BEIJING, November 25, 2013 /PRNewswire/ -- China TechFaith Wireless Communication Technology Limited (NASDAQ: CNTF) ("TechFaith" or the "Company") today announced unaudited financial results for the third quarter ended September 30, 2013.
For the third quarter of 2013, TechFaith reported net revenue of US$29.9 million, a decrease of 0.9% compared to US$30.2 million in the previous quarter. Revenue in the third quarter of 2013 from the Company's Original Developed Product (ODP) segment was US$21.3 million compared to US$20.1 million in the previous quarter and US$13.3 million in the third quarter of 2012. Revenue in the third quarter of 2013 from the Company's Brand name phone sales segment was US$8.1 million, compared US$8.4 million in the previous quarter and US$11.3 million in the third quarter of 2012. Revenue from the Company's Game segment was US$0.49 million compared to US$1.6 million in the previous quarter and US$6.9 million in the third quarter of 2012.
Gross profit for the third quarter of 2013 was US$4.9 million compared to US$3.4 million in the previous quarter and US$7.2 million in the third quarter of 2012. Gross margin for the third quarter of 2013 was 16% compared to 11% in the previous quarter and 23% in the third quarter of 2012. Net income attributed to TechFaith for the third quarter of 2013 was US$0.26 million or US$0.00 per basic and diluted weighted average outstanding ADS, compared to net loss of US$0.97 million or US$0.02 loss per basic and diluted weighted average outstanding ADS in the previous quarter and net income of US$0.88 million or US$0.02 per basic and diluted weighted average outstanding ADS in the third quarter of 2012.
Ms. Ouyang Yuping, TechFaith's Chief Financial Officer said: "We were able to achieve positive net income in the third quarter, reversing the loss from the prior quarter despite revenue being about the same level quarter to quarter. An increase in demand in our ODP business helped to offset declines in our Game segment. Importantly, we benefited from a more favorable product mix. As a result, our gross margin improved to 16% in the third quarter from 11%. We think there is additional room for improvement as we focus on expanding our revenue derived from niche mobile phone markets, where customers are seeking tailored, more specialized product offerings. This includes our medical and ruggedized products lines. We remain focused on reducing costs where possible and closely managing our operations to gain added efficiencies where possible. This strategy, combined with our improved margin, helped us to increase our balance of cash and cash equivalents to US$267 million at the end of the third quarter of 2013 compared to US$258 million at the end of 2012."
Mr. Deyou Dong, President and Chief Operating Officer of TechFaith, said, "The overall operating environment remains highly competitive and dynamically changing. This creates challenges and opportunities from a product development standpoint, given evolving customer demand levels. For TechFaith, we have determined a significant, sustainable opportunity within this environment is for tailored, niche phones. Many of the features we have been pushing forward, including ruggedized models and the convergence of value added healthcare functions into mobile phones, are now being adopted by some of the largest handset manufacturers given the validation of market demand. We expect to further build on these opportunities in the coming quarters, as we work to capitalize on interest seen at the recent Gitex Technology Week in Dubai, and in other markets. We also plan to introduce additional, value added outdoor applications to integrate with our mobile devices to provide a more holistic experience for the end consumers."
Mr. Defu Dong, Chairman and Chief Executive Officer of TechFaith, said, "We continue to focus on best positioning our mobile phones to address higher margin niche opportunities. This strategy is allowing us to more effectively deploy development and production resources, and to improve profitability on a lower revenue level. In our gaming segment, the challenges have been greater than seen when our motion gaming business was expanding several quarters ago. We still believe there are opportunities to create value in the gaming business, within software and mobile platforms, in order to expand our existing customer base. Separately, we continue to move forward with the development of previously announced facilities. Our focus remains on balancing this portfolio with facilities needed for our own operations and those that can be potentially leased or sold to third parties as we seek to increase value for our shareholders."
Fourth Quarter of 2013 Outlook
TechFaith currently expects total revenues for the fourth quarter of 2013 to be in the range of US$28.0million to US$32 million. This forecast is TechFaith's current and preliminary view, which is subject to change.
Investor Conference Call / Webcast Details
TechFaith will hold a conference call on Monday, November 25, 2013 at 8:00 a.m. U.S. Eastern Time (9:00 p.m. Monday, November 25, 2013 in Beijing) using dial-in +1-857-244-7321 or +1-877-415-3178. The conference call passcode is 36850911. 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 by telephone at +1-617-801-6888, with passcode 59784798. A webcast replay will also be available at www.techfaithwireless.com.
