Spreadtrum Communications, Inc. Announces First Quarter 2013 Financial Results

Spreadtrum Communications, Inc. Announces First Quarter 2013 Financial Results

PR Newswire

SHANGHAI, May 8, 2013

SHANGHAI, May 8, 2013 /PRNewswire-FirstCall/ -- Spreadtrum Communications,
Inc. (Nasdaq: SPRD; "Spreadtrum" or the "Company"), a leading fabless
semiconductor provider in China with advanced technology in 2G, 3G and 4G
wireless communications standards, today announced its unaudited financial
results for the first quarter ended March 31, 2013.

FIRST QUARTER 2013 FINANCIAL SUMMARY:

  oTotal revenue was US$189.0 million, down 6.9% sequentially and up 17.3%
    year-over-year (y-o-y), exceeding the Company's previously guided range of
    US$180 - US$186 million.
  oGross profit was US$70.5 million, down 6.4% sequentially and up 15.0%
    y-o-y. Gross margin was 37.3% compared to 37.1% in the prior quarter and
    38.0% in 1Q12.
  oCash flow generated from operations was US$17.4 million, compared with
    cash flow used in operations of US$3.2 million in the prior quarter and
    cash flow generated from operations of US$21.0 million in 1Q12.
  oGAAP net income was US$20.3 million, down 18.5% sequentially and down
    16.5% y-o-y.
  oGAAP net income per basic and diluted ADS was US$0.42 and US$0.38,
    respectively, a decrease from US$0.52 and US$0.47, respectively, in the
    prior quarter and a decrease from US$0.53 and US$0.47, respectively, in
    1Q12.
  oNon-GAAP net income was US$26.5 million, down 15.0% sequentially and down
    9.6% y-o-y. Non-GAAP net income per diluted ADS was US$0.50, a decrease
    from US$0.59 in the prior quarter and a decrease from US$0.57 in 1Q12.

FIRST QUARTER 2013 BUSINESS HIGHLIGHTS:

  oGrew sequential shipments for single-core TD-SCDMA/EDGE smartphone
    chipsets, outperforming the typical first quarter seasonality that occurs
    in China due to the Lunar New Year holiday;
  oCommercially launched our dual-core TD-SCDMA/EDGE smartphone platform,
    expanding our addressable market;
  oAchieved volume shipments of the SC6531, our 2.5G baseband chipset with
    integrated FM and Bluetooth;
  oBegan shipping 2.5G basebands in a handset distributed by one of the
    world's largest operators.

Commenting on the first quarter 2013 results, Chairman and CEO Dr. Leo Li
said, "Demand for our single-core smartphone chipsets was exceptionally strong
throughout the quarter. Some of our TD-SCDMA customers' smartphones are now
retailing for 300RMB, which is approximately US$50. These handsets, which are
the lowest cost 3G smartphones available in China, are helping to speed the
transition from feature phones by improving affordability for the first time
smartphone buyer. EDGE smartphone shipments were also very strong, which
reflects growing demand for entry-level smartphones in overseas regions as
well.

"We have now expanded our smartphone portfolio further with the commercial
launch of our dual-core smartphone chipset, which combines exceptional
graphics performance with one of the lowest cost dual-core platforms in the
TD-SCDMA market. Further, we have started sampling our single-core WCDMA/HSPA+
smartphone chipset as well as our quad-core smartphone chipset. These
products expand our addressable market and will contribute to further growth
in the coming quarters.

"Looking ahead to the second quarter 2013, we expect revenue to be in the
range of US$220 million to US$228 million, which is an increase of 16.4% to
20.6%, with a slight improvement in gross margin."

Further commenting on the financial results, Spreadtrum CFO Shannon Gao added,
"In the first quarter, we achieved a modest improvement in gross margin as our
smartphone shipments continued to grow sequentially. We expect to see further
improvements in product mix as our dual-core and quad-core smartphone
shipments begin to ship in volume. Although operating expenses increased as a
percentage of revenue in the first quarter due to market seasonality, we
expect to see increased operating leverage during the year as our top line
grows."

FIRST QUARTER 2013 FINANCIAL REVIEW:

Revenue

Revenue in 1Q13 totaled US$189.0 million, down 6.9% from US$203.1 million in
4Q12 and up 17.3% from US$161.1 million in 1Q12. In 1Q13, smartphone products
accounted for 60% of chipset revenue, and feature phone, modem and other
products accounted for 40% of chipset revenue. In 4Q12, smartphone products
accounted for 54% of chipset revenue, and feature phone, modem and other
products accounted for 46% of chipset revenue.

