NQ Mobile Inc. Announces Third Quarter 2012 Results
NQ Mobile Inc. Announces Third Quarter 2012 Results
Record Net Revenues of $25.8 million, Up 127.4% Year-over-Year
Net Income Attributable to NQ Mobile was $0.3 million
GAAP Fully Diluted Earnings per ADS(1) of $0.01
Non-GAAP Net Income Attributable to NQ Mobile(2) was $8.1 million
Non-GAAP Fully Diluted Earnings per ADS(3) of $0.16
PR Newswire
BEIJING and DALLAS, Nov. 12, 2012
BEIJING and DALLAS, Nov. 12, 2012 /PRNewswire/ -- NQ Mobile Inc. ("NQ Mobile"
or the "Company") (NYSE: NQ), a leading global provider of mobile Internet
services, today announced its unaudited financial results for the third
quarter ended September 30, 2012.
(Logo: http://photos.prnewswire.com/prnh/20120125/CN41481LOGO-b)
Third Quarter 2012 Highlights
o Net revenues increased 127.4% year-over-year to $25.8 million from $11.3
million in the corresponding period of 2011, exceeding the high end of the
Company's previous guidance of $24 million to $25 million. Excluding
revenue contribution of $4.5 million from the recently acquired Beijing
NationSky Network Technology, Inc. ("NationSky"), net revenues increased
88.0% year-over-year to $21.3 million.
o Loss from operations was $1.0 million, mainly due to $7.8 million in
share-based compensation expense in the third quarter of 2012, compared
with an operating income of $2.1 million in the corresponding period of
2011. Non-GAAP operating income(4), increased 44.4% year-over-year to $6.8
million from $4.7 million in the corresponding period of 2011. Excluding
operating income contribution of $0.5 million from NationSky, Non-GAAP
operating income increased 34.6% year-over-year to $6.3 million.
o Net income attributable to NQ Mobile was $0.3 million, compared with net
income of $4.3 million in the corresponding period of 2011. Non-GAAP net
income(5) increased 16.2% year-over-year to $8.1 million from $7.0 million
in the corresponding period of 2011. Net income contribution from
NationSky amounted to $0.2 million in the third quarter.
o GAAP fully diluted Earnings per ADS was $0.01 and non-GAAP fully diluted
Earnings per ADS was $0.16. Diluted weighted average number of ADSs
outstanding increased to 51.2 million in the third quarter of 2012 from
50.1 million in the previous quarter.
o Net cash flow generated from operations was $6.9 million in the third
quarter of 2012, compared with $2.6 million in the corresponding period of
2011. Cash and cash equivalents and term deposits together amounted to
$126.2 million as of September 30, 2012.
o Deferred revenue was $10.9 million at the end of the third quarter of
2012, up 14.7% from $9.5 million at the end of the second quarter of
2012.
The Company's non-GAAP financial measures and related reconciliations to GAAP
financial measures are described in the accompanying sections of "Non-GAAP
Disclosure" and "Reconciliations to Unaudited Condensed Consolidated
Statements of Operations."
Third Quarter 2012 Operating Metrics
o Cumulative registered user accounts were 241.6 million as of September 30,
2012, compared with 122.8 million as of September 30, 2011 and 203.5
million as of June 30, 2012.
o Average monthly active user accounts for the third quarter ended September
30, 2012 were 84.5 million, compared with 42.7 million for the
corresponding period of 2011 and 69.2 million for the previous quarter
ended June 30, 2012.
o Average monthly paying user accounts for the third quarter ended September
30, 2012 were 8.2 million, compared with 5.0 million for the corresponding
period of 2011 and 7.4 million for the previous quarter ended June 30,
2012.
As of Sept. 30, As of Sept. 30, As of June 30,
(In millions)
2012 2011 2012
Cumulative registered user 241.6 122.8 203.5
accounts
China 141.9 78.5 121.8
Overseas 99.7 44.3 81.7
Three months Three months Three months
ended Sept. 30, ended Sept. 30, ended June 30,
2012 2011 2012
84.5 42.7 69.2
Average monthly active user
accounts
China 49.7 27.1 41.1
Overseas 34.8 15.6 28.1
Average monthly paying user 8.2 5.0 7.4
accounts
China 5.6 3.5 5.2
Overseas 2.6 1.5 2.2
"I am pleased to report that we again achieved a strong quarter with revenue
growth exceeding the high end of the previously issued guidance. Both our
registered and active user base recorded the highest sequential growth for
2012, reaching 242 million and 85 million, respectively. Additionally, we are
starting to see significant revenue contribution from the NationSky
acquisition for our enterprise business," commented Dr. Henry Lin, Chairman
and Co-Chief Executive Officer of NQ Mobile. "While we continue to see strong
growth in the global mobile security market, we also undertook an important
strategic step in broadening our mobile Internet service offerings through the
acquisition of Feiliu, to further transform NQ Mobile to become a leading
mobile Internet platform and services company."
