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SGOCO Group, Ltd. Announces Third Quarter 2013 Financial Results



       SGOCO Group, Ltd. Announces Third Quarter 2013 Financial Results

PR Newswire

BEIJING, Nov. 20, 2013

BEIJING, Nov. 20, 2013 /PRNewswire/ -- SGOCO Group, Ltd. (Nasdaq: SGOC)
("SGOCO" or the "Company"), a company focused on product design, distribution
and brand development in the flat-panel display market, today announced its
unaudited financial results for the third quarter ended September 30, 2013.

Third Quarter 2013 Comparisons with Third Quarter 2012 - Financial Highlights

  o Total revenue increased 65.0% year-over-year to $43.0 million 
  o Gross profit increased 268.2% year-over-year to $3.5 million, with gross
    margin at 8.1% as compared to 3.6%
  o Operating income increased to $2.4 million as compared to operating loss
    of $0.8 million, with operating margin at 5.7% as compared to negative
    2.9%
  o Net income increased to $2.2 million as compared to net loss of $1.1
    million, with net margin at 5.0% as compared to negative 4.2%
  o Basic and diluted earnings per share ("EPS") were $0.12 as compared to
    basic and diluted loss per share of $0.06

Third Quarter 2013 Comparisons with Third Quarter 2012 - Operational
Highlights

  o SGOCO Brand and Licensed Brands generated $23.9 million, an increase of
    35.8% year-over-year, representing 55.6% of total revenues as compared to
    67.6%. Key Accounts sales generated $19.0 million, an increase of 125.2%
    year-over-year, representing 44.3% of total revenues as compared to 32.4%.

First Nine Months 2013 Comparisons with First Nine Months 2012 - Financial
Highlights

  o Total revenue increased 51.8% year-over-year to $156.8 million
  o Gross profit increased 63.8% year-over-year to $12.4 million, with gross
    margin at 7.9% as compared to 7.3%
  o Operating income increased 210.2% year-over-year to $9.2 million, with
    operating margin at 5.8% as compared to 2.9%
  o Net income increased 586.3% year-over-year to $7.3 million, with net
    margin at 4.6% as compared to 1.0%
  o Basic and diluted earnings per share were $0.42 as compared to $0.06

First Nine Months 2013 Comparisons with First Nine Months 2012 - Operational
Highlights

  o SGOCO Brand and Licensed Brands generated $101.9 million, an increase of
    33.2% year-over-year, representing 65% of total revenues as compared to
    74.1%. Key Accounts sales generated $42.7 million, increasing 59.5%
    year-over-year, representing 27.2% of total revenues as compared to 25.9%.

Mr. Burnette Or, President and Chief Executive Officer of Sgoco, commented on
the results. "Our sales performance over the third quarter remained strong,
despite a seasonal slowdown in the flat panel display market over the three
months of July to September. This is predominantly as a result of the
transition of our business model, designed to move up the value chain with a
focus on branding and distribution. This strategic transition has allowed us
to mitigate the pricing pressure from the overall display market during this
quarter and enabled our margin to stay at a sustainable level.

"During this quarter, we continued to take concrete steps towards our
previously mentioned strategic initiatives, primarily strengthening our
product portfolio, expanding our sales channels and developing solution-based
services for high-growth industries, and our progress in these areas has been
encouraging. The development of our new products, including our previously
mentioned AIOs and PIOs, have progressed well in demo showcasing and pilot
sales programs. We expect some of these new products to begin providing more
contributions to revenues in the coming two to three quarters. Over the next
few months we will continue to evaluate our strategies for growth while
maintaining our ambition to lead the industry in profitability."

Mr. Or concluded, "In the long term, we will strive to make the necessary
investments that will grow SGOCO's revenue, by identifying and seizing the
abundant opportunities prevalent in the display market. We will leverage on
our core competencies to expand and extend our offerings. Our goal is to
upgrade ourselves from a product provider to a solution-based enabler, and to
serve retail and commercial customers in various industry verticals through
our renowned omni channel model. 2013 continues to be a year of transformation
and investment for SGOCO, and I believe we will see some significant momentum
in 2014 as a result."

THIRD QUARTER 2013 FINANCIAL RESULTS

Revenue

Total revenue for the third quarter 2013 increased 65.0% to $43.0 million from
$26.0 million in the third quarter of 2012. The year-over-year revenue
increase was mainly due to the rebound in sales volume of flat panel monitors
as compared with the same quarter last year.

Of the total revenues in the quarter, $23.9 million or 55.6% of total revenues
were from SGOCO Brand and its Licensed Brands; $19.0 million or 44.3% of total
revenues were from Key Accounts sales; and the remaining 0.1% of total
revenues were from sales of Other Application Products.

Cost of Goods Sold

Cost of goods sold increased 57.3% to $39.5 million from $25.1 million in the
third quarter of 2012. The increase was generally in line with the revenue
growth.

