SOURCE: China TechFaith

November 13, 2007 16:00 ET

TechFaith Reports Third Quarter 2007 Results

BEIJING, CHINA--(Marketwire - November 13, 2007) - China TechFaith Wireless Communication Technology Limited (NASDAQ: CNTF), an ODM focused on research and development of cell phone solutions, today announced its unaudited financial results for the third quarter ended September 30, 2007.

Net revenues for the third quarter of 2007 were US$38.4 million, a 122.8% increase compared to US$17.3 million for the same period in 2006. Net income for the third quarter of 2007 was US$1.6 million or US$0.04 per weighted average outstanding ADS (basic and diluted) compared to a net loss of US$6.5 million or US$0.15 per weighted average outstanding ADS (basic and diluted) for the same period in 2006. TechFaith ended the third quarter of 2007 with a balance of US$84.9 million in cash and cash equivalents and US$5.2 million in restricted cash.

Defu Dong, TechFaith's Chairman and CEO, said, "We are excited and encouraged by our third quarter results. We achieved 20.0% sequential growth in revenues, and returned to profitability ahead of plan. We continue to make significant progress and have quickly become one of the most successful new ODMs in China with 82.5% of our total revenue coming from ODM business. We announced several major new contracts, strategic partnerships and products in the quarter. Of note, we were recently granted a new license agreement from Qualcomm. TechFaith, as a handset ODM, is now able to develop, manufacture and sell products covering the 3G spectrum, including CDMA2000, WCDMA/UMTS and TD-SCDMA. We are also excited about our successful launch of the world's first WCDMA/GSM dual mode dual standby phone known as 'Twins,' and our launch of the world's first Windows-based GSM/CDMA dual mode dual standby pocket PC phone known as 'Gallic.' In addition, we announced our first contract from a customer that is not in the traditional telecommunications sector. We expect to benefit from strong demand in the broader, non-telecommunications market going forward, as our custom developed phones are adopted to meet needs ranging from security and surveillance, to data management, GPS/location based tracking and other data and communications needs."

Bob Huo, TechFaith's Deputy CEO, added, "Based on our results and customer demand, we are confident we have the right business model in place. TechFaith is now providing dual mode, dual SIM and dual standby handsets with technology combinations including GSM/GSM, GSM/CDMA1X, WCDMA/GSM. We expect to develop additional handset models that combine different technologies in the future. For medium- and high-end markets, TechFaith now offers feature phones and smart phones based on 3G and 3.5G technologies, including WCDMA, EVDO, TD-SCDMA and HSDPA. We have diversified our customer base by successfully penetrating the China market, as well as other markets worldwide. We expect TechFaith will benefit from continued strong global ODM demand over the coming quarters, and at the same time, maintaining strict operating cost controls. We are confident our current headcount level can support a much higher revenue level, and have no plans to increase our hiring. Our goal is to further strengthen our supply chain management as we optimize our cost structure. Overall, we expect revenue in the fourth quarter to increase by 10%-14% over the third quarter."

TechFaith's ADSs, each of which represents 15 ordinary shares of TechFaith, are currently trading on the Nasdaq Global Market under the symbol ''CNTF.''

Investor Conference Call / Webcast Details

The dial-in number for the live audio call beginning on November 13, 2007 at 7:00 p.m. U.S. Eastern Time (8:00 a.m., November 14, 2007 in Beijing) is +1-866-713-8565 (domestic) or +1-617-597-5324 (international). The passcode is 56065255. A live webcast of the conference call will be available on TechFaith's website at www.techfaithwireless.com.

A replay of the call will be available on November 13, 2007 at 9:00 p.m., U.S. Eastern Time (10:00 a.m., November 14, 2007 in Beijing) through midnight on November 20, 2007, U.S. Eastern Time (1:00 p.m., November 21, 2007 in Beijing) at www.techfaithwireless.com and by telephone at +1-888-286-8010 (domestic) or +1-617-801-6888 (international). The passcode to access the replay is 79569228.

