BEIJING, Nov. 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 third quarter ended September 30, 2013.
Third Quarter 2013 Comparisons with Third Quarter 2012 -
Financial Highlights
- Total revenue increased 65.0% year-over-year to $43.0 million
- Gross profit increased 268.2% year-over-year to $3.5 million, with gross margin at 8.1% as
compared to 3.6%
- Operating income increased to $2.4
million as compared to operating loss of $0.8 million, with operating margin at 5.7% as
compared to negative 2.9%
- Net income increased to $2.2
million as compared to net loss of $1.1 million, with net margin at 5.0% as compared
to negative 4.2%
- Basic and diluted earnings per share ("EPS") were $0.12 as compared to basic and diluted loss per
share of $0.06
Third Quarter 2013 Comparisons with Third Quarter 2012 -
Operational Highlights
- SGOCO Brand and Licensed Brands generated $23.9 million, an increase of 35.8%
year-over-year, representing 55.6% of total revenues as compared to
67.6%. Key Accounts sales generated $19.0
million, an increase of 125.2% year-over-year, representing
44.3% of total revenues as compared to 32.4%.
First Nine Months 2013 Comparisons with First
Nine Months 2012 - Financial Highlights
- Total revenue increased 51.8% year-over-year to $156.8 million
- Gross profit increased 63.8% year-over-year to $12.4 million, with gross margin at 7.9% as
compared to 7.3%
- Operating income increased 210.2% year-over-year to
$9.2 million, with operating margin
at 5.8% as compared to 2.9%
- Net income increased 586.3% year-over-year to $7.3 million, with net margin at 4.6% as compared
to 1.0%
- Basic and diluted earnings per share were $0.42 as compared to $0.06
First Nine Months 2013 Comparisons with First
Nine Months 2012 - Operational Highlights
- SGOCO Brand and Licensed Brands generated $101.9 million, an increase of 33.2%
year-over-year, representing 65% of total revenues as compared to
74.1%. Key Accounts sales generated $42.7
million, increasing 59.5% year-over-year, representing 27.2%
of total revenues as compared to 25.9%.
Mr. Burnette Or, President and
Chief Executive Officer of Sgoco, commented on the results. "Our
sales performance over the third quarter remained strong, despite a
seasonal slowdown in the flat panel display market over the three
months of July to September. This is predominantly as a result of
the transition of our business model, designed to move up the value
chain with a focus on branding and distribution. This strategic
transition has allowed us to mitigate the pricing pressure from the
overall display market during this quarter and enabled our margin
to stay at a sustainable level.
"During this quarter, we continued to take concrete steps
towards our previously mentioned strategic initiatives, primarily
strengthening our product portfolio, expanding our sales channels
and developing solution-based services for high-growth industries,
and our progress in these areas has been encouraging. The
development of our new products, including our previously mentioned
AIOs and PIOs, have progressed well in demo showcasing and pilot
sales programs. We expect some of these new products to begin
providing more contributions to revenues in the coming two to three
quarters. Over the next few months we will continue to evaluate our
strategies for growth while maintaining our ambition to lead the
industry in profitability."
Mr. Or concluded, "In the long term, we will strive to make the
necessary investments that will grow SGOCO's revenue, by
identifying and seizing the abundant opportunities prevalent in the
display market. We will leverage on our core competencies to expand
and extend our offerings. Our goal is to upgrade ourselves from a
product provider to a solution-based enabler, and to serve retail
and commercial customers in various industry verticals through our
renowned omni channel model. 2013 continues to be a year of
transformation and investment for SGOCO, and I believe we will see
some significant momentum in 2014 as a result."
THIRD QUARTER 2013 FINANCIAL RESULTS
Revenue
Total revenue for the third quarter 2013 increased 65.0% to
$43.0 million from $26.0 million in the third quarter of 2012. The
year-over-year revenue increase was mainly due to the rebound in
sales volume of flat panel monitors as compared with the same
quarter last year.
Of the total revenues in the quarter, $23.9 million or 55.6% of total revenues were
from SGOCO Brand and its Licensed Brands; $19.0 million or 44.3% of total revenues were
from Key Accounts sales; and the remaining 0.1% of total revenues
were from sales of Other Application Products.
Cost of Goods Sold
Cost of goods sold increased 57.3% to $39.5 million from $25.1
million in the third quarter of 2012. The increase was
generally in line with the revenue growth.
Gross Profit and Gross Margin
Gross profit increased 268.2% to $3.5
million from $0.9 million for
the third quarter of 2012.