"In the third quarter, we continued our product expansion and were excited to
bring more innovative products to the global market such as NQ Family
Guardian," added Omar Khan, Co-Chief Executive Officer of NQ Mobile. "With the
formal opening of our new international corporate headquarters in Dallas, we
remain committed to our global expansion efforts and continue to see strong
momentum in international business development with newly announced agreements
with Go Wireless, Wireless and Cat® Phones in the United States, Celcom in
Malaysia, epay in Australia and Phones4you in the United Kingdom. Revenue from
international markets today already accounts for more than 54% of our consumer
business and we believe that the continued build out and investment in our
international business will further drive and sustain NQ Mobile's long term
growth."
Third Quarter 2012 Results
Revenues
Net revenues in the third quarter of 2012 were $25.8 million, an increase of
127.4% year-over-year from $11.3 million in the third quarter of 2011 and
29.3% sequentially from $20.0 million in the second quarter of 2012, exceeding
the high end of the Company's previous guidance of $24 million and $25
million. Excluding revenues of $4.5 million from NationSky, net revenues
increased 88.0% year-over-year and 15.0% sequentially to $21.3 million.
Net revenues from premium mobile Internet services increased 77.4%
year-over-year and 14.2% sequentially to $18.4 million in the third quarter of
2012. The increases were primarily due to the strong and steady growth in the
number of paying user accounts, which reflected growth in the number of
registered and active user accounts, as well as increased use of NQ Mobile's
premium services, particularly among the overseas paying user accounts, which
generally pay a higher subscription rate. Revenue contribution from overseas
users accounted for 54.1% of total net revenues from premium mobile Internet
services in the third quarter of 2012, compared with 49.6% in the third
quarter of 2011, and 51.2% in the second quarter of 2012.
Net revenues from other services in the third quarter of 2012, which include
revenues from NationSky, increased 642.6% year-over-year and 91.4%
sequentially to $7.4 million. Excluding the revenues of $4.5 million from
NationSky, net revenues from other services were $2.9 million, representing an
increase of 196.5% year-over-year and 19.7% sequentially. The increases were
mainly due to the growth in revenues from secured download and delivery
services for mobile applications produced by third parties. The revenues from
NationSky increased 218.0% sequentially to $4.5 million in the third quarter
due to the strong growth in its enterprise business and new customer gains.
Excluding revenues from NationSky, net revenues from other services as a
percentage of total net revenue was 13.9% in the third quarter of 2012,
compared with 8.8% in the third quarter of 2011 and 13.4% in the second
quarter of 2012.
Cost of Revenues
Cost of revenues in the third quarter of 2012 was $8.0 million, representing
an increase of 264.0% year-over-year and 69.5% sequentially. Excluding $3.4
million of NationSky's contribution, cost of revenues increased 109.6%
year-over-year and 28.4% sequentially to $4.6 million. The year-over-year and
sequential increases were primarily due to increased customer acquisition
costs as a result of more users acquired in the third quarter and higher
revenue sharing with mobile payment service providers consistent with the
increase of revenue from mobile payment service providers.
Gross Profit and Gross Margin
Gross profit in the third quarter of 2012 was $17.8 million, representing an
increase of 94.8% year-over-year from $9.2 million in the third quarter of
2011 and 16.9% sequentially from $15.3 million in the second quarter of 2012.
Gross margin, or gross profit as a percentage of net revenues, was 69.2% in
the third quarter of 2012, compared with 80.7% in the third quarter of 2011
and 76.5% in the second quarter of 2012. Excluding the impact from NationSky,
gross margin was 78.5% and 80.8% in the third and second quarter of 2012,
respectively. Given NationSky's lower margin business nature, gross margin is
expected to decline further in the fourth quarter of 2012 as NationSky's
revenue contribution becomes greater. NationSky's gross margin in the third
quarter and second quarter of 2012 were about 24.6% and 19.9% on a standalone
basis, respectively, and cost of revenues for NationSky primarily consist of
the hardware device procurement cost.
Operating Expenses
Total operating expenses in the third quarter of 2012 were $18.8 million,
representing an increase of 164.9% year-over-year and 36.7% sequentially.
Non-GAAP operating expenses(6), were $11.1 million in the third quarter of
2012, representing an increase of 146.7% year-over-year from $4.5 million in
the third quarter of 2011 and 26.4% sequentially from $8.8 million in the
second quarter of 2012. NationSky contributed $0.64 million in operating
expenses in the third quarter of 2012.