About TechFaith

TechFaith (NASDAQ: CNTF) is an original design manufacturer, or ODM, focused on research and development of cell phone solutions. Based in China, the Company employs approximately 1,200 professionals, of whom 90% are engineers. TechFaith's business includes handset design, feature phone solution, data card and wireless module, application software, and smartphone and pocket PC. With the capability of developing MMI / UI software on 2/2.5G(GSM/GPRS, CDMA1X), 3G(EV-DO, WCDMA/UMTS, TD-SCDMA) and 3.5G(HSDPA) communication technologies, TechFaith is able to provide MMI/UI software packages that fulfill the specifications of handset brand owners and major global operators. Having a full range of wireless application software including WAP, Java, MMS, WWW browser, SyncML and DRM, TechFaith is also providing total solutions for upper layer software of handsets. In addition, TechFaith is developing smartphone software based on open operating systems including Linux and Windows Mobile, and capable of implementing high-end smartphones integrating Bluetooth, WiFi, high megapixel cameras, etc. based on different communication technologies according to special requirements of customers. 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" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as TechFaith's strategic and operational plans, 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, TechFaith's limited operating history, TechFaith's ability to retain existing or attract additional domestic and international customers, TechFaith's earnings or margin declines, failure to compete against new and existing competitors, mobile handset brand owners' discontinuation or reduction of the use of independent design houses, and other 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       Nine Months Ended
              June 30          September 30              September 30
               2007         2006         2007         2006         2007
           -----------  -----------  -----------  -----------  -----------
Revenues:
Design
 Fees      $     5,185  $     4,131  $     5,425  $    25,571  $    20,728
Royalty
 income          2,638        1,764        1,280        5,810        6,713
Component
 and products
 sales          24,204       11,358       31,723       20,274       70,294
Service
 income              -            -           18            -           18
           -----------  -----------  -----------  -----------  -----------
Total net
 revenues  $    32,027  $    17,253  $    38,446  $    51,655  $    97,753

Cost of
 revenues:
Design
 fees      $     3,906  $     3,945  $     2,177  $    17,200  $    13,828

Royalty
 income              -            -            -            -            -
Component
 and products
 sales          20,499        9,744       27,096       17,000       59,583
Service Cost         -            -            4            -            4
           -----------  -----------  -----------  -----------  -----------
Total cost of
 revenues  $    24,405  $    13,689  $    29,277  $    34,200  $    73,415

Gross
 Profit    $     7,622  $     3,564  $     9,169  $    17,455  $    24,338

Operating
 expenses:
General
 and
 administra-
 tive      $     4,187  $     4,137  $     1,839  $     9,056  $     8,162
Research
 and
 development     8,549        7,688        6,524       14,145       23,068
Selling
 and marketing     844          605          794        1,612        2,554
Exchange
 loss              439           28          357           28        1,338
           -----------  -----------  -----------  -----------  -----------
Total
 operating
 expenses  $    14,019  $    12,458  $     9,514  $    24,841  $    35,122

Other
 operating
 income            789          154          864          160        1,653

(Loss)
 income
 from
 opera-
 tions     $    (5,608) $    (8,740) $       519  $    (7,226) $    (9,131)

Interest
 expense           (38)          (4)         (89)          (4)        (140)
Other
 income,
 net               826        1,359          905        3,741        2,681
Change in
 fair value of
 call option       (72)           -           24            -          (31)
           -----------  -----------  -----------  -----------  -----------
Income
 before
 income
 taxes     $    (4,892) $    (7,385) $     1,359  $    (3,489) $    (6,621)
Income tax          (3)           -            -          (15)          (3)
           -----------  -----------  -----------  -----------  -----------
Income
 before
 minority
 interests $    (4,895) $    (7,385) $     1,359  $    (3,504) $    (6,624)
Minority
 interests         245          906          226        1,361          977
Equity in
 loss of an
 affiliate           -            -            -            -         (851)
           -----------  -----------  -----------  -----------  -----------
Net (loss)
 income    $    (4,650) $    (6,479) $     1,585  $    (2,143) $    (6,498)
           -----------  -----------  -----------  -----------  -----------