The overall gross margin for the third quarter of 2013 was 8.1%,
as compared with 3.6% for the third quarter of 2012. The increase
in gross margin was mainly due to the Company's efforts in
streamlining its operations while minimizing costs. During the
third quarter of 2013, SGOCO Brand and its Licensed Brands' sales
had a gross margin of 8.5%, which increased from 3.9% in the third
quarter of 2012. During the third quarter of 2013 and 2012, Key
Accounts sales had a gross margin of 7.5% and 2.9%, respectively.
Sales of other application products in the third quarter of 2013
recorded a gross margin of 11.6%, as compared to nil sales in the
third quarter of 2012.
Operating Expenses
Selling, General and Administrative expenses for the third
quarter of 2013 decreased 39.6% to $1.0
million from $1.7 million for
the third quarter of 2012, primarily due to the decrease in General
and Administrative ("G&A") expenses.
Selling expenses for the third quarter of 2013 increased 22.2%
year-over-year to $0.3 million,
representing 0.6% of total revenues, compared with $0.2 million or 0.8% of total revenues in the
third quarter of 2012. The increase in selling expenses was mainly
attributable to an increase in transportation costs from increased
product sales during the third quarter and increased staff costs in
association with the growing sales teams in the Shenzhen and Beijing offices.
G&A expenses decreased 48.4% year-over-year to $0.8 million from $1.5
million for the third quarter of 2012. The decrease of
G&A expenses was due to a decrease in legal and professional
fees and other expenses in relation to the Company's temporary
trading halt and change of auditors in 2012.
Operating Income and Operating Margin
Operating income for the third quarter of 2013 was $2.4 million, up from operating loss of
$0.8 million in the third quarter of
2012. Operating margin was 5.7%, and improved from negative 2.9% in
the third 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 third quarter of 2013 was $2.2 million, and improved from net loss of
$1.1 million in the third quarter of
2012. Net margin was 5.0% for the third quarter of 2013, which
increased from negative 4.2% in the third quarter of 2012.
Basic and diluted EPS were $0.12
for the third quarter of 2013, compared to basic and diluted loss
per share of $0.06 in the third
quarter of 2012. Basic and diluted EPS for the third quarter of
2013 was calculated based on 17,254,860 weighted average number of
common shares as compared to 17,059,860 weighted average number of
common shares in the third quarter of 2012.
Balance Sheet
Cash and cash equivalents
As of September 30, 2013, cash and
cash equivalents were $13.7 million,
an increase of $2.2 million from
$11.5 million as of December 31, 2012. The increase in the cash
position was primarily attributable to a $4.0 million short-term loan drawn in
September 2013 for the purpose of
operational financing.
Accounts receivable
Accounts receivable as of September 30,
2013 decreased 8.4% to $54.4
million from $59.4 million as
of December 31, 2012. As of
September 30, 2013, Accounts
Receivable Turnover Days was 99 days compared to 87 days as of
December 31, 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 September 30, 2013
increased 349.1% to $25.7 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
September 30, 2013, Inventory
Turnover Days was 30 days compared to 9 days as of December 31, 2012. The increase in Inventory
Turnover Days was mainly due to inventory build-up by the end of
the third quarter in anticipation of the Golden Week sales in
China's October National Holiday.
Working capital
Working capital increased to $85.7
million from $78.1 million as
of September 30, 2013. The current
ratio was 3.49 on September 30, 2013,
compared to 3.86 on December 31,
2012.
CONFERENCE CALL INFORMATION
SGOCO's senior management will host a conference call on
Thursday, November 21, 2013 at
8 a.m. (Eastern) /5 a.m. (Pacific) / 9
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.
1-877-941-1427 (US Toll-free)
1-480-629-9664 (International)
4001-200-611 (China Toll-free)
86-400-628-0671 (China)
Conference call identification number: 4647981
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=106646
An archive of the call will be available within 48 hours at
http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=recent&id=17
ABOUT SGOCO GROUP, LTD.
SGOCO Group Ltd. (NASDAQ: SGOC) offers innovative display
products and solutions to consumers and businesses in various
industry verticals. By collaborating with its brand partners
and utilizing comprehensive industry knowledge in product
development, SGOCO addresses customers' rapid-changing display
needs by delivering highly intelligent products and solutions that
integrate hardware and software in SGOCO's own brand and co-brands.
