SOURCE: China TechFaith

China Techfaith

May 19, 2010 16:15 ET

TechFaith Reports First Quarter 2010 Financial Results

BEIJING--(Marketwire - May 19, 2010) - China Techfaith Wireless Communication Technology Limited (NASDAQ: CNTF) ("TechFaith" or the "Company") today announced its unaudited financial results for the first quarter ended March 31, 2010.

For the first quarter of 2010, TechFaith reported net revenue of US$60.9 million (RMB 415.8 million), a 1.8% increase compared to US$59.8 million (RMB 408.3 million) in the fourth quarter of 2009 and a 25.1% increase compared to US$48.7 million (RMB 332.9 million) in the same period of last year. Gross margin for the first quarter of 2010 improved to 22.0% compared to 16.1% in the previous quarter and 18.1% in the same quarter last year. Net income attributable to Techfaith for the first quarter of 2010 was US$6.9 million (RMB47.1 million), compared to US$3.1 million (RMB21.2 million) in the fourth quarter of 2009, and US$2.1 million (RMB14.4 million) in the same quarter of last year.

Starting with this quarter, TechFaith will report its financial results in three segments. The original developed products ("ODP") segment, which focuses on selling products designed by the Company, will include revenue from product sales and handset design. The brand name phone sales segment will include revenue from selling phones under licensed brands or brands owned by the Company's subsidiary QIGI&BODEE Technology (Beijing) Co., Ltd. ("QIGI"). The game segment will include revenue from the Company's online and mobile games.

Ouyang Yuping, TechFaith's CFO, said, "We achieved our highest revenues level in this quarter since the Company was founded, and one of the highest net income levels by focusing on higher margin opportunities and cost controls. We increased our overall gross margin from 18.1% for the first quarter of 2009 and 16.1% for the fourth quarter of 2009 to 22.0% in the first quarter of 2010. We also achieved another company record in our ODP business, where we sold more than a half million units of mobile phones and data cards for revenues of US$54.4 million (RMB 371.4 million). The higher selling price of mobile phones helped gross margin improve from 15.5% to 18.7% in our ODP business. We expect continued growth in our ODP business as we are launching several new high-end products in China and overseas. Results also benefited from our acquisition of QIGI, which had revenues of US$5.2 million (RMB35.5 million) and a gross margin of 39.5% in the first quarter of 2010, led by higher margin brand name mobile phone products. We also continued to expand our mobile game and online game business, where we generated a combined US$1.3 million (RMB 8.9million) revenues with a 94.4% gross margin in the first quarter."

Dong Defu, TechFaith's Chairman and CEO, commented, "Overall, our businesses are performing well entering the second quarter. In our ODP business, we have nearly forty mid- to high-end mobile phone models based on HSDPA, EVDO, TD-SCDMA, and GSM technologies ready to launch. We expect further improvements in our ODP business to contribute to improvements in our gross margin. We are also excited about the upcoming launch of two global brands for handsets - Barbie and Disney. We expect to launch both branded mobile phones this summer through our subsidiary Glomate Mobile (Beijing) Co., Ltd., to target girls and teenage users. We continue to evaluate other brands for opportunities in niches ranging from sporting to fashion and luxury. Also central to our continued success is QIGI, already a leading smart phone brand in China, which focuses on enterprise users and the operator tailored market. QIGI plans to promote a series of larger display mobile phones, with features such as Windows Mobile based or Android based operating systems for businesses users based on HASDPA, EVDO, TD-SCDMA, and GSM technologies. For our mobile and online game business, we are on track to launch additional mobile and online gaming titles this year, with the goal of building out our catalog and establishing a larger audience among loyal game players."

Second Quarter 2010 Outlook

TechFaith currently expects revenue to be in the range of US$62 million to US$65 million for the second quarter of 2010, with a gross margin level similar to the first quarter of 2010. This forecast reflects TechFaith's current and preliminary view, which is subject to change.

