Quarterly Revenue was $28.3 million, Net
Loss of $2.2 millionNine-Month Revenue was $142.9
million, Net Income of $1.2 millionConference Call
on Tuesday November 20, 2018 at 8pm ET
Borqs Technologies, Inc. (Nasdaq: BRQS) (the “Company”), a global
leader in embedded software and products for the Internet of Things
(IoT), today reported financial results for the quarter ended
September 30, 2018.
Revenues
The Company reported net revenue of $28.3
million for the third quarter of 2018, including $22.3 million from
the Connected Solutions Business Unit which is engaged in the
design and manufacturing of IoT products, and $6.0 million from the
MVNO Business Unit which includes mobile virtual operator and some
traditional telephony services. Net revenue for the first nine
months of 2018 was $142.9 million which included $121.3 million
from the Connected Solutions Business Unit and $21.6 million from
the MVNO BU. Revenue for the first nine months was an increase of
46.3% from $97.7 million from the same period in 2017.
The decrease and fluctuation in the third
quarter of 2018 was primarily due to reduced hardware sales. Net
revenue from hardware projects was recognized when delivery of
products was made. Such quarterly fluctuations in hardware net
revenue may not be indicative of any pattern within this business
activity. We do not believe that the reduction in revenues in Q3
2018 was due to seasonality or a significant decline in orders from
customers.
We expect to report a higher level of Connected
Solutions Business Unit sales in the fourth quarter as evidenced by
the current delivery activities; and we also anticipate modest
growth in the MVNO mobile services in future periods as well.
Gross Margins
For the quarter ended September 30, 2018, gross
margin for the Connected Solutions Business Unit was 5.7% compared
with 14.7% from the same quarter in 2017. This decrease in gross
margin for the third quarter was primarily due to periodic
amortization from previously capitalized costs representing a
larger proportion of costs of goods during this quarterly period
when the volume of product delivery was comparatively
less.
For the quarter ended September 30, 2018, our
MVNO Business Unit (which includes some traditional telephony
businesses) returned a 43.1% gross margin versus 30.1% from 2017.
The increase in gross margin during this quarter was primarily due
to higher than usual sales of mobile phone numbers with repeating
digits (“beauty numbers”). During this period, our MVNO received
additional numbers for its customers to select and the availability
was from new phone numbers assigned from the incumbent operator and
also from the recycling of some previously expired phone
numbers.
Despite a small decrease in the third quarter
2018 in our MVNO revenue to $6.0 million from $7.8 million of the
same quarter last year, a healthy MVNO gross margin has been
maintained since 2017 and that was attributed to our activities
achieving economies of scale and also that a minimum charge by our
incumbent operator, China Unicom, had been removed since October
2016.
The resulting combined gross margin for Q3 of
2018 was 13.6% versus 17.4% from a year ago. For the first nine
months of 2018 our gross margin was 14.3% as compared to 18.0% from
the same period of last year.
Net Income
The Company has net loss of $2.2 million and net
income $1.2 million for the three and nine months ended September
30, 2018, as compared to losses of $11.6 million and $12.5 million
for the respective periods of a year ago. The larger loss in
the third quarter of 2017 was due to non-cash merger transaction
related expenditures in August 2017.
Adjusted EBITDA
Adjusted EBITDA was $0.8 million and $9.7
million for the three and nine months ended September 30, 2018, as
compared to $4.1 million and $7.8 million for the same periods in
2017. Adjusted EBITDA excluded net interest expense, income taxes,
depreciation and amortization, and other non-operational expense
(income).
Guidance from the Chief
Executive
The Company’s Chairman and CEO, Pat Chan,
commented: “We are pleased to report that our business plans are
progressing as expected. Based on the purchase orders we have
received and the business activities that have occurred so far in
the fourth quarter, we reiterate that aggregate revenues for the
full year of 2018 to come within a range from $195 million to $215
million, and net income (after taxes but excluding one-off
expenditures, if any) to be in the range of $4 million to $6
million.”
Non-US-GAAP Reconciliation
Adjusted EBITDA is a
supplemental non-GAAP financial measure exclusive of
certain items to facilitate management’s review of the
comparability of our core operating results on a period to period
basis because such items are not related to our ongoing core
operating results as viewed by management.
Adjusted EBITDA is not a measure of net income
or cash flows as determined by GAAP. We define Adjusted EBITDA as
Net Income plus income taxes, net interest expense, depreciation
and amortization, and excluding other non-operation expense
(income).
