Trunkbow Announces First Quarter 2012 Financial Results MPS Gross Revenue Increases 208% Year-over-Year to $4.4 Million

Total Gross Profit up 21%, on 33% Year-over-Year Increase in Total Gross Revenue

Reiterates Full-year 2012 Guidance of $23 Million in Net Income

BEIJING, May 21, 2012 /PRNewswire-Asia/ -- Trunkbow International Holdings Limited (NASDAQ: TBOW) ("Trunkbow" or the "Company"), a leading provider of Mobile Payment Solutions ("MPS") and Mobile Value Added Services ("MVAS") in the PRC, today announced financial results for its first quarter ended March 31, 2012.

First Quarter and Recent Financial and Business Highlights

  • Gross revenue increased 33.2% year-over-year to $6.8 million, from $5.1 million in the first quarter of 2011.
    • MVAS gross revenue decreased to $2.4 million, compared with $3.7 million a year ago.
    • MPS gross revenue totaled $4.4 million, compared with $1.4 million in the first quarter of 2011.
  • Gross profit increased 20.6% year-over-year to $5.3 million, from $4.4 million in the first quarter of 2011; gross margin was 80.0%, compared with 88.9% in the first quarter of 2011.
  • Net income decreased 34.2% year-over-year to $2.2 million, or $0.06 per diluted share, compared with $3.4 million, or $0.09 per diluted share in the first quarter of 2011. The year-over-year decline in net income was attributable to a $1.3 million refund of value-added tax ("VAT") refund received in the first quarter of 2011, compared to no such refund in the first quarter of 2012. The Company received a VAT refund of approximately $1.0 million in April 2012, which it expects to recognize in the current fiscal quarter.
  • As of March 31, 2012, cash and cash equivalents totaled $6.1 million, unchanged from the level as of December 31, 2011.
  • Extended its cooperation with China Unicom through the deployment of a new terminal-based MPS platform in Sichuan and Heilongjiang Province.
  • Partnered with the Shandong branch of China UnionPay for the development and deployment of a new online-to-offline payment system.
  • Reiterated full-year 2012 net income guidance of $23 million, representing 36% growth over 2011.

"Our first quarter operational performance has Trunkbow firmly on-track to meet our 2012 objectives with respect to overall growth and the continued development of our emerging MPS segment. We achieved solid growth over the first quarter of last year, with gross revenue up more than 30% in addition to gains in both gross profit and operating income. The year-over-year decline in net income was primarily caused by the timing of receipt of our VAT refund, which was recognized in the first quarter of 2011, but it expects to record in the second quarter this year," said Mr. Qiang Li, Chief Executive Officer of Trunkbow. "Our most notable accomplishment in the first quarter was the growth of our mobile payments business, in which we increased revenue more than three-fold on a year-over-year basis with shared revenue growing over 100% from the level we achieved in the first quarter of 2011. We continued increasing the reach of our technology through expansion of our partnerships with China Unicom and China UnionPay, which have strengthened our nationwide merchant acquisition efforts, which are critical to Trunkbow's long-term success and the continued advancement of our business model."

"Through our growing collaboration with China's Big 3 telecom carriers, our terminal-based MPS systems are being marketed to corporations and academic institutions as a SAAS and enterprise automation tool, giving us access to another potentially lucrative end market in addition to the traditional contactless payment functionality. Bestpay, our proprietary app developed with China Telecom, has been activated on over 600,000 mobile handsets to-date. In addition, our partnership with China UnionPay has progressed well in its early stages, as the Trunkbow-UnionPay mobile applet is being used to power a growing number of web and app-based mobile storefronts, while our new online-to-offline payment system has generated significant interest from merchants and consumers alike. Our strong start to 2012 has set the stage for important near- and longer-term success for Trunkbow, and we look forward to the opportunities that lie ahead."

