SOURCE: Zoom Technologies

Zoom Technologies

November 15, 2010 16:05 ET

Zoom Technologies Reports Strong Third Quarter 2010 Results, Increases Fourth Quarter Guidance

Record Revenue in Q3 of $72.2 Million, Up 31% Over 3Q09; Net Income of $3.8 Million, Up 119% Over 3Q09

BEIJING--(Marketwire - November 15, 2010) - Zoom Technologies, Inc. (NASDAQ: ZOOM)

Financial Highlights:

--  Third quarter revenue was $72.2 million, up 31% year-over-year and up
    68% sequentially
--  Third quarter net income reached $3.8 million, up 119% year-over-year
    and up 87% sequentially
--  Revenue for first nine months increased to $166.0 million, up 21% as
    compared to last year
--  Net income for the first nine months grew to $7.7 million, up 78% over
    last year
--  LEIMONE brand phone sales reached 232,167 units in Q3

Guidance:

--  Fourth Quarter 2010 net income increases to between $4.8 and $5.4
    million
--  Fourth Quarter 2010 revenue increases to between $86 and $94 million
--  Full year 2010 net income increases to between $12.5 and $13.1 million
--  Full year 2010 revenues increase to between $252 and $260 million
--  Expects to sell 340,000 LEIMONE phones in Q4, totaling 700,000 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 third quarter ended September 30, 2010.

Mr. Lei Gu, Chairman and Chief Executive Officer of Zoom Technologies, commented, "We are pleased to report record results for the third quarter of 2010, which exceeded our expectations for both revenue and net income. We continue to experience high acceptance of our branded phones in China. As we announced earlier this month, we are rebranding our popular LEIMONE phones to the Zoom brand which we believe will expand our consumer awareness and accelerate our market share gains."

For the third quarter of 2010, Zoom reported net revenue of $72.2 million, as compared to $55.3 million for the third quarter 2009. The significant increase in revenue over the prior year was due both to the increase in sales of Zoom's branded phones and an increase in overall EMS volumes.

As a result, gross and net margins this quarter increased to 10.2% and 5.3% respectively, as compared to 5.5% and 3.1% 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.

During the third quarter, Zoom sold a total of 232,167 units of LEIMONE brand phones of which 62,468 were 3G models. Revenues from sales of LEIMONE branded products in the third quarter of 2010 totaled $14.0 million, representing 19% of total revenue.

Manufacturing volumes also increased in the third quarter of 2010 in which Zoom manufactured 2.6 million mobile phone printed circuit board assembly (PCBA) units and 1.4 million whole phones, up from 1.5 million PCBA units and 1.3 million whole phones in the third quarter 2009.

Gross profit for the third quarter of 2010 was $7.4 million, up 143% from $3.0 million for the same quarter in 2009, and up 61% sequentially from $4.6 million for the second quarter 2010.

Net income for the third quarter was $3.8 million, up 119% from $1.7 million for the same quarter last year, and up 87% sequentially from $2.0 million of the second quarter 2010.

Earnings per share for the third quarter 2010 was $0.29 as compared to $0.39 per share in the same quarter last year. For the first nine months of 2010, earnings per share was $0.68 as compared to $1.02 over the first nine months of 2009 when the operating company in China was still private until the reverse merger with Zoom on September 22, 2009.

For the first nine months of 2010, Zoom reported net revenue of $166.0 million, up 21% over $137.2 million for the first nine 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 branded phones.

Mr. Gu continued, "We continue to build traction as a consumer recognized brand. We are very excited about our ZOOM brand initiative with our ownership of the URL domain of zoom.com and uniformly branding our mobile phones. We believe Zoom Technologies will benefit from the domain name and trademark rights it has acquired. We feel that our new ZOOM mobile devices will directly reflect our mission and position in the robust China market. We are proud of our continued expansion in the rapidly growing China 3G market and our ability to produce mobile products for top tier Chinese mobile phone companies. Under the ZOOM name, we are confident our mobile phones will continue to enjoy strong growth and continue to be popular with the growing number of young people in China who seek feature-rich, mid-priced and sleek designed mobile phones."

Looking ahead, Mr. Gu remarked, "For the fourth quarter 2010, we expect net revenue to be between $86 and $94 million and net income is expected to be in the range of $4.8 and $5.4 million; and that will bring the full year 2010 revenues to between $252 and $260 million, net income to between $12.5 and $13.1 million. The mid-ranges of revenue and net income are expected at $256 million and $12.8 million, about 7% higher than our previous guidance of $240 million and $12 million respectively. We are also expecting to ship 700,000 LEIMONE branded phones in 2010, while forecasting continued strength in the mobile market for next year."

Conference Call Details

The company will host an investor call on Monday, November 15, 2010 at 4:30pm EST (1:30pm Pacific). To access the conference call, dial 877-941-1428 and enter access code 4385421. Callers outside the U.S. and Canada should dial 480-629-9664 and enter access code 4385421.

A replay of the conference call will be available through Monday, November 22, 2010. To access the replay, please dial 800-406-7325 and enter access code 4385421. Callers outside the U.S. and Canada should dial 303-590-3030 and enter access code 4385421.