Investor Conference Call / Webcast Details

TechFaith will hold a conference call on Wednesday, May 19, 2010 at 7:00 p.m. U.S. Eastern Time (7:00 a.m. May 20, 2010 in Beijing), is +1-617-597-5359. The conference call passcode is 59609619. 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 through 11:30 p.m. U.S. Eastern Time on May 26, 2010, (11:30 a.m., March 27, 2010 in Beijing) by telephone at +1-617-801-6888. To access the replay, use passcode 44810686. A webcast replay will also be available at www.techfaithwireless.com.

About TechFaith

TechFaith (NASDAQ: CNTF) is a China-based original developed product provider focused on the original design and sales of mobile phone products. TechFaith is also striving to build a leading PC and online gaming business through its wholly-owned subsidiary, 798 Entertainment Limited. 798 Entertainment Limited currently engages in providing self-developed as well as co-developed and licensed cell phone contents.

    -- TechFaith engages in the development and production of middle to
       high end handsets and tailor made handsets.  TechFaith's original
       developed products include: (1) multimedia phones and dual mode
       dual card handsets of multiple wireless technology combination
       such as GSM/GSM, GSM/CDMA, GSM/WCDMA, GSM/TD-SCDMA and UMTS/CDMA;
       (2) Windows-based smartphones and Pocket PC phones; and (3)
       handsets with interactive online gaming and professional game
       terminals with phone functionality.
    -- With the capability of developing Middleware Application MMI/UI
       software on 2G/2.5G(GSM/GPRS, CDMA1X), 3G(EV-DO, WCDMA/UMTS,
       TD-SCDMA) and 3.5G(HSDPA) communication technologies, TechFaith
       is able to provide Middleware Application MMI/UI software packages
       that fulfill the specifications of handset brand owners and
       carriers in the global market. For more information, please visit
       www.techfaithwireless.com.
    -- TechFaith is targeting both the mobile and online PC gaming markets
       through its websites www.798uu.com and www.798game.com with gaming
       content developed internally, co-developed and licensed from third
       parties.

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 OPERATIONS
  (In Thousands of U.S. Dollars, except share and per share/ADS data and
                         unless otherwise stated)

                                               Three Months Ended

                                             March 31          December 31
                                     ------------------------  -----------
                                         2010         2009         2009
Revenues:
ODP                                  $    54,438  $    48,670  $    59,273
Brand name phone sales                     5,211            -            -
Game                                       1,257            -          488
                                     -----------  -----------  -----------
Total net revenues                   $    60,906  $    48,670  $    59,761

Cost of revenues:
ODP                                  $    44,259  $    39,856  $    50,060
Brand name phone sales                     3,154            -            -
Game                                          70            -           64
                                     -----------  -----------  -----------
Total cost of revenues               $    47,483  $    39,856  $    50,124

Gross Profit                         $    13,423  $     8,814  $     9,637

Operating expenses:
General and administrative           $     2,947  $     1,740  $     2,947
Research and development                   2,995        3,096        3,199
Selling and marketing                      1,289          802          828
Exchange loss (gain)                           -           14           (8)
                                     -----------  -----------  -----------
Total operating expenses             $     7,231  $     5,652  $     6,966

Government subsidy income                    100            5          207

Income from operations               $     6,292  $     3,167  $     2,878

Interest expenses                           (265)         (30)        (366)
Interest income                              184          177          169
Other income (expense), net                    5            -          171
Change in fair value of derivatives
 embedded in Convertible notes             3,343            -        1,831
Change in fair value of put option           (33)         (18)         (27)
                                     -----------  -----------  -----------
Income before income taxes           $     9,526  $     3,296  $     4,656
Income tax expenses                       (1,933)      (1,219)      (1,215)
                                     -----------  -----------  -----------
Net income                           $     7,593  $     2,077  $     3,441
Less: net income (loss) attributable
 to the noncontrolling interest             (738)          44         (329)
                                     -----------  -----------  -----------
Net income attributable to TechFaith $     6,855  $     2,121  $     3,112
                                     ===========  ===========  ===========