Leveraging on its highly integrated distribution channels, SGOCO
primarily targets China's rapidly-emerging tier three and four
cities across 19 Provinces in China. SGOCO is also regarded
as a reliable brand developer. SGOCO was established in 2005 and
maintains its headquarters in Beijing,
China. 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: +86-10-8587-0173 (China)
US: +1-646-583-1616 (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 SEPTEMBER 30, 2013 AND 2012
|
(Unaudited)
|
(In thousands
of U.S. dollars except share and per share data)
|
|
|
|
2013
|
|
2012
|
REVENUES:
|
|
|
|
|
Revenues
|
|
42,969
|
|
26,047
|
|
|
|
|
|
COST OF GOODS
SOLD:
|
|
|
|
|
Cost of goods sold
|
|
39,501
|
|
25,105
|
|
|
|
|
|
GROSS
PROFIT
|
|
3,468
|
|
942
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Selling expenses
|
|
259
|
|
212
|
General and administrative
expenses
|
|
765
|
|
1,482
|
Total operating
expenses
|
|
1,024
|
|
1,694
|
|
|
|
|
|
INCOME (LOSS) FROM
OPERATIONS
|
|
2,444
|
|
(752)
|
|
|
|
|
|
OTHER INCOME
(EXPENSES):
|
|
|
|
|
Interest income
|
|
2
|
|
1
|
Interest expense
|
|
(63)
|
|
(12)
|
Other income (expense),
net
|
|
267
|
|
(23)
|
Change in fair value of warrant
derivative liability
|
|
17
|
|
27
|
Total other income
(expenses), net
|
|
223
|
|
(7)
|
|
|
|
|
|
INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES
|
|
2,667
|
|
(759)
|
|
|
|
|
|
PROVISION FOR INCOME
TAXES
|
|
513
|
|
331
|
NET INCOME
(LOSS)
|
|
2,154
|
|
(1,090)
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME (LOSS):
|
|
|
|
|
Foreign currency translation
adjustment
|
|
26
|
|
(3)
|
|
|
|
|
|
COMPREHENSIVE INCOME
(LOSS)
|
|
2,180
|
|
(1,093)
|
|
|
|
|
|
EARNINGS (LOSS) PER
SHARE:
|
|
|
|
|
Basic
|
|
0.12
|
|
(0.06)
|
Diluted
|
|
0.12
|
|
(0.06)
|
|
|
|
|
|
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING:
|
|
|
|
|
Basic
|
|
17,254,860
|
|
17,059,860
|
Diluted
|
|
17,254,860
|
|
17,059,860
|
SGOCO GROUP, LTD.
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
|
(Unaudited)
|
(In thousands
of U.S. dollars except share and per share data)
|
|
|
|
2013
|
|
2012
|
REVENUES:
|
|
|
|
|
Revenues
|
|
156,754
|
|
103,272
|
|
|
|
|
|
COST OF GOODS
SOLD:
|
|
|
|
|
Cost of goods sold
|
|
144,341
|
|
95,692
|
|
|
|
|
|
GROSS
PROFIT
|
|
12,413
|
|
7,580
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Selling expenses
|
|
815
|
|
460
|
General and administrative
expenses
|
|
2,435
|
|
4,166
|
Total operating
expenses
|
|
3,250
|
|
4,626
|
|
|
|
|
|
INCOME FROM
OPERATIONS
|
|
9,163
|
|
2,954
|
|
|
|
|
|
OTHER INCOME
(EXPENSES):
|
|
|
|
|
Interest income
|
|
7
|
|
3
|
Interest expense
|
|
(156)
|
|
(51)
|
Other income (expense),
net
|
|
206
|
|
(35)
|
Change in fair value of warrant
derivative liability
|
|
(10)
|
|
75
|
Total other income
(expenses), net
|
|
47
|
|
(8)
|
|
|
|
|
|
INCOME BEFORE
PROVISION FOR INCOME TAXES
|
|
9,210
|
|
2,946
|
|
|
|
|
|
PROVISION FOR INCOME
TAXES
|
|
1,942
|
|
1,887
|
NET INCOME
|
|
7,268
|
|
1,059
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME (LOSS):
|
|
|
|
|
Foreign currency translation
adjustment
|
|
132
|
|
(85)
|
|
|
|
|
|
COMPREHENSIVE
INCOME
|
|
7,400
|
|
974
|
|
|
|
|
|
EARNINGS PER
SHARE:
|
|
|
|
|
Basic
|
|
0.42
|
|
0.06
|
Diluted
|
|
0.42
|
|
0.06
|
|
|
|
|
|
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING:
|
|
|
|
|
Basic
|
|
17,172,820
|
|
17,059,860
|
Diluted
|
|
17,172,820
|
|
17,059,860
|
SGOCO GROUP, LTD.
