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| 8-K - CURRENT REPORT - Trunkbow International Holdings Ltd | v328495_8k.htm |
Exhibit 99.1
Trunkbow Announces Third Quarter 2012 Financial Results
BEIJING, November 14, 2012 -- Trunkbow International Holdings Limited (NASDAQ: TBOW) ("Trunkbow" or the "Company"), a leading provider of Mobile Payment Solutions ("MPS") and Mobile Value Added Services ("MVAS") in the PRC, today announced financial results for its third quarter ended September 30, 2012.
Third Quarter and Recent Financial and Business Highlights
| · | Gross revenue was $9.0 million, compared with $5.8 million in the third quarter of 2011. |
| · | MPS gross revenue for the quarter was $0.6 million, compared with $2.1 million in the third quarter of 2011. |
| · | MVAS gross revenue increased to $8.5 million, compared with $3.7 million a year ago. |
| · | Gross profit for the quarter was $7.0 million, compared with $4.3 million in the third quarter of 2011; quarterly gross margin improved to 78.6%, compared with 77.2% in the third quarter of 2011. |
| · | Net income totaled $3.2 million, or $0.09 per diluted share, compared with $0.8 million, or $0.02 per diluted share in the third quarter of 2011. |
| · | As of September 30, 2012, cash and cash equivalents totaled $0.3 million. |
| · | Collected approximately $4.1 million of outstanding accounts receivable as of November 12, 2012. |
| · | Reaffirmed full-year 2012 net income guidance of approximately $17 million. |
| · | Announced that the Company’s board of directors has received a preliminary non-binding "going-private" transaction proposal letter, dated November 2, 2012. |
| · | Signed an agreement to develop and implement a new electronic payment system for China Minsheng Banking Corp., Ltd. ("CMBC"), China's first national joint-stock commercial bank, serving non state-owned enterprises, small businesses and high-end consumers. New system will be designed to simplify mobile and Internet payments for 10 million CMBC credit cardholders. |
"Our results for the third quarter of 2012 were driven largely by the strong performance in our MVAS business, partially offset by weakness in the MPS segment due to a reduction in system integration, software and maintenance sales. We continue to execute on our MPS strategy, transitioning from one-time platform centric sales to a recurring model based on revenue sharing and transaction processing,” said Mr. Qiang Li, Chief Executive Officer of Trunkbow. “We had over 5,000 MPS merchant partners at the end of September, and are working to further grow this number to expand our recurring revenue streams.
“In addition to merchant and subscriber acquisition in our MPS segment, we are also implementing our data center projects in Shanghai and Guangzhou. We have invested approximately US$12.2 million in these projects to-date. We are making substantial investments to advance our existing business and develop new services to strengthen the foundation for sustainable long-term growth and improved earnings performance.”
Third Quarter 2012 Results
Gross revenue in the third quarter of 2012 was $9.0 million, an increase of 57.0% year-over-year, compared with gross revenue of $5.8 million in the same period a year ago. The increase in gross revenue was primarily attributable to the significant increase of the software sales. Revenue from MVAS increased $4.8 million, or 131.3%, to $8.5 million for the third quarter of 2012, compared with $3.66 million in the same period of 2011. The increase in MVAS revenue was primarily attributed to growth in MVAS software sales. Revenue from the Company’s MPS offerings decreased 72.2% to $0.6 million for the third quarter of 2012, compared with $2.1 million in the same period of 2011. The decrease in MPS revenue was attributable to a reduction of MPS system integration and software sales.
Cost of revenue in the third quarter of 2012 was $1.9 million, compared with $1.3 million in the same period of 2011. The increase in cost of revenue was in line with the increase in revenue.
Gross profit in the third quarter of 2012 totaled $7.0 million, compared with $4.3 million in the third quarter of 2011. As a percentage of net revenue, gross margin was 78.6% in the third quarter of 2012, compared with 77.2% in the year-ago period. The year-over-year improvement in gross margin was attributable to the decrease of revenues from system integration, which involves significantly higher hardware costs.