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

This information and other statements by the Company in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, or other financial items, and statements regarding future economic, industry or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "preliminary" and similar expressions. You should not place undue reliance on these forward-looking statements because actual performance or results could differ materially from that anticipated by these forward-looking statements, and such forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement. If the Company does update any forward-looking statement, no inference should be drawn that the Company will make additional updates with respect to that statement or any other 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 which are available to the public at www.sec.gov.


                          ZOOM TECHNOLOGIES, INC.
                        CONSOLIDATED BALANCE SHEETS



                                              September 30,  December 31,
                                                  2010           2009
                                              -------------  -------------
ASSETS                                         (Unaudited)
  Current assets
    Cash and cash equivalents                 $   2,017,215  $   1,472,300
    Restricted cash                              10,044,609     11,993,214
    Notes receivable                                114,958              -
    Accounts receivable, net                     37,385,012     16,835,074
    Other receivables and prepaid expenses          572,506        311,808
    Advance to suppliers                         20,863,977     27,471,601
    Inventories, net                              1,760,973      1,534,989
    Due from related parties                      9,321,547     12,221,778
    Deferred tax assets, net                        102,277        504,222
                                              -------------  -------------
  Total current assets                           82,183,074     72,344,986

  Property, plant and equipment, net              5,103,326      5,673,923
  Research and development contracts in
   progress                                       1,011,398              -
  Construction in progress                                -         32,849
  Construction in progress deposit - related
   parties                                        9,664,554              -
  Intangible assets                                 180,793              -
  Goodwill                                        8,498,897        103,057
                                              -------------  -------------

TOTAL ASSETS                                  $ 106,642,042  $  78,154,815
                                              =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities
    Short-term loans                          $  20,033,975  $  16,000,702
    Notes payable                                19,916,096     23,986,427
    Accounts payable                              2,459,160      2,439,925
    Advance from customers                          513,612         51,243
    Dividends payable                               591,616        579,579
    Taxes payable                                 3,788,963      1,603,557
    Interest payable                                 67,942              -
    Accrued expenses and other payables           1,166,995        127,484
    Due to related parties                        8,982,161      5,245,415
                                              -------------  -------------

  Total current liabilities                      57,520,520     50,034,332
                                              -------------  -------------

  Long-term payables                                580,000              -

TOTAL LIABILITIES                                58,100,520     50,034,332
                                              -------------  -------------

STOCKHOLDERS' EQUITY
    Common stock: authorized 25,000,000
     shares, par value $0.01
    Issued 12,996,358 shares and outstanding
     12,994,678 shares; and Issued 8,780,988
     shares and outstanding 8,779,308 shares
     at September 30, 2010 and December 31,
     2009 respectively                              129,947         87,793
    Shares to be issued                                   -            592
    Subscription receivable                               -           (378)
    Deferred expenses                              (240,316)             -
    Additional paid-in capital                   30,207,988     14,309,538
    Treasury shares: 1,680 shares at cost            (7,322)        (7,322)
    Statutory surplus reserve                       692,167        633,378
    Accumulated other comprehensive income          741,888        210,773
    Retained earnings                            13,927,309      6,254,479
                                              -------------  -------------

TOTAL STOCKHOLDERS' EQUITY                       45,451,661     21,488,853
                                              -------------  -------------
  Noncontrolling interest                         3,089,861      6,631,630
                                              -------------  -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $ 106,642,042  $  78,154,815
                                              =============  =============



            ZOOM TECHNOLOGIES, INC. AFFILIATES & SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME



                         Three months ended         Nine months ended
                            September 30               September 30
                      ------------------------  --------------------------
                          2010         2009         2010          2009
                      -----------  -----------  ------------  ------------
Net revenues          $72,155,779  $55,290,880  $166,011,921  $137,240,898
Cost of sales         (64,783,811) (52,262,849) (149,881,942) (128,412,782)
                      -----------  -----------  ------------  ------------

Gross profit            7,371,968    3,028,031    16,129,979     8,828,116

Operating expenses:
  Sales and marketing    (153,307)     (36,431)     (267,345)   (1,320,422)
  General and
   administrative      (1,052,776)    (255,122)   (2,867,839)   (1,183,095)
  Research and
   development
   expenses              (689,682)           -      (689,682)            -
  Non-cash
   equity-based
   compensation          (434,489)           -    (1,217,398)            -
  Total operating
   expenses            (2,330,254)    (291,553)   (5,042,264)   (2,503,517)
                      -----------  -----------  ------------  ------------

Income from
 operations             5,041,714    2,736,478    11,087,715     6,324,599

Other income
 (expenses)
  Interest income         127,601      113,219       251,717       278,765
  Gain/(Loss) on
   disposal of fixed
   assets                 (62,823)           -       (64,850)            -
  Government grant
   income                  50,606            -        68,958             -
  Other income                573       12,340       214,194       437,658
  Interest expense       (324,087)    (380,096)   (1,006,362)   (1,032,605)
  Exchange (loss)          (7,483)      (1,126)       (8,477)      (30,317)
  Other expenses          (71,053)     (63,688)     (184,548)     (132,461)
                      -----------  -----------  ------------  ------------
  Total other income
   (expenses)            (286,666)    (319,351)     (729,368)     (478,960)
                      -----------  -----------  ------------  ------------
Income before income
 taxes and
 noncontrolling
 interest               4,755,048    2,417,127    10,358,347     5,845,639

