SOURCE: Zoom Technologies

Zoom Technologies

August 19, 2010 16:05 ET

Zoom Technologies Reports Second Quarter 2010 Results

Reaffirms 2010 Net Income Guidance, LEIMONE Brand Continues High Acceptance by Mobile Phone Users

BEIJING--(Marketwire - August 19, 2010) -  Zoom Technologies, Inc. (NASDAQ: ZOOM)

Financial Highlights:

  • Second quarter net income reached $2.03 million, up 20% year-over-year and up 7% sequentially
  • Second quarter net margin increased to 4.7%
  • Revenue for first six months increased 14.5% as compared to last year, despite impact of decreased second quarter pass-through revenue
  • Net income for the first six months grew 50.0% over last year to $3.93 million
  • LEIMONE brand phone sales reached 128,000 units

Guidance:

  • Third Quarter 2010 net income between $2.7 and $3.3 million
  • Third Quarter 2010 revenues between $55 and $61 million
  • Reaffirms full year 2010 net income guidance of between $11.5 and $12.5 million
  • Revises full year 2010 revenues guidance to between $210 and $230 million reflecting impact of pass-through revenue
  • Expects to sell 600,000 LEIMONE units in 2010

Zoom Technologies, Inc. (NASDAQ: ZOOM), a leading China-based manufacturer of mobile phones and other mobile electronic products, reported financial results for the second quarter ended June 30, 2010.

Mr. Lei Gu, Chairman and Chief Executive Officer of Zoom Technologies, commented, "We continue to gain market share and increase presence with our 3G LEIMONE brand phones in China. We are thrilled to report six month year-over-year revenue growth and sequentially higher net income, and we are encouraged by the strong acceptance of our LEIMONE brand phone in China. The decrease in our second quarter revenue is solely a reflection of the strength in our consignment business which impacted the total revenue figure while leaving net income unaffected. During the second quarter, one of our major customers provided us components that are normally sourced by Zoom and would have been included in our revenue. This is not a sign of reduced business activity, since we actually increased our manufacturing volume and posted higher net income than the previous quarter. We believe that the increased production capacity, along with the strength of our EMS business, will contribute to improving our margins and further our revenue growth through the second half of 2010."

For the second quarter of 2010, Zoom reported net revenue of $42.9 million, as compared to $53.1 million for the second quarter 2009. The reduced revenue figure in the quarter was due to proportionally more "consignment manufacturing" where the customer provided the components and Zoom was not required to procure components, resulting in less pass-through revenues. As a result, gross and net margins this quarter increased to 10.7% and 4.7% respectively, as compared to 5.9% and 3.2% respectively for the year ago quarter. The increase in margins was also attributed to the sales of Zoom's proprietary LEIMONE brand phones which carry higher margins.

Manufacturing volumes increased sequentially in the second quarter of 2010. Zoom manufactured 1.7 million mobile phone printed circuit board assembly (PCBA) units and 1.0 million whole phones in the quarter, up 17% and 14% respectively over the first quarter 2010. Revenue from the sale of our higher margin LEIMONE brand phones in the second quarter was $4.5 million, or 10.4% of total revenue. During the quarter, Zoom sold 56,714 units of LEIMONE brand mobile phones of which 18% were 3G units. Zoom did not sell its own branded phones in the year ago period.

Gross profit for the second quarter of 2010 was $4.58 million, up 45% from $3.16 million for the same quarter in 2009, and up 10% sequentially from $4.18 million for the first quarter 2010. 

Net income for the second quarter was $2.03 million, up 20% from $1.70 million for the same quarter last year, and up 7.3% from $1.90 million of the first quarter 2010. Earnings per share for the second quarter 2010 was $0.17 as compared to $0.86 per share in the same quarter last year when the operating entity was a private company in China.

For the first six months of 2010, Zoom reported net revenue of $93.86 million, up 14.5% over $81.95 million for the first six months of 2009. The year over year revenue growth was primarily due to an increase in orders from domestic EMS customers and an increase in sales of Zoom's proprietary LEIMONE phones. 

Mr. Gu continued, "We continue to build traction as a leading consumer recognized brand. This leadership is reflected by the launch of our third 3G LEIMONE phone reflects Zoom's outstanding technology and continues to solidify our already strong relationship with China Telecom. Zoom believes it is well positioned to benefit from the outstanding growth expected in the design and production of advanced mobile phones for China's 3G network. With the successful launches of several LEIMONE models so far in 2010, the Company anticipates selling more than 600,000 LEIMONE units by the end of this year. We are confident that our mobile phones will appeal to China's burgeoning young customer base."

Looking ahead, Mr. Gu remarked, "We will continue to focus on our mobile manufacturing business in the second half of 2010, as the market opportunity in China is enormous. We are ready to take advantage of the foreseeable growth in China's mobile market. For the third quarter 2010, we expect net revenue to be between $55 million and $61 million and net income is expected to be in the range of $2.7 and $3.3 million. For the full year 2010, we maintain our net income guidance of $11.5 million to $12.5 million, and revise our net revenue to be between $210 and $230 million reflecting the impact of pass-through revenue."

