BEIJING--(Marketwire - 08/17/10) - China Techfaith Wireless Communication Technology Limited (NASDAQ:CNTF - News) ("TechFaith" or the "Company") today announced its unaudited financial results for the second quarter ended June 30, 2010.
For the second quarter of 2010, TechFaith reported net revenue of US$65.5 million (RMB447.0 million), a 7.6% increase compared to US$60.9 million (RMB415.8 million) in the first quarter of 2010 and a 31.5% increase compared to US$49.8 million (RMB340.1 million) in the second quarter of last year. Gross margin for the second quarter of 2010 improved to 24.2% compared to 22.0% in the previous quarter and 19.0% in the same quarter last year. Income from operations for the second quarter of 2010 was US$8.3 million (RMB56.6 million), a 31.7% increase compared to US$6.3 million (RMB43.0 million) in the previous quarter and a 277.3% increase compared to US$2.2 million (RMB14.9 million) in the same quarter last year. Net income attributable to TechFaith for the second quarter of 2010 was US$7.3 million (RMB49.8 million), a 5.8% increase compared to US$6.9 million (RMB47.1million) in the first quarter of 2010 and a 62.2% increase compared to US$4.5 million (RMB30.7 million) in the same quarter of last year.
Ouyang Yuping, TechFaith's CFO, said, "Results in the second quarter exceeded prior guidance and reached another record level for TechFaith. We continue to successfully execute on our business strategy, as evidenced by the higher revenue, continued improvement in gross margin, and cash flow generation. Our original developed products ('ODP') business revenue also broke our prior company record, reaching US$56.3 million (RMB384.2 million). Revenue from our branding business increased 46.5% from US$5.2million (RMB35.5 million) to US$7.6 million (RMB51.9 million) compared to the first quarter, as we continue to benefit from the successful integration of the business and demand for existing enterprise mobile phone users and enthusiasm for pending launches. Revenue from TechFaith's gaming business increased 22.0% from US$1.3 million (RMB8.9million) to US$1.5 million (RMB10.2 million) compared to the first quarter."
Mr. Deyou Dong, who as COO of TechFaith is in charge of the company's mobile business, said, "We achieved further success in our ODP business, with total sales improving to 691,000 units in the second quarter. The improvement has been driven by strong demand in China, India, South East Asia and Europe. Our branding business has also achieved excellent results, especially with QIGI, which maintained higher gross margins due to its enterprise user targeted products, including smartphones. Both the branding business and the ODP business are now equally important for TechFaith, while we believe the branding business can create more business opportunities longer-term."
Mr. Defu Dong, Chairman and CEO of TechFaith, commented, "We have achieved a return to more reasonable and stable growth in our business, with many promising growth initiatives well underway. And while our ODP business and branding businesses are performing well we want to replicate that success in our gaming business given the large existing opportunities in PC online, mobile and motion games. We have already built a strong platform to grow off with our team working hard to build our catalog of gaming titles. This is central to our efforts to build a larger customer base among loyal game players. Fortunately, TechFaith is in a position of operating strength with continued growth expected in each of our operating units, along with a continued strong balance sheet with US$3.60 per ADS in cash and cash equivalents. Our goal remains to further increase value for our shareholders as we drive our company to achieve the growth and profitability levels each operating unit is capable of."
Third Quarter 2010 Outlook
The below forecast reflects TechFaith's current and preliminary view, which is subject to change.
TechFaith currently expects revenue to be in the range of US$66.0 million to US$68.0 million for the third quarter of 2010, with a gross margin and operating expense levels similar to the second quarter of 2010.
The Company expects its ODP business to grow sequentially and year over year, as it launches three new mobile phones targeting the global market, in addition to the Company's existing product families. Within the Company's branding business, sales are planned in the third quarter for the Barbie and Disney mobile phones through Glomate Mobile (Beijing) Co., Ltd. TechFaith also expects QIGI to achieve growth sequentially and year over year as it provides tailored content for its mobile phones. Additionally, TechFaith plans to launch its first model with outdoor specialized content by the end of 2010. Meanwhile, the Company expects continuing growth in its gaming business above levels achieved in the second quarter 2010.