Gross Profit and Margin

Gross profit for the quarter was US$70.5 million, down 6.4% from US$75.3
million in 4Q12 and up 15.0% from US$61.3 million in 1Q12. Gross margin for
the quarter was 37.3%, up from 37.1% in 4Q12 and down from 38.0% in 1Q12.
Non-GAAP gross margin, adjusted to exclude share-based compensation expenses,
was 37.4%, up from 37.2% in 4Q12 and down from 38.1% in 1Q12.

Cost of revenue in 1Q13 totaled US$118.5 million, a decrease of 7.3% from the
previous quarter and an increase of 18.7% from 1Q12.

Operating Expense and Margin

The Company's operating margin for the quarter was 11.9%, down from 13.0% in
the previous quarter and 16.1% in 1Q12. The sequential decrease in operating
margin was primarily due to higher research and development (R&D) expenses as
a percentage of revenue. Non-GAAP operating margin, adjusted to exclude
share-based compensation expenses was 15.2% in 1Q13, compared to 16.1% in 4Q12
and 19.2% in 1Q12.

Total operating expenses in 1Q13, including R&D expenses and selling, general
and administrative (SG&A) expenses, were US$48.0 million, a decrease from
US$48.9 million in 4Q12 and an increase from US$35.4 million in 1Q12.

R&D expenses decreased 4.2% sequentially and increased 39.0% year-over-year to
US$39.5 million in 1Q13. The sequential decrease in R&D expenses was primarily
due to a decrease in new product development engineering expenses and employee
compensation expenses, partially offset by a decrease in recognized R&D
subsidies. The year-over-year increase in R&D expenses was primarily due to an
increase in new product development engineering expenses, amortization
expenses and employee compensation expenses.

SG&A expenses increased 10.4% sequentially and increased 21.4% year-over-year
to US$8.4 million in 1Q13. The sequential and year-over-year increase in SG&A
expenses was primarily due to increases in legal expenses and employee
compensation expenses including share-based compensation.

Non-Operating Income

In 1Q13, the Company recorded interest income of US$1.2 million, down from
US$1.3 million in the previous quarter and US$2.2 million in 1Q12. Interest
expense in 1Q13 was US$0.9 million, down from US$1.0 million in the previous
quarter and from US$1.4 million in 1Q12. Other income (net) in 1Q13 was a loss
of US$0.3 million, compared to a gain of US$16 thousand in 4Q12 and a gain of
US$0.6 million in 1Q12. Other income (net) mainly represented net foreign
exchange gains and losses.

Net Income

The Company's net income totaled US$20.3 million in 1Q13, compared to US$24.9
million in 4Q12 and US$24.3 million in 1Q12. The sequential decrease in net
income was primarily due to the decrease in gross profit. Net margin was
10.7%, down from 12.2% in 4Q12 and from 15.1% in 1Q12. Basic and diluted
income per ADS were US$0.42 and US$0.38, respectively, in 1Q13, compared to
US$0.52 and US$0.47, respectively, in 4Q12, and US$0.53 and US$0.47,
respectively, in 1Q12.

Excluding share-based compensation expenses, the Company's non-GAAP net income
for 1Q13 was US$26.5 million, down from a non-GAAP net income of US$31.2
million in 4Q12 and down from US$29.3 million in 1Q12. Diluted non-GAAP net
income per ADS in 1Q13 was US$0.50, compared with US$0.59 per ADS in the prior
quarter and US$0.57 per diluted ADS in 1Q12.

Balance Sheet and Cash Flow

As of March 31, 2013, the total balance of cash and cash equivalents and term
deposit with maturity dates over 90 days was US$168.4 million, compared to
US$165.2 million as of December 31, 2012. The total balance of short-term and
long-term restricted cash pledged to banks for short-term and long-term loans
was US$91.9 million, compared with $81.7 million as of December 31, 2012. In
1Q13, the Company generated US$17.4 million in cash from operating activities
and used US$11.4 million on intangible assets and US$2.1 million on equity
investments.

