SOURCE: China TechFaith
TechFaith Reports Third Quarter 2008 Financial Results
Highlights: Cooperation Agreement Signed With 'aigo' for China Operator Tailored Market; Cooperation Agreement Signed With QIGI for Chinese Smartphone Business; Developed First CDMA Touch Screen Smartphone for Latin America; Net Revenue Increased 32.2% Year-Over-Year; Gross Profit Increased 1.7% Year-Over-Year
BEIJING--(Marketwire - November 17, 2008) - China TechFaith Wireless Communication Technology
Limited (
For the third quarter of 2008, TechFaith reported net revenue of US$50.8 million representing a 32.2% increase over US$38.4 million for the third quarter of 2007 and a 10.2% decrease from US$56.6 million for the second quarter of 2008. Net revenue for the quarter was driven by increased demand in the Chinese and South East Asian markets.
Gross profit for the third quarter of 2008 was US$9.3 million, representing a 1.7% increase over US$9.2 million for the same period last year. The increase was attributed to the strong performance of the domestic Smartphone business during the quarter. Gross margin for the third quarter of 2008 was 18%, down from 24% in the third quarter of 2007. Gross margin was impacted by the weak international demand for the feature phones and one-stop sell out of the CDMA1X data cards.
Total operating expenses were US$11.2 million for the third quarter of 2008 compared to US$10.7 million in previous quarter. The increase in operating expenses is due to a US$2.3 million severance cost as a result of the corporate restructuring.
Net income for the third quarter of 2008 was US$0.45 million, or US$0.01 per weighted average outstanding ADS (basic and diluted), compared to net income of US$1.6 million, or US$0.04 per weighted average outstanding ADS (basic and diluted), for the same period in 2007. The income tax provision in the third quarter of 2008 was US$0.02 million.
Mr. Defu Dong, Chairman and Chief Executive Officer of TechFaith, said, "The third quarter results demonstrate our effort to continue to improve our organizational efficiency, promptly react to the market environment, and maintain our strong market position. We are proud to announce year-over-year revenue growth of over 30%, which further validates our strategy to focus on middle to high-end product offerings during this tough competitive environment and weak economy. Also, we signed a cooperation agreement with both 'aigo' and QIGI in order to strengthen our market position in China and we were approved as the first CDMA Smartphone with touch screen function by a carrier in Latin American."
Mr. Xiaonong Cai, the Deputy CEO of TechFaith, said, "Looking to the fourth quarter, we expect operating costs to fall significantly due to the completion of our corporate restructuring and we will focus on the development of the Google Android phone. The test products of the Android phone will be available in the fourth quarter and we target a commercial launch by the end of the first quarter of 2009."
Recent Developments
In an effort to avoid the effects of the global financial crisis and weakening economic conditions, TechFaith strengthens its position in the Chinese market through cooperation agreements with 'aigo' for China operator tailored market, and QIGI for the Chinese Smartphone business. Under the strategic cooperation agreement with 'aigo', TechFaith will provide total solutions products, including CDMA1X/EVDO and UMTS/HSDPA, under the 'aigo' brand name and through 'aigo's' sales channels for operator tailored market in China. Under the cooperation agreement with QIGI, TechFaith will be the sole provider of Smartphone solution products to QIGI and the Smartphone will be sold under QIGI's brand name and through its sales channels in China. These strategic collaborations will help promote TechFaith products in China and swiftly bring them to market.
TechFaith also made advances in the international market through the development of the first CDMA Smartphone with a touch screen function in Latin American, which is expected to launch before year-end. This achievement is an enormous milestone for TechFaith and the company's Smartphone growth in the international market. In addition, TechFaith continues to receive 3G Smartphone orders from the European and South East Asian markets.
TechFaith Interactive made further progress and it will be renamed One Net entertainment Ltd. Radiation studio, Star studio and Mythos studio have been set up and are developing games. MMORPG games (massively multiplayer online role-playing games) "Seven Swords" and "Liao Zhai" are expected to complete beta versions by the second quarter of 2009. Mobile online gaming platform www.798uu.com is under testing now and will launch a beta version by the end of November 2008. Wireless online game "Hero Times" is expected to launch in the first quarter of 2009. The publisher system has been set up and is expected to be in operation by April 2009. One Net entertainment Ltd. is expected to be profitable in the second quarter of 2009.
On September 29, Techfaith announced that its Board of Directors approved a share repurchase program pursuant to authorization previously obtained from its shareholders. Under the program, TechFaith is authorized, but not obligated, to repurchase up to $10 million worth of its outstanding American Depository Shares. The company will begin the ADS repurchases in an organized manner after the financial stock market stabilizes.
Financial Guidance
The Company expects revenues in the fourth quarter of 2008 to be in the range of US$43 million to US$48 million. The Smartphone products in China are the major revenue drivers for the fourth quarter and the overseas markets including South East Asian, European Union and Latin America will continue to drive revenue. TechFaith expects operating costs to be significantly lower in the fourth quarter due to cost saving measures and the completion of the corporate restructuring.