Selling and marketing expenses were $5.7 million in the third quarter of 2012,
representing an increase of 227.9% year-over-year and 52.1% sequentially. The
year-over-year and sequential increases were primarily due to higher marketing
and advertising spending, higher share-based compensation expenses, and higher
staff costs as a result of increases in salary and headcount. Non-GAAP selling
and marketing expenses(7) were $4.7 million in the third quarter of 2012,
representing an increase of 251.6% year-over-year and 40.3% sequentially,
compared with $1.3 million in the third quarter of 2011 and $3.4 million in
the second quarter of 2012. The year-over-year and sequential increases were
primarily due to higher marketing and advertising spending and higher staff
costs as a result of increases in salary and headcount.
General and administrative expenses were $10.3 million in the third quarter of
2012, representing an increase of 151.8% year-over-year and 27.1%
sequentially. The year-over-year increase was mainly due to higher share-based
compensation expenses caused by the impact of additional option and restricted
shares issuance to executives and non-employee consultants since the end of
the third quarter of 2011, higher staff costs from salary and headcount
increases, and higher legal and professional fees resulted from acquisition
and investment activities made from the second quarter of 2012. The sequential
increase was primarily due to higher share-based compensation expenses and
higher staff costs. Non-GAAP general and administrative expenses(8) were $4.0
million in the third quarter of 2012, compared with $2.1 million in the third
quarter of 2011 and $3.7 million in the second quarter of 2012. The 91.6%
year-over-year increase was primarily due to higher staff costs from salary
and headcount increases, higher legal and professional fees and higher
consulting fees resulted from acquisition and investment activities made from
the second quarter of 2012 while the 9.5% sequential increase was primarily
due to higher staff costs, higher travelling and entertainment costs partially
offset by lower office related expenses.
Research and development expenses were $2.8 million in the third quarter of
2012, representing an increase of 121.4% year-over-year and 47.6%
sequentially. The year-over-year and sequential increases were primarily due
to higher staff costs as a result of increases in salary and headcount and
higher share-based compensation expenses. Non-GAAP research and development
expenses(9) were $2.3 million in the third quarter of 2012, representing an
increase of 122.8% year-over-year and 35.4% sequentially, compared with $1.0
million in the third quarter of 2011 and $1.7 million in the second quarter of
2012. The year-over-year and sequential increases were primarily due to higher
staff costs from salary and headcount increases
Operating Loss and Operating Margin
Operating loss in the third quarter of 2012 was $1.0 million, down from an
income of $2.1 million in the third quarter of 2011 and an income of $1.5
million in the second quarter of 2012. The main reason for the decrease in
operating income was the significant increase in share-based compensation
expenses associated with newly hired executives and newly engaged non-employee
consultants in the first three quarters of 2012.
Non-GAAP operating income was $6.8 million in the third quarter of 2012,
representing an increase of 44.4% year-over-year from $4.7 million in the
third quarter of 2011 and a sequential increase of 4.1% from $6.5 million in
the second quarter of 2012. Non-GAAP operating margin(10) was 26.4% in the
third quarter of 2012, compared with 41.6% in the third quarter of 2011 and
32.8% in the second quarter of 2012. Excluding the impact from NationSky,
non-GAAP operating margin was 29.8% and 34.5% in the third quarter and second
quarter of 2012, respectively. NationSky's operating margin was about 10.3%
and 10.4% on a standalone basis in the third and second quarter of 2012,
respectively.
Foreign Exchange Loss, Interest Income and Gain on change of interest in An
Associate
Foreign exchange loss was $0.2 million in the third quarter of 2012, compared
with a gain of $1.6 million in the third quarter of 2011 and a loss of $0.3
million in the second quarter of 2012. The foreign exchange loss was primarily
attributable to the depreciation of RMB against US$ as a significant portion
of IPO proceeds was converted into RMB and placed in bank deposits since the
second quarter of 2011. Interest income was $0.8 million in the third quarter
of 2012, compared with $0.5 million in the third quarter of 2011 and $0.8
million in the second quarter of 2012. The significant year-over-year
increases were primarily due to the higher term deposit position. The company
also recorded a gain on change of interest in an associate of $0.9 million in
the third quarter of 2012. The Company and all other existing shareholders
transferred to a new shareholder 20% of their equity interest in Feiliu,
which we accounted for by equity method, in exchange for the transfer of
certain intangible assets.
Income Tax
Income tax expenses were $0.31 million, compared with an income tax expense of
$0.08 million in the third quarter of 2011 and an income tax expense of $0.12
million in the second quarter of 2012. The sequential and year-over-year
increase is mainly due to more taxable profit generated.