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
AS OF SEPTEMBER
30, 2013 AND DECEMBER 31, 2012
|
(In thousands
of U.S. dollars except share and per share data)
|
|
|
|
September 30,
2013
|
|
December 31,
2012
|
ASSETS
|
|
(Unaudited)
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Cash
|
|
13,681
|
|
11,548
|
Accounts receivable,
net of provision for doubtful accounts of $106 and nil,
respectively
|
|
54,393
|
|
59,355
|
Notes
receivable
|
|
1,640
|
|
-
|
Other receivables and
prepayments
|
|
4,194
|
|
169
|
Inventories
|
|
25,709
|
|
5,725
|
Advances to
suppliers
|
|
20,502
|
|
28,511
|
Other current
assets
|
|
85
|
|
78
|
Total current
assets
|
|
120,204
|
|
105,386
|
|
|
|
|
|
PLANT AND EQUIPMENT,
NET
|
|
241
|
|
261
|
|
|
|
|
|
Total
assets
|
|
120,445
|
|
105,647
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
Short-term loans
|
|
11,451
|
|
6,230
|
Accounts payable, trade
|
|
8,342
|
|
12,038
|
Accrued liabilities
|
|
191
|
|
156
|
Short-term loan –
shareholder
|
|
-
|
|
209
|
Other payables
|
|
480
|
|
379
|
Customer deposits
|
|
6,098
|
|
1,155
|
Taxes
payable
|
|
7,915
|
|
7,147
|
Total current
liabilities
|
|
34,477
|
|
27,314
|
|
|
|
|
|
OTHER
LIABILITIES
|
|
|
|
|
Warrant derivative
liability
|
|
28
|
|
18
|
Total
liabilities
|
|
34,505
|
|
27,332
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Preferred stock,
$0.001 par value, 1,000,000 shares
authorized, nil issued and outstanding as of
September 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 September 30, 2013 and
December 31, 2012,
respectively
|
|
18
|
|
17
|
Paid-in-capital
|
|
25,052
|
|
24,828
|
Statutory
reserves
|
|
401
|
|
401
|
Retained
earnings
|
|
60,312
|
|
53,044
|
Accumulated other
comprehensive income
|
|
157
|
|
25
|
Total shareholders'
equity
|
|
85,940
|
|
78,315
|
Total liabilities and
shareholder's equity
|
|
120,445
|
|
105,647
|
SGOCO GROUP, LTD.
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
|
(Unaudited)
|
(In thousands
of U.S. dollars)
|
|
|
|
|
|
|
|
2013
|
|
2012
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
Net income
|
|
|
|
7,268
|
|
1,059
|
|
Adjustments to
reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
54
|
|
49
|
|
Provision for doubtful debts
|
|
106
|
|
-
|
|
Change in fair value of warrant derivative liability
|
|
10
|
|
(75)
|
|
Share-based compensation expenses
|
|
225
|
|
273
|
|
Change in operating
assets and liabilities
|
|
|
|
|
|
Accounts receivable, trade
|
|
4,449
|
|
(5,556)
|
|
Notes receivable
|
|
(1,640)
|
|
(3,679)
|
|
Other
receivables and prepayments
|
|
(3,976)
|
|
(209)
|
|
Inventories
|
|
(19,626)
|
|
34,132
|
|
Advances to suppliers
|
|
8,555
|
|
(39,460)
|
|
Other current assets
|
|
(3)
|
|
(68)
|
|
Accounts
payables, trade
|
|
(3,924)
|
|
(730)
|
|
Notes payables
|
|
-
|
|
254
|
|
Accrued liabilities
|
|
31
|
|
(142)
|
|
Other payables
|
|
91
|
|
117
|
|
Customer deposits
|
|
4,860
|
|
403
|
|
Taxes payable
|
|
599
|
|
1,494
|
|
|
Net cash used in operating activities
|
|
(2,921)
|
|
(12,138)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
Settlement of
consideration received from disposal of subsidiaries
|
|
-
|
|
18,734
|
|
Purchase of
equipment
|
|
(29)
|
|
(105)
|
|
|
Net cash (used in) provided by
investing
activities
|
|
(29)
|
|
18,629
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
Increase in
restricted cash
|
|
-
|
|
(254)
|
|
Proceeds from
short-term loans
|
|
5,221
|
|
-
|
|
Repayment of the
short-term loan - shareholder
|
|
(209)
|
|
-
|
|
|
Net cash provided by (used in) financing
activities
|
|
5,012
|
|
(254)
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE
RATE ON CASH
|
|
71
|
|
(24)
|
|
|
|
|
|
|
|
|
|
INCREASE IN
CASH
|
|
2,133
|
|
6,213
|
|
|
|
|
|
|
|
|
|
CASH, beginning of
period
|
|
|
11,548
|
|
535
|
|
|
|
|
|
|
|
|
|
CASH, end of
period
|
|
|
|
13,681
|
|
6,748
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
Interest expenses
paid (net of amount capitalized)
|
|
156
|
|
51
|
|
Income taxes
paid
|
|
|
1,191
|
|
432
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING
AND FINANCING
ACTIVITIES
|
|
|
|
Settlement of
consideration receivable – received in finished goods
|
|
-
|
|
38,992
|
SOURCE SGOCO Group, Ltd.