Reports Revenue Growth of 78% Y/Y to $9.3m & Net Income of $1.9m
BEIJING, Nov. 14 /Xinhua-PRNewswire-FirstCall/ -- Telestone Technologies Corporation Ltd. ("Telestone") (Nasdaq: TSTC), a leading developer and provider of wireless communication coverage solutions based in the People's Republic of China, today announced its unaudited financial results for the third quarter of 2007.
Third Quarter Highlights:
-- Revenue for the quarter increased to US $9.3 million, up 78% from Q3
2006, including $1.4 million in revenue contribution from the
acquisition of Shandong Guolian. Excluding Shandong Guolian, revenues
increased 50% compared to the corresponding period of the previous
year.
-- Gross margins of 50.0%, compared to 40.5% in Q3 2006.
-- Gross profit increased to US $4.6 million, up 119% from Q3 2006.
-- Net income of US $1.9 million, up 153% from Q3 2006, including
$275,000 in net income from Shandong Guolian. Excluding Shandong
Guolian, net income increased 116% compared to the corresponding
period of the previous year.
"Telestone has again reported strong results for the quarter, as we continue to provide industry-leading products and innovative solutions to our established customers while developing new business opportunities in additional mobile telecommunication markets," commented Mr. Han Daqing, Chairman and Chief Executive Officer of Telestone. "Our relationship with China Mobile strengthened during the quarter, and we have seen important progress regarding our proprietary WFDS product, which generated revenue for Telestone even as we further develop the technology. I believe our diverse and growing set of relationships, products, solutions and markets will continue to enhance our business prospects for the future."
Third Quarter Financial Results:
Telestone reported quarterly revenue of US $9.3 million, up 78% compared to US$5.2 million in Q3 2006, largely due to an increase in demand for products and services from China Mobile and China Unicom. During the quarter, revenue from all four major Chinese carriers increased compared to the same quarter last year, as well as revenue from other customers rising 21%, albeit from a limited base. $1.4 million in revenue contribution arose from the acquisition of Shandong Guolian.
Gross profit of US $4.6 million was an increase of 119.2% from the US $2.1 million of Q3 2006, with gross margin for the quarter of 50.0%, compared to 40.5% in Q3 2006. The gross profit increase during the reporting period is primarily attributable to revenue growth during the quarter. Gross margin of 50% was up significantly from the same period last year, given that margins were negatively pressured by the WFDS trials undertaken by Telestone during the third quarter of 2006.
Net income for the third quarter rose significantly to US $1.9 million from US $739,000 in the year ago period, including $275,000 in net income from Shandong Guolian. Excluding Shandong Guolian, net income increased 116% compared to the corresponding period of the previous year. The increase in organic net income was primarily due to revenue growth and the maintenance of strong margins, despite an increase in expenses such as sales and marketing costs, general and administrative costs and research and development that were incurred to invest in the Company's growth over the coming quarters. Diluted earnings per share were $0.19.
Recent Operational Highlights:
Recent accomplishments include:
-- The announcement of positive responses from China Mobile on the WFDS
field tests. These trials, carried out by China Mobile on TD-SCDMA
networks in Xiamen and Beijing during the third quarter of 2007,
covered a comprehensive range of criteria and applied strict testing
standards on the WFDS equipment supplied. The application costs of
WFDS were also analyzed and assessed.
-- The formation of a subsidiary company named Beijing Telestone
Communication Technology Corp. focused on developing and managing
Telestone's overseas businesses. The subsidiary will be responsible
for Telestone's overseas businesses and aims to provide greater focus
to the Company's international expansion efforts and simplify current
reporting lines. The subsidiary will also seek to identify new
opportunities for delivering consistent growth to Telestone's overseas
businesses.
-- In the United States, Telestone has been approved for license
agreements from the Federal Communication Commission on CDMA signal
repeater products. The company's CDMA repeater products have also
successfully passed trials conducted by Verizon.
-- Closed the acquisition of Shandong Guolian, a leading provider of
wireless coverage services for carriers in the Shandong Province of the
PRC. The principal business activities of Guolian and its subsidiary
are the design, development, production, installation and trading of
wireless telecommunication coverage system equipment. The financial
results of Shandong Guolian were consolidated in Telestone's third
quarter 2007 results.
Business Outlook
The Company believes that revenues will continue to improve for the remainder of the year and now estimate that full-year earnings growth will exceed the previously announced 30%, resulting in revenues of at least US$30 million for 2007. This expectation is based on anticipated sales of new products and solutions within the People Republic of China and new geographical markets, as well as revenue contribution from Shandong Guolian.
Conference Call
The Company's management team will conduct a conference call on Wednesday, November 15, 2007 at 5:00 a.m. (Pacific)/8:00 a.m. (Eastern)/9:00 p.m. (Beijing/Hong Kong).
Dial-in numbers and passcode:
U.S. callers please dial: 800-860-2442
International callers please dial: +1-412-858-4600
A live audio webcast of the conference call will also be available through our new corporate website, please visit: http://www.telestone.com/english .
The audio replay of the conference call will be available for one year following the announcement at the above link.
Replay dial is also available through the following number:
US Playback Number: +1-877-344-7529
International: +1-412-317-0088
Passcode: 413215
About Telestone Technologies Corporation
Telestone provides wireless communications coverage solutions primarily in the PRC. These solutions include products such as repeaters, antennas and radio accessories. Telestone also provides services that include project design, project management, installation, maintenance and other after-sales services. Telestone currently has approximately 800 employees. For more information please visit http://www.telestone.com .
Safe Harbor Statement
Statements about the Company's future expectations, including future revenue and earnings and all other statements in this press release, other than historical facts, are "forward-looking" statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time. The Company's actual results could differ materially from expected results. In reflecting subsequent events or circumstances, the Company undertakes no obligation to update forward-looking statements.
