NQ Mobile Inc. Announces Third Quarter 2012 Results
BEIJING and DALLAS, Nov. 12,
2012 /PRNewswire/ -- NQ Mobile Inc. ("NQ Mobile" or the
"Company") (NYSE: NQ), a leading global provider of mobile Internet
services, today announced its unaudited financial results for the
third quarter ended September 30,
2012.
(Logo:
http://photos.prnewswire.com/prnh/20120125/CN41481LOGO-b)
Third Quarter 2012 Highlights
- Net revenues increased 127.4% year-over-year to $25.8 million from $11.3
million in the corresponding period of 2011, exceeding the
high end of the Company's previous guidance of $24 million to $25 million. Excluding revenue
contribution of $4.5 million from the
recently acquired Beijing NationSky Network Technology, Inc.
("NationSky"), net revenues increased 88.0% year-over-year to
$21.3 million.
- Loss from operations was $1.0
million, mainly due to $7.8
million in share-based compensation expense in the third
quarter of 2012, compared with an operating income of $2.1 million in the corresponding period of 2011.
Non-GAAP operating income(4), increased 44.4% year-over-year to
$6.8 million from $4.7 million in the corresponding period of 2011.
Excluding operating income contribution of $0.5 million from NationSky, Non-GAAP operating
income increased 34.6% year-over-year to $6.3 million.
- Net income attributable to NQ Mobile was $0.3 million, compared with net income of
$4.3 million in the corresponding
period of 2011. Non-GAAP net income(5) increased 16.2%
year-over-year to $8.1 million from
$7.0 million in the corresponding
period of 2011. Net income contribution from NationSky amounted to
$0.2 million in the third
quarter.
- GAAP fully diluted Earnings per ADS was $0.01 and non-GAAP fully diluted Earnings per ADS
was $0.16. Diluted weighted average
number of ADSs outstanding increased to 51.2 million in the third
quarter of 2012 from 50.1 million in the previous quarter.
- Net cash flow generated from operations was $6.9 million in the third quarter of 2012,
compared with $2.6 million in the
corresponding period of 2011. Cash and cash equivalents and term
deposits together amounted to $126.2
million as of September 30,
2012.
- Deferred revenue was $10.9
million at the end of the third quarter of 2012, up 14.7%
from $9.5 million at the end of the
second quarter of 2012.
The Company's non-GAAP financial measures and related
reconciliations to GAAP financial measures are described in the
accompanying sections of "Non-GAAP Disclosure" and "Reconciliations
to Unaudited Condensed Consolidated Statements of Operations."
Third Quarter 2012 Operating Metrics
- Cumulative registered user accounts were 241.6 million as of
September 30, 2012, compared with
122.8 million as of September 30,
2011 and 203.5 million as of June 30,
2012.
- Average monthly active user accounts for the third quarter
ended September 30, 2012 were 84.5
million, compared with 42.7 million for the corresponding period of
2011 and 69.2 million for the previous quarter ended June 30, 2012.
- Average monthly paying user accounts for the third quarter
ended September 30, 2012 were 8.2
million, compared with 5.0 million for the corresponding period of
2011 and 7.4 million for the previous quarter ended June 30, 2012.
(In
millions)
|
As of Sept. 30,
2012
|
As of
Sept. 30,
2011
|
As of June
30,
2012
|
Cumulative
registered user accounts
|
241.6
|
122.8
|
203.5
|
China
|
141.9
|
78.5
|
121.8
|
Overseas
|
99.7
|
44.3
|
81.7
|
|
|
|
|
|
Three
months
ended Sept. 30,
2012
|
Three
months
ended
Sept. 30,
2011
|
Three
months
ended June
30,
2012
|
Average
monthly active user accounts
|
84.5
|
42.7
|
69.2
|
China
|
49.7
|
27.1
|
41.1
|
Overseas
|
34.8
|
15.6
|
28.1
|
Average
monthly paying user accounts
|
8.2
|
5.0
|
7.4
|
China
|
5.6
|
3.5
|
5.2
|
Overseas
|
2.6
|
1.5
|
2.2
|
"I am pleased to report that we again achieved a strong quarter
with revenue growth exceeding the high end of the previously issued
guidance. Both our registered and active user base recorded
the highest sequential growth for 2012, reaching 242 million and 85
million, respectively. Additionally, we are starting to see
significant revenue contribution from the NationSky acquisition for
our enterprise business," commented Dr. Henry Lin, Chairman and Co-Chief Executive
Officer of NQ Mobile. "While we continue to see strong growth in
the global mobile security market, we also undertook an important
strategic step in broadening our mobile Internet service offerings
through the acquisition of Feiliu, to further transform NQ Mobile
to become a leading mobile Internet platform and services
company."
"In the third quarter, we continued our product expansion and
were excited to bring more innovative products to the global market
such as NQ Family Guardian," added Omar
Khan, Co-Chief Executive Officer of NQ Mobile. "With the
formal opening of our new international corporate headquarters in
Dallas, we remain committed to our
global expansion efforts and continue to see strong momentum in
international business development with newly announced agreements
with Go Wireless, Wireless and Cat® Phones in the United States, Celcom in Malaysia, epay in Australia and Phones4you in the United Kingdom. Revenue from international
markets today already accounts for more than 54% of our consumer
business and we believe that the continued build out and investment
in our international business will further drive and sustain NQ
Mobile's long term growth."