Gross Profit and Gross Margin

Gross profit increased 268.2% to $3.5 million from $0.9 million for the third
quarter of 2012.

The overall gross margin for the third quarter of 2013 was 8.1%, as compared
with 3.6% for the third quarter of 2012. The increase in gross margin was
mainly due to the Company's efforts in streamlining its operations while
minimizing costs. During the third quarter of 2013, SGOCO Brand and its
Licensed Brands' sales had a gross margin of 8.5%, which increased from 3.9%
in the third quarter of 2012. During the third quarter of 2013 and 2012, Key
Accounts sales had a gross margin of 7.5% and 2.9%, respectively. Sales of
other application products in the third quarter of 2013 recorded a gross
margin of 11.6%, as compared to nil sales in the third quarter of 2012.

Operating Expenses

Selling, General and Administrative expenses for the third quarter of 2013
decreased 39.6% to $1.0 million from $1.7 million for the third quarter of
2012, primarily due to the decrease in General and Administrative ("G&A")
expenses.

Selling expenses for the third quarter of 2013 increased 22.2% year-over-year
to $0.3 million, representing 0.6% of total revenues, compared with $0.2
million or 0.8% of total revenues in the third quarter of 2012. The increase
in selling expenses was mainly attributable to an increase in transportation
costs from increased product sales during the third quarter and increased
staff costs in association with the growing sales teams in the Shenzhen and
Beijing offices.

G&A expenses decreased 48.4% year-over-year to $0.8 million from $1.5 million
for the third quarter of 2012. The decrease of G&A expenses was due to a
decrease in legal and professional fees and other expenses in relation to the
Company's temporary trading halt and change of auditors in 2012.

Operating Income and Operating Margin

Operating income for the third quarter of 2013 was $2.4 million, up from
operating loss of $0.8 million in the third quarter of 2012. Operating margin
was 5.7%, and improved from negative 2.9% in the third quarter of 2012 due to
the increase of revenue and reduction of G&A expenses.

Net Income, Net Margin and EPS

Net income for the third quarter of 2013 was $2.2 million, and improved from
net loss of $1.1 million in the third quarter of 2012. Net margin was 5.0% for
the third quarter of 2013, which increased from negative 4.2% in the third
quarter of 2012.

Basic and diluted EPS were $0.12 for the third quarter of 2013, compared to
basic and diluted loss per share of $0.06 in the third quarter of 2012. Basic
and diluted EPS for the third quarter of 2013 was calculated based on
17,254,860 weighted average number of common shares as compared to 17,059,860
weighted average number of common shares in the third quarter of 2012.

Balance Sheet

Cash and cash equivalents
As of September 30, 2013, cash and cash equivalents were $13.7 million, an
increase of $2.2 million from $11.5 million as of December 31, 2012. The
increase in the cash position was primarily attributable to a $4.0 million
short-term loan drawn in September 2013 for the purpose of operational
financing.

Accounts receivable
Accounts receivable as of September 30, 2013 decreased 8.4% to $54.4 million
from $59.4 million as of December 31, 2012. As of September 30, 2013, Accounts
Receivable Turnover Days was 99 days compared to 87 days as of December 31,
2012. The increase in Accounts Receivable Turnover Days was mainly because
most of our customers made use of the credit period we granted them.

Inventories
Inventories as of September 30, 2013 increased 349.1% to $25.7 million from
$5.7 million as of December 31, 2012. The increase was primarily to fulfill
the upcoming sales orders and expected market demand. As of September 30,
2013, Inventory Turnover Days was 30 days compared to 9 days as of December
31, 2012. The increase in Inventory Turnover Days was mainly due to inventory
build-up by the end of the third quarter in anticipation of the Golden Week
sales in China's October National Holiday.

Working capital
Working capital increased to $85.7 million from $78.1 million as of September
30, 2013. The current ratio was 3.49 on September 30, 2013, compared to 3.86
on December 31, 2012.

CONFERENCE CALL INFORMATION

SGOCO's senior management will host a conference call on Thursday, November
21, 2013 at 8 a.m. (Eastern) /5 a.m. (Pacific) / 9 p.m. (Beijing/Hong Kong) to
discuss quarterly results and operational updates.

To access the conference call, please dial in at least 10 minutes before the
call.

1-877-941-1427 (US Toll-free)
1-480-629-9664 (International)
4001-200-611 (China Toll-free)
86-400-628-0671 (China)

Conference call identification number: 4647981

The Company will also broadcast a live audio webcast of the conference call.
The webcast will be available at http://public.viavid.com/index.php?id=106646

An archive of the call will be available within 48 hours at
http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=recent&id=17

ABOUT SGOCO GROUP, LTD.

