Revenue Growth of 31.4% Y/Y to $6.86m; Gross Margin Rises to 54.6%.
Conference Call Scheduled for 8am ET on August 15.
BEIJING, Aug 15 /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 second quarter of 2007.
Second Quarter Highlights:
-- Revenue increased to US $6.86 million, up 31.4% from Q2 2006
-- Gross margin increased to 54.6%, compared to 49.5% of Q2 2006
-- Gross profit increased to US $3.7 million, up 44.9% from Q2 2006
-- Net income was US $1.4 million, down 7.8% from Q2 2006 due to increased
investment in R&D and marketing.
"I am pleased that Telestone has continued to maintain its impressive growth during the second quarter of 2007," commented Mr. Han Daqing, Chairman and Chief Executive Officer of Telestone. "We aim to continue this momentum by expanding our domestic footprint through organic growth while potentially making selective acquisitions to complement our existing business. We will also develop our international network in markets such as Vietnam, Indonesia and the US, and continue with the rollout of our higher margin WFDS products and system integration services. These have already received a positive response from domestic telecom operators, and we feel confident that with our increasingly diverse product offering we will continue to grow by delivering leading wireless communications coverage solutions to our customers."
Second Quarter Financial Results:
Telestone reported quarterly revenue of US $6.86 million, up 31.4% compared to US$5.22 million in Q2 2006, due largely to an expanded revenue stream from the sales of indoor coverage solutions to China Mobile and China Unicom. This was slightly offset by a decline in revenue from China Telecom.
Gross profit increased 44.9% to US $3.7 million from US $2.6 million of Q2 2006. Gross margin for the quarter was 54.6%, compared to 49.5% in Q2 2006. The gross profit increase during the reporting period is attributable to revenue growth and increasing gross margin of service sales, due to a change in our service model whereby system integration services are now carried out by local technicians instead of technicians sent from our headquarters in Beijing. The new service model reduces service costs and increases the gross margin on services provided.
Net income for the second quarter declined slightly to US $1.4 million from US $1.5 million in the year ago period. The decrease in net income was primarily due to an increase in expenses such as sales and marketing costs, general and administrative costs and research and development that were incurred in order to benefit our income growth over the coming quarters. Diluted earnings per share were $0.14.
Operational Highlights:
Recent accomplishments include:
-- The development of WFDS (Wireless Fiber Distribution System), a leading
wireless indoor coverage solution, and its promotion to China's major
wireless carriers. WFDS applies to all modes of the wireless network
and received a positive response from China Mobile, which is scheduled
to conduct further trials of WFDS on the TD-SCDMA network during the
third quarter of 2007. WFDS is a commercialized product of Telestone's
3D technology offering.
-- Successfully won a bid for TD-SCDMA trunk amplifiers and combiners for
China Mobile LTD TD-SCDMA trial networks. Telestone was appointed an
official provider for China Mobile, who is building the test networks
in eight major Chinese cities, and Telestone will be allocated no less
than 10% of the wireless equipment orders in the network building in
the two largest cities, Beijing and Shanghai.
-- Announced the acquisition of Shandong Guolian in July, a leading
provider of wireless coverage services for carriers in the Shandong
Province of the PRC.
Business Outlook
The Company believes that revenues will continue to improve for the remainder of the year and estimate full-year earnings growth of at least 30%, resulting in revenues of at least US$28 million for 2007. This expectation is based on anticipated sales of new products and solutions in both the PRC and new geographical markets.
Conference Call
The Company's management team will conduct a conference call on Wednesday, Aug 15, 2007 at 5:00 am (Pacific)/8:00 am (Eastern)/8:00 pm (Beijing/Hong Kong).
Dial-in numbers and pass code:
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. As the Company's corporate website is under reconstruction the webcast will be available through the following link:
http://www.videonewswire.com/event.asp?id=41801.