Third Quarter 2012 Results
Revenues
Net revenues in the third quarter of 2012 were $25.8 million, an increase of 127.4%
year-over-year from $11.3 million in
the third quarter of 2011 and 29.3% sequentially from $20.0 million in the second quarter of 2012,
exceeding the high end of the Company's previous guidance of
$24 million and $25 million. Excluding revenues of $4.5 million from NationSky, net revenues
increased 88.0% year-over-year and 15.0% sequentially to
$21.3 million.
Net revenues from premium mobile Internet services increased
77.4% year-over-year and 14.2% sequentially to $18.4 million in the third quarter of 2012. The
increases were primarily due to the strong and steady growth in the
number of paying user accounts, which reflected growth in the
number of registered and active user accounts, as well as increased
use of NQ Mobile's premium services, particularly among the
overseas paying user accounts, which generally pay a higher
subscription rate. Revenue contribution from overseas users
accounted for 54.1% of total net revenues from premium mobile
Internet services in the third quarter of 2012, compared with 49.6%
in the third quarter of 2011, and 51.2% in the second quarter of
2012.
Net revenues from other services in the third quarter of 2012,
which include revenues from NationSky, increased 642.6%
year-over-year and 91.4% sequentially to $7.4 million. Excluding the revenues of
$4.5 million from NationSky, net
revenues from other services were $2.9
million, representing an increase of 196.5% year-over-year
and 19.7% sequentially. The increases were mainly due to the growth
in revenues from secured download and delivery services for mobile
applications produced by third parties. The revenues from NationSky
increased 218.0% sequentially to $4.5
million in the third quarter due to the strong growth in its
enterprise business and new customer gains. Excluding revenues from
NationSky, net revenues from other services as a percentage of
total net revenue was 13.9% in the third quarter of 2012, compared
with 8.8% in the third quarter of 2011 and 13.4% in the second
quarter of 2012.
Cost of Revenues
Cost of revenues in the third quarter of 2012 was $8.0 million, representing an increase of 264.0%
year-over-year and 69.5% sequentially. Excluding $3.4 million of NationSky's contribution, cost of
revenues increased 109.6% year-over-year and 28.4% sequentially to
$4.6 million. The year-over-year and
sequential increases were primarily due to increased customer
acquisition costs as a result of more users acquired in the third
quarter and higher revenue sharing with mobile payment service
providers consistent with the increase of revenue from mobile
payment service providers.
Gross Profit and Gross Margin
Gross profit in the third quarter of 2012 was $17.8 million, representing an increase of 94.8%
year-over-year from $9.2 million in
the third quarter of 2011 and 16.9% sequentially from $15.3 million in the second quarter of 2012.
Gross margin, or gross profit as a percentage of net revenues, was
69.2% in the third quarter of 2012, compared with 80.7% in the
third quarter of 2011 and 76.5% in the second quarter of 2012.
Excluding the impact from NationSky, gross margin was 78.5% and
80.8% in the third and second quarter of 2012, respectively.
Given NationSky's lower margin business nature, gross margin is
expected to decline further in the fourth quarter of 2012 as
NationSky's revenue contribution becomes greater. NationSky's gross
margin in the third quarter and second quarter of 2012 were about
24.6% and 19.9% on a standalone basis, respectively, and cost of
revenues for NationSky primarily consist of the hardware device
procurement cost.
Operating Expenses
Total operating expenses in the third quarter of 2012 were
$18.8 million, representing an
increase of 164.9% year-over-year and 36.7% sequentially. Non-GAAP
operating expenses(6), were $11.1
million in the third quarter of 2012, representing an
increase of 146.7% year-over-year from $4.5
million in the third quarter of 2011 and 26.4% sequentially
from $8.8 million in the second
quarter of 2012. NationSky contributed $0.64
million in operating expenses in the third quarter of
2012.
Selling and marketing expenses were $5.7
million in the third quarter of 2012, representing an
increase of 227.9% year-over-year and 52.1% sequentially. The
year-over-year and sequential increases were primarily due to
higher marketing and advertising spending, higher share-based
compensation expenses, and higher staff costs as a result of
increases in salary and headcount. Non-GAAP selling and marketing
expenses(7) were $4.7 million in the
third quarter of 2012, representing an increase of 251.6%
year-over-year and 40.3% sequentially, compared with $1.3 million in the third quarter of 2011 and
$3.4 million in the second quarter of
2012. The year-over-year and sequential increases were primarily
due to higher marketing and advertising spending and higher staff
costs as a result of increases in salary and headcount.
General and administrative expenses were $10.3 million in the third quarter of 2012,
representing an increase of 151.8% year-over-year and 27.1%
sequentially. The year-over-year increase was mainly due to higher
share-based compensation expenses caused by the impact of
additional option and restricted shares issuance to executives and
non-employee consultants since the end of the third quarter of
2011, higher staff costs from salary and headcount increases, and
higher legal and professional fees resulted from acquisition and
investment activities made from the second quarter of 2012. The
sequential increase was primarily due to higher share-based
compensation expenses and higher staff costs. Non-GAAP general and
administrative expenses(8) were $4.0
million in the third quarter of 2012, compared with
$2.1 million in the third quarter of
2011 and $3.7 million in the second
quarter of 2012. The 91.6% year-over-year increase was primarily
due to higher staff costs from salary and headcount increases,
higher legal and professional fees and higher consulting fees
resulted from acquisition and investment activities made from the
second quarter of 2012 while the 9.5% sequential increase was
primarily due to higher staff costs, higher travelling and
entertainment costs partially offset by lower office related
expenses.
Research and development expenses were $2.8 million in the third quarter of 2012,
representing an increase of 121.4% year-over-year and 47.6%
sequentially. The year-over-year and sequential increases were
primarily due to higher staff costs as a result of increases in
salary and headcount and higher share-based compensation expenses.