Operating expenses in the third quarter of 2012 were $3.3 million, an increase of 2.1% year-over-year. The increase in operating expenses was primarily related to a bad debt provision of $0.5 million provided to accounts receivable over one year old, partially offset by lower advertisement and promotion expenses and a decrease in general and administrative expenses.
Operating income in the third quarter of 2012 was $3.7 million, compared with $1.1 million reported in the same period last year. The increase in operating profit for the quarter was in line with the increase in revenue.
Net income attributable to Trunkbow was $3.2 million in the third quarter of 2012, compared with $0.8 million in the third quarter of 2011. Earnings per basic and diluted share in the third quarter of 2012 were $0.09 each, based on basic and diluted shares outstanding of 36.81 million. This compares with $0.02 per basic and diluted share, respectively, based on basic and diluted shares outstanding of 36.6 million and 37.7 million, respectively, in the year-ago period.
Balance Sheet and Cash Flow
As of September 30, 2012, the Company had $0.3 million in cash and cash equivalents, compared with $6.1 million as of December 31, 2011. As of September 30, 2012, the Company had working capital of $46.3 million and total shareholders' equity of $90.2 million. Accounts receivable on September 30, 2012 totaled approximately $45.2 million. As of November 12, 2012, the Company had collected approximately $4.1 million of these outstanding receivables.
Business Outlook
Trunkbow reaffirmed its 2012 financial guidance, which calls for approximately $17 million in net income.
Mr. Li concluded, "We are pleased with the ongoing shift from platform installations to recurring revenue from shared services and transaction processing. We continue to pursue the development of our hosted services offering, which we believe can become a long-term growth driver for our businesses. We are confident that we can continue the transformation of our businesses and achieve our strategic objectives.”
Conference Call
The Company will host a conference call to discuss financial results for the third quarter 2012 on November 14, 2012 at 8:00 p.m. EDT. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1 (718) 354-1231. International callers should dial +65 6723-9381. The passcode required is 63838568.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on November 14, 2012. To access the replay, please dial +1 (646) 254-3697, international callers dial +61 (2) 8199-0299, and enter the passcode 63838568.
About Trunkbow
Trunkbow International Holdings (NASDAQ: TBOW) is a leading provider of Mobile Payment Solutions ("MPS") and Mobile Value Added Solutions ("MVAS") in PRC. Trunkbow's solutions enable the telecom operators to offer their subscribers access to unique mobile applications, innovative tools, value-added services that create a superior mobile experience, and as a result generate higher average revenue per user and reduce subscriber churn. Since its inception in 2001, Trunkbow has established a proven track record of innovation, and has developed a significant market presence in both the Mobile Value Added and Mobile Payment solutions markets. Trunkbow supplies its mobile payment solutions to all three Chinese mobile telecom operators, as well as re-sellers, in several provinces of China. For more information, please visit www.trunkbow.com.
Safe Harbor Statement
This press release contains forward-looking statements that reflect the Company's current expectations and views of future events that involve known and unknown risks, uncertainties and other factors that may cause its actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward looking statements involve known and unknown risks and uncertainties, including but not limited to uncertainties relating to the Company's relationship with China's major telecom carriers and its resellers, competition from domestic and international companies, changes in technology, contributions from revenue sharing plans and general economic conditions. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. You should understand that the Company's actual future results may be materially different from and worse than what the Company expects. Information regarding these risks, uncertainties and other factors is included in the Company's annual report on Form 10-K and other filings with the SEC.