Appendix: Financial Statements of Telestone Technology Corporation Ltd.
Condensed Consolidated Statements of Operations and Other Comprehensive Income
(Dollars in thousands except share data and per share amounts)
(Unaudited) (Unaudited)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
US$’000 US$’000 US$’000 US$’000
Operating revenues
Net sales of equipment 7,344 4,026 15,055 10,851
Service income 1,956 1,208 5,898 3,377
Operating expenses 9,300 5,234 20,953 14,228
Equipment and services 4,655 3,115 10,170 7,560
Sales and marketing 1,462 780 3,447 2,010
General and administrative 713 256 1,893 764
Research and development 165 111 662 391
Depreciation and amortization 61 60 217 158
Total operating expenses 7,056 4,322 16,389 10,883
Operating income 2,244 912 4,564 3,345
Interest expense (12) (30) (64) (30)
Other income, net 5 21 17 167
Income before income taxes 2,237 903 4,517 3,482
Income taxes (369) (164) (800) (506)
Net income 1,868 739 3,717 2,976
Other comprehensive income
Foreign currency translation
adjustment 34 -- 63 --
Comprehensive income 1,902 739 3,780 2,976
Earnings per share:
Weighted average number of
shares outstanding
Basic 9,604,550 8,608,128 9,479,489 8,597,981
Dilutive effect of warrant 108,506 85,495 102,735 106,993
Diluted 9,713,056 8,693,623 9,582,224 8,704,974
Net income per share of
common stock
Basic:
Net income (US$) 0.19 0.09 0.39 0.35
Diluted:
Net income (US$) 0.19 0.09 0.39 0.34
Condensed Consolidated Balance Sheets
(Dollars in thousands except share data and per share amounts)
(Unaudited)
As of As of
September 30, December 31,
2007 2006
US$’000 US$’000
ASSETS
Current assets
Cash and cash equivalents 4,416 3,380
Accounts receivable 41,095 29,777
Due from related parties 2,268 1,409
Inventories, net 6,134 5,048
Prepayment 1,642 315
Other current assets 758 373
Total current assets 56,313 40,302
Goodwill 3,119 --
Property, plant and equipment, net 1,145 821
Total assets 60,577 41,123
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term bank loan 2,193 1,279
Accounts payable - Trade 6,969 6,314
Customer deposits for sales of
equipment 663 20
Due to related parties 2,055 2,001
Taxes payable 6,266 2,571
Accrued expenses and other accrued
liabilities 3,803 4,668
Total current liabilities 21,949 16,853
Long-term loan from related parties 62 --
22,011 16,853
Commitments and contingencies
Stockholders’ equity
Preferred stock, US$0.001 par value,
10,000,000 shares authorized, no
shares issued -- --
Common stock and paid-in capital,
US$0.001 par value:
Authorized - 100,000,000 shares as of
September 30, 2007 and December 31,
2006 -- --
Issued and outstanding - 9,604,550
shares as of September 30, 2007 and
8,935,106 shares as of December 31,
2006 10 9
Reserved and to be issued - 800,000
shares as of September 30, 2007 1 --
Dedicated reserves 2,619 2,619
Additional paid-in capital 18,989 8,475
Other comprehensive income 1,078 1,015
Retained earnings 15,869 12,152
Total stockholders’ equity 38,566 24,270
Total liabilities and stockholders’
equity 60,577 41,123
Condensed Consolidated Statement of Cash Flow
(Dollars in thousands except share data and per share amounts)
(Unaudited)
Nine months ended
September 30,
2007 2006
US$’000 US$’000
Cash flows from operating activities
Net income 3,717 2,976
Adjustments to reconcile net income
to net cash used in operating
activities:
Loss (gain) on disposal of property,
plant and equipment 5 (139)
Depreciation and amortization 217 158
Provision for doubtful accounts 3,629 --
Exchange difference 63
Changes in assets and liabilities:
Accounts receivable (10,431) (2,362)
Inventories, net (81) (2,148)
Due from related parties (419) (276)
Prepayment (439) 127
Other current assets 21 (50)
Accounts payable (1,571) 1,476
Due to related parties (12) (142)
Customer deposits for sales of
equipment 207 (1)
Taxes payable 1,845 (1,197)
Accrued expenses and other accrued
liabilities (1,481) (682)
Net cash used in operating
activities (4,640) (2,260)
Cash flows from investing activities
Purchase of property, plant and
equipment (246) (79)
Proceeds from disposal of property,
plant and equipment 31 233
Acquisition of a subsidiary, net of
cash disbursed (186) --
Net cash (used in) provided by
investing activities (401) 154
Cash flows from financing activities
Proceeds from short-term bank loan 631 1,239
Proceeds from issuance of shares 5,454 1,043
Repayment of long term loan (8) --
Net cash provided by financing 6,361 2,282
Net increase in cash and cash
equivalents 1,036 176
Cash and cash equivalents, beginning
of the period 3,380 3,605
Cash and cash equivalents, end of the
period 4,416 3,781
Supplemental disclosure of cash flow
information
Interest income 21 --
Interest expenses 64 --
Non-cash investing activity
Acquisition of a subsidiary 5,062 --
For further information please contact:
Telestone Technologies Corporation Ltd.
Todd Lu Qiang Li
Tel: +86-10-8367-0088 x1201
Email: liluqiang@telestone.com
Phoebe Cui
Tel: +86-10-8367-0088 x1203
Email: cuifang@telestone.com
FD Beijing
Julian Wilson
Tel: +86-10-8591-1951
Email: Julian.Wilson@fd.com
FD New York
Peter Schmidt
Tel: +86-10-8591-1953
Email: Peter.Schmidt@fd.com