SGOCO Group Ltd. (NASDAQ: SGOC) offers innovative display products and
solutions to consumers and businesses in various industry verticals. By
collaborating with its brand partners  and utilizing comprehensive industry
knowledge in product development, SGOCO addresses customers' rapid-changing
display needs by delivering highly intelligent products and solutions that
integrate hardware and software in SGOCO's own brand and co-brands. Leveraging
on its highly integrated distribution channels, SGOCO primarily targets
China's rapidly-emerging tier three and four cities across 19 Provinces in
China.  SGOCO is also regarded as a reliable brand developer. SGOCO was
established in 2005 and maintains its headquarters in Beijing, China. For more
information about SGOCO, please visit our investor relations website
http://www.sgocogroup.com.

For investor and media inquiries, please contact:

SGOCO Group, Ltd.

Serena Wu
Investor Relations Manager
Tel: +86-10-8587-0173 (China)
US: +1-646-583-1616 (Voice mail)
Email: ir@sgoco.com  

SAFE HARBOR AND INFORMATIONAL STATEMENT

This announcement contains "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements are made under the "safe harbor"
provisions of the U.S. Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical fact, including, without
limitation, those with respect to the objectives, plans and strategies of the
Company set forth herein and those preceded by or that include the words
"believe," "expect," "anticipate," "future," "will," "intend," "plan,"
"estimate" or similar expressions, are "forward-looking statements".
Forward-looking statements in this release include, without limitation, the
effectiveness of the Company's multiple-brand, multiple channel strategy and
the transitioning of its product development and sales focus to a
"light-asset" model. Although the Company's management believes that such
forward-looking statements are reasonable, it cannot guarantee that such
expectations are, or will be, correct. These forward-looking statements
involve a number of risks and uncertainties, which could cause the Company's
future results to differ materially from those anticipated. These
forward-looking statements can change as a result of many possible events or
factors not all of which are known to the Company, which may include, without
limitation, requirements or changes adversely affecting the LCD and LED market
in China; fluctuations in customer demand for LCD and LED products generally;
our success in promoting our brand of LCD and LED products in China and
elsewhere; our ability to have effective internal control over financial
reporting; our success in designing and distributing products under brands
licensed from others; management of sales trends and client mix; possibility
of securing loans and other financing without fixed assets as collateral;
changes in government policy in China; the fluctuations and competition in
sales and sale prices of LCD and LED products in China; China's overall
economic conditions and local market economic conditions; our ability to
expand through strategic acquisitions and establishment of new locations;
compliance with government regulations; legislation or regulatory
environments; geopolitical events, and other events and/or risks outlined in
SGOCO's filings with the U.S. Securities and Exchange Commission, including
its annual report on Form 20-F and other filings. All information provided in
this press release and in the attachments is as of the date of the issuance,
and SGOCO does not undertake any obligation to update any forward-looking
statement, except as required under applicable law.

 

SGOCO GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(Unaudited)
(In thousands of U.S. dollars except share and per share data)
                                                     2013        2012
REVENUES:
   Revenues                                          42,969      26,047
COST OF GOODS SOLD:
   Cost of goods sold                                39,501      25,105
GROSS PROFIT                                         3,468       942
OPERATING EXPENSES:
   Selling expenses                                  259         212
    General and administrative expenses              765         1,482
Total operating expenses                             1,024       1,694
INCOME (LOSS) FROM OPERATIONS                        2,444       (752)
OTHER INCOME (EXPENSES):
   Interest income                                   2           1
   Interest expense                                  (63)        (12)
   Other income (expense), net                       267         (23)
   Change in fair value of warrant derivative        17          27
liability
Total other income (expenses), net                   223         (7)
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES      2,667       (759)
PROVISION FOR INCOME TAXES                           513         331
NET INCOME (LOSS)                                    2,154       (1,090)
OTHER COMPREHENSIVE INCOME (LOSS):
   Foreign currency translation adjustment           26          (3)
COMPREHENSIVE INCOME (LOSS)                          2,180       (1,093)
EARNINGS (LOSS) PER SHARE:
Basic                                                0.12        (0.06)
Diluted                                              0.12        (0.06)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES

OUTSTANDING:
Basic                                                17,254,860  17,059,860
Diluted                                              17,254,860  17,059,860

 

