SHANGHAI, May 27 /PRNewswire-Asia-FirstCall/ -- Spreadtrum Communications, Inc. (Nasdaq: SPRD; "Spreadtrum" or the "Company"), one of China's leading wireless baseband chipset providers, today announced its fourth quarter 2008 and first quarter 2009 financial results.
FOURTH QUARTER 2008 (4Q08) FINANCIAL SUMMARY:
-- Total revenue in 4Q08 was US$10.2 million, down 79% year over year and
49% sequentially. Baseband and RF revenue in 4Q08 was US$9.3 million,
down 79% year over year and 50% sequentially.
-- Diluted loss per American Depositary Share (ADS) was US$1.19, compared
to diluted earnings per ADS of US$0.22 in 4Q07 and diluted loss per ADS
of US$0.71 in 3Q08.
-- Gross margin in 4Q08 was -26.8% compared to 45.5% in 4Q07 and 43.7% in
3Q08.
-- GAAP net loss in 4Q08 was US$52.3 million, compared to net income of
US$10.2 million in 4Q07 and net loss of US$31.3 million in 3Q08.
FIRST QUARTER 2009 (1Q09) FINANCIAL SUMMARY:
-- Total revenue in 1Q09 was US$8.2 million, down 79% year over year and
20% sequentially. Baseband and RF revenue in 1Q09 was US$8.0 million,
down 77% year over year and 14% sequentially.
-- Diluted loss per American Depositary Share (ADS) was US$0.19, compared
to diluted earnings per ADS of US$0.06 in 1Q08 and diluted loss per ADS
of US$1.19 in 4Q08.
-- Gross margin in 1Q09 was 19.4% compared to 44.9% in 1Q08 and-26.8% in
4Q08.
-- GAAP net loss in 1Q09 was US$8.3 million, compared to net income of
US$2.8 million in 1Q08 and net loss of US$52.3 million in 4Q08.
BUSINESS HIGHLIGHTS:
-- Samsung selected Spreadtrum as a new chipset supplier for its mobile
phone models. Volume shipment of QS520 GSM/GPRS and QS1001 EDGE
transceivers commenced in 1Q09.
-- During the 2009 GSMA Mobile World Congress, Spreadtrum launched the
world's first TD-SCDMA/HSDPA/EDGE/GPRS/GSM single-chip RF transceiver,
the QS3200.
-- Spreadtrum received RMB300 million (approximately US$44 million) of new
financing from a Chinese bank in the form of a fixed-term loan. The
interest on borrowings under this bank loan will be mostly covered by
Chinese government subsidy funds.
-- Spreadtrum was chosen by China Mobile as one of a select few companies
to participate in its "Low Cost 3G Handset" project.
-- Spreadtrum promoted Dr. Leo Li from the Company's President to
President and Chief Executive Officer (CEO). Dr. Ping Wu, previously
the CEO and Chairman of the Board of Directors, will retain his role as
Chairman of the Board.
Commenting on the results, Spreadtrum's CEO, Dr. Leo Li, said: "It is clear that market conditions have not been in our favor for the last several quarters. However, we are actively taking measures to counter the effects and ensure that the Company performs reasonably well against the backdrop of a difficult operating environment. We intend to stay ahead of the technological curve as 3G rollout continues in China, and remain focused on driving long-term growth. We took some non-cash charges in 4Q08 including, a US$32.3 million impairment loss of goodwill, a US$3.0 million impairment loss of long-lived assets, US$2.4 million in share-based compensation, US$2.1 million in depreciation and intangible assets amortization, US$5.4 million in inventory valuation allowance and US$2.8 million in bad debt expenses. These items have impacted our results on paper; however they are not reflective of our operational performance or potential for long-term success.
"Spreadtrum scored some key victories during the past two quarters, most notably our selection by Samsung to supply chipsets for its mobile phones. Our QS520 GSM/GPRS and QS1001 EDGE transceivers have been designed into Samsung's mobile phones in 4Q08, which will be shipped internationally. I am extremely pleased that a well-respected company like Samsung has selected Spreadtrum as a supplier and we view this partnership as a testament to the quality of our products and the advantages they offer.
"We have new leadership in place, and my colleagues and I are committed to navigating the business through these difficult times. We are well along with our search for a new CFO, and I expect to announce an appointment in the coming weeks. To stay ahead of the competition, it is important that we continue to improve the quality of products and enhance the overall effectiveness and efficiency of our operations. To this end, we plan to continue to strengthen our technological leadership via increased investment in new GSM and TD-SCDMA products. We are also taking measures to strengthen our financial position, recently securing nearly $44 million from a Chinese bank in financing with support from the Chinese government, resulting in a nearly interest free loan. In order to cut costs and drive improvements in our financial performance, we have implemented a 15% headcount reduction and reduced inventory. We are also taking steps to improve the sales cycle, and have already seen some improvement in accounts receivable metrics in 1Q09. Currently we expect 2Q 09 revenue will be in the range of US$10million to US$14 million with improved margins, sequentially," Dr. Li concluded.