Non-GAAP research and development expenses(9) were $2.3 million in the third quarter of 2012,
representing an increase of 122.8% year-over-year and 35.4%
sequentially, compared with $1.0
million in the third quarter of 2011 and $1.7 million in the second quarter of 2012. The
year-over-year and sequential increases were primarily due to
higher staff costs from salary and headcount increases
Operating Loss and Operating Margin
Operating loss in the third quarter of 2012 was $1.0 million, down from an income of $2.1 million in the third quarter of 2011 and an
income of $1.5 million in the second
quarter of 2012. The main reason for the decrease in operating
income was the significant increase in share-based compensation
expenses associated with newly hired executives and newly engaged
non-employee consultants in the first three quarters of 2012.
Non-GAAP operating income was $6.8
million in the third quarter of 2012, representing an
increase of 44.4% year-over-year from $4.7
million in the third quarter of 2011 and a sequential
increase of 4.1% from $6.5 million in
the second quarter of 2012. Non-GAAP operating margin(10) was 26.4%
in the third quarter of 2012, compared with 41.6% in the third
quarter of 2011 and 32.8% in the second quarter of 2012. Excluding
the impact from NationSky, non-GAAP operating margin was 29.8% and
34.5% in the third quarter and second quarter of 2012,
respectively. NationSky's operating margin was about 10.3% and
10.4% on a standalone basis in the third and second quarter of
2012, respectively.
Foreign Exchange Loss, Interest Income and Gain on change of
interest in An Associate
Foreign exchange loss was $0.2
million in the third quarter of 2012, compared with a gain
of $1.6 million in the third quarter
of 2011 and a loss of $0.3 million in
the second quarter of 2012. The foreign exchange loss was primarily
attributable to the depreciation of RMB against US$ as a
significant portion of IPO proceeds was converted into RMB and
placed in bank deposits since the second quarter of 2011.
Interest income was $0.8 million in
the third quarter of 2012, compared with $0.5 million in the third quarter of 2011 and
$0.8 million in the second quarter of
2012. The significant year-over-year increases were primarily due
to the higher term deposit position. The company also recorded a
gain on change of interest in an associate of $0.9 million in the third quarter of 2012. The
Company and all other existing shareholders transferred to a new
shareholder 20% of their equity interest in Feiliu, which we
accounted for by equity method, in exchange for the transfer of
certain intangible assets.
Income Tax
Income tax expenses were $0.31
million, compared with an income tax expense of $0.08 million in the third quarter of 2011 and an
income tax expense of $0.12 million
in the second quarter of 2012. The sequential and
year-over-year increase is mainly due to more taxable profit
generated.
Net Income
Net income attributable to NQ Mobile was $0.3 million in the third quarter of 2012,
compared with an income of $4.3
million in the third quarter of 2011 and an income of
$2.1 million in the second quarter of
2012. Non-GAAP net income attributable to NQ Mobile was
$8.1 million in the third quarter of
2012, compared with $7.0 million in
the third quarter of 2011 and $7.1
million in the second quarter of 2012.
Cash Flows and Deferred Revenue
Net cash flow generated from operations for the third quarter of
2012 was $6.9 million, compared with
$2.6 million for the corresponding
period of 2011 and $1.9 million for
the second quarter of 2012. As of September
30, 2012, the Company had total cash position of
$126.2 million ($35.1 million in cash and cash equivalents and
$91.1 million in term deposits) and
deferred revenue of $10.9
million.
Equity Investments
Equity investments, referring to those investments made on
equity instruments, were $16.4
million as of the end of third quarter of 2012 compared to
$6.7 million as of the end of second
quarter of 2012 because the Company made minority equity
investments in three mobile internet companies in the third quarter
totaling $8.7 million of which the
investment in Hesine Technologies contributed $6.4 million.
Other Business Updates and Significant Events
Phones 4u to Offer NQ Mobile Security™ in Over 600 Retail
Locations across the UK
On November 12, 2012, NQ Mobile announced that UK retailer
Phones 4u will offer NQ Mobile Security at retail locations across
the UK. In-store availability should begin in December 2012. Phones 4u operates over 600 retail
locations in the UK.
epay to Offer NQ Mobile Guard™ in Major Retail
Locations Throughout Australia
On November 8, 2012, NQ Mobile announced that epay
Australia will offer NQ Mobile
Guard in major retail locations across Australia, including Harvey Norman and Allphones. epay, a global
retail solutions provider, will offer their customers NQ Mobile's
award-winning mobile security protection for their Android devices.
epay will provide license keys, in-store cards, and sales support
to their partners who retail NQ Mobile Guard.
Celcom and NQ Mobile Partner to Offer Smartphone Families
Protection, Connection and Peace of Mind
On November 1, 2012, NQ Mobile and Celcom Axiata Berhad,
the first and foremost mobile telecommunications provider in
Malaysia, announced that they will
bring the 12 million Celcom subscribers easy access to the most
comprehensive parental controls and management toolset available
today. The agreement will promote the adoption of NQ Mobile's NQ
Family Guardian solution, a complete parental controls suite for
child safety and monitoring that uniquely offers a needed balance
between protection and connection. Celcom will promote NQ Mobile's
Family Guardian to new Celcom subscribers purchasing smartphones
for their families and to Celcom's existing smartphone subscribers
through direct marketing, monthly SMS campaigns, retail messaging,
website banners, and other targeted promotions. To facilitate the
purchase of NQ Mobile applications, Celcom will also offer carrier
billing support.
