Trunkbow Announces Fourth Quarter and Full Year 2011 Financial Results

BEIJING, March 30, 2012 /PRNewswire-Asia/ -- Trunkbow International Holdings Limited (NASDAQ: TBOW) ("Trunkbow" or the "Company"), a leading provider of Mobile Payment Solutions ("MPS") and Mobile Value Added Services ("MVAS") in the People's Republic of China, today announced financial results for its fourth quarter and full year ended December 31, 2011.

Full Year 2011 Financial Highlights

• Gross revenue increased 19.6% year-over-year to $29.7 million, compared with $24.8 million in 2010.
  • MVAS gross revenue grew 37.7% to $17.4 million
  • MPS gross revenue grew 0.8% to $12.3 million
• Gross profit increased 17.9% year-over-year to $22.9 million, compared with $19.5 million in 2010.
• Net income increased 25.1% year-over-year to $16.9 million, or $0.47 per diluted share. This compared with net income of $13.5 million, or $0.44 per diluted share, in 2010.
• As of December 31, 2011, cash and cash equivalents totaled $6.1 million, compared with $10.3 million as of December 31, 2010.
• Introduced full-year 2012 guidance of approximately $23 million in net income, representing 36% growth compared with 2011.

Fourth Quarter 2011 Financial Highlights

• Gross revenue was $9.7 million, compared with $13.9 million in the fourth quarter of 2010.
  • MPS gross revenue increased to $8.2 million, compared with $7.0 million in the fourth quarter of 2010.
  • MVAS gross revenue totaled $1.5 million, compared with $6.9 million a year ago.
• While gross profit decreased 17.5% year-over-year to $8.3 million, from $10.1 million in the fourth quarter of 2010, gross margin improved to 86.7%, compared with 73.6% in the fourth quarter of 2010.

2011 and Recent Business Highlights

• Partnered with China UnionPay, China's leading bankcard association, to launch the Trunkbow UnionPay mobile payment applet, enabling simple, secure M-commerce transactions through China's largest financial clearing house.
• Extended partnership with China UnionPay to develop and deploy new online-to-offline payment system.
• Launched first MPS platform with China Mobile in Hebei Province.
• Expanded presence with China Unicom through installation of an MPS platform in Hubei Province, increasing total penetration through this carrier to ten provinces.
• Entered strategic partnership with China Telecom for nationwide rollout of Bestpay MPS application to the carrier's 28 million 3G subscribers.
• Signed agreement with group of online retailers to enable the purchase of movie tickets at over 270 theaters using the Bestpay application.

"2011 began with our initial public offering on the Nasdaq, and throughout the year we made progress against our key strategic growth objectives while generating record full-year revenue, gross profit and net income. We significantly expanded our geographic presence with wireless carriers, finishing the year with 27 platform installations in 19 provinces nationwide and signed two important software partnerships, with China Telecom and China UnionPay, which will greatly increase our subscriber penetration and position us well to ramp our merchant acquisition efforts in the new year," said Mr. Qiang Li, Chief Executive Officer of Trunkbow." Through the end of 2011, approximately 1 million mobile users had made a purchase using our physical Point-of-Sale or software-based MPS technology, a number that we expect to increase dramatically in 2012 as we continue to grow our merchant network through new POS terminal installations and application partnerships.

"We believe that MPS adoption presents a compelling value proposition for merchants both online and off-line, and is an important tool that can be used for customer engagement and to improve the overall purchasing experience. By integrating features such as loyalty and rewards programs, location-based services, mobile couponing and handset-based alerts, we believe that MPS can simplify consumers' lives while helping merchants attract new shoppers and retain existing customers. We expect that the recurring revenue generated by the shift in our MPS business will provide a solid foundation for our expected 20% top-line growth in 2012. We are well positioned to build upon our leadership position in the world's largest mobile phone market, not only growing our business, but helping drive the growth of this emerging industry."

Fourth Quarter 2011 Results

Gross revenue in the fourth quarter of 2011 was $9.7 million, compared with gross revenue of $13.9 million in the same period a year ago. Revenue from MPS increased to $8.2 million in the fourth quarter of 2011, compared with $7.0 million in the year-ago period. The increase in MPS revenue was primarily related to the continued rollout of mobile payment platforms in new provinces. Revenue from the Company's MVAS offering totaled $1.5 million, compared with $6.9 million in the fourth quarter of 2010. The year-over-year decline in revenue was primarily attributable to reduced customer demand in the fourth quarter of 2011.

Cost of revenue in the fourth quarter of 2011 was $1.3 million, compared with $3.6 million in the same period of 2010. The decrease in cost of revenue was primarily attributed to the decrease in MVAS gross sales.

Gross profit in the fourth quarter of 2011 totaled $8.3 million, compared with $10.1 million in the fourth quarter of 2010. As a percentage of gross revenue, gross margin was 86.7% in the fourth quarter of 2011, compared with 73.6% in the year-ago period. The increase in gross margin was primarily attributable to increased profitability associated with the Company's MPS software sales.