Conference Call
TechFaith will hold a conference call on Monday, November 17, 2008 at 7:00 p.m. U.S. Eastern Time (8:00 a.m., November 18, 2008 in Beijing) to discuss the results. The dial-in numbers are +1-866-713-8395 (U.S.) or +1-617-597-5309 (international). The passcode for both is 91884175. A live webcast of the conference call will be available on TechFaith's website at www.techfaithwireless.com.
A replay of the call will be available from Monday, November 17, 2008 at 9 p.m., U.S. Eastern Time (9 a.m., November 18, 2008 in Beijing) through midnight on Monday, November 24, 2008, U.S. Eastern Time (12 p.m., November 26, 2008 in Beijing) on the Company's website at www.techfaithwireless.com and by telephone at +1-888-286-8010 (U.S.) or +1-617-801-6888 (international). The passcode to access the replay is 66896525.
About TechFaith
TechFaith (
With the capability of developing Middleware Application MMI/UI software on 2G/2.5G(GSM/GPRS, CDMA1X), 3G(EV-DO, WCDMA/UMTS, TD-SCDMA) and 3.5G(HSDPA) communication technologies, TechFaith is able to provide Middleware Application MMI/UI software packages that fulfill the specifications of handset brand owners and carriers in the global market. For more information, please visit www.techfaithwireless.com
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as TechFaith's strategic and operational plans, contain forward-looking statements. TechFaith may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about TechFaith's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, disruptions in the financial markets and other macro-economic challenges currently affecting the economy of the United States and other parts of the world, TechFaith's limited operating history, TechFaith's ability to effectively manage its rapid expansion, loss of TechFaith's customers and claims against TechFaith due to defects in its designs or other reasons, TechFaith's limited insurance coverage and its exposure to product liability and product recall, TechFaith's ability to retain existing or attract additional domestic and international customers, TechFaith's earnings or margin declines, failure to compete against new and existing competitors, mobile handset brand owners' discontinuation or reduction of the use of independent design houses, and other risks outlined in TechFaith's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. TechFaith does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of U.S. Dollars, except share and per share/ADS data and
unless otherwise stated)
Three Months Ended Three Months Ended Nine Months Ended
June 30 September 30 September 30
2008 2007 2008 2007 2008
----------- ----------- ----------- ----------- -----------
Revenues:
Design
fees $ 4,656 $ 5,425 $ 1,051 $ 20,728 $ 8,971
Royalty
income 277 1,280 166 6,713 977
Component
sales 520 1,682 544 7,289 1,795
Product
sales 50,973 30,041 49,036 63,005 145,040
Service
income 164 18 13 18 212
----------- ----------- ----------- ----------- -----------
Total net
revenues $ 56,590 $ 38,446 $ 50,810 $ 97,753 $ 156,995
Cost of
revenues:
Design
fees $ 2,340 $ 2,177 $ 1,447 $ 13,828 $ 5,405
Component
sales 306 2,055 451 7,221 1,313
Product
sales 39,998 25,041 39,576 52,362 117,252
Service
Cost 11 4 10 4 43
----------- ----------- ----------- ----------- -----------
Total cost
of
revenues $ 42,655 $ 29,277 $ 41,484 $ 73,415 $ 124,013
Gross
Profit $ 13,935 $ 9,169 $ 9,326 $ 24,338 $ 32,982
Operating
expenses:
General and
administ-
rative $ 2,777 $ 1,839 $ 6,143 $ 8,162 $ 12,121
Research
and
development 6,625 6,524 3,462 23,068 15,583
Selling
and
marketing 1,300 794 1,676 2,554 3,829
Exchange
loss
(gain) (19) 357 (100) 1,338 415
----------- ----------- ----------- ----------- -----------
Total
operating
expenses $ 10,683 $ 9,514 $ 11,181 $ 35,122 $ 31,948
Other
operating
income 22 864 2,136 1,653 4,699
(Loss)
income from
operat-
ions $ 3,274 $ 519 $ 281 ($ 9,131) $ 5,733
Interest
expense (7) (89) (5) (140) (21)
Interest
income 499 911 405 3,022 1,321
Other
income
(expense),
net (18) (6) (196) (341) (211)
Change in
fair
value of
put option (6) 24 (201) (31) (192)
----------- ----------- ----------- ----------- -----------
Income
before
income
taxes $ 3,742 $ 1,359 $ 284 ($ 6,621) $ 6,630
Income tax - - (21) (3) (21)
----------- ----------- ----------- ----------- -----------
Income
before
minority
interests $ 3,742 $ 1,359 $ 263 ($ 6,624) $ 6,609