| Contact Information | |
| In China: | In the U.S. |
| Trunkbow International Holdings Limited | The Piacente Group |
| Ms Alice Ye, Chief Financial Officer | Brandi Floberg/Lee Roth |
| Phone: +86 (10) 8571-2518 (Beijing) | Phone: + (1) 212-481-2050 (New York) |
| Email: ir@trunkbow.com | E-mail: trunkbow@tpg-ir.com |
- FINANCIAL TABLES FOLLOW -
TRUNKBOW INTERNATIONAL HOLDINGS LIMITED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2012 | 2011 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents* | $ | 339,139 | $ | 6,139,589 | ||||
| Accounts receivable, net* | 45,219,905 | 41,147,767 | ||||||
| Advances to suppliers | 6,825,876 | 9,783,454 | ||||||
| Prepayment | 1,627,935 | 316,258 | ||||||
| Other current assets* | 7,767,163 | 4,040,152 | ||||||
| Due from directors* | 48,859 | 758,033 | ||||||
| Inventories* | 6,345,902 | 5,569,624 | ||||||
| Deferred tax asset | 294,397 | 117,952 | ||||||
| Total current assets | 68,469,176 | 67,872,829 | ||||||
| Property and equipment, net* | 38,758,514 | 20,775,594 | ||||||
| Land use right, net | 5,845,219 | 5,905,583 | ||||||
| Intangible assets, net | 274,576 | 33,958 | ||||||
| Long-term prepayment* | 524,315 | 2,733,363 | ||||||
| TOTAL ASSETS | $ | 113,871,800 | $ | 97,321,327 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable* | $ | 2,232,026 | $ | 2,238,179 | ||||
| Accrued expenses and other current liabilities* | 2,613,266 | 2,216,128 | ||||||
| Short-term loan | 13,751,679 | 6,460,945 | ||||||
| Due to directors* | 9,772 | 11,959 | ||||||
| Taxes payable* | 3,521,343 | 4,209,907 | ||||||
| Total current liabilities | 22,128,086 | 15,137,118 | ||||||
| Deferred revenue | 1,501,620 | 0 | ||||||
| Total liabilities | 23,629,706 | 15,137,118 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Stockholders’ equity | ||||||||
| Preferred Stock: par value $0.001, authorized 10,000,000 shares, none issued and outstanding at September 30, 2012 and December 31, 2011, respectively | 0 | 0 | ||||||
| Common Stock: par value $0.001, authorized 190,000,000 shares, 36,807,075 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively | 36,807 | 36,807 | ||||||
| Additional paid-in capital | 39,671,966 | 39,671,966 | ||||||
| Appropriated retained earnings | 4,504,667 | 4,504,667 | ||||||
| Unappropriated retained earnings | 42,687,053 | 34,989,429 | ||||||
| Accumulated other comprehensive income | 3,341,601 | 2,981,340 | ||||||
| Total stockholders’ equity | 90,242,094 | 82,184,209 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 113,871,800 | $ | 97,321,327 | ||||
TRUNKBOW INTERNATIONAL HOLDINGS LIMITED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOM
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenues | $ | 9,048,886 | $ | 5,765,327 | $ | 21,817,127 | $ | 19,984,170 | ||||||||
| Less: Business tax and surcharges | 168,007 | 169,089 | 406,000 | 472,644 | ||||||||||||
| Net revenues | 8,880,879 | 5,596,238 | 21,411,127 | 19,511,526 | ||||||||||||
| Cost of revenues | 1,898,626 | 1,273,984 | 3,968,955 | 4,858,522 | ||||||||||||
| Gross profit | 6,982,253 | 4,322,254 | 17,442,172 | 14,653,004 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling and distribution expenses | 662,343 | 700,242 | 2,535,720 | 1,668,383 | ||||||||||||
| General and administrative expenses | 2,087,644 | 2,109,943 | 5,898,692 | 4,617,500 | ||||||||||||
| Research and development expenses | 517,891 | 390,834 | 1,576,808 | 1,026,913 | ||||||||||||
| 3,267,878 | 3,201,019 | 10,011,220 | 7,312,796 | |||||||||||||
| Income from operations | 3,714,375 | 1,121,235 | 7,430,952 | 7,340,208 | ||||||||||||
| Other income (expenses) | ||||||||||||||||
| Interest income | 58,734 | 29,533 | 174,305 | 102,274 | ||||||||||||
| Interest expense | (297,059 | ) | (334 | ) | (733,193 | ) | (51,230 | ) | ||||||||
