SinoHub, Inc. Reports Record Fourth Quarter and Record Full Year 2010 Financial Results

SHENZHEN, China, March 14, 2011 /PRNewswire-Asia/ -- SinoHub, Inc. (NYSE Amex: SIHI), a rapidly-growing electronics company in the People's Republic of China, engaged in private label, custom design mobile phone manufacturing and sales (ICM) and electronic component sales and services (ECSS), today reported financial results for the fourth quarter and year ended December 31, 2010 and provided revenue guidance for 2011.

Summary Financials

Fourth Quarter 2010 Results

Sales - Total revenues for fourth quarter of 2010 increased 37% to $58.5 million from $42.8 million in the same year ago period.  ECSS, including procurement-fulfillment, spot component sales and supply chain management services, decreased 16% to $36 million during the fourth quarter of 2010. Revenue from ICM was $22.5 million for the quarter.

Gross Profit and Gross Margin - Gross profit for the fourth quarter of 2010 totaled $13.0 million an increase of 103% over $6.4 million in the fourth quarter of 2009. Gross profit margin, which benefited from the higher margin ICM business, increased from 15% in the fourth quarter of 2009 to 22.2% in the fourth quarter of 2010.

Operating Expenses - Total operating expenses were $3.3 million, or 5.6% of revenues in the fourth quarter of 2010, compared to $1.6 million, or 3.7 % of revenues in the same period in 2009. Selling, general and administrative expenses increased 62% to $2.1 million in the fourth quarter of 2010 from $1.3 million, representing approximately 3.6% and 3.0 % of revenues in the fourth quarter of 2010 and 2009, respectively.

Income from Operations - Income from operations was $9.7 million in the fourth quarter of 2010, or 16.6% of sales, as compared to operating income of $4.8 million, or 11.2% of sales in the fourth quarter of 2009, largely as the result of the higher margin ICM business. Operating margins increased from 11.2% in the fourth quarter of 2009 to 16.6% in the fourth quarter of 2010.

Net Income - Net income for the fourth quarter of 2010 increased 95% to $7.2 million, or $0.25 per fully diluted share, compared to $3.7 million, or $0.13 per fully diluted share, in the fourth quarter of 2009, based on 28.7 million and 27.3 million shares outstanding, respectively.

Full-year 2010 Results

Sales - Revenues for the year ended December 31, 2010 were $196.7 million, up 53% from $128.4 million in 2009. ECSS revenues, consisting of procurement-fulfillment, spot component sales and supply chain management services, grew 5.5% to $135.5 million for 2010 from $128.4 million in 2009, and were driven by the Company's ability to leverage, economies of scale and purchasing power from suppliers while meeting manufacturer customers sourcing needs with preferential pricing and enhanced inventory management. We anticipate increased demand for supply chain management services in 2011 originating from new design house customers. ICM revenues were $61.2 million due to robust demand for mobile phones from customers in developing countries.

"We are pleased with our financial performance during the fourth quarter and full year 2010. We achieved a significant milestone by meeting our 1 million phones production goal as we generated over $60 million in ICM sales from a business which began just over one year ago.  We continue to leverage the information exchange between our two business segments to provide integrated solutions to customers operating in the electronic marketplace," said Harry Cochran, Chief Executive Officer of SinoHub. "We are extremely enthusiastic about continued growth in our ICM business and expect to produce over 3 million phones in 2011, with a meaningful portion expected to come from sales of higher priced, higher margin smart phones."  

Gross Profit and Gross Margin - Gross profit for 2010 totaled $37.8 million, an increase of 69% over $22.4 million in 2009. Gross profit margins increased from 17.4% in 2009 to 19.2% in 2010.

Operating Expenses - Total operating expenses were $11.8 million or 6.0% of revenues in 2010, compared to $6.2 million, or 4.8% of revenues in 2009. Selling, general and administrative expenses increased to $8.7 million in 2010 from $5.0 million in 2009, representing approximately 4.4% of revenues in 2010 compared to 3.9% in 2009. Salaries and fringe benefits to support higher headcount in our growing ICM business drove the increase in SG&A. Other significant factors were customs clearance and management fees, logistics fees, staff travel, and factory, office and warehouse rent to support the general growth in sales and expanded operations. Depreciation was $1.3 million in 2010, compared to $553,000 in 2009 with the increase due primarily to additional leasehold improvements.

Income from Operations - Income from operations was $26.1 million in 2010, or 13.3% of sales, as compared to operating income of $16.2 million, or 12.6% of sales in 2009.

Net Income - Net income for the year ended December 31, 2010 increased 54% to $19.1 million from $12.4 million with corresponding fully diluted earnings per share of $0.67 compared to $0.48 in 2009 based on 28.4 million and 25.7 million fully diluted shares, in each respective period.