NQ Mobile Collaborates with Cat® Phones to Make Rugged
Smartphones even Safer
On October 24, 2012, NQ Mobile announced an agreement
that will bring the most effective mobile security solution
available to the recently released, Android-based, Cat B10
smartphone. Under terms of the contract, all Cat® smartphones
shipped in the Americas will come pre-loaded with NQ
Mobile Security. This gives device owners a weapon for combating
viruses, malicious URLs, and other mobile threats that is as strong
as the ruggedized handset itself. A 3-month trial of all premium
features will be provided to consumers who purchase the Cat
B10.
Wireless to Offer NQ Mobile Guard™, NQ Mobile Vault™ for
Android and NQ Family Guardian™ in More Than 80 Retail Locations
across the U.S.
On October 23, 2012, NQ
Mobile announced that authorized Verizon dealer Wireless
will offer NQ Mobile Guard, Vault for Android and Family Guardian
at more than 80 retail locations across the United States. Wireless was founded in 2001 by
Shawn Cunix to provide Verizon
Wireless services in central Ohio. Wireless has grown
from one store and a handful of employees to 80-plus stores with
over 300 employees spread across the United States.
GoWireless to Offer Mobile Guard™, NQ Mobile Vault™, and NQ
Family Guardian™ in More Than 350 Verizon Premium Wireless Retail
Locations across the U.S.
On October 18, 2012, NQ
Mobile announced that GoWireless will now offer NQ Mobile's
award-winning applications including NQ Mobile Guard, NQ Mobile
Vault for Android and NQ Family Guardian to its customers at more
than 350 retail locations across the United States. GoWireless was founded
in Southern California in 1995, and it has over 350
stores throughout the United
States.
NQ Mobile Announces Management/Founders Lock-up
On September 5, 2012, NQ
Mobile announced that RPL Holdings Limited ("RPL"), a
substantial shareholder in NQ Mobile, has agreed to a two-year
voluntary lock-up which will expire in September 2014. RPL, a
limited liability company organized under the laws of
the British Virgin Islands, is owned and controlled by the
three founders of NQ Mobile, Dr. Henry Yu Lin,
Dr. Vincent Wenyong Shi, and Mr. Xu
Zhou (collectively, the "Founders"). As of June 30, 2012,
RPL held 50,352,941 Class B common shares (equivalent to
approximately 10.1 million ADSs) of NQ Mobile, representing
approximately 21.2% of NQ Mobile's outstanding common shares.
Under the terms of the lock-up agreement with the Company, RPL
agreed to a two-year lock-up, which means it will not sell any of
its holdings until September 2014. In addition, Dr.Henry Yu
Lin and Dr. Vincent Wenyong Shi have agreed not to
sell any of the other NQ Mobile shares, including shares
underlying stock options that they hold, totaling 5.35 million
Class B common shares assuming exercise of all the outstanding
options (equivalent to approximately 1.1 million ADSs), during the
same lock-up period.
NQ Mobile Gains Access to Premier Mobile Messaging
Technologies through Acquisition of One-third Stake in Hesine
Technologies
On August 16, 2012, NQ Mobile and MediaTek Inc., a
leading fabless semiconductor company for wireless communications
and digital multimedia solutions, reached an agreement
regarding NQ Mobile's acquisition of approximately one-third
interest in Hesine Technologies International Worldwide
Inc. ("Hesine"), a wholly owned subsidiary
of MediaTek and a premier mobile messaging solution
provider. NQ Mobile's Co-founder, Chairman and
Co-CEO, Henry Lin, will join the Board of Directors of Hesine
and provide overall strategic direction to the company under the
Board's supervision. Hesine will provide NQ Mobile with
access to its premier mobile messaging solutions, which provides
mobile push notification and messaging services across various
radio access technologies, wireless carriers, and
geographies.
Business Outlook
The Company expects net revenues to be in the range of
$28.5 million and $29.5 million for the fourth quarter of 2012 and
raises the full year 2012 net revenue guidance from the previously
issued range of $86 million to $89
million to a range of $90 million to
$91 million. The Company also initiates its revenue guidance
for 2013 to be in the range of $150
million and 155 million.
The above forecast reflects the Company's current and
preliminary view, which is subject to possible material
changes.
Conference Call Information
NQ Mobile's management will hold an earnings conference call at
8:00 p.m. U.S. Eastern Time on
Monday, November 12, 2012
(9:00 a.m. Beijing/Hong Kong Time on Tuesday, November 13, 2012) to discuss results
and highlights from the quarter and to answer questions.
The dial-in details for the conference call are:
U.S. Toll Free: +1 866 519
4004
International: +1 718 354 1231
Hong Kong: +852 2475
0994
United Kingdom: +44 2030598139
China Mainland: 400 620 8038 or 800
819 0121
Conference ID:
47396044
Please dial in 10 minutes before the call is scheduled to begin
and provide the conference ID to join the call.
A replay of the call will be available after the conclusion of
the conference call at 11:00 p.m.
U.S. Eastern Time on November 12 through
December 12, 2012. The dial-in details for the replay
are:
U.S. Toll Free: +1 866 214 5335
International: +1 718 354 1232
Conference ID:
47396044
Additionally, a live and archived webcast of this call will be
available on the Investor Relations section of NQ Mobile's website
at http://ir.nq.com
About NQ Mobile
NQ Mobile Inc. (NYSE: NQ) is a leading global provider of
trusted mobile Internet services built on its world-class
acquisition, engagement and monetization platform. The
company was one of the first to recognize the growing security
threats targeting smartphone users and now has about 242 million
registered and 85 million active user accounts globally. NQ
Mobile's cloud-based trust platform has been recognized by
third-party testing facilities around the world as the most
effective solution for detecting and combating mobile threats. NQ
Mobile is recognized as a global pioneer in mobile innovation and
technology leadership. NQ Mobile maintains dual headquarters
in Dallas, TX, USA and
Beijing, China. For more
information on NQ Mobile, please visit http://www.nq.com.
