BEIJING, Aug. 20, 2013 /PRNewswire/ -- SGOCO Group,
Ltd. (Nasdaq: SGOC) ("SGOCO" or the "Company"), a company focused
on product design, distribution and brand development in the
flat-panel display market, today announced its unaudited financial
results for the second quarter ended June
30, 2013.
Second Quarter 2013 Comparisons with Second Quarter 2012 -
Financial Highlights
- Total revenue increased 38.7% year-over-year to $59.2 million
- Gross profit increased 31.5% year-over-year to $5.2 million, gross margin at 8.8% as compared to
9.3%
- Operating income increased 97.3% year-over-year to $4.1 million, operating margin at 6.8% as
compared to 4.8%
- Net income increased 175.7% year-over-year to $3.4 million, net margin at 5.7% as compared to
2.9%
- Basic and diluted earnings per share ("EPS") were $0.20 as compared to $0.07
Second Quarter 2013 Comparisons with Second Quarter
2012 - Operational Highlights
- SGOCO Brand and Licensed Brands (previously known as "SGOCO
Brand") generated $41.3 million, an
increase of 9.1% year-over-year, representing 69.8% of total
revenues as compared to 88.7%. Key Accounts sales (previously known
as "Non-SGOCO brand and OEM") generated $17.1 million, an increase of 255.8%
year-over-year, representing 28.9% of total revenues as compared to
11.3%.
First Half 2013 Comparisons with First Half 2012 -
Financial Highlights
- Total revenue increased 47.3% year-over-year to $113.8 million
- Gross profit increased 34.8% year-over-year to $8.9 million, gross margin at 7.9% as compared to
8.6%
- Operating income increased 81.3% year-over-year to $6.7 million, operating margin at 5.9% as
compared to 4.8%
- Net income up 137.9% year-over-year to $5.1 million, net margin at 4.5% as compared to
2.8%
- Basic and diluted earnings per share were $0.30 as compared to $0.12
First Half 2013 Comparisons with First Half 2012 -
Operational Highlights
- SGOCO Brand and Licensed Brands generated $77.9 million, increased 32.6% year-over-year,
representing 68.5% of total revenues as compared to 76.3%. Key
Accounts sales generated $23.6
million, increased 29.5% year-over-year, representing 20.7%
of total revenues as compared to 23.7%.
Mr. Burnette Or, President and
Chief Executive Officer of SGOCO, commented on the results. "Our
performance over the second quarter demonstrated our continued
strength in the flat-panel display market, as revenue grew 39% year
over year and net earnings increased by 176% from last year. These
positive signs are indicative of the success we have achieved in
implementing our four-prong strategy to position the Company in a
promising direction for the future.
"Our four-prong strategy enables us to focus on strengthening
our brand portfolio, specializing in high-growth industry
verticals, diversifying our product lines and expanding
distribution channels across China's tier three and four cities.
These strategies are being well-implemented and we are pleased with
the results of our efforts. We have received positive feedback for
our newly developed products, the touch-screen Parts-In-One (PIO)
and All-In-One (AIO) PC. We expect these new products to further
drive our growth in the second half of the year and to facilitate
the expansion of our sales and distribution networks in various
areas of China. As a result, we are able to strengthen our solid
brand portfolio and expand our market share.
"With China's economic focus expected to shift towards tier
three and four cities over the next decade, our leading
capabilities in product distribution in these cities will come to
bear on numerous opportunities and challenges that lie ahead. Over
the last three quarters, we have rapidly expanded our coverage of
distribution networks in rural areas to most of the provinces,
covering a substantial area of China geographically."
Mr. Or concluded, "We have also opened our new sales operation
in Shenzhen, one of the most
active and demanding cities for innovative electronic devices to
accommodate the expansion of sales and services in China, and it will become SGOCO's key sales
and operational base going forward. Our focus on geographic and
product expansion guarantees SGOCO's success in increasing
profitability through the development of new products and
opportunistic acquisitions, priming the Company to capitalize on
the enormous business opportunities afforded by China's shifting
landscape."
SECOND QUARTER 2013 FINANCIAL
RESULTS
Revenue
Total revenue for the second quarter 2013 increased 38.7% to
$59.2 million from $42.7 million in the second quarter of 2012. The
year-over-year revenue increase was mainly due to the addition of a
few local distributor clients and increased sales of flat panel
monitors in the second quarter.
Of the total revenues in the quarter, $41.3 million or 69.8% of total revenues were
from SGOCO Brand and its Licensed Brands; $17.1 million or 28.9% of total revenues were
from Key Accounts sales; and $0.8
million or 1.3% of total revenues were from sales of Other
Application Products.