First Quarter 2012 Results

Gross revenue in the first quarter of 2012 was $6.8 million, an increase of 33.2% year-over-year, compared with gross revenue of $5.1 million in the same period a year ago. The increase in gross revenue was primarily attributable to rapid growth in system integration services. Revenue from MVAS decreased to $2.4 million in the first quarter of 2012, compared with $3.7 million in the year-ago period. The decrease in MVAS revenue was primarily caused by lower demand for MVAS platforms and maintenance services. Revenue from the Company's MPS offering increased 207.9% to $4.4 million, compared with $1.4 million in the first quarter of 2011. The increase in MPS revenue was driven by strong MPS software sales and growth in shared services revenue.

Cost of revenue in the first quarter of 2012 was $1.3 million, compared with $0.6 million in the same period of 2011. The increase in cost of revenue was primarily related to the rapid growth in the Company's system integration business, which consumed significant hardware costs.

Gross profit in the first quarter of 2012 increased 20.6% year-over-year to $5.3 million, from $4.4 million in the first quarter of 2011. As a percentage of net revenue, gross margin was 80.0% in the first quarter of 2012, compared with 88.9% in the year-ago period. The decrease in gross margin was due to lower margins associated with the Company's system integration services.

Operating expenses in the first quarter of 2012 were $2.7 million, an increase of 38.2% year-over-year, driven primarily by increased selling expenses to support the Company's direct sales and merchant acquisition efforts, and increased research and development costs associated with the recruitment of more engineers, increasing salaries and new product development efforts.

Operating income in the first quarter of 2012 was $2.6 million, an improvement of 6.4% over the $2.4 million reported in the same period last year. The increase in operating profit for the quarter was primarily related to the increase in revenue and gross margin, partially offset by the increase in operating expenses, as compared with the first quarter of 2011.

Net income attributable to Trunkbow was $2.2 million in the first quarter of 2012, a decrease of 34.2% from the comparable period in 2011. Net margin was 33% in the first quarter of 2012, compared with 67.3% in the first quarter of 2011. Earnings per basic and diluted share in the first quarter of 2012 were $0.06, based on basic and diluted shares outstanding of 36.81 million and 36.83 million, respectively. This compares with $0.10 and $0.09 per basic and diluted share, based on basic and diluted shares outstanding of 34.98 million and 36.01 million, respectively, in the year-ago period. The decrease in net income was primarily related to the delayed receipt of a VAT refund of $1.0 million for the 2011 tax year, which the Company received in April 2012 and it expects to recognize in the current fiscal quarter.

Balance Sheet and Cash Flow

As of March 31, 2012, the Company had $6.1 million in cash and cash equivalents, unchanged from the level as of December 31, 2011. As of March 31, 2012, the Company had working capital of $65.5 million and total shareholders' equity of $84.9 million.  Accounts receivable on March 31, 2012 totaled approximately $42.3 million. As of May 18, 2012, the Company had collected approximately $4.6 million of these outstanding receivables.

Business Outlook

Trunkbow reaffirmed its 2012 financial guidance, which calls for approximately $23 million in net income, representing 36% growth over 2011. The Company expects that this growth will be largely the result of the continued expansion of its MPS business, as it continues to develop its merchant network, broadens its presence in new provinces, increases its penetration within China's leading mobile carriers and launches its technology in strategically targeted international markets.

Mr. Li concluded, "We are proud of what we have accomplished in the first quarter with regard to the ongoing development of our MPS operations and our efforts to migrate this segment of the business from a model focused on one-time platform installations to one that is built upon a solid foundation of recurring revenue from transaction processing and shared services. Our efforts last year were centered around the development of infrastructure needed to support a concentrated merchant acquisition and consumer engagement program. With these resources in place nationwide, we are working closely with our carrier partners and China UnionPay to build awareness of the benefits of MPS among merchants and mobile subscribers to make the technology more prevalent in the market. Our ultimate goal is to help make the mobile phone as synonymous with payments as cash, credit and debit cards. We not only believe that this goal can be accomplished, but that 2012 will be a transformational year for the MPS industry and our Company, in which substantial progress can be made toward this objective."