About TechFaith
TechFaith (NASDAQ: CNTF) has three primary businesses. The Company is a leading global mobile solutions provider for the global mobile handsets market (previously called the ODP (Original Developed Product) business). The Company is a leading developer of specialized mobile phones for differentiated market segments, including the rapidly growing smartphone market targeting wireless mobile phone network operators and end users; the Company also serves sports enthusiasts with a tailored line under the Jungle brand and the teen market under licensed brands. Under the Company's 17FOX brand (previously "17VEE"), the Company has built a leading intellectual property based motion gaming business ranging from Bluetooth-enabled motion gaming controllers and software to a planned proprietary set-top motion game box. 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," "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 COMPREHENSIVE INCOME | |||||||
(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 | |||||
2013 | 2013 | 2012 | 2013 | 2012 | |||
Revenues: | |||||||
ODP | $20,128 | $21,321 | $13,311 | $55,981 | $45,726 | ||
Brand name phone sales | 8,392 | 8,096 | 11,329 | 26,789 | 38,649 | ||
Game | 1,643 | 486 | 6,909 | 5,531 | 22,256 | ||
Total net revenues | $30,163 | $29,903 | $31,549 | $88,301 | $106,631 | ||
Cost of revenues: | |||||||
ODP | $19,059 | $18,280 | $12,222 | $50,496 | $43,394 | ||
Brand name phone sales | 6,414 | 6,384 | 7,783 | 20,676 | 25,310 | ||
Game | 1,303 | 373 | 4,337 | 4,315 | 12,569 | ||
Total cost of revenues | $26,776 | $25,037 | $24,342 | $75,487 | $81,273 | ||
Gross Profit | $3,387 | $4,866 | $7,207 | $12,814 | $25,358 | ||
Operating expenses: | |||||||
General and administrative | $1,722 | $1,193 | $669 | $4,662 | $3,637 | ||
Research and development | 1,884 | 2,334 | 2,192 | 6,063 | 7,333 | ||
Selling and marketing | 657 | 684 | 1,545 | 1,988 | 11,527 | ||
Impairment of intangible assets | - | 515 | 702 | 515 | 702 | ||
Total operating expenses | $4,263 | $4,726 | $5,108 | $13,228 | $23,199 | ||
Government subsidy income | 170 | 84 | 99 | 273 | 188 | ||
Other operating income | 297 | 580 | 281 | 1,161 | 649 | ||
(Loss) income from operations | $(409) | $804 | $2,479 | $1,020 | $2,996 | ||
Interest expenses | (1) | (36) | - | (37) | - | ||
Interest income | 447 | 456 | 523 | 1,426 | 1,604 | ||
Other income (expense) | 4 | 13 | (313) | 17 | (309) | ||
Change in fair value of put option | (30) | (60) | (90) | (120) | (90) | ||
Income before income taxes | $11 | $1,177 | $2,599 | $2,306 | $4,201 | ||
Income tax expenses | (1,177) | (1,106) | (1,518) | (3,037) | (3,488) | ||
Net (loss) income | $(1,166) | $71 | $1,081 | $(731) | $713 | ||
Less: net (loss) income attributable to the noncontrolling interest | (196) | (187) | 205 | (325) | 964 | ||
Net (loss) income attributable to TechFaith | $(970) | $258 | $876 | $(406) | $(251) | ||
Net (loss) income attributable to TechFaith per share | |||||||
Basic | $(0.00) | $0.00 | $0.00 | $(0.00) | $0.00 | ||
Diluted | $(0.00) | $0.00 | $0.00 | $(0.00) | $0.00 | ||
Net (loss) income attribute to TechFaith per ADS | |||||||
Basic | $(0.02) | $0.00 | $0.02 | $(0.01) | $(0.00) | ||
Diluted | $(0.02) | $0.00 | $0.02 | $(0.01) | $(0.00) | ||
Net (loss) income | $(1,166) | $71 | $1,081 | $(731) | $713 | ||
Other comprehensive income, net of tax | |||||||
Foreign currency translation adjustment | 3,974 | 978 | 4,008 | 5,984 | 642 | ||
Comprehensive income | 2,808 | 1,049 | 5,089 | 5,253 | 1,355 | ||
Less: Comprehensive income (loss) attributable to noncontrolling interest | 109 | (72) | 482 | 180 | 1,043 | ||
Comprehensive income attributable to TechFaith | $2,699 | $1,121 | $4,607 | $5,073 | $312 | ||