Non-GAAP Financial Measures
To supplement the Company's financial results prepared in
accordance with United States Generally Accepted Accounting
Principles ("GAAP"), NQ Mobile's management uses non-GAAP measures
of cost of revenues, operating expenses, operating income and net
income attributable to NQ Mobile, which are adjusted from results
based on GAAP to exclude the share-based compensation expenses. The
Company also uses non-GAAP fully diluted earnings per ADS, which is
the non-GAAP net income attributable to common shareholders divided
by weighted average number of diluted ADS.
The Company's non-GAAP financial information is provided as
additional information to help the Company's investors compare
business trends among different reporting periods on a consistent
basis and to enhance investors' overall understanding of the
historical and current financial performance of the Company's
continuing operations and its prospects for the future. The
Company's non-GAAP financial information should be considered in
addition to results prepared in accordance with GAAP, but should
not be considered a substitute for, or superior to, GAAP results.
In addition, the Company's calculation of this non-GAAP financial
information may be different from the calculation used by other
companies, and therefore comparability may be limited.
The non-GAAP financial measures are provided to enhance
investors' overall understanding of NQ Mobile's current financial
performance and prospects for the future. A limitation of using
non-GAAP cost of revenues, operating expenses, operating income and
net income attributable to NQ Mobile, excluding share-based
compensation expenses, is that the share-based compensation charge
has been and will continue to be a significant recurring expense in
the Company's business for the foreseeable future. In order to
mitigate these limitations the Company has provided specific
information regarding the GAAP amounts excluded from each non-GAAP
measure. The accompanying tables include details on the
reconciliation between GAAP financial measures that are most
directly comparable to the non-GAAP financial measures the Company
has presented.
Notes to Financial Information
Financial information in this press release other than the
information indicated as being non-GAAP is derived from NQ Mobile's
unaudited financial information prepared in accordance with
GAAP.
Forward Looking Statements
This news release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in 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" and similar
statements. All statements other than statements of historical fact
in this press release are forward-looking statements and involve
certain risks and uncertainties that could cause actual results to
differ materially from those in the forward-looking statements.
These forward-looking statements are based on management's current
expectations, assumptions, estimates and projections about the
Company and the industry in which the Company operates, but involve
a number of unknown risks and uncertainties, Further information
regarding these and other risks is included in the Company's
filings with the U.S. Securities and Exchange Commission. The
Company undertakes no obligation to update forward-looking
statements to reflect subsequent occurring events or circumstances,
or changes in its expectations, except as may be required by law.
Although the Company believes that the expectations expressed in
these forward-looking statements are reasonable, it cannot assure
you that such expectations will turn out to be correct, and actual
results may differ materially from the anticipated results. You are
urged to consider these factors carefully in evaluating the
forward-looking statements contained herein and are cautioned not
to place undue reliance on such forward-looking statements, which
are qualified in their entirety by these cautionary statements.
(1) "ADS"
is American Depositary Share. Each ADS represents five Class A
common shares of NQ Mobile.
|
(2) Non-GAAP net income attributable to NQ
Mobile is a non-GAAP financial measure, defined as net income
attributable to NQ Mobile excluding share-based compensation
expenses.
|
(3)
Non-GAAP fully diluted earnings per ADS is a non-GAAP financial
measure, defined as non-GAAP net income attributable to common
shareholders divided by the weighted average number of diluted
ADSs.
|
(4) Non-GAAP operating income is a non-GAAP
financial measure, defined as operating income excluding
share-based compensation expenses.
|
(5) Non-GAAP net income is a non-GAAP financial
measure, defined as net income attributable to NQ Mobile excluding
share-based compensation expenses.
|
(6) Non-GAAP operating expenses is a non-GAAP
financial measure, defined as operating expenses that exclude
share-based compensation expenses.
|
(7) Non-GAAP selling and marketing expenses is a
non-GAAP financial measure, defined as selling and marketing
expenses that exclude share-based compensation expenses.
|
(8) Non-GAAP general and administrative expenses
is a non-GAAP financial measure, defined as general and
administrative expenses that exclude share-based compensation
expenses.
|
(9) Non-GAAP research and development expenses
is a non-GAAP financial measure, defined as research and
development expenses that exclude share-based compensation
expenses.
|
(10)
Non-GAAP operating margin is a non-GAAP financial measure, defined
as non-GAAP operating income as a percentage of net
revenues.
|
For investor and media inquiries please contact:
Investor Relations
NQ Mobile Inc.
Email: investors@nq.com
Phone: +852 3975 2853
NQ MOBILE
INC.
