omniture

SinoHub, Inc. Reports Record First Quarter 2010 Financial Results; Affirms Guidance for Full-year 2010

2010-05-17 19:49 753

SANTA CLARA, Calif. and SHENZHEN, China, May 17 /PRNewswire-Asia/ --

- First quarter 2010 revenues increased 113.4% to $38.6 million

- New Virtual Contract Manufacturing business exceeds expectations with

sales of $6.4 million and gross margin of 20.6%

- Gross margin up sequentially to 18.4% from 15.0%

- Net income increased 75.6% to $3.5 million, with EPS of $0.12

SinoHub, Inc. (NYSE Amex: SIHI), a rapidly growing electronics company in the People's Republic of China currently engaged in electronic component sales, private label mobile phone manufacturing and sales, and electronic component supply chain management (SCM) services, today reported financial results for the three month period ended March 31, 2010 and reaffirmed full-year revenue guidance for 2010.

Summary Financials

First Quarter 2010 Results (USD) (unaudited)

(three months ended March 31,) Q1 2010 Q1 2009 CHANGE

Sales $38.6 million $18.1 million +113.4%

Gross Profit $7.1 million $3.8 million +85.0%

Net Income $3.5 million $2.0 million +75.6%

Fully diluted EPS $0.12 $0.08 +50.0%

First Quarter 2010 Results

Sales - Total revenues for first quarter 2010 advanced 113.4% to $38.6 million from $18.1 million for the first quarter of 2009. Revenues from electronic component sales, including procurement-fulfillment and spot component sales, increased more than 88.0% to $30.7 million for first quarter 2010 from $16.3 million for the same period last year. Revenues from the Company's new virtual contract manufacturing business, which was launched in late 2009, totaled $6.4 million. The Company's supply chain management services business generated $1.6 million for the first three months of 2010, compared to $1.8 million in the same period in 2009.

First Quarter 2010 Revenue Breakdown By Business Unit (USD in thousands)

(unaudited)

(three months ended March 31,) 2010 2009 CHANGE

Electronic Components $30.7 million $16.3 million +88.0%

% of Sales 79.4% 90.2%

Virtual Contract

Manufacturing $6.4 million -- --

% of Sales 16.6%

Supply Change

Management Services $1.6 million $1.8 million -11.1%

% of Sales 4.0% 9.8%

Total Sales $38.6 million $18.1 million +113.4%

"We are pleased with our strong financial results for the first quarter of 2010, as sales from our recently launched virtual contract manufacturing (VCM) business exceeded our expectations and contributed to gross margin expansion over fourth quarter 2009, and as we generated continued strong growth in our electronic component purchasing (ECP) business unit," said Harry Cochran, Chief Executive Officer of SinoHub. "While sales declined for our SCM business, this unit remains pivotal to our overall business model as we leverage proprietary information gained through our SCM software platform to add new ECP and VCM customers, and as our world-class SCM solutions benefit electronics manufacturers in the growing China marketplace by substantially decreasing their production cycles and inventory levels while improving their working capital position."

Cost of Sales - Cost of goods sold totaled $31.5 million in the first quarter of 2010, up 121.0% in dollar volume from $14.3 million in the first quarter of 2009.

Gross Profit and Gross Margin - Gross profit for the first quarter of 2010 totaled $7.1 million, an increase of 87.0% over $3.8 million in the first quarter of 2009. Gross profit margin for the first quarter of 2010 increased sequentially to 18.4% from 15.0% in the fourth quarter of 2009 due primarily to the contribution of the Company's newly launched VCM business. Compared to the first quarter of 2009, gross margin decreased from 21.0% due primarily to the substantially lower percentage of high margin net sales from the Company's SCM business in the first quarter of 2010 compared to the same period in 2009. Net margin from the Company's ECP business was 14.0% in the first quarter of 2010, up slightly from 13.1% in the first quarter of 2009, and the Company's new VCM business generated 20.6% in gross margin in the first quarter of 2010, its initial quarter of operation.

Operating Expenses - Total operating expenses were $2.5 million, or 6.6% of revenues in the first quarter of 2010, compared to $1.3 million, or 7.0% of revenues in the same period in 2009. Selling, general and administrative expenses increased to $1.9 million in the first quarter of 2010 from $0.9 million in the first quarter of 2009, representing approximately 4.9% of revenues in the first quarter of 2010 compared to 5.0% in the same period of 2009. Income from operations was $4.6 million in the first quarter of 2010, or 11.8% of sales, as compared to operating income of $2.6 million, or 14.2% of sales in the first quarter of 2009.

Net Income - Net income for the first quarter of 2010 increased 75.6% to $3.5 million, or $0.12 per fully diluted share, compared to $2.0 million, or $0.08 per fully diluted share, in the first quarter of 2009, based on 28.0 million and 25.2 million weighted average, diluted shares outstanding, respectively.