FOURTH QUARTER 2008 FINANCIAL REVIEW:
Revenue
Revenue in the fourth quarter 2008 totaled US$10.2 million, representing a decrease of 79% from 4Q07 and 49% from 3Q08. Revenue from baseband and RF semiconductors was US$9.3 million, or 91% of total revenue, down from 93% of total revenue in 4Q07 and 94% of total revenue in 3Q08. Revenue from turnkey solutions was US$0.9 million, which represented 9% of total revenue, up from 7% of total revenue in 4Q07 and 6% of total revenue in 3Q08.
Revenue from baseband and RF semiconductors in 4Q08 decreased 79% from 4Q07 and 50% from 3Q08 to US$9.3 million in 4Q08. Unit shipments of baseband and RF semiconductors decreased 61% from 4Q07 and 27% from 3Q08. Of the total baseband and RF shipments for 4Q08, 2G/2.5G baseband semiconductor shipments accounted for approximately 56%, RF shipments accounted for approximately 43%, 3G baseband semiconductor shipments accounted for approximately 0.3%. The average selling price per unit for baseband and RF semiconductors decreased by 47% from 4Q07 and by 32% from 3Q08 due to market pricing pressure.
Revenue from turnkey solutions decreased during the quarter by 74% from 4Q07 and by 23% from 3Q08 to US$ 0.9 million, as a result of the Company's ongoing plan to phase out its modules business.
Gross Margin
Gross margin for the quarter was -26.8%, down from 45.5% in 4Q07 and 43.7% in 3Q08. Non-GAAP gross margin adjusted to exclude share-based compensation was -25.7%, down from 45.6% in 4Q07 and 44.3% in 3Q08.
Cost of revenue in 4Q08 totaled US$13.0 million, representing decrease of 51% from 4Q07 and increase of 15% from 3Q08. The year-over-year decrease was attributable to a decline in total sales volumes. The sequential increase was due to higher inventory valuation allowance cost partially offset by a decline in total sales volumes.
Operating Margin
In 4Q08, the Company recognized several non-cash expenses: US$32.3 million in impairment loss of goodwill, US$3.0 million in impairment loss of long-lived assets, US$2.4 million in share based compensation, US$2.1 million in depreciation and intangible assets amortization and US$2.8 million in bad debt expenses.
As a result of these expenses, the Company's operating margin was -530.8% in 4Q08, compared to 17.6% in 4Q07 and -159.0% in 3Q08. The year-over-year and sequential decreases in operating margin were primarily attributable to a significant decline in gross margin, the US$32.3 million impairment loss of goodwill, a US$3.0 million impairment loss of long-lived assets, a US$1.6 million provision for bad debt related to other receivables for promissory notes and a US$1.2 million provision for bad debt in accounts receivable from customers coupled with a decline in sales volumes. Excluding share-based compensation expenses, the amortization of intangibles from the Quorum acquisition, and impairments of goodwill and long-lived assets, non-GAAP operating margin in 4Q08 was -159.4%, down from 20.7% in 4Q07 and -24.1% in 3Q08.
Total operating expenses in 4Q08, including selling, general and administrative (SG&A) expenses and R&D expenses, were US$51.6 million, representing increases of 282% from 4Q07 and 27% from 3Q08. Excluding share-based compensation expenses, the amortization of intangibles from the Quorum acquisition and the impairments of goodwill and long-lived assets, total non-GAAP operating expenses in 4Q08 were US$13.7 million, compared to US$12.1 million in 4Q07 and US$13.7 million in 3Q08. Total non-GAAP operating expenses for the quarter represented 133.8% of revenue.
SG&A expenses increased in 4Q08 78% from 4Q07 and 59% from 3Q08. The year-over-year and sequential increases were driven primarily by higher bad debt expenses and higher marketing and sales promotion costs, but partially offset by lower employee compensation expenses.
Recurring R&D expenses in 4Q08 decreased 5% year-over-year and 25% sequentially. The year-over-year and sequential dollar decreases were primarily due to lower employee compensation expenses and lower software license and maintenance fees.
Non-Operating Income
In 4Q08, the Company recorded net interest income of US$0.5 million, representing a decrease of US$1.0 million from 4Q07 and flat compared to 3Q08. The year-over-year and sequential decreases were primarily attributable to interest earned from investing a lower balance of cash and cash equivalents as well as declines in interest rates.
In 4Q08, the Company also recognized other income of US$0.5 million, representing a decrease of US$0.1 million from 4Q07 and increase of US$0.2 million from 3Q08. The year-over-year dollar decrease was primarily due to a decrease in foreign exchange gain. The sequential dollar increase was primarily due to an increase related to the waiver of a fourth payment for Grandview IP purchased, partially offset by a decrease in foreign exchange gain.
