Quarterly Revenue increased 155% over the
same period in 2017Net Income increased 308% over
the same quarter in 2017 Conference Call on
Wednesday August 15, 2018 at 9am 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 June
30, 2018.
Revenues
The Company reported net revenue of $56.34
million for the second quarter of 2018, including $48.64 million
from the Connected Solutions Business Unit which engaged in the
design and manufacturing of IoT products, and $7.70 million from
the MVNO Business Unit which included mobile virtual operator and
some traditional telephony services. Net revenue for the
first half of 2018 was $114.60 million versus $53.34 million for
the first half of 2017. This represented increases of 155%
and 115% in net revenue for the three and six months ended June 30
this year from the corresponding periods of last year,
respectively. The increased sales in IoT products was primarily due
to hardware orders from a customer from the emerging markets in
Asia. We expect a similar strong trend in the Connected
Solutions sales and anticipate modest growth in the MVNO mobile
services for the rest of the year 2018.
Gross Margins
For the quarter ended June 30, 2018, gross
margin for the Connected Solutions Business Unit was 11.2% compared
with 20.5% from the same quarter in 2017. While the sales volume in
our Connected Solutions BU increased in the second quarter of 2018
over the same period last year, our gross margin decreased due to
competitive pricing on larger orders combined with a supply
shortage during Q2 2018 and resulting increase in component prices
on orders for which the sales price had already been fixed.
For the quarter ended June 30, 2018, our MVNO
Business Unit (which includes some traditional telephony
businesses) returned a 29.5% gross margin versus 35.8% from
2017. The decrease was primarily due to the impact of
heightened security checks in our sales process as well as the
unavailability of one-time “beauty” phone numbers sales (e.g. sales
of phone numbers with multiple digits of “8”). From time to
time, we are assigned blocks of numbers from the incumbent
operator; the lack of beauty numbers in Q2 2018 is not expected to
re-occur in future periods. Despite the small decrease year
over year, a healthy MVNO gross margin that has been maintained
since 2017 was attributed to our activities in this business unit
that has achieved economies of scale and also to the lingering
effect of the removal of a minimum charge by our incumbent
operator, China Unicom since October 2016.
The resulting combined gross margin for Q2 of
2018 was 13.7% versus 25.7% from a year ago. On a six-month basis,
in the first half of 2018 our gross margin was 14.5% as compared to
18.5% from the first half of last year.
Net Income
The Company achieved net income of $2.01 million
and $3.40 million for the three and six months ended June 30, 2018,
as compared to losses of $0.97 million and $0.95 for the respective
periods of a year ago.
EBITDA and Adjusted EBITDA
EBITDA was $3.99 million and $8.91 million for
the three and six months ended June 30, 2018, as compared to $1.29
million and $3.77 million for the same periods in 2017. Adjusted
EBITDA, which includes other non-operational expense (income), was
$3.98 million for the second quarter in 2018, as compared to $1.40
million for the same period in 2017.
Guidance from the Chief
Executive
The Company’s Chairman and CEO, Pat Chan,
commented: “We are pleased to report another strong quarter
following the first quarter of 2018, both in revenue and net
income. Gross margins in our Connected Business Unit were
impacted in part by a sudden component shortage which caused an
increase in component prices, while the selling price of the
product was determined more than six months ago. We anticipate this
component shortage will be relieved in the second half of this year
as suppliers ramp up the manufacturing of such components.
Meanwhile, we anticipate the gross margin of the MVNO business unit
for the second half of 2018 will continue to be around 30%. Based
primarily on the purchase orders we have received together with the
positive impact on sales that we anticipate will be generated by
our receipt of an official MVNO license in July of this year, we
are estimating 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. We anticipate
continued robust growth in 2019 as well.”
Non-US-GAAP Reconciliation
EBITDA and Adjusted EBITDA are
supplemental non-GAAP financial measures 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.
EBITDA and Adjusted EBITDA are not measures of
net income or cash flows as determined by GAAP. We define EBITDA as
Net Income plus income taxes, net interest expense, depreciation
and amortization, and Adjusted EBITDA as EBITDA minus other
non-operation expense (income).
We believe EBITDA and Adjusted EBITDA are useful
because they allow 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 EBITDA
and 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. EBITDA and
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 EBITDA and 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 EBITDA and Adjusted EBITDA. In
prior periods, the Company has excluded other items that it no
longer excludes for purposes of its non-GAAP financial measures.
Our computations of EBITDA and 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 six months ended June 30, 2018 and 2017:
|
|
|
|
|
|
|
3 months ended 06-30 |
|
6 months ended 06-30 |
|
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
|
(US$ in thousands) |
|
(US$ in thousands) |
Net income
(loss) |
|
(965) |
|
2,008 |
|
(947) |
|
3,395 |
Interest expense –
net |
|
516 |
|
1,115 |
|
1,133 |
|
1,354 |
Income tax expense |
|
446 |
|
(146) |
|
890 |
|
1,037 |
Depreciation and
amortization |
|
1,135 |
|
1,643 |
|
2,360 |
|
3,386 |
Foreign exchange loss
(gain) |
|
156 |
|
(633) |
|
333 |
|
(259) |
EBITDA |
|
1,288 |
|
3,987 |
|
3,769 |
|
8,913 |
|
|
|
|
|
|
|
|
|
Other non-operation
expense (income) |
|
107 |
|
(12) |
|
(78) |
|
(6) |
Adjusted
EBITDA |
|
1,395 |
|
3,975 |
|
3,691 |
|
8,907 |
|
|
|
|
|
|
|
|
|
Other Details
The Company’s quarterly report on Form 10-Q for
the quarter ended June 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 second quarter 2018 results and highlights for the
remainder of the year on Wednesday, August 15, 2018 at 9:00 am ET
(6:00 am 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 1398108. A
replay of the conference call will be available through August 23,
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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