Liquidity and Capital Resources

SinoHub's cash and cash equivalents grew to $10.3 million at March 31, 2010 from $8.3 million at December 31, 2009. The Company had working capital of $49.8 million on March 31, 2010, up from $41.7 million at the end of 2009, and a current ratio of 3.6 to 1 at March 31, 2010 compared to a current ratio of 3.2 to 1 at December 31, 2009. Inventories were approximately $9.7 million and accounts receivable were $31.2 million on March 31, 2010, compared to approximately $11.6 million and $28.8 million on December 31, 2009, respectively. During the first quarter of 2010, the Company used $38,000 in cash in operations versus $4.4 million used in operations in the same period in 2009.

Full-year 2010 Revenue Guidance

For full fiscal year 2010, SinoHub reaffirmed revenue guidance of $180 million, representing anticipated year-over-year growth of 40% over 2009. 2010 guidance provided assumes a substantial increase in sales from its new virtual contract manufacturing (VCM) business.

Business Review and Outlook

In April 2010, SinoHub commenced operations at its new 77,500 sq. ft. mobile phone manufacturing facility located in the Bao'an district of Shenzhen, China, marking a significant milestone in the development of the Company's new virtual contract manufacturing (VCM) business unit. By operating its own manufacturing facility, the Company believes it can further optimize its SCM platform and improve its ability to ensure the quality and on-time delivery of initial and rush orders, resulting in incremental revenue and earnings growth and higher gross and operating margins.

The new mobile phone facility currently has annual output capacity of approximately 2.7 million handsets, or 225,000 handsets per month based on 6 assembly lines. The Company expects to reach full capacity utilization, or over 75,000 handsets per month, on the initial two assembly lines in Q3 2010 to produce mobile phones for developing countries, with additional assembly lines to be added based on increasing demand. In addition, the Company plans to install 3.5 surface mount lines starting in June with production capacity of over 150,000 mobile phone mother boards per month. SinoHub currently serves 10 customers through its new VCM business segment. In April, the Company received new orders for an aggregate of 61,000 custom, private label mobile phone handsets from the following new customers: Taxco (50,000), Magicon (5,000), Ximax (5,000) and My Audio (1,000), located in Indonesia, India, Malaysia and Hungary, respectively.

In 2010 and beyond, SinoHub plans to build its VCM business to serve mobile phone distributors in emerging markets outside of China. Developing country markets, according to a report from JP Morgan Global Equity Research, account for over two-thirds of all mobile phone sales in the world. It is estimated that over 797 million handsets were sold in developing countries in 2009, compared to 335 million in developed countries, with sales to developing countries expected to rise to over 1 billion in 2011 compared to 373 million in developed countries. The Company is also evaluating additional international expansion of its VCM business for mobile phones in the US.

Conference Call and Webcast

SinoHub will hold a conference call at 9:30 a.m. ET on Monday, May 17, 2010. Interested participants should call 1-877-941-2068 when calling within the United States or 1-480-629-9712 when calling internationally.

A playback will be available through May 24, 2010. To listen, please call 1-800-406-7325 within the United States or 1-303-590-3030 when calling internationally. Utilize the pass code 4299945 for the replay. An archived version of the teleconference will also be available on the Company's Web site at http://www.sinohub.com under the Investors tab at Online Audio Files.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=00007553 , or visiting ViaVid's website at www.viavid.net , where the webcast can be accessed through May 24, 2010.

About SinoHub, Inc.

SinoHub, Inc. is a rapidly growing electronics company in the People's Republic of China (PRC) currently operating in three business units: electronic component sales, electronics product manufacturing and sales, and electronic component supply chain management (SCM) services. The Company's electronic component sales unit includes procurement-fulfillment and spot electronic component sales to manufacturers and design houses. The Company's product manufacturing and sales unit is currently focused on providing custom, private label mobile phones to developing countries. SinoHub's SCM business includes warehousing, delivery and import/export services incorporating the Company's proprietary web-based SCM software platform that gives its customers total transparency in their supply chains. SinoHub, founded in 2000 by veteran entrepreneur Harry Cochran and electronics industry veteran Lei Xia to play a part in the electronics revolution in China, conducts substantially all of its operations through its wholly-owned subsidiary SinoHub Electronics Shenzhen Limited in the PRC and its wholly-owned B2B Chips subsidiary in Hong Kong. For more information, visit the Company's Web site at http://www.sinohub.com and the B2B Chips Web site at http://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.

For Additional Information Contact:

SinoHub, Inc.:

Falicia Cheng

Tel: +86-755-2661-1080

Email: falicia@sinohub.com

In the US:

HC International, Inc.