Earnings
The Company's net loss totaled US$52.3 million in 4Q08, compared to net income of US$10.2 million in 4Q07 and a net loss of US$31.3 million in 3Q08. Excluding the aforementioned share-based compensation expenses, the amortization of intangibles from the Quorum acquisition and the impairments of goodwill and long-lived assets the Company's non-GAAP net loss for 4Q08 would have been US$14.3 million, down from non-GAAP net income of US$11.7 million in 4Q07 and a non-GAAP net loss of US$4.3 million in 3Q08. Diluted non-GAAP loss per ADS in 4Q08 was US$0.32 down from diluted earnings per ADS of US$0.25 in 4Q07 and a diluted loss per ADS of US$0.1 in 3Q08. Net margin was -511.0%, down from 21.0% in 4Q07 and -156.5% in 3Q08.
Balance Sheet and Cash Flow
As of December 31, 2008, the Company had US$57.8 million in cash and cash equivalents, which represented a decrease of US$8.5 million from September 30, 2008. The Company also had $5.2 million in term deposits with maturity dates over 90 days. In 4Q08, the Company used US$4.9 million cash for operating activities, US$2.9 million cash on property and equipment and US$3.3 million toward intangible assets.
Accounts receivable (A/R) decreased by US$1.2 million from US$11.4 million at September 30, 2008 to US$10.1 million at December 31, 2008. Average A/R days increased from 66 days to 97 days. As of April 30, 2009, the Company collected US$8.8 million of its A/R while US$1.3 million of outstanding receivables were past due. Inventory at December 31, 2008 was US$13.8 million, a decrease of $4.2 million from September 30, 2008, and inventory days decreased from 146 days to 98 days, primarily due to US$5.4 million inventory reserve in 4Q08. Total assets as of December 31, 2008 were US$152.9 million, down 25% from US$203.9 million at September 30, 2008. The decrease in total assets was primarily attributable to a reduction in goodwill and long-lived assets due to impairment, an increase in inventory valuation allowance and a decrease in cash and cash equivalents due to working capital usage in 4Q08.
Current liabilities decreased from US$30.7 million at September 30, 2008 to US$29.9 million at December 31, 2008, primarily due to a decrease in accounts payable as a result of lower purchasing. Long-term liabilities at December 31, 2008 were US$1.0 million, compared to US$1.3 million at September 30, 2008, primarily due to US$0.3 million in long-term payables related to IP purchased due in 4Q08 being reclassified from long-term notes payable to short-term notes payable.
FIRST QUARTER 2009 FINANCIAL REVIEW:
Revenue
Revenue in the first quarter totaled US$8.2 million, representing a decrease of 79% from 1Q08 and 20% from 4Q08. Revenue from baseband and RF semiconductors was US$8.0 million, or 98% of total revenue, up from 90% of total revenue in 1Q08 and 91% of total revenue in 4Q08. Revenue from turnkey solutions was US$0.2 million, which represented 2% of total revenue, down from 10% of revenue in 1Q08 and 9% of total revenue in 4Q08.
Revenue from baseband and RF semiconductors decreased 77% from 1Q08 and 14% from 4Q08 to US$8.0 million in 1Q09. Unit shipments of baseband and RF semiconductors decreased 41% from 1Q08 and increased 13% from 4Q08. Of the total baseband and RF shipments for 1Q09, 2G/2.5G baseband semiconductor shipments in the first quarter accounted for approximately 40%, RF shipments accounted for approximately 58% of which 48.8% was from Samsung, 3G baseband semiconductor shipments accounted for approximately 1%. The average selling price per unit for baseband and RF semiconductors decreased 62% from 1Q08 and 24% from 4Q08 due to market pricing pressure.
Revenue from turnkey solutions decreased during the quarter by 95% from 1Q08 and by 78% from 4Q08 to US$ 0.2 million, as a result of the Company's ongoing plan to phase out its modules business.
Gross Margin
Gross margin for the quarter was 19.4%, down from 44.9% in 1Q08 and up from -26.8% in 4Q08. The non-GAAP gross margin, adjusted to exclude share-based compensation, was 19.8%, down from 45.1% in 1Q08 and up from -25.7% in 4Q08.
Cost of revenue in 1Q09 totaled US$6.6 million, representing decreases of 70% from 1Q08 and 49% from 4Q08. The year-over-year and sequential decreases were attributable to a decline in total baseband sales volumes, which were partially offset by an increase in RF shipments that present a lower average selling price per unit than baseband.
Operating Margin
In 1Q09, the Company recognized US$2.1 million in depreciation and intangible assets amortization and a US$0.6 million share based compensation cost.
The Company's operating margin was -116.4% in 1Q09, compared to 5.1% in 1Q08 and -530.8% in 4Q08. The year-over-year decrease in operating margin was primarily due to a decline in sales volume. The sequential increase was primarily due to the fact that impairment loss of goodwill and long-lived assets and bad debt expenses recorded in 4Q08 but not in 1Q09. Excluding $0.6 million in share-based compensation expenses and US$0.3 million of amortization of intangibles from the Quorum acquisition, non-GAAP operating margin in 1Q09 was -105.5%, down from 10.8% in 1Q08 and up from -159.4% in 4Q08.