Weighted average shares | |||||||
Basic | 794,003,193 | 794,003,193 | 794,003,193 | 794,003,193 | 794,003,193 | ||
Diluted | 794,003,193 | 794,003,193 | 794,003,193 | 794,003,193 | 794,003,193 | ||
CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED | ||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(In Thousands of U.S. Dollars) | ||||||
September 30, 2013 | June 30, 2013 | December 31, 2012 | ||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $267,024 | $257,715 | $257,950 | |||
Accounts receivable | 25,156 | 21,665 | 8,666 | |||
Notes receivable | 33 | - | - | |||
Inventories | 7,681 | 8,189 | 7,490 | |||
Prepaid expenses and other current assets | 8,394 | 8,815 | 15,678 | |||
Total current assets | $308,288 | $296,384 | $289,784 | |||
Property, plant and equipment, net | $46,517 | $47,286 | $44,084 | |||
Land use rights, net | 10,669 | 10,694 | 10,645 | |||
Construction in progress | 41,732 | 40,252 | 36,530 | |||
Acquired intangible assets, net | 4,863 | 4,041 | 4,061 | |||
Goodwill | 1,242 | 1,242 | 1,242 | |||
Total assets | $413,311 | $399,899 | $386,346 | |||
Liabilities and shareholders' equity | ||||||
Current liabilities: | ||||||
Accounts payable (including accounts payable of the consolidated variable interest entity without recourse to China Techfaith Wireless Communication Technology Limited, $nil, $nil and $nil as of September 30, 2013, June 30, 2013 and December 31, 2012, respectively) | 19,795 | 19,180 | 11,140 | |||
Accrued expenses and other current liabilities(including accrued expenses and other current liabilities of the consolidated variable interest entity without recourse to China Techfaith Wireless Communication Technology Limited, $187, $187 and $184 as of September 30, 2013, June 30, 2013 and December 31, 2012, respectively) | 18,007 | 15,212 | 13,464 | |||
Advance from customers(including advance from customers of the consolidated variable interest entity without recourse to China Techfaith Wireless Communication Technology Limited, $nil, $nil and $nil as of September 30, 2013, June 30, 2013 and December 31, 2012, respectively) | 9,602 | 9,885 | 9,173 | |||
Deferred revenue(including deferred revenue of the consolidated variable interest entity without recourse to China Techfaith Wireless Communication Technology Limited, $nil, $nil and $nil as of September 30, 2013, June 30, 2013 and December 31, 2012, respectively) | 2,756 | 2,527 | 4,178 | |||
Income tax payable (including income tax payable of consolidated variable interest entity without recourse to China Techfaith Wireless Communication Technology Limited, $22, $22 and $21 as of September 30, 2013, June 30, 2013 and December 31, 2012, respectively) | 1,606 | 1,000 | 1,062 | |||
Short-term loan (including short-term loan of the consolidated variable interest entity without recourse to China Techfaith Wireless Communication Technology Limited, $nil, $nil and $nil as of September 30, 2013, June 30, 2013 and December 31, 2012, respectively) | 15,350 | 15,350 | 15,350 | |||
Total current liabilities | $67,116 | $63,154 | $54,367 | |||
Long-term loan | 290 | 290 | 290 | |||
Total liabilities | $67,406 | $63,444 | $54,657 | |||
Shareholders' equity | ||||||
Paid in capital | $16 | $16 | $16 | |||
Additional paid-in capital | 143,680 | 143,399 | 142,837 | |||
Accumulated other comprehensive income | 52,301 | 51,438 | 46,822 | |||
Statutory reserve | 23,137 | 23,137 | 23,137 | |||
Retained earnings | 93,066 | 92,808 | 93,472 | |||
Total Techfaith shareholders' equity | $312,200 | $310,798 | $306,284 | |||
Noncontrolling interest | $33,705 | $25,657 | $25,405 | |||
Total shareholders' equity | $345,905 | $336,455 | $331,689 | |||
Total liabilities and shareholders' equity | $413,311 | $399,899 | $386,346 | |||