Cost of Goods Sold
Cost of goods sold increased 39.5% to $54.0 million from $38.7
million in the second quarter of 2012. The increase was in
line with the revenue growth.
Gross Profit and Gross Margin
Gross profit increased 31.5% to $5.2
million from $4.0 million for
the second quarter of 2012.
The overall gross margin for the second quarter of 2013 was
8.8%, as compared with 9.3% for the second quarter of 2012. The
decrease in gross margin was mainly due to withholding tax paid to
Chinese authorities, starting in the second half of 2012, for
recycling imported monitors. This decrease was alleviated by the
exchange gain we recognized due to the appreciation of the
Renminbi, as most of our purchases were settled in USD. During the
second quarter of 2013, SGOCO Brand and its Licensed Brands' sales
had a gross margin of 9.6%, which decreased from 9.9% in the second
quarter of 2012. During the second quarter of 2013 and 2012, Key
Accounts sales had a gross margin of 8.2% and 5.9%, respectively.
Sales of other application products in the second quarter of 2013
recorded a gross margin of 10.4%, as compared to nil sales in the
second quarter of 2012.
Operating Expenses
Selling, General and Administrative expenses for the second
quarter of 2013 decreased to $1.2
million from $1.9 million for
the second quarter of 2012.
Selling expenses for the second quarter of 2013 increased 140.0%
year-over-year to $0.3 million,
representing 0.5% of total revenues, compared with $0.1 million or 0.3% of total revenues in the
second quarter of 2012. The increase was mainly attributable to an
increase in transportation costs from increased product sales
during the second quarter and increased staff costs due to
additional employees hired in Shenzhen and Beijing offices to strengthen the sales
team.
General and Administrative ("G&A") expenses decreased 52.7%
year-over-year to $0.8 million from
$1.8 million for the second quarter
of 2012. The decrease of G&A expenses was due to tightened
controls over expenses and a decrease in the professional fees due
to the completion of investigation in relation to the Company's
trading halt and change of auditors in 2012.
Operating Income and Operating Margin
Operating income for the second quarter of 2013 was $4.1 million, up 97.3% from $2.1 million in the second quarter of 2012.
Operating margin was 6.8%, and improved from 4.8% in the second
quarter of 2012 due to the increase of revenue and reduction of
G&A expenses.
Net Income, Net Margin and EPS
Net income for the second quarter of 2013 was $3.4 million, an increase of 175.7% from
$1.2 million in the second quarter of
2012. Net margin was 5.7% for the second quarter of 2013, which
increased from 2.9% in the second quarter of 2012.
Basic and diluted EPS were $0.20
for the second quarter of 2013, compared to $0.07 in the second quarter of 2012. Basic and
diluted EPS for the second quarter of 2013 was calculated based on
17,173,981 weighted average number of common shares as compared to
17,059,860 weighted average number of common shares in the second
quarter of 2012.
Balance Sheet
Cash and cash equivalents
As of June 30, 2013, cash and cash
equivalents were $14.2 million, an
increase of $ 2.7 million from
$11.5 million as of December 31, 2012. The increase in the cash
position was primarily attributable to an increase in operating
cash flow from increased sales during the second quarter.
Accounts receivable
Accounts receivable as of June 30,
2013 increased 28.7% to $76.4
million from $59.4 million as
of December 31, 2012. The increase
was primarily attributable to increased sales during the second
quarter. As of June 30, 2013,
Accounts Receivable Turnover Days was 108 days compared to 68 days
as of June 30, 2012. The increase in
Accounts Receivable Turnover Days was mainly because most of our
customers made use of the credit period we granted them.
Inventories
Inventories as of June 30, 2013
increased 186.6% to $16.4 million
from $5.7 million as of December 31, 2012. The increase was primarily to
fulfill the upcoming sales orders and expected market demand. As of
June 30, 2013, Inventory Turnover
Days was 19 days compared to 4.5 days as of June 30, 2012. The increase in Inventory Turnover
Days was mainly because we made significant purchases close to
June 30, 2013 for next quarter
orders.
Working capital
Working capital increased to $83.6
million from $78.1 million at
the end of 2012. The current ratio was 2.56 on June 30, 2013, compared to 3.86 on December 31, 2012.