Total operating expenses in 1Q09, which include selling, general and administrative (SG&A) expenses and R&D expenses, were US$11.2 million, representing decreases of 29% from 1Q08 and 78% from 4Q08. Excluding the aforementioned share-based compensation expense and the amortization of intangibles from the Quorum acquisition, total non-GAAP operating expenses in 1Q09 were US$10.3 million, compared to US$13.6 million in 1Q08 and US$13.7 million in 4Q08. Total non-GAAP operating expenses for the quarter represented 125.2% of revenue.
SG&A expenses in 1Q09 decreased 29% from 1Q08 and 54% from 4Q08. The year-over-year dollar decrease was driven primarily by lower marketing and sales promotion costs, lower employee compensation expenses and lower share-based compensation expenses. The sequential decrease was primarily due to lower bad debt expenses and lower share-based compensation expenses.
Recurring R&D expenses in 1Q09 decreased 29% year over year and 12% sequentially. The year-over-year and sequential dollar decreases were primarily due to lower tape-out expenses, lower share-based compensation expenses and lower employee salaries and wages.
Non-Operating Income
In 1Q09, the Company recorded net interest income of US$0.2 million, representing a decrease of US$0.6 million from 1Q08 and US$0.4 million from 4Q08. The year-over-year and sequential decreases were primarily attributable to interest earned from investing a lower balance of cash and cash equivalents as well as declines in interest rates.
The Company also recognized other income of US$0.4 million, representing a decrease of US$0.2 million from 1Q08 and flat from 4Q08. The year-over-year dollar decrease was primarily due to a decrease in foreign exchange gain.
Earnings
The Company's net loss totaled US$8.3 million in 1Q09, compared to net income of US$2.8 million in 1Q08 and a net loss of US$52.3 million in 4Q08. Net margin was -101.1%, down from 7.0% in 1Q08 and up from -511.0% in 4Q08. Excluding the aforementioned share-based compensation expenses and the amortization of intangibles from the Quorum acquisition, the Company's non-GAAP net loss for 1Q09 would have been US$7.4 million, down from net income of US$5.0 million in 1Q08 and up from net loss of US$14.3 million in 4Q08. Non-GAAP net margin was -90.2% in 1Q09, down from 12.7% in 1Q08 and up from -139.6% in 4Q08.
Balance Sheet and Cash Flow
As of March 31, 2009, the Company had US$52.2 million in cash and cash equivalents, which represented a decrease of US$5.6 million from December 31, 2008. The Company also had $5.2 million in term deposits with maturity dates over 90 days. In 1Q09, the Company used US$0.5 million in operating activities, US$3.0 million cash on property and equipment and US$2.2 million toward intangible asset acquisitions.
Accounts receivable (A/R) decreased US$5.4 million from US$10.1 million at December 31, 2008 to US$4.7 million at March 31, 2009. Average A/R days decreased from 97 days to 82 days. As of April 30, 2009, the Company collected US$3.6 million of its A/R and US$1.0 million of outstanding receivables that were past due. Inventory at March 31, 2009 was US$12.0 million, a decrease of $1.8 million from December 31, 2008, and the inventory days increased from 98 days to 163 days as a result of the slower sales. Total assets as of March 31, 2009 were US$139.8 million, down 9% from US$152.9 million at December 31, 2008. The decrease in total assets was primarily attributable to reductions in accounts receivable resulting from receipt of payments in 1Q09 and cash and cash equivalents due to working capital usage in 1Q09.
Current liabilities decreased from US$29.9 million at December 31, 2008 to US$24.9 million at March 31, 2009, primarily due to a decrease in accounts payable as a result of lower purchasing. Long-term liabilities at March 31, 2009 were US$0.6 million, compared to US$1.0 million at December 31, 2008, primarily due to US$0.4 million in long-term payables related to IP purchased due in 1Q09 being reclassified from long-term notes payable to short-term notes payable.
BUSINESS OUTLOOK:
Spreadtrum currently expects 2Q09 revenue to be slightly better than the first quarter of 2009, with a forecasted range of US$10million to US$14 million. The Company also estimates that gross margin will improve slightly on a sequential basis in the second quarter.
WEBCAST OF CONFERENCE CALL:
The Company's management team will conduct a conference call at 8:00 pm (Eastern) on Wednesday, May 27, 2009. A webcast of the conference call will be accessible on the Company's web site at http://www.spreadtrum.com . The conference call can also be accessed via the following telephone numbers:
Toll Free Toll
United States: 1-888-679-8037 +1-617-213-4849
China: 10-800-130-0399
Hong Kong: 800-96-2844
United Kingdom: 0207-1365-118
Participants are encouraged to pre-register before the start of the conference call. Pre-registration URL: https://www.theconferencingservice.com/prereg/key.process?key=PULD6C8KE
A telephone replay will be available shortly after the call until June 3, 2009 at (US Toll Free) 1-888-286-8010 or (US Toll) +1-617-801-6888. Passcode: 38527443.