Accounts receivable increased by US$2.1 million from US$50.3 million as of
December 31, 2012 to US$52.4 million as of March 31, 2013. Average accounts
receivable days, calculated based on quarterly average accounts receivable
divided by quarterly revenue and multiplied by number of days in the quarter,
increased sequentially from 16 days to 25 days. The increase in average
accounts receivable days was mainly due to increased revenue contribution from
certain strategic large customers with longer credit terms. Inventory as of
March 31, 2013 was US$149.1 million, an increase of US$20.3 million from
December 31, 2012. Inventory days, calculated based on quarterly average
inventory (excluding deferred cost) divided by quarterly cost of goods sold
and multiplied by number of days in the quarter, increased from 90 days in
4Q12 to 107 days in 1Q13. The increase in inventory is to prepare for the
significant increase in demand for our smartphone products that is expected in
the second quarter. Deferred cost, which consists of products that have
shipped to customer where the rights and obligations of ownership have passed
to customers but revenue has not yet been recognized due to pending customer
acceptance, decreased from US$16.1 million as of December 31, 2012 to US$15.5
million as of March 31, 2013. Total assets as of March 31, 2013 were US$740.4
million, up US$40.2 million from US$700.2 million as of December 31, 2012. The
increase in total assets was primarily attributable to increases of US$20.3
million in inventory and US$13.5 million in cash.

Current liabilities increased from US$234.0 million as of December 31, 2012 to
US$251.4 million as of March 31, 2013, primarily due to increase of US$29.0
million in advances from customers and US$10.0 million in short-term bank
loans, offset by a US$23.0 million decrease in accounts payable. Long-term
liabilities as of March 31, 2013 were US$82.5 million, compared to US$82.4
million as of December 31, 2012.

BUSINESS OUTLOOK:

Looking ahead, Spreadtrum expects revenue for the second quarter of 2013 to be
in the range of US$220 million – US$228 million, with a slight improvement in
gross margin relative to the first quarter 2013.

WEBCAST OF CONFERENCE CALL:

The Company's senior management will host a conference call at 9:00 pm (U.S
Eastern) / 6:00 pm (U.S Pacific) on Wednesday, May 8, 2013, which is 9:00 am
on Thursday, May 9, 2013 in Hong Kong to discuss the financial results and
recent business activities. The conference call may be accessed by calling:

                            Toll
United States/International +1 718 354 1231
United Kingdom              +44 20 3059 8139
Hong Kong                   +852 2475 0994
Singapore                   +65 672 39381
China                       +86 4006208038 or +86 8008190121
Participant Passcode        "SPRD" or "Spreadtrum"

A telephone replay will be available shortly after the call until May 16, 2013
at (US Toll / International) +1 646 254 3697 or (Hong Kong) +852 3051 2780,
passcode: 44497516.

A live webcast of the conference call and replay, along with an accompanying
quarterly results presentation, will be available in the investor relations
section of the Company's website.

DISCUSSION OF NON-GAAP FINANCIAL MEASURES:

In addition to disclosing financial results prepared in accordance with US
GAAP, the Company's earnings release contains non-GAAP financial measures that
exclude the effects of share-based compensation and other non-recurring items.
The non-GAAP financial measures used by management and disclosed by the
Company exclude the income statement effects of all forms of share-based
compensation.

The non-GAAP financial measures disclosed by the Company should not be
considered a substitute for financial measures prepared in accordance with US
GAAP. The financial results reported in accordance with US GAAP and
reconciliation of GAAP to non-GAAP results should be carefully evaluated. The
non-GAAP financial measures used by the Company may be prepared differently
from and, therefore, may not be comparable to similarly titled measures used
by other companies.

The Company provides the presentation of non-GAAP gross margin, non- GAAP
operating margin, non-GAAP net income, and non-GAAP diluted earnings per ADS,
all excluding share-based compensation expenses. The Company believes that
these non-GAAP financial measures provide important supplemental information
to management and investors regarding financial and business trends relating
to the Company's financial condition and results of operations. The non-GAAP
diluted earnings per ADS are calculated by dividing non-GAAP net income by the
US GAAP weighted average diluted shares outstanding.



Spreadtrum Communications, Inc.

Condensed Consolidated Income Statements

(in thousands of US dollars, except per share data and percentages)