Investor Conference Call / Webcast Details
TechFaith will hold a conference call on Tuesday, August 17, 2010 at 7:00 p.m. U.S. Eastern Time (7:00 a.m. Wednesday, August 18, 2010 in Beijing). The dial-in phone number is +1-617-614-3670. The conference call passcode is 39014903. A live webcast of the conference call will also be available on TechFaith's website at www.techfaithwireless.com.
A replay of the call will be available approximately 2 hours after the conclusion of the live call through 11:30 p.m. U.S. Eastern Time on August 24, 2010, (11:30 a.m., August 25, 2010 in Beijing) by telephone at +1-617-801-6888. To access the replay, use passcode 88471016. A webcast replay will also be available at www.techfaithwireless.com.
About us
TechFaith (NASDAQ:CNTF - News) is a China-based original developed product ("ODP") provider focused on the original design and sales of mobile phone products. TechFaith aims to become a branded mobile phone specialist in differentiated market segments in the China market. TechFaith is also striving to build a leading PC and online gaming business through its wholly-owned subsidiary, 798 Entertainment Limited.
-- TechFaith engages in the development and production of middle to high
end handsets and tailor made handsets. TechFaith's original developed
products include: (1) multimedia phones and dual mode dual card
handsets of multiple wireless technology combination such as GSM/GSM,
GSM/CDMA, GSM/WCDMA, GSM/TD-SCDMA and UMTS/CDMA; (2) Windows-based
smartphones and Pocket PC phones; and (3) handsets with interactive
online gaming and professional game terminals with phone functionality.
-- 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.
-- TechFaith is aiming to become a branded mobile phone specialist for
differentiated market segments in the China market, such as under its
wholly-owned subsidiary brand name QIGI for smartphone business which
targets enterprise users and operator tailored market, under Glomate
brand, selling other brand names for girls and teenagers, under the
TechFace brand name to target the market of outdoor sports enthusiasts.
-- TechFaith is targeting both the mobile and online PC gaming markets
through its websites www.798uu.com and www.798game.com with gaming
content developed internally, co-developed and licensed from third
parties.
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," "outlook" and similar statements. Among other things, the business outlook and strategic and operational plans of TechFaith and management quotations 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, those 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 Six Months Ended
March 31 June 30 June 30
2010 2009 2010 2009 2010
----------- ----------- ----------- ----------- -----------
Revenues:
ODP $ 54,438 $ 49,846 $ 56,336 $ 98,516 $ 110,774
Brand name
phone
sales 5,211 - 7,633 - 12,844
Game 1,257 - 1,534 - 2,791
----------- ----------- ----------- ----------- -----------
Total net
revenues $ 60,906 $ 49,846 $ 65,503 $ 98,516 $ 126,409
Cost of
revenues:
ODP $ 44,259 $ 40,366 $ 44,859 $ 80,222 $ 89,118
Brand name
phone
sales 3,154 - 4,752 - 7,906
Game 70 - 42 - 112
----------- ----------- ----------- ----------- -----------
Total cost
of
revenues $ 47,483 $ 40,366 $ 49,653 $ 80,222 $ 97,136
Gross
Profit $ 13,423 $ 9,480 $ 15,850 $ 18,294 $ 29,273
Operating
expenses:
General
and
administ-
rative $ 2,947 $ 3,479 $ 3,193 $ 5,219 $ 6,140
Research
and
develop-
ment 2,995 3,189 2,764 6,285 5,759
Selling and
marketing 1,289 624 1,583 1,426 2,872
Exchange
loss - 21 20 35 20
----------- ----------- ----------- ----------- -----------
Total
operating
expenses $ 7,231 $ 7,313 $ 7,560 $ 12,965 $ 14,791
Government
subsidy
income 100 12 51 17 151
Income
from
operatio-
ns $ 6,292 $ 2,179 $ 8,341 $ 5,346 $ 14,633
Interest
expenses (265) (62) (265) (92) (530)
Interest
income 184 156 206 333 390
Other
income, net 5 38 188 38 193
Change in
fair
value of
derivatives