Conference Call Details
The company will host an investor call at 4:30pm EDT (1:30pm Pacific). To access the conference call, dial 877-941-2069 and enter access code 4351698. Callers outside the U.S. and Canada should dial 480-629-9713 and enter access code 4351698.

A replay of the conference call will be available through Thursday, August 26, 2010. To access the replay, please dial 800-406-7325 and enter access code 4351698. Callers outside the U.S. and Canada should dial 303-590-3030 and enter access code 4351698.

About Zoom Technologies, Inc.
Zoom Technologies is a holding company with subsidiaries that engage in the manufacturing, research and development, and sale of electronic and telecommunication products for the latest generation mobile phones, wireless communication circuitry, and related software products. Zoom Technologies' subsidiary, Jiangsu Leimone, owns a majority stake of TCB Digital, which offers highly customized and high quality Electronic Manufacturing Service (EMS) for Original Equipment Manufacturer (OEM) customers as well as its own brand under the brand name of Leimone. The company's products are both exported and sold domestically. For more information about Zoom Technologies please visit Zoom's corporate website at http://www.zoomleimone.com.

Forward-Looking Statements
Certain statements in this press release may constitute "forward looking statements" that involve risks and uncertainties. These include statements about our expectations, plans, objectives, assumptions or future events. You should not place undue reliance on these forward-looking statements. Information concerning factors that could cause our actual results to differ materially from these forward-looking statements can be found in our periodic reports filed with the Securities and Exchange Commission. We undertake no obligation to publicly release revisions to these forward-looking statements to reflect future events or circumstances or reflect the occurrence of unanticipated events.

ZOOM TECHNOLOGIES, INC.  
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME  
   
                       
  Three months ended June 30     Six months ended June 30  
  2010     2009     2010     2009  
                               
Net revenues $ 42,876,873     $ 53,133,461     $ 93,856,142     $ 81,950,018  
Cost of sales   (38,297,116 )     (49,973,216 )     (85,098,131 )     (76,105,167 )
                               
Gross profit   4,579,757       3,160,245       8,758,011       5,844,851  
                               
Operating expenses:                              
  Sales and marketing   (69,962 )     (304,696 )     (114,038 )     (1,353,019 )
  General and administrative   (910,422 )     (116,229 )     (1,815,063 )     (903,711 )
  Non-cash equity-based compensation   (413,250 )     -       (782,909 )     -  
    (1,393,634 )     (420,925 )     (2,712,010 )     (2,256,730 )
                               
Income from operations   3,186,123       2,739,320       6,046,001       3,588,121  
                               
Other income (expenses)                              
  Interest income   123,929       11,376       124,116       165,546  
  Gain/(Loss) on disposal of intangible assets   (2,027 )     -       (2,027 )     -  
  Government grant income   18,352       -       18,352       -  
  Other income   213,621       280       213,621       425,318  
  Interest expense   (424,649 )     (331,602 )     (682,275 )     (652,509 )
  Exchange (loss)   (839 )     (4,288 )     (994 )     (29,191 )
  Other expenses   (98,642 )     (37,213 )     (113,495 )     (68,773 )
  Total other income (expenses)   (170,255 )     (361,447 )     (442,702 )     (159,609 )
Income before income taxes and noncontrolling interest   3,015,868       2,377,873       5,603,299       3,428,512  
                               
Income tax expense   (1,019,280 )     (451,401 )     (1,567,406 )     (598,582 )
                               
Income before noncontrolling interest   1,996,588       1,926,472       4,035,893       2,829,930  
Less: Income/(loss) attributable to noncontrolling interest   38,060       (226,747 )     (105,543 )     (209,833 )
                               
Net income attributable to Zoom Technologies Inc   2,034,648       1,699,725       3,930,350       2,620,097  
                               
Other comprehensive income/(loss)   110,615       (961 )     111,003       15,707  
                               
Comprehensive income $ 2,145,263     $ 1,698,764     $ 4,041,353     $ 2,635,804  
                               
Basic and diluted income/(loss) per common share:                              
Basic $ 0.17     $ 0.86     $ 0.37     $ 1.32  
Diluted   0.17       0.86       0.36       1.32  
                               
Weighted average common shares outstanding:                              
  Basic   12,095,579       1,978,478       10,508,532       1,978,478  
  Diluted   12,321,977       1,978,478       10,794,055       1,978,478  
   
   
ZOOM TECHNOLOGIES, INC.  
CONSOLIDATED BALANCE SHEETS  
   
    June 30, 2010     December 31, 2009  
ASSETS   (Unaudited)        
  Current assets                
    Cash and cash equivalents   $ 2,917,641     $ 1,472,300  
    Restricted cash     12,293,276       11,993,214  
    Notes receivable     607,573       -  
    Accounts receivable, net     26,343,988       16,835,074  
    Other receivables and prepaid expenses     492,678       311,808  
    Advance to suppliers     23,002,457       27,471,601  
    Inventories, net     1,404,499       1,534,989  
    Due from related parties     12,230,017       12,221,778  
    Deferred tax assets     117,816       504,222  
  Total current assets     79,409,945       72,344,986  
                 