(unaudited)
                       Three months ended
                       March 31    December   March 31   change from
                                    31
                       2012         2012        2013        4Q12      1Q12
Revenue                161,114      203,129     189,019     -6.9%     17.3%
Cost of revenue        99,821       127,805     118,515     -7.3%     18.7%
Gross profit           61,293       75,324      70,504      -6.4%     15.0%
Operating expenses
Research & development 28,422       41,235      39,508      -4.2%     39.0%
Selling, general and   6,960        7,651       8,446       10.4%     21.4%
administrative
Total operating        35,382       48,886      47,954      -1.9%     35.5%
expenses
Operating income       25,911       26,438      22,550      -14.7%    -13.0%
Non-operating income
(expense)
Interest income        2,230        1,270       1,154       -9.1%     -48.3%
Interest expense       (1,404)      (980)       (930)       -5.1%     -33.8%
Other income           636          16          (286)       -1,887.5% -145.0%
(expense), net
Total non-operating    1,462        306         (62)        -120.3%   -104.2%
income (loss)
Income before income
tax and equity in loss
of                     27,373       26,744      22,488      -15.9%    -17.8%

affiliates
Income tax expense     (3,367)      (1,619)     (1,799)     11.1%     -46.6%
Equity in loss of
affiliates, net of     (55)         (372)       (434)       16.7%     689.1%
taxes
Net income             23,951       24,753      20,255      -18.2%    -15.4%
Net loss attributable
to non-controlling     305          114         -           -         -
interest
Net income
attributable to
Spreadtrum             24,256       24,867      20,255      -18.5%    -16.5%

Communications, Inc.
Income per ADS, basic  0.53         0.52        0.42
Income per ADS,        0.47         0.47        0.38
diluted
Margin analysis:
Gross margin           38.0%        37.1%       37.3%
Operating margin       16.1%        13.0%       11.9%
Net margin             15.1%        12.2%       10.7%
Weighted average ADS
equivalent: ^ [1]
Basic                  45,945,184   47,572,178  48,446,586
Diluted                51,108,873   52,682,347  52,948,094
ADS equivalent
outstanding at end of  46,028,101   47,805,783  48,753,586
period
[1] Assumes all outstanding ordinary shares are represented by ADSs. Each ADS
represents three ordinary shares.



Spreadtrum Communications, Inc.

Condensed Consolidated Balance Sheets

(in thousands of US dollars)

(unaudited)
                                            As of
                                            March 31,  December 31,  March 31,
                                            2012       2012          2013
ASSETS
Current assets
Cash and cash equivalents                   192,308    132,156       134,834
Restricted cash                             70,047     17,969        28,019
Short-term deposit                          40,825     32,995        33,596
Accounts receivable, net                    7,270      50,313        52,427
Inventories                                 62,907     128,758       149,081
Deferred cost                               55,830     16,112        15,545
Deferred tax assets                         2,917      2,450         2,456
Prepaid expenses and other current assets   19,114     27,671        30,234
Total current assets                        451,218    408,424       446,192
Property and equipment, net                 46,009     51,339        49,468
Acquired intangible assets, net             59,929     73,089        74,619
Equity investment                           23,934     52,813        55,645
Deferred tax assets                         820        771           771
Goodwill                                    36,208     38,908        38,908
Long-term restricted cash                   -          63,759        63,882
Indemnification assets                      5,567      5,567         5,567
Other long-term assets                      4,560      5,485         5,346
Total assets                                628,245    700,155       740,398
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term loans and current portion of a   111,740    14,090        24,078
long-term loan
Accounts payable                            57,817     132,684       109,724
Advances from customers                     63,047     20,472        49,425
Income tax payable                          21,610     13,226        12,738
Accrued expenses and other current          55,073     53,489        55,478
liabilities
Total current liabilities                   309,287    233,961       251,443
Long-term loan                              -          70,000        70,000
Other long-term obligations                 5,048      5,223         5,280
Long-term tax liabilities                   5,567      5,567         5,567
Deferred tax liabilities                    1,612      1,612         1,612
Total long term liabilities                 12,227     82,402        82,459
Total liabilities                           321,514    316,363       333,902
Non-controlling shareholder interest        1,760      396           396
Shareholders' equity                        304,971    383,396       406,100
Total liabilities and shareholders' equity  628,245    700,155       740,398



Spreadtrum Communications, Inc.

Reconciliation of GAAP to Non-GAAP Results

(in thousands of US dollars, except per share data and percentages)