UNAUDITED
INTERIM CONDENSED CONSOLIDATED
BALANCE
SHEETS
(In
thousands)
|
|
|
As
of
|
|
|
September 30,
2012
|
|
December 31,
2011
|
|
|
US$
|
|
US$
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash equivalents
|
|
35,053
|
|
69,510
|
Term deposits
|
|
91,153
|
|
58,563
|
Accounts receivable, net of allowance US$647 and
US$636 as of
September 30, 2012 and December 31, 2011,
respectively
|
|
39,971
|
|
21,379
|
Inventory
|
|
633
|
|
-
|
Prepaid expenses and other current assets
|
|
13,913
|
|
6,806
|
Total
current assets
|
|
180,723
|
|
156,258
|
Equity
investments
|
|
16,432
|
|
1,182
|
Property
and equipment, net
|
|
1,928
|
|
1,078
|
Intangible
assets, net
|
|
8,710
|
|
1,590
|
Goodwill
|
|
2,082
|
|
-
|
Other
non-current assets
|
|
372
|
|
374
|
Total
Assets
|
|
210,247
|
|
160,482
|
LIABILITIES
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Short-term loan
|
|
710
|
|
-
|
Accounts payable
|
|
5,088
|
|
1,014
|
Receipt in advance
|
|
322
|
|
-
|
Deferred revenue
|
|
10,861
|
|
7,090
|
Accrued expenses and other current
liabilities
|
|
6,559
|
|
3,656
|
Tax payable
|
|
788
|
|
368
|
Deferred tax liabilities, current
|
|
36
|
|
103
|
Total
current liabilities
|
|
24,364
|
|
12,231
|
Noncurrent liabilities:
Deferred tax liabilities, non-current
|
|
720
|
|
-
|
Other non-current liabilities
|
|
254
|
|
-
|
Total
Liabilities
|
|
25,338
|
|
12,231
|
Commitments and contingencies
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
Common
shares
|
|
23
|
|
22
|
Additional
paid-in capital
|
|
184,572
|
|
157,064
|
Accumulated deficit
|
|
(7,182)
|
|
(11,743)
|
Accumulated other comprehensive income
|
|
2,506
|
|
2,841
|
Total
NQ Mobile Inc.'s shareholders' equity
|
|
179,919
|
|
148,184
|
Non-controlling interest
|
|
4,990
|
|
67
|
Total
shareholders' equity
|
|
184,909
|
|
148,251
|
Total
Liabilities and Shareholders' Equity
|
|
210,247
|
|
160,482
|
|
|
|
|
|
NQ MOBILE
INC.
UNAUDITED
INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(In
thousands, except for share and per share data)
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
September 30,
2012
|
|
June 30,
2012
|
|
September 30,
2011
|
|
September 30,
2012
|
|
September 30,
2011
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenues
|
|
|
|
|
|
|
|
|
|
|
Premium mobile Internet services
|
|
18,354
|
|
16,069
|
|
10,344
|
|
48,308
|
|
24,611
|
Other services
|
|
7,448
|
|
3,892
|
|
1,003
|
|
13,431
|
|
3,231
|
Total net
revenues
|
|
25,802
|
|
19,961
|
|
11,347
|
|
61,739
|
|
27,842
|
Cost of
revenues*
|
|
(7,954)
|
|
(4,693)
|
|
(2,185)
|
|
(16,068)
|
|
(5,498)
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
17,848
|
|
15,268
|
|
9,162
|
|
45,671
|
|
22,344
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses*
|
|
(5,680)
|
|
(3,735)
|
|
(1,732)
|
|
(12,607)
|
|
(4,341)
|
General and administrative expenses*
|
|
(10,332)
|
|
(8,130)
|
|
(4,104)
|
|
(25,001)
|
|
(10,516)
|
Research and development expenses*
|
|
(2,805)
|
|
(1,900)
|
|
(1,267)
|
|
(6,190)
|
|
(3,410)
|
Total
operating expenses
|
|
(18,817)
|
|
(13,765)
|
|
(7,103)
|
|
(43,798)
|
|
(18,267)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Income from operations
|
|
(969)
|
|
1,503
|
|
2,059
|
|
1,873
|
|
4,077
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income, net
|
|
797
|
|
817
|
|
452
|
|
2,296
|
|
713
|
Foreign
exchange (loss) / gain, net
|
|
(203)
|
|
(336)
|
|
1,642
|
|
(602)
|
|
2,119
|
Gain on
change of interest in an associate
|
|
943
|
|
-
|
|
-
|
|
943
|
|
-
|
Other
income, net
|
|
115
|
|
105
|
|
191
|
|
335
|
|
206
|
Income before income taxes
|
|
683
|
|
2,089
|
|
4,344
|
|
4,845
|
|
7,115
|
Income tax
expense
|
|
(308)
|
|
(119)
|
|
(78)
|
|
(492)
|
|
(50)
|
Share of
profit/(loss) from an associate
|
|
125
|
|
155
|
|
68
|
|
403
|
|
(3)
|
Net
income
|
|
500
|
|
2,125
|
|
4,334
|
|
4,756
|
|
7,062
|
Net
(income) / loss attributable to the non-
controlling interest
|
|
(152)
|
|
(43)
|
|
3
|
|
(195)
|
|
-
|
Net income attributable to NQ Mobile Inc.
|
|
348
|
|
2,082
|
|
4,337
|
|
4,561
|
|
7,062
|
Accretion
of redeemable convertible preferred
shares
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(535)
|
Allocation
of net income to participating
preferred shareholders
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(1,595)
|
Net
income attributable to common
shareholders (Note 1)
|
|
348
|
|
2,082
|
|
4,337
|
|
4,561
|
|
4,932
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
500
|
|
2,125
|
|
4,334
|
|
4,756
|
|
7,062
|
Other
comprehensive (income) / loss: foreign currency translation
adjustment
|
|
(173)
|
|
(270)
|
|
472
|
|
(335)
|
|
1,016
|
Comprehensive income
|
|
327
|
|
1,855
|
|
4,806
|
|
4,421
|
|
8,078
|
Comprehensive (income) / loss attributable to
non-controlling interest
|
|
(152)
|
|
(43)
|
|
3
|
|
(195)
|
|
-
|
Comprehensive income attributable
to
NQ Mobile Inc.