Operating expenses in the fourth quarter of 2011 were $4.4 million, compared with $1.9 million in the fourth quarter of 2010, with the increase driven primarily by increased selling expenses to support the Company's direct sales and merchant acquisition efforts, as well as increased general and administrative expenses related to being a US public company. Operating expenses in the fourth quarter of 2011 also included $0.9 million of general and administrative expenses related to a provision for doubtful debts.

Operating income in the fourth quarter of 2011 was $3.9 million, compared with $8.2 million reported in the year-ago period. The decrease in operating income for the quarter was primarily related to the decrease in revenue associated with MVAS and the increased operating expenses including the abovementioned provision for doubtful debts, partially offset by gross margin improvement.

Net income attributable to Trunkbow was $4.8 million in the fourth quarter of 2011, a decrease of 41.5% from the comparable period in 2010. Net margin was 50.1% in the fourth quarter of 2011, compared with 60.0% in the fourth quarter of 2010. Earnings per diluted share in the fourth quarter of 2011 were $0.13 compared to $0.25 per diluted share in the year-ago period.

Balance Sheet and Cash Flow

As of December 31, 2011, the Company had $6.1 million in cash and cash equivalents, compared with $10.3 million as of December 31, 2010. The decrease in cash and cash equivalents was primarily due to increases in inventories, accounts receivable, advances to suppliers, property and equipment, and land use rights, partially offset by the proceeds from the Company's initial public offering completed in February 2011. As of December 31, 2011, the Company had working capital of $62.0 million and total shareholders' equity of $82.2 million. Accounts receivable on December 31, 2011 totaled approximately $41.1 million. As of March 30, 2012, the Company had collected approximately $5.7 million of these outstanding receivables.

Business Outlook

Trunkbow introduced 2012 financial guidance, which calls for approximately $23 million in net income, representing 36% growth over 2011. The Company expects that this growth will be largely the result of the continued expansion of the MPS and MVAS markets, as it develops its merchant network, broadens its presence in new provinces, increases its penetration within China's leading mobile carriers and launches its technology in strategically targeted international markets.

Mr. Li concluded, "Our accomplishments in 2011 included strong double-digit growth across each of our key operating metrics. Looking ahead, as we execute on our merchant acquisition strategy and shift the mix of MPS sales form one-time system installations toward a recurring revenue model driven by function fees and transaction-based revenue, we expect to see greater top-line stability and a steadier revenue ramp. Mobile phones are already an integral part of consumers' lives, and their importance is increasing every day through enhancements and the addition of new functionalities. One such functionality is the use of the handset as a payment method, something that Chinese consumers are just beginning to adopt. We expect to see rapid growth in end-user uptake as more merchants implement MPS to give their customers a new, simple and secure payment alternative. Through our partnerships with China's three mobile carriers and its dominant financial clearing house, our technological leadership and concentrated growth strategy, Trunkbow is poised to lead the MPS revolution in China, and we look forward to the opportunities that lie ahead."

Conference Call

The Company will host a conference call to discuss financial results for the fourth quarter and full year 2011 on March 30, 2012, at 10:00 a.m. EDT. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1 (718) 354-1231. International callers should dial +65 6723-9381. The pass code required is 22600413. A live webcast of the conference call will be available on the investor relations section of Trunkbow's website at http://www.trunkbow.com, and will be archived for a period of one year.

If you are unable to participate in the call, a replay will be available for 14 days beginning approximately two hours after the conclusion of the live call. To access the replay, please dial +1 (718) 354-1232, international callers dial +61 (2) 8235-5000, and enter the passcode 62605401.

About Trunkbow

Trunkbow International Holdings (NASDAQ: TBOW) is a leading provider of Mobile Payment Solutions ("MPS") and Mobile Value Added Solutions ("MVAS") in PRC. Trunkbow's solutions enable the telecom operators to offer their subscribers access to unique mobile applications, innovative tools, value-added services that create a superior mobile experience, and as a result generate higher average revenue per user and reduce subscriber churn. Since its inception in 2001, Trunkbow has established a proven track record of innovation, and has developed a significant market presence in both the Mobile Value Added and Mobile Payment solutions markets. Trunkbow supplies to all three Chinese mobile telecom operators, as well as re-sellers, in several provinces of China. For additional information please visit http://www.trunkbow.com

Safe Harbor Statement

This press release contains forward-looking statements that reflect the Company's current expectations and views of future events that involve known and unknown risks, uncertainties and other factors that may cause its actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward looking statements involve known and unknown risks and uncertainties, including but not limited to uncertainties relating to the Company's relationship with China's major telecom carriers and its resellers, competition from domestic and international companies, changes in technology, contributions from revenue sharing plans and general economic conditions. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. You should understand that the Company's actual future results may be materially different from and worse than what the Company expects. Information regarding these risks, uncertainties and other factors is included in the Company's annual report on Form 10-K and other filings with the SEC.

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