(unaudited)
                                           Three Months ended
                                           March 31, December 31, March 31,
                                           2012       2012          2013
Cost of revenue                           99,821     127,805       118,515
Adjustment for share-based compensation   (158)      (149)         (174)
Cost of revenue (non-GAAP)                99,663     127,656       118,341
Operating income                          25,911     26,438        22,550
Adjustment for share-based compensation   158        149           174
within: Cost of revenue
Research and development                  3,519      4,607         4,243
Selling, general, and administrative      1,345      1,539         1,808
Operating income (non-GAAP)              30,933     32,733        28,775
Net income                                24,256     24,867        20,255
Adjustment for share-based compensation   158        149           174
within: Cost of revenue
Research and development                  3,519      4,607         4,243
Selling, general, and administrative      1,345      1,539         1,808
Net income (non-GAAP)*                    29,278     31,162        26,480
Net income per ADS, diluted               0.47       0.47          0.38
Adjustment for share-based compensation   0.10       0.12          0.12
Net income per ADS, diluted (non-GAAP)*   0.57       0.59          0.50
Gross margin                              38.0%      37.1%         37.3%
Adjustment for share-based compensation   0.1%       0.1%          0.1%
Gross margin (non-GAAP)                  38.1%      37.2%         37.4%
Operating margin                          16.1%      13.0%         11.9%
 Adjustment for share-based compensation  3.1%       3.1%          3.3%
Operating margin (non-GAAP)*              19.2%      16.1%         15.2%
Net margin                               15.1%      12.2%         10.7%
Adjustment for share-based compensation    3.1%       3.1%          3.3%
Net margin (non-GAAP)*                    18.2%      15.3%         14.0%
Operating expenses                        35,382     48,886        47,954
Adjustment for share-based compensation:
Research and development                  (3,519)    (4,607)       (4,243)
Selling, general and administrative       (1,345)    (1,539)       (1,808)
Operating expenses (non-GAAP)             30,518     42,740        41,903
* There is no tax effect resulting from these adjustment items.



ABOUT SPREADTRUM COMMUNICATIONS, INC.

Spreadtrum Communications, Inc. (NASDAQ:SPRD; "Spreadtrum") is a fabless
semiconductor company that develops mobile chipset platforms for smartphones,
feature phones and other consumer electronics products, supporting 2G, 3G and
4G wireless communications standards. Spreadtrum's solutions combine its
highly integrated, power-efficient chipsets with customizable software and
reference designs in a complete turnkey platform, enabling customers to
achieve faster design cycles with a lower development cost. Spreadtrum's
customers include global and China-based manufacturers developing mobile
products for consumers in China and emerging markets around the world. For
more information, visit www.spreadtrum.com.

SAFE HARBOR STATEMENT:

This press release contains "forward-looking statements" within the meaning of
the "safe harbor" provisions of the U.S. Private Securities Litigation Reform
Act of 1995. Such forward-looking statements include, without limitation,
statements regarding the transition from feature phones to smartphones in
China; growing demand for entry-level smartphones in overseas regions; the
Company's expectations with respect to its dual-core smartphone chipset,
single-core WCDMA/HSPA+ smartphone chipset and quad-core smartphone chipset
being contributing to further growth in the coming quarters; the Company's
expectations with respect to revenue in the second quarter of 2013 being in
the range of US$220 million - US$228 million with a slight improvement in
gross margin relative to the first quarter 2013; the Company's expectations
with respect to further improvements in product mix as its dual-core and
quad-core smartphone shipments begin to ship in volume; and the Company's
expectations with respect to increased operating leverage during the year as
its top line grows. The Company uses words like "believe," "anticipate,"
"intend," "estimate," "expect," "project" and similar expressions to identify
forward-looking statements, although not all forward-looking statements
contain these words. These statements are forward-looking in nature and
involve risks and uncertainties that may cause actual market trends and the
Company's actual results to differ materially from those expressed or implied
in these forward-looking statements for a variety of reasons. Potential risks
and uncertainties include, but are not limited to, continuing competitive
pressure in the semiconductor industry and the effect of such pressure on
prices; unpredictable changes in technology and consumer demand for mobile
phones; the rate at which the market adoption of TD-SCDMA technology will
grow; the Company's ability to sustain recent rates of growth and its dominant
market share position in TD-SCDMA market; market acceptance of the Company's
smartphone products; the state of and any change in the Company's relationship
with its major domestic and international customers and Chinese government
agencies; and changes in political, economic, legal and social conditions in
China. For additional discussion of these risks and uncertainties and other
factors, please consider the information contained in the Company's filings
with the U.S. Securities and Exchange Commission (the "SEC") and the annual
report on Form 20-F filed on April 26, 2013 especially the section under "Risk
Factors" and such other documents that the Company may file with the SEC from
time to time, including on Form 6-K. The Company assumes no obligation to
update any forward-looking statements, which apply only as of the date of this
press release, and does not intend to update any forward-looking statement
whether as a result of new information, future events or otherwise except as
required by law.

SOURCE Spreadtrum Communications, Inc.

Website: http://www.spreadtrum.com
Contact: Investor Relations, +1-650-308-8148, ir@spreadtrum.com