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:
U.S. callers please dial: 877 344 7529
International callers please dial: +1 412 317 0088
Password: 409911
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 556 employees. Additional information on the Company can be found at http://www.telestonecorp.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 1: Condensed Consolidated Statements of Operations
(Unaudited) (Unaudited)
Three months ended Six months ended
June 30, June 30,
2007 2006 2007 2006
US$'000 US$'000 US$'000 US$'000
Operating revenues
Net sales of equipment 4,760 3,571 7,711 6,826
Service income 2,096 1,648 3,941 2,168
6,856 5,219 11,652 8,994
Operating expenses
Equipment and services 3,114 2,637 5,515 4,445
Sales and marketing 1,065 576 1,985 1,230
General and administrative 593 205 1,213 508
Research and development 325 167 497 280
Depreciation and amortization 64 42 123 98
Total operating expenses 5,161 3,627 9,333 6,561
Operating income 1,695 1,592 2,319 2,433
Interest expense (26) -- (51) --
Other income, net 11 141 11 145
Income before income taxes 1,680 1,733 2,279 2,578
Income taxes (279) (214) (430) (342)
Net income 1,401 1,519 1,849 2,236
Other comprehensive income 31 -- 42 --
1,432 1,519 1,891 2,236
Earnings per share:
Weighted average number of
shares outstanding
Basic 9,604,550 8,602,106 9,415,919 8,592,824
Dilutive effect of warrants 123,606 121,043 91,833 104,738
Diluted 9,728,156 8,723,149 9,507,752 8,697,562
Net income per share of
common stock
Basic:
Net income 0.15 0.18 0.20 0.26
Diluted:
Net income 0.14 0.17 0.19 0.26
Appendix 2: Condensed Consolidated Balance Sheets
(Unaudited)
As of As of
June 30, December 31,
2007 2006
US$'000 US$'000
ASSETS
Current assets
Cash and cash equivalents 4,861 3,380
Accounts receivable 31,872 29,777
Due from related parties 1,644 1,409
Inventories - Finished goods 5,854 5,048
Prepayment 101 315
Other current assets 566 373
Total current assets 44,898 40,302
Property, plant and equipment, net 811 821
Total assets 45,709 41,123
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank loan -- 1,279
Accounts payable - Trade 5,263 6,314
Customer deposits for sales of
equipment 211 20
Due to related parties 2,004 2,001
Taxes payable 5,231 2,571
Accrued expenses and other accrued
liabilities 1,379 4,668
Total current liabilities 14,088 16,853
Commitments and contingencies
Minority interests
Stockholders' equity
Preferred stock, US$0.001 par value,
10,000,000 shares authorized, no
shares issued -- --
Common stock and paid-in capital,
US$0.001 par value:
Authorized - 100,000,000 shares as of
June 30, 2007 and December 31, 2006 -- --
Issued and outstanding - 9,604,550
shares as of June 30, 2007 and
8,935,106 shares as of December 31,
2006 10 9
Dedicated reserves 2,619 2,619
Additional paid-in capital 13,934 8,475
Other comprehensive income 1,057 1,015
Retained earnings 14,001 12,152
Total stockholders' equity 31,621 24,270
Total liabilities and stockholders'
equity 45,709 41,123
Appendix 3: Condensed Consolidated Statement of Cash Flows
(Unaudited)
Six months ended June 30,
2007 2006
US$'000 US$'000
Cash flows from operating activities
Net income 1,849 2,236
Adjustments to reconcile net income
to net cash used in operating
activities:
Loss (Gain) on disposal of property,
plant and equipment 3 (138)
Depreciation and amortization 123 98
Provision for doubtful accounts 402 --
Exchange difference 42 --
Changes in assets and liabilities:
Accounts receivable (2,497) (277)
Inventories, net (806) (2,117)
Due from related parties (235) (140)
Prepayment 214 313
Other current assets (193) (34)
Accounts payable (1,051) 588
Due to related parties 3 (144)
Customer deposits for sales of
equipment 191 (2)
Taxes payable 2,660 (993)
Accrued expenses and other accrued
liabilities (3,289) (690)
Net cash used in operating
activities (2,584) (1,300)
Cash flows from investing activities
Purchase of property, plant and
equipment (146) (27)
Proceeds from disposal of property,
plant and equipment 30 232
Net cash (used in) provided by
investing activities (116) 205
Cash flows from financing activities
Proceeds from (Repayment of) short-
term bank loan (1,279) 1,239
Proceeds from issuance of shares 5,460 75
Net cash provided by financing 4,181 1,314
Net increase in cash and cash
equivalents 1,481 219
Cash and cash equivalents, beginning
of the period 3,380 3,605
Cash and cash equivalents, end of the
period 4,861 3,824
Supplemental disclosure of cash flow
information
Interest income 14 9
Interest expenses (51) --
For further information, please contact:
Telestone Technologies Corporation Ltd.
Todd Lu Qiang Li
Tel: +86-10-8367-0088 ext. 1201
Email: liluqiang@telestone.com
Sissi Wang
Tel: +86-10-8367-0088 ext. 1203
Email: wangxiaolin@telestone.com
FD Beijing
Julian Wilson
Tel: +86-10-5811-1902
Email: Julian.Wilson@fd.com
FD New York
Peter Schmidt
Tel: +1-212-850-5654
Email: peter.schmidt@fd.com