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, amortization of intangibles from the Quorum acquisition and impairment loss of goodwill and long-lived assets. 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, amortization of intangibles from the Quorum acquisition and impairment loss of goodwill and long-lived assets.
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 believes that the presentation of non-GAAP gross margin, non- GAAP operating margin, non-GAAP net income (loss), and non-GAAP diluted earnings per ADS provides 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 (loss) by the US GAAP weighted average diluted shares outstanding.
Listed below are the share-based compensation amounts included in net income that management excludes in computing the non-GAAP financial measures referred to in the text of this press release. A reconciliation of GAAP to non-GAAP results is presented after the consolidated balance sheets.
Three months ended
(in thousands of US dollars)
December 31, March 31,
2007 2008
(audited) (unaudited)
Share-based compensation:
Cost of revenue $47 $75
Research and development $535 $790
Selling, general, and administrative $913 $991
Three months ended
(in thousands of US dollars)
September December March
30, 2008 31, 2008 31, 2009
(unaudited) (unaudited) (unaudited)
Share-based compensation:
Cost of revenue $121 $120 $29
Research and development $1,185 $1,186 $312
Selling, general, and administrative $1,108 $1,108 $300
Spreadtrum Communications, Inc.
Condensed Consolidated Income Statements
(in thousands of US dollars, except per share data and percentages)
(unaudited)
Three months ended
December September December Change from
31, 2007 30, 2008 31, 2008 4Q07 3Q08
Revenue $48,542 $19,977 $10,235 -79% -49%
Cost of revenue 26,476 11,242 12,982 -51% 15%
Gross profit 22,066 8,735 (2,747) -112% -131%
Operating expenses
Research &
development 9,352 11,756 8,838 -5% -25%
Selling, general &
administrative 4,154 4,647 7,401 78% 59%
IPR&D expense
acquired per Quorum
acquisition -- 6,612 -- -- --
Impairment loss of
long-lived assets -- 17,484 3,000 -- --
Impairment loss of
goodwill -- -- 32,345 -- --
Total operating expenses 13,506 40,499 51,584 282% 27%
Operating income (loss) 8,560 (31,764) (54,331) -735% 71%
Non-operating income
(expense)
Interest income 1,452 530 487 -66% -8%
Interest expense (27) (54) (99) 267% 83%
Other income, net 563 289 460 -18% 59%
Total non-operating
income 1,988 765 848 -57% 11%
Income (loss) before tax 10,548 (30,999) (53,483) -607% 73%
Income tax
expense(benefit) 352 259 (1,185) -437% -558%
Net income (loss) $10,196 $(31,258) $(52,298) -613% 67%
Income (loss) per ADS,
basic $0.24 $(0.71) $(1.19) -596% 68%
Income (loss) per ADS,
diluted $0.22 $(0.71) $(1.19) -641% 68%
Margin analysis:
Gross margin 45.5% 43.7% -26.8% -- --
Operating margin 17.6% -159.0% -530.8% -- --
Net margin 21.0% -156.5% -511.0% -- --
Weighted average ADS
equivalent: [1]
Basic 42,263,233 43,935,121 43,992,272 -- --
Diluted 47,032,432 43,935,121 43,992,272 -- --
ADS equivalent
outstanding at end of
period 42,304,837 43,991,458 43,993,071 -- --
[1] Assumes all outstanding ordinary shares are represented by ADSs. Each ADS represents three ordinary shares.
Spreadtrum Communications, Inc.
Consolidated Income Statements
(in thousands of US dollars, except per share data and percentages)
(unaudited)
Twelve months ended
December 31, December 31,
2007 2008 Change
Revenue $145,466 $109,937 -24%
Cost of revenue 79,969 68,033 -15%
Gross profit 65,497 41,904 -36%
Operating expenses
Research & development 32,297 42,877 33%
Selling, general & administrative 16,282 21,998 35%
IPR&D expense acquired per Quorum
acquisition -- 6,612 --
Impairment loss of long-lived
assets -- 20,484 --
Impairment loss of goodwill -- 32,345 --
Total operating expenses 48,579 124,316 156%
Operating income (loss) 16,918 (82,412) -587%
Non-operating income (expense)
Interest income 3,866 2,348 -39%
Interest expense (57) (230) -304%
Other income, net 1,357 2,330 72%
Total non-operating income 5,166 4,448 -14%
Income (loss) before tax 22,084 (77,964) -453%
Income tax expense 1,017 201 -80%
Net income (loss) $21,067 $(78,165) -471%
Income (loss) per ADS, basic $0.29 $(1.78) -714%
Income (loss) per ADS, diluted $0.16 $(1.78) -1213%
Margin analysis:
Gross margin 45.0% 38.1% --
Operating margin 11.6% -75.0% --
Net margin 14.5% -71.1% --
Weighted average ADS equivalent: [2]
Basic 73,037,662 43,836,786 --
Diluted 128,745,085 43,836,786 --
[2] Assumes all outstanding ordinary shares are represented by ADSs. Each ADS represents three ordinary shares.