Net income
 per ordinary
 share
  Basic    $     (0.01) $     (0.01) $         -  $         -  $     (0.01)
           ===========  ===========  ===========  ===========  ===========
  Diluted  $     (0.01) $     (0.01) $         -  $         -  $     (0.01)
           ===========  ===========  ===========  ===========  ===========

Net income
 per ADS*
  Basic    $     (0.11) $     (0.15) $      0.04  $     (0.05) $     (0.15)
           ===========  ===========  ===========  ===========  ===========
  Diluted  $     (0.11) $     (0.15) $      0.04  $     (0.05) $     (0.15)
           ===========  ===========  ===========  ===========  ===========

Weighted
 average
 ordinary
 shares
 outstanding
  Basic    649,758,772  658,234,687  649,863,772  658,200,690  649,794,157
           ===========  ===========  ===========  ===========  ===========
  Diluted  649,758,772  658,234,687  649,863,772  658,200,690  649,794,157
           ===========  ===========  ===========  ===========  ===========



Revenue
 Breakout      1Q06     2Q06     3Q06     4Q06     1Q07     2Q07     3Q07
             -------- -------- -------- -------- -------- -------- --------
Design fees
 International
  customers  $  5,737 $  5,299 $  3,546 $  1,883 $  9,463 $  4,811 $  2,687
 Domestic
  customers  $  3,253 $  7,151 $    585 $  2,410 $    655 $    374 $  2,738

Royalty
 International
  customers  $    454 $    918 $    184 $    141 $    300 $    461 $    194
 Domestic
  customers  $    638 $    885 $  1,285 $  1,723 $  1,851 $  1,427 $    925
 Component
  vendors    $    757 $    394 $    295 $      - $    644 $    750 $    161

Component
 and products
 Smart Phone $      - $  1,906 $  3,074 $ 13,055 $  4,014 $  6,557 $  8,688
 PCBA        $      - $    271 $  3,016 $  3,243 $  2,149 $  2,454 $    717
 Wireless
  module     $  1,304 $  2,776 $  4,808 $  4,039 $  1,452 $  7,202 $  2,483
 Feature
  phone      $      - $      - $      - $    452 $  3,787 $  5,349 $ 18,153
 Other
  component
  sales      $    689 $  1,970 $    460 $  2,203 $  2,965 $  2,642 $  1,682

Service
 income      $      - $      - $      - $      - $      - $      - $     18

             -------- -------- -------- -------- -------- -------- --------
Total net
 revenues    $ 12,832 $ 21,570 $ 17,253 $ 29,149 $ 27,280 $ 32,027 $ 38,446
             ======== ======== ======== ======== ======== ======== ========



        CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
         UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                      (In Thousands of U.S. Dollars)


                                  For Three Months      For Nine Months
                                        Ended                 Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2006       2007       2006       2007
                                ---------  ---------  ---------  ---------
Cash flows from operating
 activities:
Net (loss) income               $  (6,479) $   1,585  $  (2,143) $  (6,498)
Adjustments to reconcile net
 income to net cash (used in)
 provided by operating
 activities                         6,039     (9,025)    17,168     (7,972)

                                ---------  ---------  ---------  ---------
Net cash (used in) provided by
 operating activities           $    (440) $  (7,440) $  15,025  $ (14,470)
                                ---------  ---------  ---------  ---------

Cash flows from investing
 activities:
Deposit paid for acquisition of
 and purchase of plant,
 machinery and equipment           (4,378)       (24)    (6,020)    (8,556)
Purchase of plant, machinery
 and equipment                    (13,539)      (296)   (15,035)    (7,821)
Purchase of acquired intangible
 assets                                 -       (145)         -       (145)
Purchase of equity in a
 subsidiary from minority
 shareholder                            -          -          -     (1,361)
Investment in an affiliate              -          -     (1,243)         -
Proceeds on disposal of plant,
 machinery and equipment                -          -          1         40
Decrease in restricted cash             -     11,932          -        (23)