|
|
175
|
|
1,812
|
|
4,809
|
|
4,226
|
|
8,078
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
0.0015
|
|
0.0090
|
|
0.0189
|
|
0.0196
|
|
0.0320
|
Diluted
|
|
0.0014
|
|
0.0083
|
|
0.0185
|
|
0.0183
|
|
0.0285
|
Weighted
average number of common shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
235,248,711
|
|
232,891,181
|
|
229,699,213
|
|
232,900,331
|
|
154,247,881
|
Diluted
|
|
256,143,907
|
|
250,549,533
|
|
234,482,353
|
|
249,914,090
|
|
179,822,002
|
Net
earnings per ADS (Note 2):
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
0.0075
|
|
0.0450
|
|
0.0945
|
|
0.0980
|
|
0.1600
|
Diluted
|
|
0.0070
|
|
0.0415
|
|
0.0925
|
|
0.0915
|
|
0.1425
|
Weighted
average number of ADS outstanding
(Note 2):
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
47,049,742
|
|
46,578,236
|
|
45,939,843
|
|
46,580,066
|
|
30,849,576
|
Diluted
|
|
51,228,781
|
|
50,109,907
|
|
46,896,471
|
|
49,982,818
|
|
35,964,400
|
*
Share-based compensation expense
included in:
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
57
|
|
52
|
|
54
|
|
161
|
|
77
|
Selling
and marketing expenses
|
|
944
|
|
360
|
|
385
|
|
1,731
|
|
711
|
General
and administrative expenses
|
|
6,290
|
|
4,439
|
|
1,994
|
|
14,303
|
|
6,017
|
Research
and development expenses
|
|
495
|
|
194
|
|
230
|
|
892
|
|
513
|
Note 1:
The net income attributable to common shareholders reflected the
impact of non-cash accounting charges relating to the preferred
shares. All outstanding preferred shares were automatically
converted into common shares upon the completion of the Company's
IPO on May 5, 2011. Thereafter, there was no accretion and
allocation of net income to the preferred shares and all net income
was attributable to the common shareholders subsequent to
IPO.
Note 2:
The Company was listed in May 2011, the net earnings per ADS for
the three months ended March 31, 2011 is calculated using the same
conversion ratio assuming the ADS was existed during such period.
Each ADS represents five Class A common shares.
|
NQ MOBILE
INC.
UNAUDITED
INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF CASH
FLOWS
(In
thousands)
|
|
|
Three months ended
|
|
|
Sept 30,
2012
|
|
June 30,
2012
|
|
Sept 30,
2011
|
|
|
US$
|
|
US$
|
|
US$
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
500
|
|
2,125
|
|
4,334
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
475
|
|
257
|
|
147
|
Allowance for doubtful accounts
|
|
7
|
|
71
|
|
233
|
Share-based compensation
|
|
7,786
|
|
5,045
|
|
2,663
|
Deferred income tax
|
|
(43)
|
|
(21)
|
|
(18)
|
Foreign exchange loss/(gain), net
|
|
203
|
|
336
|
|
(1,642)
|
Gain on change of interest in an associate
|
|
(943)
|
|
-
|
|
-
|
Share of profit of an associate
|
|
(125)
|
|
(155)
|
|
(68)
|
Other income from ADR depository arrangement, net of
tax paid
|
|
(80)
|
|
(80)
|
|
(134)
|
Changes in operating assets and liabilities, net of acquisition:
|
|
|
|
|
|
|
Accounts receivable
|
|
(7,664)
|
|
(5,439)
|
|
(3,875)
|
Prepaid expenses and other current assets
|
|
2,279
|
|
(1,094)
|
|
(531)
|
Inventory
|
|
(446)
|
|
207
|
|
-
|
Other non-current assets
|
|
112
|
|
-
|
|
-
|
Accounts payable
|
|
2,492
|
|
682
|
|
(69)
|
Deferred revenue
|
|
1,388
|
|
1,156
|
|
1,429
|
Accrued expenses and other current
liabilities
|
|
692
|
|
(1,304)
|
|
149
|
Tax payable
|
|
301
|
|
76
|
|
15
|
Net
cash provided by operating activities
|
|
6,934
|
|
1,862
|
|
2,633
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
Placement of term deposits
|
|
(27,882)
|
|
(30,040)
|
|
(30,111)
|
Maturities of term deposits
|
|
29,806
|
|
9,092
|
|
-
|
Proceeds from the repayment of the advance to Tianjin
Yidatong
Technology Development
Co.,Ltd.
|
|
-
|
|
-
|
|
42
|
Disbursement from the lending of the housing loans to
employees
|
|
(79)
|
|
(79)
|
|
-
|
Proceeds from the repayment of the housing loans to
employees
|
|
37
|
|
34
|
|
50
|
Investment in equity investees
|
|
(2,794)
|
|
(3,478)
|
|
-
|
Bridge loans in connection with future equity
investments
|
|
(4,796)
|
|
(1,423)
|
|
-
|
Cash acquired from business acquisition
|
|
-
|
|
735
|
|
-
|
Purchase of property and equipment and intangible
assets
|
|
(1,321)
|
|
(182)
|
|
(1,759)
|
Net
cash used in by investing activities
|
|
(7,029)
|
|
(25,341)
|
|
(31,778)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
Proceeds from exercising of share options
|
|
-
|
|
635
|
|
(125)
|
Net
cash provided by financing activities
|
|
-
|
|
635
|
|
(125)
|
Effect of
exchange rate changes on cash and cash equivalents
|
|
(353)
|
|
(543)
|
|
2,132
|
Net
decrease in cash and cash equivalents
|
|
(448)
|
|
(23,387)
|
|
(27,138)
|
Cash and
cash equivalents at the beginning of the period
|
|
35,501
|
|
58,888
|
|
98,448
|
Cash and
cash equivalents at the end of the period
|
|
35,053
|
|
35,501
|
|
71,310
|
NQ MOBILE
INC.