Liquidity and Capital Resources

SinoHub's working capital was $57.5 million on December 31, 2010, up from $39.4 million at the end of 2009, and the Company had a current ratio of 2.4 to 1 at December 31, 2010 compared to a current ratio of 3.2 to 1 at December 31, 2009. Inventories were approximately $14.6 million and accounts receivables were $45.7 million on December 31, 2010, compared to approximately $11.6 million and $28.8 million on December 31, 2009, respectively. The increase in inventory and accounts receivable was roughly proportional to the increase in sales.

Full-year 2011 Revenue Guidance

For full fiscal year 2011, SinoHub is providing revenue guidance of $255 million, representing anticipated year-over-year growth of 30% over 2010.

Business Outlook for 2011

In April 2010, SinoHub commenced operations at its new 104,400 sq. ft. manufacturing facility located in the Bao'an district of Shenzhen, China, to launch its new custom design mobile phone business unit. By operating its own manufacturing facility, the Company has been able to manage product quality more efficiently, enable the timely delivery of phones for both initial and rush orders, and generate higher operating margins.

SinoHub produced approximately 1.15 million mobile handsets in 2010. The Company recently expanded its production facility from 4 assembly lines, adding four more in the third quarter of 2010 for a total of 8 lines with annual output capacity of approximately 3.6 million handsets, or 300,000 handsets per month, to support future growth. The Company started with 3 high speed surface mount (SMT) lines and added four in the fourth quarter of 2010, ending the year with 7 high speed lines with production capacity of over 630,000 mobile phone motherboards per month.

During its first year of operations, the ICM business generated $61.2 million of revenues, with gross margins of 18.9%. Management expects ICM margins to benefit as it makes further improvements in operating efficiencies and product mix, including increased smart phone production, while decreasing contract printed circuit board assembly production work in favor of utilizing motherboard production for its products.  We also expect that over time, and in product cycles, these benefits may be offset somewhat by competitive pricing pressures.

"During the past year I have led the sales efforts for our ICM business and am convinced that we entered the market at an opportune time," stated President Lei Xia. "With a higher handset replacement rate in developing countries and private label phone manufacturers continuing to gain market share, we believe we are well positioned to participate in the robust growth currently taking place in the emerging markets. Securing our first smart phone orders was a significant milestone and provides us the opportunity to fully leverage the online joint design capabilities we developed for our clients, while producing higher priced, higher margin phones. We secured orders from customers such as China Unicom, which had 166 million subscribers, including 12.8 million 3G subscribers, at the end of 2010, and HT Mobile in Indonesia, which sells between 500,000 and 600,000 phones per month, which we believe validates our business model and puts us on a path to secure much larger orders and drive incremental growth during 2011."

Conference Call and Webcast

SinoHub will hold a conference call on Monday March 14, 2010 at 10:00 a.m. EDT to discuss the Company's fourth quarter and year-end 2010 financial results. Interested participants should call 877-941-1427 when calling within the United States or 480-629-9664 when calling internationally. The passcode is 4424326.

This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on this link: http://viavid.net/dce.aspx?sid=000082F3, or visiting http://www.viavid.net, where the Webcast can be accessed through March 19, 2011. The Webcast will be accessible live and on an archived basis via the Company's Web site (http://www.sinohub.com/investors).

To hear a replay interested parties may also call 1-877-870-5176 when calling within the United States or 1-858-384-5517 when calling internationally (passcode 4424326) through March 21, 2011.

About SinoHub

SinoHub, Inc., founded in 2000 by veteran entrepreneur Harry Cochran and electronics industry veteran Lei Xia to play a part in the electronics revolution in China, provides integrated contract manufacturing, electronic component purchasing, and world-class supply chain management services with transparent information access for participants in the electronic components supply chain in China. SinoHub conducts substantially all of its operations through its wholly-owned subsidiary SinoHub Electronics Shenzhen Limited in the People's Republic of China and its wholly-owned B2B Chips subsidiary in Hong Kong, which offers electronic component purchasing and integrated contract manufacturing services currently focusing on the mobile phone market. For more information, visit the Company's Web site at www.sinohub.com and the B2B Chips Web site at www.b2bchips.com.

Cautionary Statement Regarding Forward-looking Information

Some of the statements contained in this press release that are not historical facts constitute forward-looking statements under the federal securities laws. Forward-looking statements can be identified by the use of the words "may," "will," "should," "could," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "potential," "proposed," or "continue" or the negative of those terms. These statements involve risks known to the Company, significant uncertainties, and other factors, many of which cannot be predicted with accuracy and some of which may not even be anticipated, which may cause actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by those forward-looking statements. Such risks, uncertainties and factors include, but are not limited to, the Company's ability to expand its customer base, the ability to access capital for such expansion, assumptions concerning future economic and competitive conditions and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

(Financial Tables Follow)