Ted Haberfield

Tel: +1-760-755-2716

Email: thaberfield@hcinternational.net

(Financial Tables Follow)

SINOHUB, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS March 31, December 31,

2010 2009

(Unaudited) (Audited)

CURRENT ASSETS

Cash and cash equivalents $ 10,305,000 $ 8,347,000

Restricted cash 11,579,000 7,595,000

Accounts receivable, net of

allowance 31,244,000 28,828,000

Inventories, net 9,655,000 11,647,000

Prepaid expenses and other current

assets 1,030,000 650,000

Deposit with suppliers 1,120,000 --

Total current assets 64,933,000 57,067,000

PROPERTY AND EQUIPMENT, NET 4,235,000 2,271,000

TOTAL ASSETS $ 69,168,000 $ 59,338,000

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable $ 1,722,000 $ 1,209,000

Customer deposits 364,000 1,348,000

Accrued expenses and other current

liabilities 401,000 731,000

Bank borrowings 15,468,000 11,793,000

Income and other taxes payable 1,420,000 2,605,000

Total current liabilities 19,375,000 17,686,000

STOCKHOLDERS' EQUITY

Preferred stock, $0.001 par value,

5,000,000 shares authorized;

no shares issued -- --

Common stock, $0.001 par value,

100,000,000 shares authorized;

28,393,016 shares and 26,669,605

shares issued and outstanding

as of March 31, 2010 and December

31, 2009, respectively 28,000 27,000

Additional paid-in capital 22,024,000 17,239,000

Deferred stock compensation (167,000) --

Retained earnings

Unappropriated 26,219,000 22,725,000

Appropriated 788,000 787,000

Accumulated other comprehensive

income 901,000 874,000

Total stockholders' equity 49,793,000 41,652,000

TOTAL LIABILITIES AND STOCKHOLDERS'

EQUITY $ 69,168,000 $ 59,338,000

SINOHUB, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three months ended March 31,

2010 2009

(Unaudited) (Unaudited)

NET SALES

Supply chain management services $ 1,551,000 $ 1,778,000

Electronic components 30,667,000 16,314,000

VCM business 6,386,000 --

Total net sales 38,604,000 18,092,000

COST OF SALES

Supply chain management services 59,000 82,000

Electronic components 26,379,000 14,175,000

VCM business 5,071,000 --

Total cost of sales 31,509,000 14,257,000

GROSS PROFIT 7,095,000 3,835,000

OPERATING EXPENSES

Selling, general and administrative 1,895,000 921,000

Professional services 245,000 229,000

Depreciation 223,000 104,000

Stock compensation expense 149,000 13,000

Allowance for doubtful accounts 33,000 2,000

Total operating expenses 2,545,000 1,269,000

INCOME FROM OPERATIONS 4,550,000 2,566,000

OTHER INCOME (EXPENSE)

Interest expense (30,000) (25,000)

Interest income 6,000 7,000

Other, net 6,000 4,000

Total other expense, net (18,000) (14,000)

INCOME BEFORE INCOME TAXES 4,532,000 2,552,000

Income tax expense 1,037,000 562,000

NET INCOME 3,495,000 1,990,000

OTHER COMPREHENSIVE INCOME

Foreign currency translation gain 27,000 30,000

COMPREHENSIVE INCOME $ 3,522,000 $ 2,020,000

SHARE AND PER SHARE DATA

Net income per share-basic $ 0.13 $ 0.08

Weighted average number of

shares-basic 27,283,000 24,581,000

Net income per share-diluted $ 0.12 $ 0.08

Weighted average number of

shares-diluted 27,979,000 25,156,000

SINOHUB, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended March 31,

2010 2009

(Unaudited) (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $3,495,000 $1,990,000

Adjustments to reconcile net income to cash

used in operations:

Depreciation 223,000 104,000

Stock compensation expense 149,000 13,000

Allowance for doubtful accounts 33,000 2,000

Changes in operating assets and

liabilities:

Accounts receivable (2,445,000) (7,310,000)

Inventories 1,993,000 (1,138,000)

Prepaid expenses and other current

assets (379,000) (253,000)

Deposit with suppliers (1,120,000) --

Accounts payable 513,000 3,940,000

Customer deposits (985,000) --

Accrued expenses and other current

liabilities (330,000) 76,000

Income and other taxes payable (1,185,000) (1,805,000)

Net cash used in operating

activities (38,000) (4,381,000)

CASH FLOWS FROM INVESTING ACTIVITIES

Increase of restricted cash (3,984,000) (259,000)

Purchase of property and equipment (2,186,000) (29,000)

Net cash used in investing activities (6,170,000) (288,000)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of common stock, net

of cost 4,470,000 --

Proceeds from exercise of warrants issued

for services, net of costs -- 13,000

Bank borrowing proceeds 7,003,000 5,760,000

Bank borrowing repayments (3,328,000) (2,123,000)

Net cash provided by financing

activities 8,145,000 3,650,000

EFFECT OF EXCHANGE RATE CHANGES 21,000 25,000

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS 1,958,000 (994,000)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,347,000 5,860,000

CASH AND CASH EQUIVALENTS AT END OF PERIOD $10,305,000 $4,866,000

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest $ 30,000 $ 25,000

Cash paid for income tax $2,350,000 $2,187,000

Source: SinoHub, Inc.
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