SUPPLEMENTARY NOTES – UNAUDITED INTERIM CONDENSED
CONSOLIDATED
STATEMENT
OF OPERATION
(In
thousands)
|
|
|
Three
months ended September 30, 2012
|
|
|
NQ Mobile Inc.
Group
excluding NationSky
|
|
NationSky
|
|
|
Consolidated
|
|
|
US$
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
Net
Revenues
|
|
|
|
|
|
|
|
Premium mobile Internet services
|
|
18,354
|
|
-
|
|
|
18,354
|
Other services
|
|
2,974
|
|
4,474
|
|
|
7,448
|
Total net
revenues
|
|
21,328
|
|
4,474
|
|
|
25,802
|
Cost of
revenues
|
|
(4,579)
|
|
(3,375)
|
|
|
(7,954)
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
16,749
|
|
1,099
|
|
|
17,848
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
(5,471)
|
|
(209)
|
|
|
(5,680)
|
General and administrative expenses
|
|
(10,123)
|
|
(209)
|
|
|
(10,332)
|
Research and development expenses
|
|
(2,585)
|
|
(220)
|
|
|
(2,805)
|
Total
operating expenses
|
|
(18,179)
|
|
(638)
|
|
|
(18,817)
|
|
|
|
|
|
|
|
|
(Loss)/ Income from operations
|
|
(1,430)
|
|
461
|
|
|
(969)
|
|
|
|
|
|
|
|
|
Interest
income/(expense), net
|
|
807
|
|
(10)
|
|
|
797
|
Foreign
exchange loss, net
|
|
(203)
|
|
-
|
|
|
(203)
|
Gain on
change of interest in an associate
|
|
943
|
|
-
|
|
|
943
|
Other
income, net
|
|
115
|
|
-
|
|
|
115
|
Income
before income taxes
|
|
232
|
|
451
|
|
|
683
|
Income tax
expense
|
|
(195)
|
|
(113)
|
|
|
(308)
|
Share of
profit from an associate
|
|
125
|
|
-
|
|
|
125
|
Net
income
|
|
162
|
|
338
|
|
|
500
|
Net income
attributable to the non-controlling interest
|
|
-
|
|
(152)
|
|
|
(152)
|
Net
income attributable to NQ Mobile
Inc.
|
|
162
|
|
186
|
|
|
348
|
Net income attributable to common shareholders
|
|
162
|
|
186
|
|
|
348
|
NQ MOBILE INC.
NON-GAAP
MEASURE RECONCILIATIONS
(In
thousands)
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
September 30,
2012
|
|
June 30,
2012
|
|
September 30,
2011
|
|
September 30,
2012
|
|
September 30,
2011
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and marketing expenses under
GAAP
|
|
(5,680)
|
|
(3,735)
|
|
(1,732)
|
|
(12,607)
|
|
(4,341)
|
Share
based compensation expense*
|
|
944
|
|
360
|
|
385
|
|
1,731
|
|
711
|
Non-GAAP selling and marketing
expenses
|
|
(4,736)
|
|
(3,375)
|
|
(1,347)
|
|
(10,876)
|
|
(3,630)
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses under
GAAP
|
|
(10,332)
|
|
(8,130)
|
|
(4,104)
|
|
(25,001)
|
|
(10,516)
|
Share
based compensation expense*
|
|
6,290
|
|
4,439
|
|
1,994
|
|
14,303
|
|
6,017
|
Non-GAAP general and administrative
expenses
|
|
(4,042)
|
|
(3,691)
|
|
(2,110)
|
|
(10,698)
|
|
(4,499)
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
under GAAP
|
|
(2,805)
|
|
(1,900)
|
|
(1,267)
|
|
(6,190)
|
|
(3,410)
|
Share
based compensation expense*
|
|
495
|
|
194
|
|
230
|
|
892
|
|
513
|
Non-GAAP research and development
expenses
|
|
(2,310)
|
|
(1,706)
|
|
(1,037)
|
|
(5,298)
|
|
(2,897)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Income from operations under
GAAP
|
|
(969)
|
|
1,503
|
|
2,059
|
|
1,873
|
|
4,077
|
Share
based compensation expense*
|
|
7,786
|
|
5,045
|
|
2,663
|
|
17,087
|
|
7,318
|
Non-GAAP income from operations
|
|
6,817
|
|
6,548
|
|
4,722
|
|
18,960
|
|
11,395
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to NQ Mobile Inc.
under GAAP
|
|
348
|
|
2,082
|
|
4,337
|
|
4,561
|
|
7,062
|
Share
based compensation expense*
|
|
7,786
|
|
5,045
|
|
2,663
|
|
17,087
|
|
7,318
|
Non-GAAP net income attributable to NQ
Mobile Inc.
|
|
8,134
|
|
7,127
|
|
7,000
|
|
21,648
|
|
14,380
|
* It
represented elimination of share-based compensation expenses
resulting from granting of options and restricted shares to
qualified employees and consultants by the Company during the prior
and current periods.
|
SOURCE NQ Mobile Inc.