| Refund of value-added tax | 6,597 | 0 | 1,549,765 | 1,307,836 | ||||||||||||
| Government grants | 178,478 | 0 | 300,427 | 4,740,134 | ||||||||||||
| Other income | 37,160 | 40,009 | 92,710 | 79,837 | ||||||||||||
| Other expenses | 0 | (56,794 | ) | (12,391 | ) | (130,959 | ) | |||||||||
| (16,090 | ) | 12,414 | 1,371,623 | 6,047,892 | ||||||||||||
| Income before income tax expense | 3,698,285 | 1,133,649 | 8,802,575 | 13,388,100 | ||||||||||||
| Income tax expense | 516,246 | 302,582 | 1,104,951 | 1,241,572 | ||||||||||||
| Net income | 3,182,039 | 831,067 | 7,697,624 | 12,146,528 | ||||||||||||
| Foreign currency translation fluctuation | (163,043 | ) | 670,848 | 360,261 | 1,784,893 | |||||||||||
| Comprehensive income | $ | 3,018,996 | $ | 1,501,915 | $ | 8,057,885 | $ | 13,931,421 | ||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic | 36,807,075 | 36,649,466 | 36,807,075 | 36,080,866 | ||||||||||||
| Diluted | 36,807,075 | 37,733,261 | 36,813,912 | 37,283,765 | ||||||||||||
| Earnings per share | ||||||||||||||||
| Basic | $ | 0.09 | $ | 0.02 | $ | 0.21 | $ | 0.34 | ||||||||
| Diluted | $ | 0.09 | $ | 0.02 | $ | 0.21 | $ | 0.33 | ||||||||
TRUNKBOW INTERNATIONAL HOLDINGS LIMITED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, | ||||||||
| 2012 | 2011 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 7,697,624 | $ | 12,146,528 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 739,581 | 220,807 | ||||||
| Provision for doubtful debts | 1,908,674 | 0 | ||||||
| Deferred taxes | -175,335 | 0 | ||||||
| Share-based compensation expenses | 0 | 262,500 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | -5,778,091 | -9,923,613 | ||||||
| Advance to suppliers | 3,017,886 | 2,927,681 | ||||||
| Prepayment | -1,311,965 | 0 | ||||||
| Other current assets | -2,920,921 | -1,029,348 | ||||||
| Due from directors | 713,968 | -599,968 | ||||||
| Inventories | -728,629 | 3,611,360 | ||||||
| Long-term prepayment | 2,225,864 | -2,285,550 | ||||||
| Accounts payable | -17,497 | -277,580 | ||||||
| Accrued expenses and other current liabilities | 386,447 | 1,231,409 | ||||||
| Amounts due to directors | -2,251 | 0 | ||||||
| Taxes payable | -710,814 | -539,393 | ||||||
| Deferred revenue | 1,503,640 | 0 | ||||||
| Net cash flows provided by operating activities | 6,548,181 | 5,744,833 | ||||||
| Cash flows from investing activities | ||||||||
| Acquisition of property and equipment and intangible assets | -18,819,394 | -20,059,801 | ||||||
| Collection (Payment on) loans to third parties | -791,390 | 2,870,023 | ||||||
| Acquisition of land use right | 0 | -5,847,835 | ||||||
| Acquisition of Delixunda Company (net of cash acquired) | 0 | -38,173 | ||||||
| Net cash flows used in investing activities | -19,610,784 | -23,075,786 | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of common stock (net of finance costs) | 0 | 17,332,251 | ||||||
| Proceeds from (repayment of ) bank loan | 7,267,819 | -1,846,949 | ||||||
| Restricted deposit collected from bank | 0 | 369,390 | ||||||
| Proceeds from exercise of warrants | 0 | 610,000 | ||||||
| Net cash flows provided by financing activities | 7,267,819 | 16,464,692 | ||||||
| Effect of exchange rate fluctuation on cash and cash equivalents | -5,666 | 124,652 | ||||||
| Net increase in cash and cash equivalents | -5,800,450 | -741,609 | ||||||
| Cash and cash equivalents – beginning of the year | 6,139,589 | 10,259,750 | ||||||
| Cash and cash equivalents – end of the period | $ | 339,139 | $ | 9,518,141 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | 733,193 | $ | 51,230 | ||||
| Cash paid for income taxes | $ | 1,619,878 | $ | 304,623 | ||||
| Supplemental disclosure of noncash financing activities | ||||||||
| Issuance of 30,000 common shares at $5.00 each for the legal fee | $ | 0 | $ | 150,000 | ||||