TechFaith Reports Second Quarter 2013 Financial Results

BEIJING, Aug. 20, 2013 /PRNewswire/ -- China TechFaith Wireless Communication Technology Limited (NASDAQ: CNTF) ("TechFaith" or the "Company") today announced unaudited financial results for the second quarter ended June 30, 2013.

For the second quarter of 2013, TechFaith reported net revenue of US$30.2 million, an increase of 6.8% compared to US$28.2 million in the previous quarter. Revenue in the second quarter of 2013 derived from the Company's Original Developed Product (ODP) was US$20.1 million compared to US$14.5 million in the first quarter of 2013 and US$13.5 million in the second quarter of 2012. Revenue from the Company's Game segment was US$1.6 million compared to US$3.4 million in the prior quarter and US$7.2 million in the second quarter of 2012. Revenue in the second quarter of 2013 from the Company's Brand name phone sales segment was US$8.4 million compared to US$10.3 million in the first quarter of 2013 and US$11.8 million in the second quarter of 2012.

Gross profit for the second quarter of 2013 was US$3.4 million compared to US$4.6 million in the previous quarter and US$7.3 million in the second quarter of 2012. Gross margin for the second quarter of 2013 was 11% compared to 16% in the previous quarter and 23% compared to the second quarter of 2012. Net loss attributed to TechFaith for the second quarter of 2013 was US$0.97 million or US$0.02 loss per basic and diluted weighted average outstanding ADS, compared to net income of US$0.3 million or US$0.01 per basic and diluted weighted average outstanding ADS in the previous quarter and a net loss of US$0.7 million or US$0.01 loss per basic and diluted weighted average outstanding ADS in the second quarter of 2012.

Ms. Ouyang Yuping, TechFaith's Chief Financial Officer, said, "While revenue for the second quarter was in line with our guidance, our gross margin was lower than expected as a result of  the negative impact of competitions from the market. We would expect to see improvement in our gross margin in the third quarter. Demand in our ODP business was able to offset declines in both our Brand name phone sales and game business. This volatility is a continuation of the difficult business environment we have been navigating, with high competition in both domestic and international markets, shorter product lifecycles and lower average selling prices. While our balance of cash and cash equivalents remained robust at US$257.7 million it reflects a decline of about US$3.5 million compared to the prior quarter. The slight decline is primarily due to capital expenditure on equipment and facility constructions."

Mr. Deyou Dong, President and Chief Operating Officer of TechFaith, said, "We continue to see demand for our popular ruggedized phones. As a result, we launched several new models this year, and have received positive feedback. We are optimistic that shipments for the new ruggedized models will increase over the next few quarters given the uniqueness of the integrated hardware and software. The phone meets demands from a specific segment of the market and allows us to have more stability over our pricing. We are working to leverage our success with the ruggedized line into other niche models where market demand is not being presently met. We also continue to draw on our expertise to provide customized enterprise solutions for our customers and continue to develop our 17Fox brand in the domestic China market. In line with this strategy, we acquired some additional application software during the second quarter."

Mr. Defu Dong, Chairman and Chief Executive Officer of TechFaith, said, "The market remains highly competitive with new features quickly adopted by other handset developers. Our focus on niche opportunities gives us a more defensible market position but the unit volumes are much lower than those in popular mass market designs. This makes it critical that we maintain close relationships with our customers in order to meet their changing needs. We are confident that we can be successful in our approach but do not expect to see a rebound in our revenue to our higher historical levels over the near-term. Rather, we are focusing on driving improved profitability at the lower revenue level, and further strengthening our balance sheet. We also remain optimistic about the development of our facilities, which remain on track, as seen by the increased asset level on our balance sheet in terms of construction in progress and property value held."

Third Quarter of 2013 Outlook

The forecast below is TechFaith's current and preliminary view, which is subject to change. TechFaith currently expects total revenues for the third quarter of 2013 to be in the range of US$29.0 million to US$33.0 million.

Investor Conference Call / Webcast Details

TechFaith will hold a conference call on Tuesday, August 20, 2013 at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Tuesday, August 20, 2013 in Beijing) using dial-in +1-857-244-7556 or +1-877-474-9503. The conference call passcode is 16255845. A live webcast of the conference call will also be available on TechFaith's website at www.techfaithwireless.com.

A replay of the call will be available approximately 2 hours after the conclusion of the live call by telephone at +1-617-801-6888, with passcode 32882355. A webcast replay will also be available at www.techfaithwireless.com.

About TechFaith

TechFaith (NASDAQ: CNTF) has three primary businesses. The Company is a leading global mobile solutions provider for the global mobile handsets market (previously called the ODP (Original Developed Product) business). The Company is a leading developer of specialized mobile phones for differentiated market segments, including the rapidly growing smartphone market targeting wireless mobile phone network operators and end users; the Company also serves sports enthusiasts with a tailored line under the Jungle brand and the teen market under licensed brands. Under the Company's 17FOX brand (previously "17VEE"), the Company has built a leading intellectual property based motion gaming business ranging from Bluetooth-enabled motion gaming controllers and software to a planned proprietary set-top motion game box. For more information, please visit www.techfaithwireless.com.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident," "outlook" and similar statements. Among other things, the business outlook and strategic and operational plans of TechFaith and management quotations contain forward-looking statements. TechFaith may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about TechFaith's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, those risks outlined in TechFaith's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. TechFaith does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

SOURCE China TechFaith Wireless Technology Limited