embedded in
convertible
notes 3,343 2,113 1,266 2,113 4,609
Change in
fair value
of put
option (33) - (30) (18) (63)
----------- ----------- ----------- ----------- -----------
Income
before
income
taxes $ 9,526 $ 4,424 $ 9,706 $ 7,720 $ 19,232
Income tax
benefits
(expenses) (1,933) 106 (2,175) (1,113) (4,108)
----------- ----------- ----------- ----------- -----------
Net income $ 7,593 $ 4,530 $ 7,531 $ 6,607 $ 15,124
Less: net
income
(loss)
attributable
to the
noncontr-
olling
interest (738) (26) (249) 18 (987)
----------- ----------- ----------- ----------- -----------
Net income
attribut-
able to
TechFaith $ 6,855 $ 4,504 $ 7,282 $ 6,625 $ 14,137
=========== =========== =========== =========== ===========
Net income
attribut-
able to
TechFaith
per share
Basic $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.02
=========== =========== =========== =========== ===========
Diluted $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.02
=========== =========== =========== =========== ===========
Net income
attribute to
TechFaith
per ADS*
Basic $ 0.15 $ 0.10 $ 0.15 $ 0.15 $ 0.30
=========== =========== =========== =========== ===========
Diluted $ 0.13 $ 0.10 $ 0.13 $ 0.15 $ 0.27
=========== =========== =========== =========== ===========
Weighted
average
shares
outstand-
ing
Basic 685,868,082 650,034,590 715,172,111 650,034,590 700,601,047
=========== =========== =========== =========== ===========
Diluted 811,983,427 679,148,185 841,286,432 664,671,776 826,715,923
=========== =========== =========== =========== ===========
CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of U.S. Dollars)
June 30, March 31, June 30,
2009 2010 2010
---------- ---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 111,794 $ 162,421 $ 170,879
Restricted cash 81 - -
Accounts receivable 24,376 17,740 17,613
Notes receivable 693 - -
Amounts due from a related party 7,144 2,622 4,103
Inventories 27,642 24,178 22,218
Prepaid expenses and other current assets 12,745 13,666 14,104
Deferred tax assets-current 96 - -
---------- ---------- ----------
Total current assets $ 184,571 $ 220,627 $ 228,917
---------- ---------- ----------
Plant, machinery and equipment, net $ 22,589 $ 20,245 $ 19,666
Construction in progress 23,498 23,965 24,195
Acquired intangible assets, net 758 3,235 3,075
Deferred tax assets-noncurrent 117 - -
Goodwill 619 1,848 1,848
---------- ---------- ----------
Total assets $ 232,152 $ 269,920 $ 277,701
========== ========== ==========
Liabilities and equity
Current liabilities:
Current portion of long term payable $ 1,028 $ 687 $ 687
Accounts payable 6,042 9,952 9,727
Amounts due to related parties 297 701 43
Accrued expenses and other current
liabilities 11,726 10,408 9,277
Advance from customers 6,771 5,494 7,351
Deferred revenue 773 1,031 889
Income tax payable 149 2,221 2,366
---------- ---------- ----------
Total current liabilities $ 26,786 $ 30,494 $ 30,340
Convertible notes and embedded derivatives 7,529 12,363 11,362
Deferred tax liability-noncurrent - 170 157
---------- ---------- ----------
Total liabilities $ 34,315 $ 43,027 $ 41,859
---------- ---------- ----------
Equity
Paid in capital $ 13 $ 14 $ 14
Additional paid-in capital 105,848 126,292 126,292
Accumulated other comprehensive income 23,838 23,801 25,219
Statutory reserve 8,542 10,993 10,993
Retained earnings 58,605 62,721 70,003
---------- ---------- ----------
Total Techfaith shareholders' equity $ 196,846 $ 223,821 $ 232,521
---------- ---------- ----------
Noncontrolling interest $ 991 $ 3,072 $ 3,321
---------- ---------- ----------
Total equity $ 197,837 $ 226,893 $ 235,842
---------- ---------- ----------
Total liabilities and equity $ 232,152 $ 269,920 $ 277,701
========== ========== ==========
Contact:
CONTACTS:
In China:
Jay Ji
China Techfaith Wireless Communication Technology Limited
Tel: 86-10-5822-8390
ir@techfaith.cn
In the U.S.:
David Pasquale
Global IR Partners
Tel: +1 914-337-8801
cntf@globalirpartners.com