We believe Adjusted EBITDA is useful because it
allows us to more effectively evaluate our operating performance
and compare the results of our operations from period to period
without regard to our financing methods or capital structure. We
exclude the items listed above in arriving at Adjusted EBITDA
because these amounts can vary substantially from company to
company within our industry depending upon accounting methods and
book values of assets, capital structures and the method by which
the assets were acquired. Adjusted EBITDA should not be considered
as an alternative to, or more meaningful than, net income as
determined in accordance with GAAP, or as an indicator of our
operating performance or liquidity. Certain items excluded from
Adjusted EBITDA are significant components in understanding and
assessing a company’s financial performance, such as a company’s
cost of capital and tax structure, as well as the historic costs of
depreciable assets, none of which are components of Adjusted
EBITDA. In prior periods, the Company has excluded other items that
it no longer excludes for purposes of its non-GAAP financial
measure. Our computations of Adjusted EBITDA may not be comparable
to other similarly titled measures of other companies.
The following table presents a reconciliation of
the non-GAAP financial measures of EBITDA and Adjusted EBITDA to
the most directly comparable GAAP financial measure for the three
and nine months ended September 30, 2018 and 2017:
|
|
|
3 months ended 09-30 |
|
9 months ended 09-30 |
|
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
|
|
(US$ in thousands) |
|
(US$ in thousands) |
Net income (loss) |
|
|
(11,565 |
) |
|
(2,210 |
) |
|
(12,512 |
) |
|
1,185 |
|
Interest expense –
net |
|
|
376 |
|
|
989 |
|
|
1,509 |
|
|
2,343 |
|
Income tax expense |
|
|
58 |
|
|
396 |
|
|
948 |
|
|
1,433 |
|
Depreciation and
amortization |
|
|
964 |
|
|
1,629 |
|
|
3,324 |
|
|
5,015 |
|
EBITDA |
|
|
(10,167 |
) |
|
804 |
|
|
(6,731 |
) |
|
9,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange loss
(gain) |
|
|
54 |
|
|
(41 |
) |
|
387 |
|
|
(300 |
) |
Other non-operation
expense (income) |
|
|
(406 |
) |
|
(7 |
) |
|
(484 |
) |
|
(13 |
) |
Interest expense &
change in value of warrants |
|
|
134 |
|
|
- |
|
|
134 |
|
|
- |
|
Merger related non-cash
non-recurring SBC |
|
|
14,504 |
|
|
- |
|
|
14,504 |
|
|
- |
|
Adjusted
EBITDA |
|
|
4,119 |
|
|
756 |
|
|
7,810 |
|
|
9,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Details
The Company’s quarterly report on Form 10-Q for
the quarter ended September 30, 2018 has been filed with the U.S.
Securities and Exchange Commission, and is accessible on the SEC
website at www.sec.gov.
Conference Call ScheduleBorqs
will review the third quarter 2018 results and highlights for the
remainder of the year on Tuesday, November 20, 2018 at 8:00 pm ET
(5:00 pm Pacific). The dial-in numbers are +1-845-675-0437 or
+1-866-519-4004 in the US and +86-400-620-8038 or +86-800-819-0121
in China; and then enter the Conference ID of 9799959. A
replay of the conference call will be available through November
28, 2018. The replay dial-in numbers are +1-855-452-5696 in
the US and +86-800-870-0206 in China; and then enter the same
Conference ID.
About Borqs Technologies,
Inc.
Borqs Technologies is a leading provider of
software and products for the IoT, providing customizable,
differentiated and scalable Android-based smart connected devices
and cloud service solutions. Borqs has achieved leadership and
customer recognition as an innovative end-to-end IoT solutions
provider leveraging its strategic chipset partner relationships as
well as its broad software and IP portfolio. The Company designs,
develops and provides turnkey solutions across device form factors
such as smartphones, tablets, smartwatches, trackers, automotive
IVI, and vertical application devices (for restaurants, payments
etc.). For more information, please visit the Company’s
website (www.borqs.com).
Forward-Looking Statements and
Additional Information
This press release includes “forward-looking
statements” that involve risks and uncertainties that could cause
actual results to differ materially from what is expected. Words
such as “expects”, “anticipates” and variations and similar words
and expressions are intended to identify such forward-looking
statements, but the absence of these words does not mean that a
statement is not forward-looking. Such forward-looking statements
may include, without limitation, statements regarding the plans and
objectives of management for future operations, projections of
income or loss or other financial items, or our future financial
performance, based on currently available information and reflect
our management’s current beliefs. Many factors could cause actual
events or results to differ materially from the events and results
discussed in the forward-looking statements, including, without
limitation, market acceptance of our products and services,
competition from existing products or new products that may emerge,
the implementation of our business model and strategic plans for
our business and our products, estimates of our future revenue,
expenses, capital requirements and our need for financing, our
financial performance, and current and future government
regulations, developments relating to our competitors, so the
reader is advised to refer to the Risk Factors sections of the
Company’s filings with the Securities and Exchange Commission for
additional information identifying important factors that could
cause actual results to differ materially from those anticipated in
the forward-looking statements. Except as expressly required by
applicable securities law, the Company disclaims any obligation to
update any forward-looking statements, whether as a result of new
information, future events or otherwise.
Investor Contact:
Sandra Dou Investor Relations Sr. Manager Borqs Technologies,
Inc. sandra.dou@borqs.net www.borqs.com
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