Spreadtrum Communications, Inc.
Condensed Consolidated Income Statements
(in thousands of US dollars, except per share data and percentages)
(unaudited)
Three months ended
March December March Change from
31, 2008 31, 2008 31, 2009 1Q08 4Q08
Revenue $39,498 $10,235 $8,216 -79% -20%
Cost of revenue 21,746 12,982 6,622 -70% -49%
Gross profit 17,752 (2,747) 1,594 -91% -158%
Operating expenses
Research &
development 10,967 8,838 7,784 -29% -12%
Selling, general &
administrative 4,774 7,401 3,373 -29% -54%
Impairment loss of
long-lived assets -- 3,000 -- -- --
Impairment loss of
goodwill -- 32,345 -- -- --
Total operating expenses 15,741 51,584 11,157 -29% -78%
Operating income (loss) 2,011 (54,331) (9,563) -576% -82%
Non-operating income
(expense)
Interest income 795 487 244 -69% -50%
Interest expense (35) (99) (43) 23% -57%
Other income, net 637 460 416 -35% -10%
Total non-operating
income 1,397 848 617 -56% -27%
Income (loss) before tax 3,408 (53,483) (8,946) -363% -83%
Income tax
expense(benefit) 630 (1,185) (641) -202% -46%
Net income (loss) $2,778 $(52,298) $(8,305) -399% -84%
Income (loss) per ADS,
basic $0.06 $(1.19) $(0.19) -417% -84%
Income (loss) per ADS,
diluted $0.06 $(1.19) $(0.19) -417% -84%
Margin analysis:
Gross margin 44.9% -26.8% 19.4% -- --
Operating margin 5.1% -530.8% -116.4% -- --
Net margin 7.0% -511.0% -101.1% -- --
Weighted average ADS
equivalent: [3]
Basic 43,164,186 43,992,272 44,108,981 -- --
Diluted 46,789,892 43,992,272 44,108,981 -- --
ADS equivalent
outstanding at end of
period 45,234,665 43,993,071 44,247,916 -- --
[3] 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)
As of
December September December March
31, 2007 30, 2008 31, 2008 31, 2009
(audited) (unau (unau (unau
-dited) -dited) -dited)
Cash and cash equivalents $157,038 $66,285 $57,762 $52,163
Term deposit -- $6,600 $5,190 $5,189
Accounts receivable, net $2,198 $11,368 $10,148 $4,744
Inventories $25,054 $18,021 $13,813 $11,990
Deferred tax assets $392 $345 $1,371 $2,115
Prepaid expenses and other current
assets $5,650 $8,206 $6,647 $4,925
Total current assets $190,332 $110,825 $94,931 $81,126
Property and equipment, net $23,046 $26,209 $25,804 $29,785
Acquired intangible assets, net $14,220 $22,191 $21,100 $20,376
Goodwill -- $32,345 -- --
Equity Investment -- -- $730 $724
Deferred tax assets $1,222 $1,361 $680 $680
Other long term assets $8,102 $11,009 $9,633 $7,157
Total assets $236,922 $203,940 $152,878 $139,848
Current portion of long term loan $685 $3,667 $3,658 $3,657
Accounts payable $24,857 $12,607 $10,828 $5,613
Advances from customers $1,210 $308 $312 $162
Income tax payable $3,088 $3,737 $2,894 $2,997
Current deferred income tax
liabilities -- -- $53 $53
Accrued expenses and other current
liabilities $13,773 $10,385 $12,170 $12,390
Total current liabilities $43,613 $30,704 $29,915 $24,872
Long term loan $3,423 -- -- --
Deferred tax liabilities $37 $37 -- --
Other long-term obligations $1,954 $1,308 $1,034 $611
Total long term liabilities $5,414 $1,345 $1,034 $611
Total liabilities $49,027 $32,049 $30,949 $25,483
Shareholders' equity $187,895 $171,891 $121,929 $114,365
Total liabilities & shareholders'
equity $236,922 $203,940 $152,878 $139,848
Spreadtrum Communications, Inc.