Voting results of the 2012 Annual General Meeting of
Shareholders
SGOCO also announced the voting results of its 2012
annual general meeting of shareholders ("AGM"), held in
Beijing, China on June 24th, 2013. At the AGM, shareholders
approved all of the following resolutions put forward in the proxy
statement: (i) the approval and adoption of the financial
statements for the year ended December 31,
2012; (ii) the approval and appointment of Crowe Horwath (HK) CPA Limited as auditor of the
Company and to authorize the directors to fix the remuneration of
the auditors; (iii) the election of Burnette Or, Robert Eu,
Frank Wu, John Chen, Pik Yue
Hon, Wai Man (Helen) Hsu, and
Tin Man Or to serve as directors on the board until the close of
the next annual general meeting of shareholders or until
their successors are duly elected. For more detailed information
regarding these resolutions, please review the Notice of 2012
Annual General Meeting posted at the website:
http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=shareholder.
CONFERENCE CALL INFORMATION
SGOCO's senior management will host a conference call on
Wednesday, August 21, 2013 at
8 a.m. (Eastern)/5 a.m. (Pacific)/8
p.m. (Beijing/Hong Kong) to discuss quarterly results and
operational updates.
To access the conference call, please dial in at least 10
minutes before the call.
1-877-941-4774 (US Toll-free)
1-480-629-9760 (International)
4001-200-611 (China Toll-free)
86-400-628-0671 (China)
Conference call identification number: 4632020
The Company will also broadcast a live audio webcast of the
conference call. The webcast will be available at
http://public.viavid.com/index.php?id=105494
An archive of the call will be available within 48 hours at
http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=recent&id=16
ABOUT SGOCO GROUP, LTD.
SGOCO Group, Ltd. is focused on product design, brand
development and distribution of flat panel display products,
including computer monitors, TVs, computers and application
specific products. SGOCO sells its products and services in the
Chinese market and abroad. For more information about SGOCO, please
visit our investor relations website http://www.sgocogroup.com.
For investor and media inquiries, please contact:
SGOCO Group, Ltd.
Serena Wu
Investor Relations Manager
Tel: +86 (10) - 85870173 (China)
US: +1(646) - 5831616 (Voice mail)
Email:ir@sgoco.com
SAFE HARBOR AND INFORMATIONAL STATEMENT
This announcement contains "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These
statements are made under the "safe harbor" provisions of the U.S.
Private Securities Litigation Reform Act of 1995. All statements,
other than statements of historical fact, including, without
limitation, those with respect to the objectives, plans and
strategies of the Company set forth herein and those preceded by or
that include the words "believe," "expect," "anticipate," "future,"
"will," "intend," "plan," "estimate" or similar expressions, are
"forward-looking statements". Forward-looking statements in this
release include, without limitation, the effectiveness of the
Company's multiple-brand, multiple channel strategy and the
transitioning of its product development and sales focus to a
"light-asset" model. Although the Company's management believes
that such forward-looking statements are reasonable, it cannot
guarantee that such expectations are, or will be, correct. These
forward-looking statements involve a number of risks and
uncertainties, which could cause the Company's future results to
differ materially from those anticipated. These forward-looking
statements can change as a result of many possible events or
factors not all of which are known to the Company, which may
include, without limitation, requirements or changes adversely
affecting the LCD and LED market in China; fluctuations in customer demand for LCD
and LED products generally; our success in promoting our brand of
LCD and LED products in China and
elsewhere; our ability to have effective internal control over
financial reporting; our success in designing and distributing
products under brands licensed from others; management of sales
trends and client mix; possibility of securing loans and other
financing without fixed assets as collateral; changes in government
policy in China; the fluctuations
and competition in sales and sale prices of LCD and LED products in
China; China's overall economic
conditions and local market economic conditions; our ability to
expand through strategic acquisitions and establishment of new
locations; compliance with government regulations; legislation or
regulatory environments; geopolitical events, and other events
and/or risks outlined in SGOCO's filings with the U.S. Securities
and Exchange Commission, including its annual report on Form 20-F
and other filings. All information provided in this press release
and in the attachments is as of the date of the issuance, and SGOCO
does not undertake any obligation to update any forward-looking
statement, except as required under applicable law.
SGOCO GROUP, LTD.