Net Income
Net income attributable to NQ Mobile was $0.3 million in the third quarter of
2012, compared with an income of $4.3 million in the third quarter of 2011 and
an income of $2.1 million in the second quarter of 2012. Non-GAAP net income
attributable to NQ Mobile was $8.1 million in the third quarter of 2012,
compared with $7.0 million in the third quarter of 2011 and $7.1 million in
the second quarter of 2012.
Cash Flows and Deferred Revenue
Net cash flow generated from operations for the third quarter of 2012 was $6.9
million, compared with $2.6 million for the corresponding period of 2011 and
$1.9 million for the second quarter of 2012. As of September 30, 2012, the
Company had total cash position of $126.2 million ($35.1 million in cash and
cash equivalents and $91.1 million in term deposits) and deferred revenue of
$10.9 million.
Equity Investments
Equity investments, referring to those investments made on equity instruments,
were $16.4 million as of the end of third quarter of 2012 compared to $6.7
million as of the end of second quarter of 2012 because the Company made
minority equity investments in three mobile internet companies in the third
quarter totaling $8.7 million of which the investment in Hesine Technologies
contributed $6.4 million.
Other Business Updates and Significant Events
Phones 4u to Offer NQ Mobile Security™ in Over 600 Retail Locations across the
UK
On November 12, 2012, NQ Mobile announced that UK retailer Phones 4u will
offer NQ Mobile Security at retail locations across the UK. In-store
availability should begin in December 2012. Phones 4u operates over 600 retail
locations in the UK.
epay to Offer NQ Mobile Guard™ in Major Retail Locations Throughout Australia
On November 8, 2012, NQ Mobile announced that epay Australia will offer NQ
Mobile Guard in major retail locations across Australia, including Harvey
Norman and Allphones. epay, a global retail solutions provider, will offer
their customers NQ Mobile's award-winning mobile security protection for their
Android devices. epay will provide license keys, in-store cards, and sales
support to their partners who retail NQ Mobile Guard.
Celcom and NQ Mobile Partner to Offer Smartphone Families Protection,
Connection and Peace of Mind
On November 1, 2012, NQ Mobile and Celcom Axiata Berhad, the first and
foremost mobile telecommunications provider in Malaysia, announced that they
will bring the 12 million Celcom subscribers easy access to the most
comprehensive parental controls and management toolset available today. The
agreement will promote the adoption of NQ Mobile's NQ Family Guardian
solution, a complete parental controls suite for child safety and monitoring
that uniquely offers a needed balance between protection and connection.
Celcom will promote NQ Mobile's Family Guardian to new Celcom subscribers
purchasing smartphones for their families and to Celcom's existing smartphone
subscribers through direct marketing, monthly SMS campaigns, retail messaging,
website banners, and other targeted promotions. To facilitate the purchase of
NQ Mobile applications, Celcom will also offer carrier billing support.
NQ Mobile Collaborates with Cat® Phones to Make Rugged Smartphones even Safer
On October 24, 2012, NQ Mobile announced an agreement that will bring the most
effective mobile security solution available to the recently released,
Android-based, Cat B10 smartphone. Under terms of the contract, all Cat®
smartphones shipped in the Americas will come pre-loaded with NQ Mobile
Security. This gives device owners a weapon for combating viruses, malicious
URLs, and other mobile threats that is as strong as the ruggedized handset
itself. A 3-month trial of all premium features will be provided to consumers
who purchase the Cat B10.
Wireless to Offer NQ Mobile Guard™, NQ Mobile Vault™ for Android and NQ Family
Guardian™ in More Than 80 Retail Locations across the U.S.
On October 23, 2012, NQ Mobile announced that authorized Verizon dealer
Wireless will offer NQ Mobile Guard, Vault for Android and Family Guardian at
more than 80 retail locations across the United States. Wireless was founded
in 2001 by Shawn Cunix to provide Verizon Wireless services in central Ohio.
Wireless has grown from one store and a handful of employees to 80-plus stores
with over 300 employees spread across the United States.
GoWireless to Offer Mobile Guard™, NQ Mobile Vault™, and NQ Family Guardian™
in More Than 350 Verizon Premium Wireless Retail Locations across the U.S.
On October 18, 2012, NQ Mobile announced that GoWireless will now offer NQ
Mobile's award-winning applications including NQ Mobile Guard, NQ Mobile Vault
for Android and NQ Family Guardian to its customers at more than 350 retail
locations across the United States. GoWireless was founded in Southern
California in 1995, and it has over 350 stores throughout the United States.