  Property, plant and equipment, net     5,270,457       5,673,923  
  Research and development contracts in progress     767,594       32,849  
  Construction in progress deposit - related parties     9,429,251       -  
  Intangible assets     183,463       -  
  Goodwill     8,498,897       103,057  
                 
TOTAL ASSETS   $ 103,559,607     $ 78,154,815  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
  Current liabilities                
    Short-term loans   $ 21,761,975     $ 16,000,702  
    Notes payable     24,586,552       23,986,427  
    Accounts payable     1,953,854       2,439,925  
    Advance from customers     273,492       51,243  
    Dividends payable     582,014       579,579  
    Taxes payable     3,000,310       1,603,557  
    Interest payable     356,205       -  
    Accrued expenses and other payables     1,349,196       127,484  
    Due to related parties     5,393,452       5,245,415  
                 
  Total current liabilities     59,257,050       50,034,332  
                 
  Long-term payables     580,000       -  
                 
TOTAL LIABILITIES     59,837,050       50,034,332  
                 
STOCKHOLDERS' EQUITY                
  Common stock: authorized 25,000,000 shares, par value $0.01                
                   
  Issued 12,981,456 shares and outstanding 12,979,776 shares; and Issued 8,780,988 shares and outstanding 8,779,308 shares at June 30, 2010 and December 31, 2009 respectively     129,798       87,793  
                   
  Shares to be issued     -       592  
  Subscription receivable     -       (378 )
  Deferred expenses     (423,979 )     -  
  Additional paid-in capital     29,907,832       14,309,538  
  Treasury shares: 1,680 shares at cost     (7,322 )     (7,322 )
  Statutory surplus reserve     689,473       633,378  
  Accumulated other comprehensive income     321,776       210,773  
  Retained earnings     10,128,734       6,254,479  
                 
TOTAL STOCKHOLDERS' EQUITY     40,746,312       21,488,853  
  Noncontrolling interest     2,976,245       6,631,630  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 103,559,607     $ 78,154,815  
   
   
ZOOM TECHNOLOGIES, INC.  
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS  
             
    Six Months Ended June 30  
    2010     2009  
Cash flows from operating activities:                
Income including noncontrolling interest   $ 4,035,893     $ 2,829,930  
Adjustments to reconcile income to cash including non-controlling interest provided by (used in) operating activities:                
  Depreciation and amortization     798,526       794,796  
  Non-cash equity-based compensation     782,909       -  
  Loss on disposal of fixed assets     2,033       -  
  Deferred tax assets     330,368       97,416  
Changes in operating assets and liabilities:                
  Accounts receivable     (7,946,728 )     (28,445,473 )
  Inventories     136,413       832,479  
  Advances to suppliers     17,813,105       (7,795,231 )
  Prepaid expenses and other assets     (257,011 )     731,160  
  Accounts payable     (505,074 )     31,742,430  
  Advance from customers     39,059       3,045,866  
  Related parties-net     (8,330,669 )     (7,565,773 )
  Accrued expenses and other current liabilities     1,499,698       394,659  
Net cash provided by (used in) operating activities     8,398,522       (3,337,741 )
                 
Cash flows from investing activities:                
  Restricted cash     (248,729 )     (3,214,856 )
  Cash paid for long-term investments     (500,000 )     -  
  Purchase of property and equipment and other long-term assets     (9,450,751 )     (63,273 )
  Proceeds from notes receivable     97,644       -  
  Cash increase due to acquisition of subsidiaries     1,491,630       -  
Net cash used in investing activities     (8,610,206 )     (3,278,129 )
                 
Cash flows from financing activities:                
  Issuance of shares for cash     1,058,840       -  
  Proceeds from short-term loans     18,127,923       15,489,762  
  Advance to related parties     (4,932,483 )     (7,795,149 )
  Repayment on borrowing from related parties     (10,933,479 )     (103,219 )
  Proceeds from notes payable     497,457       6,429,712  
  Collection on advance to related parties     79,994       8,199,422  
  Receipt from related parties     10,921,930       106,374  
  Repayments on short-term loans     (13,167,982 )     (14,320,723 )
  Repayments on long-term loan     -       (1,169,039 )
Net cash provided by financing activities     1,652,200       6,837,140  
                 
Effect of exchange rate changes on cash & cash equivalents     4,825       (2,026 )
                 
Net increase (decrease) in cash and cash equivalents     1,445,341       219,244  
                 
Cash and cash equivalents, beginning balance     1,472,300       812,769  
                 
Cash and cash equivalents, ending balance   $ 2,917,641     $ 1,032,013  
                 
SUPPLEMENTARY DISCLOSURES:                
                 
  Interest paid   $ 678,702     $ 596,987  
                 
  Income tax paid   $ 36,735     $ 53,506  

Contact Information

  • Investor Contacts:
    Cynthia Hiponia
    The Blueshirt Group
    +1 415-217-4966
    Email Contact