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
FOR THE THREE
MONTHS ENDED JUNE 30, 2013 AND 2012
|
(Unaudited)
|
(In thousands
of U.S. dollars except share and per share data)
|
|
|
|
2013
|
|
2012
|
REVENUES:
|
|
|
|
|
Revenues
|
|
59,242
|
|
42,702
|
|
|
|
|
|
COST OF GOODS
SOLD:
|
|
|
|
|
Cost of
goods sold
|
|
54,040
|
|
38,746
|
|
|
|
|
|
GROSS
PROFIT
|
|
5,202
|
|
3,956
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Selling
expenses
|
|
312
|
|
130
|
General and administrative
expenses
|
|
838
|
|
1,772
|
Total operating
expenses
|
|
1,150
|
|
1,902
|
|
|
|
|
|
INCOME FROM
OPERATIONS
|
|
4,052
|
|
2,054
|
|
|
|
|
|
OTHER INCOME
(EXPENSES):
|
|
|
|
|
Interest
income
|
|
4
|
|
1
|
Interest
expense
|
|
(58)
|
|
(24)
|
Other
income (expense), net
|
|
13
|
|
3
|
Change in
fair value of warrant derivative liability
|
|
(31)
|
|
47
|
Total other income
(expenses), net
|
|
(72)
|
|
27
|
|
|
|
|
|
INCOME BEFORE
PROVISION FOR INCOME TAXES
|
|
3,980
|
|
2,081
|
|
|
|
|
|
PROVISION FOR INCOME
TAXES
|
|
586
|
|
850
|
NET INCOME
|
|
3,394
|
|
1,231
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME (LOSS):
|
|
|
|
|
Foreign
currency translation adjustment
|
|
92
|
|
(11)
|
|
|
|
|
|
COMPREHENSIVE
INCOME
|
|
3,486
|
|
1,220
|
|
|
|
|
|
EARNINGS PER
SHARE:
|
|
|
|
|
Basic
|
|
0.20
|
|
0.07
|
Diluted
|
|
0.20
|
|
0.07
|
|
|
|
|
|
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING:
|
|
|
|
|
Basic
|
|
17,173,981
|
|
17,059,860
|
Diluted
|
|
17,173,981
|
|
17,059,860
|
SGOCO GROUP, LTD.
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
FOR THE SIX
MONTHS ENDED JUNE 30, 2013 AND 2012
|
(Unaudited)
|
(In thousands
of U.S. dollars except share and per share data)
|
|
|
|
2013
|
|
2012
|
REVENUES:
|
|
|
|
|
Revenues
|
|
113,785
|
|
77,224
|
|
|
|
|
|
COST OF GOODS
SOLD:
|
|
|
|
|
Cost of
goods sold
|
|
104,840
|
|
70,586
|
|
|
|
|
|
GROSS
PROFIT
|
|
8,945
|
|
6,638
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Selling
expenses
|
|
556
|
|
247
|
General and administrative
expenses
|
|
1,670
|
|
2,684
|
Total operating
expenses
|
|
2,226
|
|
2,931
|
|
|
|
|
|
INCOME FROM
OPERATIONS
|
|
6,719
|
|
3,707
|
|
|
|
|
|
OTHER INCOME
(EXPENSES):
|
|
|
|
|
Interest
income
|
|
5
|
|
2
|
Interest
expense
|
|
(93)
|
|
(39)
|
Other
income (expense), net
|
|
(61)
|
|
(12)
|
Change in
fair value of warrant derivative liability
|
|
(27)
|
|
48
|
Total other expenses,
net
|
|
(176)
|
|
(1)
|
|
|
|
|
|
INCOME BEFORE
PROVISION FOR INCOME TAXES
|
|
6,543
|
|
3,706
|
|
|
|
|
|
PROVISION FOR INCOME
TAXES
|
|
1,429
|
|
1,556
|
NET INCOME
|
|
5,114
|
|
2,150
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME (LOSS):
|
|
|
|
|
Foreign
currency translation adjustment
|
|
106
|
|
(83)
|
|
|
|
|
|
COMPREHENSIVE
INCOME
|
|
5,220
|
|
2,067
|
|
|
|
|
|
EARNINGS PER
SHARE:
|
|
|
|
|
Basic
|
|
0.30
|
|
0.12
|
Diluted
|
|
0.30
|
|
0.12
|
|
|
|
|
|
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING:
|
|
|
|
|
Basic
|
|
17,130,888
|
|
17,059,860
|
Diluted
|
|
17,130,888
|
|
17,059,860
|
SGOCO GROUP, LTD.