Minority
interests 121 226 188 977 568
Equity in
loss of an
affiliate - - - (851) -
----------- ----------- ----------- ----------- -----------
Net (loss)
income $ 3,863 $ 1,585 $ 451 ($ 6,498) $ 7,177
=========== =========== =========== =========== ===========
Net income
per ordinary
share
Basic $ 0.01 $ - $ - ($ 0.01) $ 0.01
=========== =========== =========== =========== ===========
Diluted $ 0.01 $ - $ - ($ 0.01) $ 0.01
=========== =========== =========== =========== ===========
Net income
per ADS*
Basic $ 0.09 $ 0.04 $ 0.01 ($ 0.15) $ 0.17
=========== =========== =========== =========== ===========
Diluted $ 0.09 $ 0.04 $ 0.01 ($ 0.15) $ 0.17
=========== =========== =========== =========== ===========
Weighted
average
ordinary
shares
outstanding
Basic 649,913,136 649,863,772 650,027,078 649,794,157 649,951,394
=========== =========== =========== =========== ===========
Diluted 649,943,575 649,863,772 650,055,184 649,794,157 650,037,724
=========== =========== =========== =========== ===========
Revenue Breakout 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08
======= ======= ======= ======= ======= ======= =======
Design fees
International
customers $ 9,463 $ 4,811 $ 2,687 $ 2,415 $ 625 $ 271 $ 138
Domestic
customers $ 655 $ 374 $ 2,738 $ 2,899 $ 2,639 $ 4,385 $ 913
Royalty
International
customers $ 300 $ 461 $ 194 $ 287 $ 10 $ - $ 17
Domestic
customers $ 1,851 $ 1,427 $ 925 $ 483 $ 524 $ 277 $ 149
Component
vendors $ 644 $ 750 $ 161 $ 289 $ - $ - $ -
Component and
products
Smart Phone $ 4,014 $ 6,557 $ 8,688 $17,185 $18,123 $26,979 $29,367
PCBA $ 2,149 $ 2,454 $ 717 $ 22 $ - $ - $ 109
Wireless
module $ 1,452 $ 7,202 $ 2,483 $ 1,377 $ 3,752 $ 1,220 $ 1,035
Feature phone $ 3,787 $ 5,349 $18,153 $20,134 $23,156 $22,774 $18,525
Other
component
sales $ 2,965 $ 2,642 $ 1,682 $ 565 $ 731 $ 520 $ 544
Service income $ - $ - $ 18 $ 35 $ 35 $ 164 $ 13
------- ------- ------- ------- ------- ------- -------
Total net revenues $27,280 $32,027 $38,446 $45,691 $49,595 $56,590 $50,810
======= ======= ======= ======= ======= ======= =======
CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of U.S. Dollars)
September 30, June 30, September 30,
2007 2008 2008
------------- ------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 84,914 $ 72,163 $ 103,578
Restricted cash 5,228 417 80
Accounts receivable 45,617 36,996 40,447
Amount due from related
parties - 4,842 5,609
Notes receivable 1,992 1,706 101
Inventories 34,442 48,867 43,022
Prepaid expenses and other
current assets 8,558 10,788 12,804
------------- ------------- -------------
Total current assets $ 180,751 $ 175,779 $ 205,641
------------- ------------- -------------
Deposits for acquisition of
plant, machinery and
equipment, and acquisition of
intangible assets $ 8,713 $ 15,436 $ 15,655
Plant, machinery and
equipment, net 27,639 27,309 26,345
Acquired intangible assets,
net 320 1,919 1,747
Goodwill 606 606 606
Total assets $ 218,029 $ 221,049 $ 249,994
============= ============= =============
Liabilities and shareholders'
equity
Current liabilities:
Current portion of Long term
payable $ 599 $ 1,228 $ 1,185
Short term loan - - -
Accounts payable 31,825 11,224 40,569
Amount due to related parties - 224 475
Accrued expenses and other
current liabilities 10,943 11,058 8,874
Advance from customers 5,473 5,804 5,941
Deferred revenue 2,284 1,164 1,372
Income tax payable 139 148 171
------------- ------------- -------------
Total current liabilities $ 51,263 $ 30,850 $ 58,587
Long-term payable $ - $ 125 $ -
------------- ------------- -------------
Total liabilities $ 51,263 $ 30,975 $ 58,587
------------- ------------- -------------
Minority interests $ 1,883 $ 1,280 $ 1,092
Shareholders' equity
Ordinary shares $ 13 $ 13 $ 13
Additional paid-in capital 110,312 110,441 110,513
Treasury stock (4,628) (4,628) (4,628)
Accumulated other
comprehensive income 9,891 23,721 24,719
Statutory reserve 6,093 6,813 6,813
Retained earnings 43,202 52,434 52,885
------------- ------------- -------------
Total shareholders’ equity $ 164,883 $ 188,794 $ 190,315
------------- ------------- -------------
Total liabilities and
shareholders' equity $ 218,029 $ 221,049 $ 249,994
============= ============= =============
In China:
Jay Ji
China TechFaith Wireless
Tel: 86-10-5822-7390
Email Contact
In the U.S.:
Joseph Villalta
The Ruth Group
Tel:+646-536-7003
Email Contact