Supplemental Information
(in thousands of US dollars, except percentages)
Revenue (US$000) 2Q07 3Q07 4Q07 1Q08
Baseband Semiconductor $27,357 $34,161 $44,971 $35,532
Turnkey Solutions $4,830 $4,409 $3,571 $3,966
Total $32,187 $38,570 $48,542 $39,498
As % of Total Revenue
Baseband Semiconductor 85% 89% 93% 90%
Turnkey Solutions 15% 11% 7% 10%
Gross Margin 45.5% 45.6% 45.5% 44.9%
Revenue (US$000) 2Q08 3Q08 4Q08 1Q09
Baseband Semiconductor $38,713 $18,765 $9,298 $8,007
Turnkey Solutions $1,514 $1,212 $937 $209
Total $40,227 $19,977 $10,235 $8,216
As % of Total Revenue
Baseband Semiconductor 96% 94% 91% 98%
Turnkey Solutions 4% 6% 9% 2%
Gross Margin 45.2% 43.7% -26.8% 19.4%
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
December September December
31, 2007 30, 2008 31, 2008
Cost of revenue $26,476 $11,242 $12,982
Adjustment for share-based
compensation (47) (121) (120)
Cost of revenue (non-GAAP) 26,429 11,121 12,862
Operating income (loss) 8,560 (31,764) (54,331)
Adjustment for share-based
compensation within: Cost of
revenue 47 121 120
Research and development 535 1,185 1,186
Selling, general, and
administrative 913 1,108 1,108
Adjustment for amortization of
intangibles from Quorum
acquisition within research and
development -- 435 255
Adjustment for IPR&D expense
acquired per Quorum acquisition -- 6,612 --
Adjustment for Impairment loss of
long-lived assets -- 17,484 3,000
Adjustment for impairment loss of
goodwill 32,345
Operating income (loss) (non-GAAP) 10,055 (4,819) (16,317)
Net income (loss) 10,196 (31,258) (52,298)
Adjustment for share-based
compensation within: Cost of
revenue 47 121 120
Research and development 535 1,185 1,186
Selling, general, and
administrative 913 1,108 1,108
Adjustment for amortization of
intangibles from Quorum
acquisition within research and
development -- 435 255
Adjustment for IPR&D expense
acquired per Quorum acquisition -- 6,612 --
Adjustment for impairment loss of
long-lived assets -- 17,484 3,000
Adjustment for impairment loss of
goodwill -- -- 32,345
Net income (loss) (non-GAAP)* 11,691 (4,313) (14,284)
Income (loss) per ADS, diluted 0.22 (0.71) (1.19)
Adjustment for share-based
compensation 0.03 0.05 0.05
Adjustment for amortization of
intangibles from Quorum
acquisition -- 0.01 0.01
Adjustment for IPR&D expense
acquired per Quorum acquisition -- 0.15 --
Adjustment for impairment loss of
long-lived assets -- 0.40 0.07
Adjustment for impairment loss of
goodwill -- -- 0.74
Income (loss) per ADS, diluted (non-
GAAP)* 0.25 (0.10) (0.32)
Gross margin(loss) 45.5% 43.7% -26.8%
Adjustment for share-based
compensation 0.1% 0.6% 1.1%
Gross margin(loss) (non-GAAP) 45.6% 44.3% -25.7%
Operating margin(loss) 17.6% -159.0% -530.8%
Adjustment for share-based
compensation 3.1% 12.1% 23.6%
Adjustment for amortization of
intangibles from Quorum
acquisition 0.0% 2.2% 2.5%
Adjustment for IPR&D expense
acquired per Quorum acquisition 0.0% 33.1% 0.0%
Adjustment for impairment loss of
long-lived assets 0.0% 87.5% 29.3%
Adjustment for impairment loss of
goodwill 316.0%
Operating margin (loss)(non-GAAP) 20.7% -24.1% -159.4%
Net margin (loss) 21.0% -156.5% -511.0%
Adjustment for share-based
compensation 3.1% 12.1% 23.6%
Adjustment for amortization of
intangibles from Quorum
acquisition 0.0% 2.2% 2.5%
Adjustment for IPR&D expense
acquired per Quorum acquisition 0.0% 33.1% 0.0%
Adjustment for impairment loss of
long-lived assets 0.0% 87.5% 29.3%
Adjustment for impairment loss of
goodwill -- -- 316.0%
Net margin(loss) (non-GAAP)* 24.1% -21.6% -139.6%
Operating expenses 13,506 40,499 51,584
Adjustment for share-based
compensation:
Research and development 535 1,185 1,186
Selling, general, and
administrative 913 1,108 1,108
Adjustment for Amortization of
intangible from Quorum
acquisition -- 435 255
Adjustment for R&D-acquired
related to Quorum acquisition -- 6,612 --
Adjustment for impairment loss of
long-lived assets -- 17,484 3,000
Adjustment for impairment loss of
goodwill 32.345
Operating expenses (non-GAAP) 12,058 13,675 13,690
* The non-GAAP adjustment does not take into consideration the impact of
taxes.