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
AS OF JUNE
30, 2013 AND DECEMBER 31, 2012
|
(In thousands
of U.S. dollars except share and per share data)
|
|
|
|
June 30,
2013
|
|
December 31,
2012
|
ASSETS
|
|
(Unaudited)
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Cash
|
|
14,156
|
|
11,548
|
Accounts receivable, net of provision for doubtful accounts of $105 and nil,
respectively
|
|
76,401
|
|
59,355
|
Other
receivables and prepayments
|
|
2,665
|
|
169
|
Inventories
|
|
16,408
|
|
5,725
|
Advances to
suppliers
|
|
27,401
|
|
28,511
|
Other current
assets
|
|
115
|
|
78
|
Total current
assets
|
|
137,146
|
|
105,386
|
|
|
|
|
|
PLANT AND EQUIPMENT,
NET
|
|
242
|
|
261
|
|
|
|
|
|
Total
assets
|
|
137,388
|
|
105,647
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
Short-term loan
|
|
7,034
|
|
6,230
|
Accounts payable, trade
|
|
35,324
|
|
12,038
|
Accrued liabilities
|
|
257
|
|
156
|
Short-term loan –
shareholder
|
|
209
|
|
209
|
Other payables
|
|
403
|
|
379
|
Customer deposits
|
|
2,666
|
|
1,155
|
Taxes
payable
|
|
7,691
|
|
7,147
|
Total current
liabilities
|
|
53,584
|
|
27,314
|
|
|
|
|
|
OTHER
LIABILITIES
|
|
|
|
|
Warrant derivative
liability
|
|
44
|
|
18
|
|
|
|
|
|
Total
liabilities
|
|
53,628
|
|
27,332
|
|
|
|
|
|
Commitment and
contingencies
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Preferred stock,
$0.001 par value, 1,000,000 shares
authorized,
nil issued and outstanding as of June 30, 2013
and December
31, 2012, respectively
|
|
-
|
|
-
|
Common stock, $0.001
par value, 50,000,000 shares
authorized,
17,660,356 and 17,465,356 issued and
outstanding as
of June 30, 2013 and December 31,
2012,
respectively
|
|
18
|
|
17
|
Paid-in-capital
|
|
25,052
|
|
24,828
|
Statutory
reserves
|
|
401
|
|
401
|
Retained
earnings
|
|
58,158
|
|
53,044
|
Accumulated
other comprehensive income
|
|
131
|
|
25
|
Total shareholders'
equity
|
|
83,760
|
|
78,315
|
Total
liabilities and shareholder's equity
|
|
137,388
|
|
105,647
|
SGOCO GROUP, LTD.
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE SIX MONTHS
ENDED JUNE 30, 2013 AND 2012
|
(Unaudited)
|
(In thousands
of U.S. dollars)
|
|
|
|
2013
|
|
2012
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
Net income
|
|
5,114
|
|
2,150
|
Adjustments to
reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
Depreciation and
amortization
|
|
37
|
|
31
|
Provision for
doubtful debts
|
|
105
|
|
-
|
Change in fair value
of warrant derivative liability
|
|
27
|
|
(48)
|
Share-based
compensation expenses
|
|
224
|
|
273
|
Change in operating
assets and liabilities
|
|
|
|
|
Accounts receivable,
trade
|
|
(17,469)
|
|
(18,725)
|
Other receivables and
prepayments
|
|
(2,467)
|
|
(54)
|
Notes
receivable
|
|
-
|
|
(94)
|
Inventories
|
|
(10,475)
|
|
38,537
|
Advances to
suppliers
|
|
1,592
|
|
(43,793)
|
Other current
assets
|
|
(35)
|
|
(121)
|
Accounts payables,
trade
|
|
22,956
|
|
(144)
|
Accrued
liabilities
|
|
98
|
|
81
|
Other
payables
|
|
13
|
|
672
|
Customer
deposits
|
|
1,476
|
|
1,426
|
Taxes
payable
|
|
415
|
|
1,258
|
Net cash provided
by (used in)
operating activities
|
|
1,611
|
|
(18,551)
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
Settlement of
consideration received from disposal of subsidiaries
|
|
-
|
|
18,734
|
Purchase of
equipment
|
|
(15)
|
|
(69)
|
Net cash (used in)
provided by
investing activities
|
|
(15)
|
|
18,665
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
Increase in
restricted cash
|
|
-
|
|
(318)
|
Notes
payable
|
|
-
|
|
318
|
Proceeds from
short-term loan
|
|
804
|
|
-
|
Net cash provided
by financing activities
|
|
804
|
|
-
|
|
|
|
|
|
EFFECT OF EXCHANGE
RATE ON CASH
|
|
208
|
|
65
|
|
|
|
|
|
INCREASE IN
CASH
|
|
2,608
|
|
179
|
|
|
|
|
|
CASH, beginning of
period
|
|
11,548
|
|
535
|
|
|
|
|
|
CASH, end of
period
|
|
14,156
|
|
714
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
Interest expenses
paid (net of amount capitalized)
|
|
93
|
|
39
|
Income taxes
paid
|
|
900
|
|
293
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
|
|
|
|
|
Settlement of
consideration receivable – received in finished goods
|
|
-
|
|
38,375
|
SOURCE SGOCO Group, Ltd.