NQ Mobile Announces Management/Founders Lock-up
On September 5, 2012, NQ Mobile announced that RPL Holdings Limited ("RPL"), a
substantial shareholder in NQ Mobile, has agreed to a two-year voluntary
lock-up which will expire in September 2014. RPL, a limited liability company
organized under the laws of the British Virgin Islands, is owned and
controlled by the three founders of NQ Mobile, Dr. Henry Yu Lin, Dr. Vincent
Wenyong Shi, and Mr. Xu Zhou (collectively, the "Founders"). As of June 30,
2012, RPL held 50,352,941 Class B common shares (equivalent to approximately
10.1 million ADSs) of NQ Mobile, representing approximately 21.2% of NQ
Mobile's outstanding common shares. Under the terms of the lock-up agreement
with the Company, RPL agreed to a two-year lock-up, which means it will not
sell any of its holdings until September 2014. In addition, Dr.Henry Yu
Lin and Dr. Vincent Wenyong Shi have agreed not to sell any of the other NQ
Mobile shares, including shares underlying stock options that they hold,
totaling 5.35 million Class B common shares assuming exercise of all the
outstanding options (equivalent to approximately 1.1 million ADSs), during the
same lock-up period.
NQ Mobile Gains Access to Premier Mobile Messaging Technologies through
Acquisition of One-third Stake in Hesine Technologies
On August 16, 2012, NQ Mobile and MediaTek Inc., a leading fabless
semiconductor company for wireless communications and digital multimedia
solutions, reached an agreement regarding NQ Mobile's acquisition of
approximately one-third interest in Hesine Technologies International
Worldwide Inc. ("Hesine"), a wholly owned subsidiary of MediaTek and a premier
mobile messaging solution provider. NQ Mobile's Co-founder, Chairman and
Co-CEO, Henry Lin, will join the Board of Directors of Hesine and provide
overall strategic direction to the company under the Board's supervision.
Hesine will provide NQ Mobile with access to its premier mobile messaging
solutions, which provides mobile push notification and messaging services
across various radio access technologies, wireless carriers, and geographies.
Business Outlook
The Company expects net revenues to be in the range of $28.5 million and $29.5
million for the fourth quarter of 2012 and raises the full year 2012 net
revenue guidance from the previously issued range of $86 million to $89
million to a range of $90 million to $91 million. The Company also initiates
its revenue guidance for 2013 to be in the range of $150 million and 155
million.
The above forecast reflects the Company's current and preliminary view, which
is subject to possible material changes.
Conference Call Information
NQ Mobile's management will hold an earnings conference call at 8:00 p.m. U.S.
Eastern Time on Monday, November 12, 2012 (9:00 a.m. Beijing/Hong Kong Time on
Tuesday, November 13, 2012) to discuss results and highlights from the quarter
and to answer questions.
The dial-in details for the conference call are:
U.S. Toll Free: +1 866 519 4004
International: +1 718 354 1231
Hong Kong: +852 2475 0994
United Kingdom: +44 2030598139
China Mainland: 400 620 8038 or 800 819 0121
Conference ID: 47396044
Please dial in 10 minutes before the call is scheduled to begin and provide
the conference ID to join the call.
A replay of the call will be available after the conclusion of the conference
call at 11:00 p.m. U.S. Eastern Time on November 12 through December 12, 2012.
The dial-in details for the replay are:
U.S. Toll Free: +1 866 214 5335
International: +1 718 354 1232
Conference ID: 47396044
Additionally, a live and archived webcast of this call will be available on
the Investor Relations section of NQ Mobile's website at http://ir.nq.com
About NQ Mobile
NQ Mobile Inc. (NYSE: NQ) is a leading global provider of trusted mobile
Internet services built on its world-class acquisition, engagement and
monetization platform. The company was one of the first to recognize the
growing security threats targeting smartphone users and now has about 242
million registered and 85 million active user accounts globally. NQ Mobile's
cloud-based trust platform has been recognized by third-party testing
facilities around the world as the most effective solution for detecting and
combating mobile threats. NQ Mobile is recognized as a global pioneer in
mobile innovation and technology leadership. NQ Mobile maintains dual
headquarters in Dallas, TX, USA and Beijing, China. For more information on NQ
Mobile, please visit http://www.nq.com.
Non-GAAP Financial Measures
To supplement the Company's financial results prepared in accordance with
United States Generally Accepted Accounting Principles ("GAAP"), NQ Mobile's
management uses non-GAAP measures of cost of revenues, operating expenses,
operating income and net income attributable to NQ Mobile, which are adjusted
from results based on GAAP to exclude the share-based compensation expenses.
The Company also uses non-GAAP fully diluted earnings per ADS, which is the
non-GAAP net income attributable to common shareholders divided by weighted
average number of diluted ADS.
The Company's non-GAAP financial information is provided as additional
information to help the Company's investors compare business trends among
different reporting periods on a consistent basis and to enhance investors'
overall understanding of the historical and current financial performance of
the Company's continuing operations and its prospects for the future. The
Company's non-GAAP financial information should be considered in addition to
results prepared in accordance with GAAP, but should not be considered a
substitute for, or superior to, GAAP results. In addition, the Company's
calculation of this non-GAAP financial information may be different from the
calculation used by other companies, and therefore comparability may be
limited.