SGOCO GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(Unaudited)
(In thousands of U.S. dollars except share and per share data)
                                                        2013        2012
REVENUES:
   Revenues                                             156,754     103,272
COST OF GOODS SOLD:
   Cost of goods sold                                   144,341     95,692
GROSS PROFIT                                            12,413      7,580
OPERATING EXPENSES:
   Selling expenses                                     815         460
    General and administrative expenses                 2,435       4,166
Total operating expenses                                3,250       4,626
INCOME FROM OPERATIONS                                  9,163       2,954
OTHER INCOME (EXPENSES):
   Interest income                                      7           3
   Interest expense                                     (156)       (51)
   Other income (expense), net                          206         (35)
   Change in fair value of warrant derivative           (10)        75
liability
Total other income (expenses), net                      47          (8)
INCOME BEFORE PROVISION FOR INCOME TAXES                9,210       2,946
PROVISION FOR INCOME TAXES                              1,942       1,887
NET INCOME                                              7,268       1,059
OTHER COMPREHENSIVE INCOME (LOSS):
   Foreign currency translation adjustment              132         (85)
COMPREHENSIVE INCOME                                    7,400       974
EARNINGS PER SHARE:
Basic                                                   0.42        0.06
Diluted                                                 0.42        0.06
WEIGHTED AVERAGE NUMBER OF COMMON SHARES

OUTSTANDING:
Basic                                                   17,172,820  17,059,860
Diluted                                                 17,172,820  17,059,860

 

SGOCO GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012
(In thousands of U.S. dollars except share and per share data)
                                               September 30,  December 31,

                                               2013           2012
ASSETS                                         (Unaudited) 
CURRENT ASSETS
Cash                                           13,681         11,548
Accounts receivable, net of provision for
doubtful accounts of $106 and nil,             54,393         59,355

   respectively
Notes receivable                               1,640          -
Other receivables and prepayments              4,194          169
Inventories                                    25,709         5,725
Advances to suppliers                          20,502         28,511
Other current assets                           85             78
Total current assets                           120,204        105,386
PLANT AND EQUIPMENT, NET                       241            261
Total assets                                   120,445        105,647
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
   Short-term loans                            11,451         6,230
   Accounts payable, trade                     8,342          12,038
   Accrued liabilities                         191            156
   Short-term loan – shareholder               -              209
   Other payables                              480            379
   Customer deposits                           6,098          1,155
   Taxes payable                               7,915          7,147
Total current liabilities                      34,477         27,314
OTHER LIABILITIES
Warrant derivative liability                   28             18
Total liabilities                              34,505         27,332
SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value, 1,000,000
shares   

  authorized, nil issued and outstanding as    -              -
of September 30, 2013

  and December 31, 2012, respectively
Common stock, $0.001 par value, 50,000,000
shares

  authorized, 17,660,356 and 17,465,356
issued and                                     18             17

  outstanding as of September 30, 2013 and
December 31, 2012,   

  respectively
Paid-in-capital                                25,052         24,828
Statutory reserves                             401            401
Retained earnings                              60,312         53,044
Accumulated other comprehensive income         157            25
Total shareholders' equity                     85,940         78,315
Total liabilities and shareholder's equity     120,445        105,647

 

SGOCO GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(Unaudited)
(In thousands of U.S. dollars)
                                                           2013      2012
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                             7,268     1,059
    Adjustments to reconcile net income to net cash used
    in operating activities:
                    Depreciation and amortization          54        49
                    Provision for doubtful debts           106       -
                    Change in fair value of warrant        10        (75)
    derivative liability
                    Share-based compensation expenses      225       273
    Change in operating assets and liabilities
                    Accounts receivable, trade             4,449     (5,556)
                    Notes receivable                       (1,640)   (3,679)
                    Other receivables and prepayments      (3,976)   (209)
                    Inventories                            (19,626)  34,132
                    Advances to suppliers                  8,555     (39,460)
                    Other current assets                   (3)       (68)
                    Accounts payables, trade               (3,924)   (730)
                    Notes payables                         -         254
                    Accrued liabilities                    31        (142)
                    Other payables                         91        117
                    Customer deposits                      4,860     403
                    Taxes payable                          599       1,494
                         Net cash used in operating        (2,921)   (12,138)
                   activities
CASH FLOWS FROM INVESTING ACTIVITIES:
    Settlement of consideration received from disposal of  -         18,734
    subsidiaries
    Purchase of equipment                                  (29)      (105)
                         Net cash (used in) provided by
                                                           (29)      18,629
                         investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
    Increase in restricted cash                            -         (254)
    Proceeds from short-term loans                         5,221     -
    Repayment of the short-term loan - shareholder         (209)     -
                              Net cash provided by (used   5,012     (254)
                   in) financing activities
EFFECT OF EXCHANGE RATE ON CASH                            71        (24)
 INCREASE IN CASH                                          2,133     6,213
CASH, beginning of period                                  11,548    535
CASH, end of period                                        13,681    6,748
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Interest expenses paid (net of amount capitalized)     156       51
    Income taxes paid                                      1,191     432
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING

AND FINANCING ACTIVITIES
    Settlement of consideration receivable – received in   -         38,992
    finished goods

 

 

SOURCE SGOCO Group, Ltd.

Website: http://www.sgoco.com
Website: http://public.viavid.com/index.php?id=106646
Website:
http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=recent&id=17
Website: http://www.sgocogroup.com
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