Conference Call

The Company will host a conference call to discuss financial results for the first quarter 2012 on May 21, 2012 at 8:00 a.m. EDT. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1 (718) 354-1231. International callers should dial +65 6723-9381. The pass code required is 74019384.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on May 21, 2012. To access the replay, please dial +1 (718) 354-1232, international callers dial +61 (2) 8235-5000, and enter the pass code 74019384.

About Trunkbow

Trunkbow International Holdings (NASDAQ: TBOW) is a leading provider of Mobile Payment Solutions ("MPS") and Mobile Value Added Solutions ("MVAS") in PRC. Trunkbow's solutions enable the telecom operators to offer their subscribers access to unique mobile applications, innovative tools, value-added services that create a superior mobile experience, and as a result generate higher average revenue per user and reduce subscriber churn. Since its inception in 2001, Trunkbow has established a proven track record of innovation, and has developed a significant market presence in both the Mobile Value Added and Mobile Payment solutions markets. Trunkbow supplies its mobile payment solutions to all three Chinese mobile telecom operators, as well as re-sellers, in several provinces of China. For more information, please visit www.trunkbow.com.

Safe Harbor Statement

This press release contains forward-looking statements that reflect the Company's current expectations and views of future events that involve known and unknown risks, uncertainties and other factors that may cause its actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.  Such forward looking statements involve known and unknown risks and uncertainties, including but not limited to uncertainties relating to the Company's relationship with China's major telecom carriers and its resellers, competition from domestic and international companies, changes in technology, contributions from revenue sharing plans and general economic conditions. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs.  You should understand that the Company's actual future results may be materially different from and worse than what the Company expects. Information regarding these risks, uncertainties and other factors is included in the Company's annual report on Form 10-K and other filings with the SEC.

Contact Information


In China:

In the U.S.

Trunkbow International Holdings Limited

The Piacente Group

Ms Alice Ye, Chief Financial Officer

Brandi Floberg/Lee Roth

Phone: +86 (10) 8571-2518 (Beijing)

Phone: + (1) 212-481-2050 (New York)

Email: ir@trunkbow.com

E-mail:trunkbow@tpg-ir.com



The Piacente Group

Wendy Sun

Phone: +86 (10) 6590-7991(Beijing)

E-mail: trunkbow@tpg-ir.com

 

- FINANCIAL TABLES FOLLOW -

 

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 


March 31,


December 31,


2012


2011


(Unaudited)



ASSETS




Current assets




Cash and cash equivalents

$

6,071,371


$

6,139,589

Accounts receivable


42,262,303



41,147,767

Advances to suppliers


11,926,430



13,270,125

Prepayment


2,148,201



316,258

Other current assets, net


6,944,759



4,040,152

Due from directors


577,801



758,033

Inventories


12,292,660



11,297,513

Deferred tax asset


118,699



117,952

Total current assets


82,342,224



77,087,389

Property and equipment, net


12,352,836



11,561,034

Land use right, net


5,912,852



5,905,583

Intangible assets, net


279,971



33,958

Long-term prepayment


792,899



2,733,363

TOTAL ASSETS

$

101,680,782


$

97,321,327

LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities






Accounts payable

$

1,194,843


$

2,238,179

Accrued expenses and other current liabilities


2,298,441



2,216,128

Short-term loan


10,097,333



6,460,945

Due to directors


0



11,959

Taxes payable


3,240,015



4,209,907

Total current liabilities


16,830,632



15,137,118

Total liabilities


16,830,632



15,137,118

COMMITMENTS AND CONTINGENCIES






Stockholders' equity






Preferred Stock: par value $0.001, authorized 10,000,000 shares, none issued and outstanding at March 31, 2012 and December 31, 2011, respectively