The non-GAAP financial measures are provided to enhance investors' overall
understanding of NQ Mobile's current financial performance and prospects for
the future. A limitation of using non-GAAP cost of revenues, operating
expenses, operating income and net income attributable to NQ Mobile, excluding
share-based compensation expenses, is that the share-based compensation charge
has been and will continue to be a significant recurring expense in the
Company's business for the foreseeable future. In order to mitigate these
limitations the Company has provided specific information regarding the GAAP
amounts excluded from each non-GAAP measure. The accompanying tables include
details on the reconciliation between GAAP financial measures that are most
directly comparable to the non-GAAP financial measures the Company has
presented.
Notes to Financial Information
Financial information in this press release other than the information
indicated as being non-GAAP is derived from NQ Mobile's unaudited financial
information prepared in accordance with GAAP.
Forward Looking Statements
This news release contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and as defined in the U.S.
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by terminology such as "will," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates" and
similar statements. All statements other than statements of historical fact in
this press release are forward-looking statements and involve certain risks
and uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. These forward-looking statements are
based on management's current expectations, assumptions, estimates and
projections about the Company and the industry in which the Company operates,
but involve a number of unknown risks and uncertainties, Further information
regarding these and other risks is included in the Company's filings with the
U.S. Securities and Exchange Commission. The Company undertakes no obligation
to update forward-looking statements to reflect subsequent occurring events or
circumstances, or changes in its expectations, except as may be required by
law. Although the Company believes that the expectations expressed in these
forward-looking statements are reasonable, it cannot assure you that such
expectations will turn out to be correct, and actual results may differ
materially from the anticipated results. You are urged to consider these
factors carefully in evaluating the forward-looking statements contained
herein and are cautioned not to place undue reliance on such forward-looking
statements, which are qualified in their entirety by these cautionary
statements.
(1) "ADS" is American Depositary Share. Each ADS represents five Class A
common shares of NQ Mobile.
(2) Non-GAAP net income attributable to NQ Mobile is a non-GAAP financial
measure, defined as net income attributable to NQ Mobile excluding share-based
compensation expenses.
(3) Non-GAAP fully diluted earnings per ADS is a non-GAAP financial measure,
defined as non-GAAP net income attributable to common shareholders divided by
the weighted average number of diluted ADSs.
(4) Non-GAAP operating income is a non-GAAP financial measure, defined as
operating income excluding share-based compensation expenses.
(5) Non-GAAP net income is a non-GAAP financial measure, defined as net income
attributable to NQ Mobile excluding share-based compensation expenses.
(6) Non-GAAP operating expenses is a non-GAAP financial measure, defined as
operating expenses that exclude share-based compensation expenses.
(7) Non-GAAP selling and marketing expenses is a non-GAAP financial measure,
defined as selling and marketing expenses that exclude share-based
compensation expenses.
(8) Non-GAAP general and administrative expenses is a non-GAAP financial
measure, defined as general and administrative expenses that exclude
share-based compensation expenses.
(9) Non-GAAP research and development expenses is a non-GAAP financial
measure, defined as research and development expenses that exclude share-based
compensation expenses.
(10) Non-GAAP operating margin is a non-GAAP financial measure, defined as
non-GAAP operating income as a percentage of net revenues.
For investor and media inquiries please contact:
Investor Relations
NQ Mobile Inc.
