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Trunkbow Announces Third Quarter 2012 Financial Results

BEIJING, Nov. 14, 2012 /PRNewswire-FirstCall/ -- 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 third quarter ended September 30, 2012.

Third Quarter and Recent Financial and Business Highlights

  • Gross revenue was $9.0 million, compared with $5.8 million in the third quarter of 2011.
    • MPS gross revenue for the quarter was $0.6 million, compared with $2.1 million in the third quarter of 2011.
    • MVAS gross revenue increased to $8.5 million, compared with $3.7 million a year ago.         
  • Gross profit for the quarter was $7.0 million, compared with $4.3 million in the third quarter of 2011; quarterly gross margin improved to 78.6%, compared with 77.2% in the third quarter of 2011.
  • Net income totaled $3.2 million, or $0.09 per diluted share, compared with $0.8 million, or $0.02 per diluted share in the third quarter of 2011.
  • As of September 30, 2012, cash and cash equivalents totaled $0.3 million.
  • Collected approximately $4.1 million of outstanding accounts receivable as of November 12, 2012.
  • Reaffirmed full-year 2012 net income guidance of approximately $17 million.
  • Announced that the Company's board of directors has received a preliminary non-binding "going-private" transaction proposal letter, dated November 2, 2012.
  • Signed an agreement to develop and implement a new electronic payment system for China Minsheng Banking Corp., Ltd. ("CMBC"), China's first national joint-stock commercial bank, serving non state-owned enterprises, small businesses and high-end consumers. New system will be designed to simplify mobile and Internet payments for 10 million CMBC credit cardholders.

"Our results for the third quarter of 2012 were driven largely by the strong performance in our MVAS business, partially offset by weakness in the MPS segment due to a reduction in system integration, software and maintenance sales. We continue to execute on our MPS strategy, transitioning from one-time platform centric sales to a recurring model based on revenue sharing and transaction processing," said Mr. Qiang Li, Chief Executive Officer of Trunkbow. "We had over 5,000 MPS merchant partners at the end of September, and are working to further grow this number to expand our recurring revenue streams.

"In addition to merchant and subscriber acquisition in our MPS segment, we are also implementing our data center projects in Shanghai and Guangzhou. We have invested approximately US$12.2 million in these projects to-date. We are making substantial investments to advance our existing business and develop new services to strengthen the foundation for sustainable long-term growth and improved earnings performance."   

Third Quarter 2012 Results

Gross revenue in the third quarter of 2012 was $9.0 million, an increase of 57.0% year-over-year, compared with gross revenue of $5.8 million in the same period a year ago. The increase in gross revenue was primarily attributable to the significant increase of the software sales. Revenue from MVAS increased $4.8 million, or 131.3%, to $8.5 million for the third quarter of 2012, compared with $3.66 million in the same period of 2011. The increase in MVAS revenue was primarily attributed to growth in MVAS software sales. Revenue from the Company's MPS offerings decreased 72.2% to $0.6 million for the third quarter of 2012, compared with $2.1 million in the same period of 2011. The decrease in MPS revenue was attributable to a reduction of MPS system integration and software sales.

Cost of revenue in the third quarter of 2012 was $1.9 million, compared with $1.3 million in the same period of 2011. The increase in cost of revenue was in line with the increase in revenue.

Gross profit in the third quarter of 2012 totaled $7.0 million, compared with $4.3 million in the third quarter of 2011. As a percentage of net revenue, gross margin was 78.6% in the third quarter of 2012, compared with 77.2% in the year-ago period. The year-over-year improvement in gross margin was attributable to the decrease of revenues from system integration, which involves significantly higher hardware costs.

Operating expenses in the third quarter of 2012 were $3.3 million, an increase of 2.1% year-over-year. The increase in operating expenses was primarily related to a bad debt provision of $0.5 million provided to accounts receivable over one year old, partially offset by lower advertisement and promotion expenses and a decrease in general and administrative expenses.  