Income tax expense       (877,831)    (653,741)   (2,445,237)   (1,252,323)
                      -----------  -----------  ------------  ------------

Income before
 noncontrolling
 interest               3,877,217    1,763,386     7,913,110     4,593,316
Less: Income
 attributable to
 noncontrolling
 interest                 (75,948)     (29,330)     (181,491)     (239,163)
                      -----------  -----------  ------------  ------------

Net income
 attributable to Zoom
 Technologies Inc       3,801,269    1,734,056     7,731,619     4,354,153

Other comprehensive
 income                   420,112       10,817       531,115        26,524
                      -----------  -----------  ------------  ------------

Comprehensive income  $ 4,221,381  $ 1,744,873  $  8,262,734  $  4,380,677
                      ===========  ===========  ============  ============

Basic and diluted
 income per common
 share:
Basic                 $      0.29  $      0.39  $       0.68  $       1.02
Diluted               $      0.29  $      0.39  $       0.67  $       1.02

Weighted average
 common shares
 outstanding:
   Basic               12,981,396    4,397,763    11,341,878     4,283,366
                      ===========  ===========  ============  ============
   Diluted             13,094,204    4,397,763    11,483,631     4,283,366
                      ===========  ===========  ============  ============



            ZOOM TECHNOLOGIES, INC. AFFILIATES & SUBSIDIARIES
              UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS



                                              Nine Months Ended September
                                                           30
                                              ----------------------------
                                                  2010           2009
                                              -------------  -------------
Cash flows from operating activities:
Income including noncontrolling interest      $   7,913,110  $   4,593,316
Adjustments to reconcile income to cash
 including non-controlling interest provided
 by (used in) operating activities:
  Depreciation and amortization                   1,225,594      1,192,925
  Non-cash equity-based compensation              1,217,398              -
  Provision for inventory obsolescence                    -       (247,296)
  Provision for doubtful receivables                      -         17,067
  Loss on disposal of fixed assets                   64,850              -
  Deferred tax assets                               348,410        384,006
Changes in operating assets and liabilities:
  Accounts receivable                           (18,657,090)    (5,909,296)
  Inventories                                      (190,735)     2,015,176
  Advances to suppliers                          20,227,972    (20,283,253)
  Prepaid expenses and other assets                (331,493)       932,518
  Accounts payable                                  (64,483)      (860,014)
  Advance from customers                            271,692     11,528,554
  Related parties-net                             1,787,828       (790,359)
  Accrued expenses and other current
   liabilities                                    1,804,297        492,578
                                              -------------  -------------
Net cash provided by (used in) operating
 activities                                      15,617,350     (6,934,078)
                                              -------------  -------------

Cash flows from investing activities:
  Restricted cash                                 2,159,503     (3,215,194)
  Cash paid for long-term investments              (500,000)             -
  Purchase of property and equipment and other
  long-term assets                              (9,941,004)      (115,765)
  Proceeds from notes receivable                    593,798        (14,615)
  Cash increase due to acquisition of
   subsidiaries                                   1,491,630              -
Net cash used in investing activities            (6,196,073)    (3,345,574)
                                              -------------  -------------

Cash flows from financing activities:
  Issuance of shares for cash                     1,044,833              -
  Proceeds from short-term loans                 28,064,338     18,414,296
  Advance to related parties                     (6,182,774)    (9,846,445)
  Repayment on borrowing from related parties   (23,380,225)      (103,219)
  Proceeds from (repayment on) notes payable     (4,489,120)     6,430,389
  Collection on advance to related parties           86,284     11,671,204
  Receipt from related parties                   21,080,990      1,615,775
  Repayments on short-term loans                (25,130,273)   (15,067,570)
  Repayments on long-term loan                            -     (1,169,162)
                                              -------------  -------------
Net cash provided by (used in) financing
 activities                                      (8,905,947)    11,945,268
                                              -------------  -------------

Effect of exchange rate changes on cash &
 cash equivalents                                    29,585         (6,080)

Net increase in cash and cash equivalents           544,915      1,659,536

Cash and cash equivalents, beginning balance      1,472,300        812,769
                                              -------------  -------------

Cash and cash equivalents, ending balance     $   2,017,215  $   2,472,305
                                              =============  =============

Non-cash investing and financing activities
    Acquisition of 28.97% of TCB by issuing
     2,462,576 shares                             4,348,247              -
    Acquisition of 100% of Silver Tech by
     issuing 1,342,599 shares                     9,590,000              -

SUPPLEMENTARY DISCLOSURES:

    Interest paid                             $     992,067  $   1,032,605
                                              =============  =============

    Income tax paid                           $      51,534  $           -
                                              =============  =============

Contact Information

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