Email: investors@nq.com
Phone: +852 3975 2853
NQ MOBILE INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED
BALANCE SHEETS
(In thousands)
As of
September 30, December 31,
2012 2011
US$ US$
ASSETS
Current assets:
Cash and cash equivalents 35,053 69,510
Term deposits 91,153 58,563
Accounts receivable, net of allowance US$647 and
US$636 as of 39,971 21,379
September 30, 2012 and December 31, 2011,
respectively
Inventory 633 -
Prepaid expenses and other current assets 13,913 6,806
Total current assets 180,723 156,258
Equity investments 16,432 1,182
Property and equipment, net 1,928 1,078
Intangible assets, net 8,710 1,590
Goodwill 2,082 -
Other non-current assets 372 374
Total Assets 210,247 160,482
LIABILITIES
Current liabilities:
Short-term loan 710 -
Accounts payable 5,088 1,014
Receipt in advance 322 -
Deferred revenue 10,861 7,090
Accrued expenses and other current liabilities 6,559 3,656
Tax payable 788 368
Deferred tax liabilities, current 36 103
Total current liabilities 24,364 12,231
Noncurrent liabilities:
720 -
Deferred tax liabilities, non-current
Other non-current liabilities 254 -
Total Liabilities 25,338 12,231
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common shares 23 22
Additional paid-in capital 184,572 157,064
Accumulated deficit (7,182) (11,743)
Accumulated other comprehensive income 2,506 2,841
Total NQ Mobile Inc.'s shareholders' equity 179,919 148,184
Non-controlling interest 4,990 67
Total shareholders' equity 184,909 148,251
Total Liabilities and Shareholders' Equity 210,247 160,482
NQ MOBILE INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except for share and per share data)
Three months ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
US$ US$ US$ US$ US$
Net Revenues
Premium mobile Internet services 18,354 16,069 10,344 48,308 24,611
Other services 7,448 3,892 1,003 13,431 3,231
Total net revenues 25,802 19,961 11,347 61,739 27,842
Cost of revenues* (7,954) (4,693) (2,185) (16,068) (5,498)
Gross profit 17,848 15,268 9,162 45,671 22,344
Operating expenses:
Selling and marketing expenses* (5,680) (3,735) (1,732) (12,607) (4,341)
General and administrative expenses* (10,332) (8,130) (4,104) (25,001) (10,516)
Research and development expenses* (2,805) (1,900) (1,267) (6,190) (3,410)
Total operating expenses (18,817) (13,765) (7,103) (43,798) (18,267)
(Loss)/Income from operations (969) 1,503 2,059 1,873 4,077
Interest income, net 797 817 452 2,296 713
Foreign exchange (loss) / gain, net (203) (336) 1,642 (602) 2,119
Gain on change of interest in an associate 943 - - 943 -
Other income, net 115 105 191 335 206
Income before income taxes 683 2,089 4,344 4,845 7,115
Income tax expense (308) (119) (78) (492) (50)
Share of profit/(loss) from an associate 125 155 68 403 (3)
Net income 500 2,125 4,334 4,756 7,062
Net (income) / loss attributable to the
non- (152) (43) (195) -
controlling interest 3
Net income attributable to NQ Mobile Inc. 348 2,082 4,337 4,561 7,062
Accretion of redeemable convertible
preferred - - - - (535)
shares
Allocation of net income to participating - - - - (1,595)
preferred shareholders
Net income attributable to common 348 2,082 4,337 4,561 4,932
shareholders (Note 1)
Net income 500 2,125 4,334 4,756 7,062
Other comprehensive (income) / loss:
foreign currency translation adjustment
(173) (270) 472 (335) 1,016
Comprehensive income 327 1,855 4,806 4,421 8,078
Comprehensive (income) / loss attributable
to (43)
non-controlling interest (152) 3 (195) -
Comprehensive income attributable to
NQ Mobile Inc.
175 1,812 4,809 4,226 8,078
Net earnings per common share:
Basic 0.0015 0.0090 0.0189 0.0196 0.0320
Diluted 0.0014 0.0083 0.0185 0.0183 0.0285
Weighted average number of common shares
outstanding:
Basic 235,248,711 232,891,181 229,699,213 232,900,331 154,247,881
Diluted 256,143,907 250,549,533 234,482,353 249,914,090 179,822,002
Net earnings per ADS (Note 2):
Basic 0.0075 0.0450 0.0945 0.0980 0.1600
Diluted 0.0070 0.0415 0.0925 0.0915 0.1425
Weighted average number of ADS outstanding
(Note 2):
Basic 47,049,742 46,578,236 45,939,843 46,580,066 30,849,576
Diluted 51,228,781 50,109,907 46,896,471 49,982,818 35,964,400
* Share-based compensation expense
included in:
Cost of revenues 57 52 54 161 77
Selling and marketing expenses 944 360 385 1,731 711
General and administrative expenses 6,290 4,439 1,994 14,303 6,017
Research and development expenses 495 194 230 892 513
Note 1: The net income attributable to common shareholders reflected the impact of non-cash accounting charges
relating to the preferred shares. All outstanding preferred shares were automatically converted into common shares
upon the completion of the Company's IPO on May 5, 2011. Thereafter, there was no accretion and allocation of net
income to the preferred shares and all net income was attributable to the common shareholders subsequent to IPO.
Note 2: The Company was listed in May 2011, the net earnings per ADS for the three months ended March 31, 2011 is
calculated using the same conversion ratio assuming the ADS was existed during such period. Each ADS represents
five Class A common shares.