Operating income in the third quarter of 2012 was $3.7 million, compared with $1.1 million reported in the same period last year. The increase in operating profit for the quarter was in line with the increase in revenue.

Net income attributable to Trunkbow was $3.2 million in the third quarter of 2012, compared with $0.8 million in the third quarter of 2011. Earnings per basic and diluted share in the third quarter of 2012 were $0.09 each, based on basic and diluted shares outstanding of 36.81 million. This compares with $0.02 per basic and diluted share, respectively, based on basic and diluted shares outstanding of 36.6 million and 37.7 million, respectively, in the year-ago period.

Balance Sheet and Cash Flow

As of September 30, 2012, the Company had $0.3 million in cash and cash equivalents, compared with $6.1 million as of December 31, 2011. As of September 30, 2012, the Company had working capital of $46.3 million and total shareholders' equity of $90.2 million. Accounts receivable on September 30, 2012 totaled approximately $45.2 million. As of November 12, 2012, the Company had collected approximately $4.1 million of these outstanding receivables.

Business Outlook 

Trunkbow reaffirmed its 2012 financial guidance, which calls for approximately $17 million in net income.

Mr. Li concluded, "We are pleased with the ongoing shift from platform installations to recurring revenue from shared services and transaction processing. We continue to pursue the development of our hosted services offering, which we believe can become a long-term growth driver for our businesses. We are confident that we can continue the transformation of our businesses and achieve our strategic objectives."

Conference Call

The Company will host a conference call to discuss financial results for the third quarter 2012 on November 14, 2012 at 8:00 p.m. ET. 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 passcode required is 63838568.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on November 14, 2012. To access the replay, please dial +1 (646) 254-3697, international callers dial +61 (2) 8199-0299, and enter the passcode 63838568.

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: [email protected]

E-mail: [email protected]

- FINANCIAL TABLES FOLLOW -

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS




September 30,


December 31,



2012


2011



(Unaudited)



ASSETS







Current assets







Cash and cash equivalents


$

339,139


$

6,139,589

Accounts receivable, net



45,219,905



41,147,767

Advances to suppliers



6,825,876



9,783,454

Prepayment



1,627,935



316,258

Other current assets



7,767,163



4,040,152

Due from directors



48,859



758,033

Inventories



6,345,902



5,569,624

Deferred tax asset



294,397



117,952

Total current assets



68,469,176



67,872,829

Property and equipment, net



38,758,514



20,775,594

Land use right, net



5,845,219



5,905,583

Intangible assets, net



274,576



33,958

Long-term prepayment



524,315



2,733,363

TOTAL ASSETS


$

113,871,800


$

97,321,327

LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities







Accounts payable


$

2,232,026


$

2,238,179

Accrued expenses and other current liabilities



2,613,266



2,216,128

Short-term loan



13,751,679



6,460,945

Due to directors



9,772



11,959

Taxes payable



3,521,343



4,209,907

Total current liabilities



22,128,086



15,137,118

Deferred revenue



1,501,620



0

Total liabilities



23,629,706



15,137,118

COMMITMENTS AND CONTINGENCIES







Stockholders' equity







Preferred Stock: par value $0.001, authorized 10,000,000 shares, none issued and outstanding at September 30, 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 September 30, 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



42,687,053



34,989,429

Accumulated other comprehensive income



3,341,601



2,981,340

Total stockholders' equity



90,242,094



82,184,209

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

113,871,800


$

97,321,327

 

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME




Three Months Ended September 30,


Nine Months Ended September 30,



2012



2011


2012


2011



(Unaudited)



(Unaudited)


(Unaudited)


(Unaudited)