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 December March
31, 2008 31, 2008 31, 2009
Cost of revenue $21,746 $12,982 $6,622
Adjustment for share-based
compensation (75) (120) (29)
Cost of revenue (non-GAAP) 21,671 12,862 6,593
Operating income (loss) 2,011 (54,331) (9,563)
Adjustment for share-based
compensation within: Cost of
revenue 75 120 29
Research and development 790 1,186 312
Selling, general, and
administrative 991 1,108 300
Adjustment for amortization of
intangibles from Quorum
acquisition within research and
development 400 255 255
Adjustment for Impairment loss of
long-lived assets -- 3,000 --
Adjustment for Impairment loss of
goodwill -- 32,345 --
Operating income (loss) (non-GAAP) 4,267 (16,317) (8,667)
Net income (loss) 2,778 (52,298) (8,305)
Adjustment for share-based
compensation within: Cost of
revenue 75 120 29
Research and development 790 1,186 312
Selling, general, and
administrative 991 1,108 300
Adjustment for amortization of
intangibles from Quorum
acquisition within research and
development 400 255 255
Adjustment for impairment loss of
long-lived assets -- 3,000 --
Adjustment for Impairment loss of
goodwill -- 32,345 --
Net income (loss) (non-GAAP)* 5,034 (14,284) (7,409)
Income (loss) per ADS, diluted 0.06 (1.19) (0.19)
Adjustment for share-based
compensation 0.04 0.05 0.01
Adjustment for amortization of
intangibles from Quorum
acquisition 0.01 0.01 0.01
Adjustment for impairment loss of
long-lived assets -- 0.07 --
Adjustment for Impairment loss of
goodwill -- 0.74 --
Income (loss) per ADS, diluted (non-
GAAP)* 0.11 (0.32) (0.17)
Gross margin(loss) 44.9% -26.8% 19.4%
Adjustment for share-based
compensation 0.2% 1.1% 0.4%
Gross margin(loss) (non-GAAP) 45.1% -25.7% 19.8%
Operating margin(loss) 5.1% -530.8% -116.4%
Adjustment for share-based
compensation 4.7% 23.6% 7.8%
Adjustment for amortization of
intangibles from Quorum
acquisition 1.0% 2.5% 3.1%
Adjustment for impairment loss of
long-lived assets 0.0% 29.3% 0.0%
Adjustment for Impairment loss of
goodwill -- 316.0% --
Operating margin(loss) (non-GAAP) 10.8% -159.4% -105.5%
Net margin(loss) 7.0% -511.0% -101.1%
Adjustment for share-based
compensation 4.7% 23.6% 7.8%
Adjustment for amortization of
intangibles from Quorum
acquisition 1.0% 2.5% 3.1%
Adjustment for impairment loss of
long-lived assets 0.0% 29.3% 0.0%
Adjustment for Impairment loss of
goodwill -- 316.0% --
Net margin(loss) (non-GAAP)* 12.7% -139.6% -90.2%
Operating expenses 15,741 51,584 11,157
Adjustment for share-based
compensation:
Research and development 790 1,186 312
Selling, general, and
administrative 991 1,108 300
Adjustment for Amortization of
intangible from Quorum
acquisition 400 255 255
Adjustment for impairment loss of
long-lived assets -- 3,000 --
Adjustment for impairment loss of
goodwill -- 32,345 --
Operating expenses (non-GAAP) 13,560 13,690 10,290
(*) The non-GAAP adjustment does not take into consideration the impact of taxes.
ABOUT SPREADTRUM COMMUNICATIONS, INC.:
Spreadtrum Communications, Inc. (NASDAQ: SPRD; the "Company") is a fabless semiconductor company that designs, develops, and markets baseband processor solutions for the mobile wireless communications market. The Company combines its semiconductor design expertise with its software development capabilities to deliver highly-integrated baseband processors with multimedia functionality and power management. The Company has developed its solutions based on an open development platform, enabling its customers to develop customized wireless products that are feature-rich and meet their cost and time-to-market requirements.
SAFE HARBOR STATEMENTS:
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 possibility for a rebound in the Company's business in 2Q09, the results for 4Q08 and 1Q09 not being meaningful indicator of the Company's operational performance or potential for long-term success, the Company's plan to strengthen its technological leadership, and the Company's expectations with respect to revenue being in the range of US$10 million to US$14 million with improved margins for the second quarter. 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 Company's ability to integrate Quorum's operations into its own; the Company's ability to successfully produce and market Quorum's RF transceivers in volume; the rate at which the commercial deployment of TD-SCDMA technology will grow; market acceptance of products utilizing TD-SCDMA technology; the Company's ability to sustain recent rates of growth; the state of and any change in the Company's relationship with its major 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"), including the registration statement on Form F-1 filed on June 26, 2007, as amended, and the annual report on Form 20-F filed on June 30, 2008, 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.
For further information, please contact:
Investor Relations
Tel: +86-21-5080-2727
Email: ir@spreadtrum.com
Web: http://www.spreadtrum.com
SOURCE Spreadtrum Communications, Inc.
For further information: Spreadtrum Communications, Inc., Investor Relations, +86-21-5080-2727, ir@spreadtrum.com
© PR Newswire