NQ MOBILE INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(In thousands)
Three months ended
Sept 30, June 30, Sept 30,
2012 2012 2011
US$ US$ US$
Cash flows from operating activities:
Net income 500 2,125 4,334
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 475 257 147
Allowance for doubtful accounts 7 71 233
Share-based compensation 7,786 5,045 2,663
Deferred income tax (43) (21) (18)
Foreign exchange loss/(gain), net 203 336 (1,642)
Gain on change of interest in an associate (943) - -
Share of profit of an associate (125) (155) (68)
Other income from ADR depository arrangement, net of tax paid (80) (80) (134)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable (7,664) (5,439) (3,875)
Prepaid expenses and other current assets 2,279 (1,094) (531)
Inventory (446) 207 -
Other non-current assets 112 - -
Accounts payable 2,492 682 (69)
Deferred revenue 1,388 1,156 1,429
Accrued expenses and other current liabilities 692 (1,304) 149
Tax payable 301 76 15
Net cash provided by operating activities 6,934 1,862 2,633
Cash flows from investing activities:
Placement of term deposits (27,882) (30,040) (30,111)
Maturities of term deposits 29,806 9,092 -
Proceeds from the repayment of the advance to Tianjin Yidatong
- - 42
Technology Development Co.,Ltd.
Disbursement from the lending of the housing loans to employees (79) (79) -
Proceeds from the repayment of the housing loans to employees 37 34 50
Investment in equity investees (2,794) (3,478) -
Bridge loans in connection with future equity investments (4,796) (1,423) -
Cash acquired from business acquisition - 735 -
Purchase of property and equipment and intangible assets (1,321) (182) (1,759)
Net cash used in by investing activities (7,029) (25,341) (31,778)
Cash flows from financing activities:
Proceeds from exercising of share options - 635 (125)
Net cash provided by financing activities - 635 (125)
Effect of exchange rate changes on cash and cash equivalents (353) (543) 2,132
Net decrease in cash and cash equivalents (448) (23,387) (27,138)
Cash and cash equivalents at the beginning of the period 35,501 58,888 98,448
Cash and cash equivalents at the end of the period 35,053 35,501 71,310
NQ MOBILE INC.
SUPPLEMENTARY NOTES – UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENT OF OPERATION
(In thousands)
Three months ended September 30, 2012
NQ Mobile Inc.
Group NationSky Consolidated
excluding
NationSky
US$ US$ US$
Net Revenues
Premium mobile Internet services 18,354 - 18,354
Other services 2,974 4,474 7,448
Total net revenues 21,328 4,474 25,802
Cost of revenues (4,579) (3,375) (7,954)
Gross profit 16,749 1,099 17,848
Operating expenses:
Selling and marketing expenses (5,471) (209) (5,680)
General and administrative expenses (10,123) (209) (10,332)
Research and development expenses (2,585) (220) (2,805)
Total operating expenses (18,179) (638) (18,817)
(Loss)/ Income from operations (1,430) 461 (969)
Interest income/(expense), net 807 (10) 797
Foreign exchange loss, net (203) - (203)
Gain on change of interest in an associate 943 - 943
Other income, net 115 - 115
Income before income taxes 232 451 683
Income tax expense (195) (113) (308)
Share of profit from an associate 125 - 125
Net income 162 338 500
Net income attributable to the non-controlling - (152) (152)
interest
Net income attributable to NQ Mobile Inc. 162 186 348
Net income attributable to common shareholders 162 186 348
NQ MOBILE INC.
NON-GAAP MEASURE RECONCILIATIONS
(In thousands)
Three months ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
US$ US$ US$ US$ US$
Selling and marketing expenses under (5,680) (3,735) (1,732) (12,607) (4,341)
GAAP
Share based compensation expense* 944 360 385 1,731 711
Non-GAAP selling and marketing expenses (4,736) (3,375) (1,347) (10,876) (3,630)
General and administrative expenses under (10,332) (8,130) (4,104) (25,001) (10,516)
GAAP
Share based compensation expense* 6,290 4,439 1,994 14,303 6,017
Non-GAAP general and administrative
expenses (2,110) (4,499)
(4,042) (3,691) (10,698)
Research and development expenses (2,805) (1,900) (1,267) (6,190) (3,410)
under GAAP
Share based compensation expense* 495 194 230 892 513
Non-GAAP research and development
expenses (1,037) (2,897)
(2,310) (1,706) (5,298)
(Loss)/Income from operations under (969) 1,503 2,059 1,873 4,077
GAAP
Share based compensation expense* 7,786 5,045 2,663 17,087 7,318
Non-GAAP income from operations 6,817 6,548 4,722 18,960 11,395
Net income attributable to NQ Mobile
Inc. 348 2,082 4,337 4,561 7,062
under GAAP
Share based compensation expense* 7,786 5,045 2,663 17,087 7,318
Non-GAAP net income attributable to NQ
Mobile Inc. 7,000 14,380
8,134 7,127 21,648
* It represented elimination of share-based compensation expenses resulting from granting of options and
restricted shares to qualified employees and consultants by the Company during the prior and current periods.
SOURCE NQ Mobile Inc.
Website: http://www.netqin.com
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