Revenues


$

9,048,886



$

5,765,327


$

21,817,127


$

19,984,170

Less: Business tax and surcharges



168,007




169,089



406,000



472,644

Net revenues



8,880,879




5,596,238



21,411,127



19,511,526

Cost of revenues



1,898,626




1,273,984



3,968,955



4,858,522

Gross profit



6,982,253




4,322,254



17,442,172



14,653,004

Operating expenses














Selling and distribution expenses



662,343




700,242



2,535,720



1,668,383

General and administrative expenses



2,087,644




2,109,943



5,898,692



4,617,500

Research and development expenses



517,891




390,834



1,576,808



1,026,913




3,267,878




3,201,019



10,011,220



7,312,796

Income from operations



3,714,375




1,121,235



7,430,952



7,340,208

Other income (expenses)














Interest income



58,734




29,533



174,305



102,274

Interest expense



(297,059)




(334)



(733,193)



(51,230)

Refund of value-added tax



6,597




0



1,549,765



1,307,836

Government grants



178,478




0



300,427



4,740,134

Other income



37,160




40,009



92,710



79,837

Other expenses



0




(56,794)



(12,391)



(130,959)




(16,090)




12,414



1,371,623



6,047,892

Income before income tax expense



3,698,285




1,133,649



8,802,575



13,388,100

Income tax expense



516,246




302,582



1,104,951



1,241,572

Net income



3,182,039




831,067



7,697,624



12,146,528

Foreign currency translation fluctuation



(163,043)




670,848



360,261



1,784,893

Comprehensive income


$

3,018,996



$

1,501,915


$

8,057,885


$

13,931,421

Weighted average number of common shares outstanding














Basic



36,807,075




36,649,466



36,807,075



36,080,866

Diluted



36,807,075




37,733,261



36,813,912



37,283,765

Earnings per share














Basic


$

0.09



$

0.02


$

0.21


$

0.34

Diluted


$

0.09



$

0.02


$

0.21


$

0.33

 

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



Nine Months Ended September 30,


2012


2011


(Unaudited)


(Unaudited)

Cash flows from operating activities






Net income

$

7,697,624


$

12,146,528

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






Depreciation and amortization


739,581



220,807

Provision for doubtful debts


1,908,674



0

Deferred taxes


(175,335)



0

Share-based compensation expenses


0



262,500

Changes in operating assets and liabilities:






Accounts receivable


(5,778,091)



(9,923,613)

Advance to suppliers


3,017,886



2,927,681

Prepayment


(1,311,965)



0

Other current assets


(2,920,921)



(1,029,348)

Due from directors


713,968



(599,968)

Inventories


(728,629)



3,611,360

Long-term prepayment


2,225,864



(2,285,550)

Accounts payable


(17,497)



(277,580)

Accrued expenses and other current liabilities


386,447



1,231,409

Amounts due to directors


(2,251)



0

Taxes payable


(710,814)



(539,393)

Deferred revenue


1,503,640



0

Net cash flows provided by operating activities


6,548,181



5,744,833

Cash flows from investing activities






Acquisition of property and equipment and intangible assets


(18,819,394)



(20,059,801)

Collection (Payment on) loans to third parties


(791,390)



2,870,023

Acquisition of land use right


0



(5,847,835)

Acquisition of Delixunda Company (net of cash acquired)


0



(38,173)

Net cash flows used in investing activities


(19,610,784)



(23,075,786)

Cash flows from financing activities






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


0



17,332,251

Proceeds from (repayment of ) bank loan


7,267,819



(1,846,949)

Restricted deposit collected from bank


0



369,390

Proceeds from exercise of warrants


0



610,000

Net cash flows provided by financing activities


7,267,819



16,464,692

Effect of exchange rate fluctuation on cash and cash equivalents


(5,666)



124,652

Net increase in cash and cash equivalents


(5,800,450)



(741,609)

Cash and cash equivalents – beginning of the year


6,139,589



10,259,750

Cash and cash equivalents – end of the period

$

339,139


$

9,518,141

Supplemental disclosure of cash flow information






Cash paid for interest

$

733,193


$

51,230

Cash paid for income taxes

$

1,619,878


$

304,623

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

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