0



0

Common Stock: par value $0.001, authorized 190,000,000 shares, 36,807,075 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively


36,807



36,807

Additional paid-in capital


39,671,966



39,671,966

Appropriated retained earnings


4,504,667



4,504,667

Unappropriated retained earnings


37,201,785



34,989,429

Accumulated other comprehensive income


3,434,925



2,981,340

Total stockholders' equity


84,850,150



82,184,209

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

101,680,782


$

97,321,327

 

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 


Three Months Ended March 31,


2012


2011


(Unaudited)


(Unaudited)

Revenues

$

6,798,213


$

5,102,342

Less: Business tax and surcharges


116,551



121,424

Net revenues


6,681,662



4,980,918

Cost of revenues


1,339,336



551,833

Gross profit


5,342,326



4,429,085

Operating expenses






Selling and distribution expenses


1,025,022



436,608

General and administrative expenses


1,160,742



1,214,622

Research and development expenses


550,862



329,514



2,736,626



1,980,744

Income from operations


2,605,700



2,448,341

Other income (expenses)






Interest income


55,702



13,203

Interest expense


(179,009)



(33,252)

Refund of value-added tax


0



1,307,836

Government grants


39,627



0

Other income


15,851



23,555

Other expenses


(10,811)



(17,651)



(78,640)



1,293,691

Income before income tax expense


2,527,060



3,742,032

Income tax expense


320,572



388,353

Net income


2,206,488



3,353,679

Foreign currency translation fluctuation


459,452



222,911

Comprehensive income

$

2,665,941


$

3,576,590

Weighted average number of common shares outstanding






Basic


36,807,075



34,980,519

Diluted


36,827,585



36,008,635

Earnings per share






Basic

$

0.06


$

0.10

Diluted

$

0.06


$

0.09

 

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


Three Months Ended March 31,


2012


2011


(Unaudited)


(Unaudited)

Cash flows from operating activities






Net income

$

2,206,489


$

3,353,679

Adjustments to reconcile net income to net cash used in operating activities:






Depreciation and amortization


112,853



48,887

Changes in operating assets and liabilities:






Accounts receivable


(855,358)



(1,233,721)

Advance to suppliers


1,429,898



253,787

Prepayment


(1,832,754)



73,475

Other current assets


(1,774,648)



(4,337,835)

Due from directors


185,315



(153,455)

Inventories


(925,047)



(537,690)

Long-term prepayment


1,960,778



(65,164)

Accounts payable


(1,059,130)



(718,578)

Accrued expenses and other current liabilities


68,388



178,116

Amounts due to directors


(12,054)



 0

Taxes payable


(998,076)



(938,693)

Net cash flows used in operating activities


(1,493,346)



(4,077,192)

Cash flows from investing activities






Acquisition of property and equipment and intangible assets


(1,048,584)



(231,921)

Payment on loans to third parties


(1,109,561)



0

Acquisition of Delixunda Company (net of cash acquired)


0



(37,690)

Net cash flows used in investing activities


(2,158,145)



(269,611)

Cash flows from financing activities






Proceeds from issuance of common stock (net of finance costs)


0



17,342,251

Proceeds from (repayment of ) bank loan


3,601,015



0

Net cash flows provided by financing activities


3,601,015



17,342,251

Effect of exchange rate fluctuation on cash and cash equivalents


(17,742)



(72,954)

Net increase in cash and cash equivalents


(68,218)



12,922,494

Cash and cash equivalents – beginning of the year


6,139,589



10,259,750

Cash and cash equivalents – end of the period

$

6,071,371


$

23,182,244

Supplemental disclosure of cash flow information






Cash paid for interest

$

179,009


$

33,252

Cash paid for income taxes

$

320,572


$

0

Supplemental disclosure of noncash financing activities






Issuance of 30,000 common shares at $5.00 each for the legal fee

$

0 


$

150,000

SOURCE Trunkbow International Holdings Limited



RELATED LINKS
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