Net cash (used in) provided by
 investing activities           $ (17,917) $  11,467  $ (22,297) $ (17,866)
                                ---------  ---------  ---------  ---------

Net cash (used in) provided by
 financing activities:          $   3,000  $ (10,794) $   3,000  $    (289)
                                ---------  ---------  ---------  ---------

Effect of exchange rate changes $     697  $   1,497  $   1,343  $   4,367

Net increase (decrease) in cash
 and equivalents                  (14,660)    (5,270)    (2,929)   (28,258)
Cash and equivalents, beginning
 of the period                    148,938     90,184    137,207    113,172

                                ---------  ---------  ---------  ---------
Cash and equivalents, end of
 the period                     $ 134,278  $  84,914  $ 134,278  $  84,914
                                =========  =========  =========  =========



        CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
              UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In Thousands of U.S. Dollars)


                                    September 30,   June 30,  September 30,
                                        2006          2007        2007
                                     -----------  -----------  -----------
Assets
Current assets:
Cash and cash equivalents            $   131,335  $    90,184  $    84,914
Restricted cash                            2,943       17,160        5,228
Accounts receivable                       28,285       45,828       45,617
Notes receivable                           1,299        6,403        1,992
Inventories                                8,053       19,715       34,442
Prepaid expenses and other current
 assets                                    9,477        7,790        8,558
                                     -----------  -----------  -----------
Total current assets                 $   181,392  $   187,080  $   180,751
                                     -----------  -----------  -----------

Deposits for acquisition of plant,
 machinery and equipment, and
 acquisition of intangible assets    $     4,448  $     8,570  $     8,713
Plant, machinery and equipment, net       27,292       28,832       27,639
Acquired intangible assets, net              560          264          320
Goodwill                                       6          606          606
Long-term investment in an affiliate       1,243            -            -
                                     -----------  -----------  -----------
Total assets                         $   214,941  $   225,352  $   218,029
                                     ===========  ===========  ===========

Liabilities and shareholders' equity
Current liabilities:
Current portion of Long term payable $         -  $       479  $       599
Short term Loan                                -       10,505            -
Accounts payable                          10,442       28,669       31,825
Note Payable                                 443            -            -
Accrued expenses and other current
 liabilities                              16,994       13,246       10,943
Advance from customers                     4,233        5,460        5,473
Deferred revenue                           3,068        2,693        2,284
Income tax payable                            54          139          139
                                     -----------  -----------  -----------
Total current liabilities            $    35,234  $    61,191  $    51,263

Long-term payable                    $       812  $       409  $         -
                                     -----------  -----------  -----------

Total liabilities                    $    36,046  $    61,600  $    51,263
                                     -----------  -----------  -----------

Minority interests                   $     4,296  $     2,109  $     1,883
Shareholders' equity
Ordinary shares                      $        13  $        13  $        13
Additional paid-in capital               109,793      110,273      110,312
Treasury stock                              (610)      (4,628)      (4,628)
Accumulated other comprehensive
 income                                    2,960        8,275        9,891
Statutory reserve                          5,189        6,093        6,093
Retained earnings                         57,254       41,617       43,202
                                     -----------  -----------  -----------
Total shareholders' equity           $   174,599  $   161,643  $   164,883
                                     -----------  -----------  -----------
Total liabilities and shareholders'
 equity                              $   214,941  $   225,352  $   218,029
                                     ===========  ===========  ===========

Contact Information

  • CONTACTS:
    In China:
    Ms. Helen Zhang
    Tel: 86-10-5822-7390
    Email Contact

    In the U.S.:
    David Pasquale
    EVP at The Ruth Group
    Tel:+646-536-7006
    Email Contact