Net income attributable to TechFaith
 per share
   Basic                             $      0.01  $      0.00  $      0.00
                                     ===========  ===========  ===========
   Diluted                           $      0.01  $      0.00  $      0.00
                                     ===========  ===========  ===========

Net income attributable to TechFaith
 per ADS*
   Basic                             $      0.15  $      0.05  $      0.07
                                     ===========  ===========  ===========
   Diluted                           $      0.13  $      0.05  $      0.07
                                     ===========  ===========  ===========


Weighted average shares outstanding
   Basic                             685,868,082  650,034,590  650,043,806
                                     ===========  ===========  ===========
   Diluted                           811,983,427  650,034,590  776,158,621
                                     ===========  ===========  ===========






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

                                           March 31, March 31, December 31,
                                             2010      2009        2009

                                           --------- --------- ------------
Assets
Current assets:
Cash and cash equivalents                  $ 162,421 $  97,499 $    130,544
Restricted cash                                    -        80            -
Accounts receivable                           17,740    29,812       28,992
Notes receivable                                   -       443            -
Amounts due from a related party               2,622     7,954        9,941
Contingent receivable                            196         -            -
Inventories                                   24,178    30,367       22,937
Prepaid expenses and other current assets     13,470    11,917       12,420
Deferred tax assets-current                        -        78            -
                                           --------- --------- ------------
Total current assets                       $ 220,627 $ 178,150 $    204,834
                                           --------- --------- ------------

Plant, machinery and equipment, net        $  20,245 $  23,255 $     20,902
Construction in progress                      23,965    23,521       23,680
Acquired intangible assets, net                3,235       838          645
Deferred tax assets-noncurrent                     -        29            -
Goodwill                                       1,848       606          606
                                           --------- --------- ------------
Total assets                               $ 269,920 $ 226,399 $    250,667
                                           ========= ========= ============

Liabilities and equity
Current liabilities:
Current portion of long term payable       $     687 $   1,211 $        799
Accounts payable                               9,952     7,362       10,514
Amounts due to related parties                   701       438          266
Accrued expenses and other current
 liabilities                                  10,408     9,597       10,484
Advance from customers                         5,494    11,839        4,720
Deferred revenue                               1,031     1,431          755
Income tax payable                             2,221     1,343        1,162
                                           --------- --------- ------------
Total current liabilities                  $  30,494 $  33,221 $     28,700

Convertible notes and embedded derivatives    12,363         -       15,441
Deferred tax liability-noncurrent                170         -            -

Total liabilities                          $  43,027 $  33,221 $     44,141
                                           --------- --------- ------------

Equity
Paid in capital                            $      14 $      13 $         13
Additional paid-in capital                   126,292   105,847      113,458
Accumulated other comprehensive income        23,801    23,711       23,863
Statutory reserve                             10,993     8,542       10,993
Retained earnings                             62,721    54,101       55,866
                                           --------- --------- ------------
Total Techfaith shareholders' equity       $ 223,821 $ 192,214 $    204,193
                                           --------- --------- ------------
Noncontrolling interest                    $   3,072 $     964 $      2,333
                                           --------- --------- ------------
Total equity                               $ 226,893 $ 193,178 $    206,526
                                           --------- --------- ------------
Total liabilities and equity               $ 269,920 $ 226,399 $    250,667
                                           ========= ========= ============

Contact Information

  • CONTACTS:
    In China:
    Jay Ji
    China Techfaith Wireless Communication Technology Limited
    Tel: 86-10-5822-8390
    ir@techfaith.cn

    In the U.S.:
    David Pasquale
    Global IR Partners
    Tel: +1 914-337-8801
    cntf@globalirpartners.com