Annual sales grew 28%, Quarterly sales
grew 33.3% over the same quarter in 2016
Borqs Technologies, Inc. (Nasdaq:BRQS) (the “Company”), a
global leader in embedded software and products for the Internet of
Things (IoT), today reported financial results for the year ended
December 31, 2017.
Revenues
The Company reported net revenues of $154.3
million for the year 2017, which included $122.2 million from the
Connected Solutions Business Unit (including both software revenue
and hardware revenue), $30.1 million from the MVNO activities and
$2.0 million from Others (traditional telephony services).
This represented a 28.0% increase in net revenues from last year.
The hardware component of Connected Solutions Business Unit net
revenues was $111.0 million, compared with $70.5 million a year
ago, and the increase was mainly related to sales of mobile phone
products to a customer in India. The software component of
Connected Solutions Business Unit net revenues was $11.2 million,
compared with $14.9 million a year ago, reflecting an exit from the
mobile business for one of our chipset clients this year.
For the fourth quarter, Connected Solutions
Business Unit net revenues were $46.3 million in 2017, compared
with $33.7 million a year ago. Our MVNO sales were $9.9
million in 2017 compared with $6.0 million in 2016. The
increase in MVNO sales was due the introduction of a more efficient
security check and activation system at the point of sales of SIM
cards for our MVNO retailers. Using this new activation
system within our MVNO services, we were able to overcome the
effect from tightened security measures for SIM card
activation. Including the traditional telephony businesses,
our MNVO Business Unit net revenues for the fourth quarter was
$10.4 million in 2017 as compared to $8.8 million for the same
quarter in 2016.
We expect a similar strong trend in the
Connected Solutions sales and anticipate moderate growth in the
MVNO mobile services in the year 2018.
Non-US-GAAP Adjustments
In connection with the merger between Pacific Special
Acquisition Corp and our predecessor Borqs International Holding
Corp which was completed on August 18, 2017, the Company incurred
non-cash transaction related expenses in the amount of $14.5
million, which consisted of historical stock option charges of $5.7
million and stock-based compensation expenses of $8.8
million. As required by US GAAP, the historical option
charges were reported in the quarter in which the merger occurred
because the option plan in place when Borqs International was a
private company did not allow for options to be exercised until the
Company was publicly traded; on the occurrence of the merger with
Pacific, all outstanding options were valued at the closing price
of the ordinary shares on The Nasdaq Stock Market on the day of
merger, less the option exercise price, and the vested options were
expensed. The stock based fees represents the value of
ordinary shares paid to advisors of the transaction.
Excluding the non-cash transaction related expenses, the
non-GAAP adjusted net income for the year 2017 was $2.1
million. In 2016, the Company had net income of $2.6
million.
|
|
|
Year
ended |
|
December
31, |
|
2016 |
|
2017 |
|
|
|
|
|
|
|
(US$ in thousands) |
|
|
|
|
Net
income |
2,596 |
|
(12,359 |
) |
|
|
|
|
Stock
based compensation - options granted to employees |
|
|
5,727 |
|
Stock
based compensation - advisory fees |
|
|
8,777 |
|
Total
non-cash merger transaction related expenses |
|
|
14,504 |
|
|
|
|
|
Adjusted Net
Income |
2,596 |
|
2,145 |
|
|
|
|
|
|
Excluding the non-cash transaction related expenses and currency
exchange gain/loss, adjusted EBITDA for the years 2017 and 2016
were $11.3 million and 8.4 million, respectively.
|
|
|
|
|
Year ended |
|
December
31, |
|
2016 |
|
|
2017 |
|
|
|
|
|
|
|
|
(US$ in thousands) |
|
|
|
|
Net
income |
2,596 |
|
|
(12,359 |
) |
|
|
|
|
Interest expense -
net |
732 |
|
|
1,863 |
|
Tax expenses |
2,659 |
|
|
2,319 |
|
Depreciation and
amortization |
3,157 |
|
|
4,679 |
|
Other non-operational
(income) |
(55 |
) |
|
(512 |
) |
EBITDA |
9,089 |
|
|
(4,010 |
) |
|
|
|
|
Non-cash merger related
expenses |
|
|
|
Stock
based compensation - options granted to employees |
|
|
5,727 |
|
Stock
based compensation - advisory fees |
|
|
8,777 |
|
|
|
|
|
Foreign exchange
(gain) |
(692 |
) |
|
779 |
|
|
|
|
|
Adjusted
EBITDA |
8,397 |
|
|
11,273 |
|
|
|
|
|
|
|
GAAP Income
Including non-cash merger transaction related
expenses as described above in the amount of $14.5 million, the
year ended December 31, 2017 resulted in a net loss of $12.4
million compared with a net income of $2.6 million for the year
2016.
Gross Margins
For the year 2017, gross margin for the
Connected Solutions Business Unit was 15.3% compared with 24.0%
from 2016. The reduction was attributed to the increase in
hardware sales within the year which carried a more competitive
pricing policy.
For the year 2017, our MVNO Business Unit which
included some traditional telephony businesses returned a 26.3%
gross margin versus 13.2% from 2016. The healthy gross margin
achieved was attributed to our activities in this business unit
that has achieved economics of scale and also that our incumbent
operator, China Unicom, has removed a stringent minimum charge
since October 2016.
Other Details
The Company’s annual report on Form 10-K for the
year ended December 31, 2017 has been filed with the U.S.
Securities and Exchange Commission, and is accessible on the SEC
website at www.sec.gov.
Conference Call Schedule
Borqs will review the annual 2017 results and
highlights of the fourth quarter on Monday April 2, 2018 at 9:00 pm
ET (6:00 pm Pacific). The dial-in numbers are +1-845-675-0437 or
+1-866-519-4004 in the US and +86-400-620-8038 or +86-800-819-0121
in China; and then enter the Conference ID of 6987785. A
replay of the conference call will be available through April 9,
2018. The replay dial-in numbers are +1-855-452-5696 in the
US and +86-800-870-0206 in China; and then enter the same
Conference ID.
About Borqs Technologies,
Inc.
Borqs Technologies is a global leader in
software and products for the IoT, providing customizable,
differentiated and scalable Android-based smart connected devices
and cloud service solutions. Borqs has achieved leadership and
customer recognition as an innovative end-to-end IoT solutions
provider leveraging its strategic chipset partner relationships as
well as its broad software and IP portfolio. The Company designs,
develops and provides turnkey solutions across device form factors
such as smartphones, tablets, smartwatches, trackers, automotive
IVI, and vertical application devices (for restaurants, payments
etc.). For more information, please visit the Company’s
website (www.borqs.com).
Forward-Looking Statements, Non-GAAP
Information and Additional Information
This press release includes “forward-looking
statements” that involve risks and uncertainties that could cause
actual results to differ materially from what is expected. Words
such as “expects”, “believes”, “anticipates”, “intends”,
“estimates”, “predicts”, “seeks”, “may”, “might”, “plan”,
“possible”, “should” and variations and similar words and
expressions are intended to identify such forward-looking
statements, but the absence of these words does not mean that a
statement is not forward-looking. Such forward-looking statements
relate to future events or future results, based on currently
available information and reflect our management’s current beliefs.
Many factors could cause actual events or results to differ
materially from the events and results discussed in the
forward-looking statements, so the reader is advised to refer to
the Risk Factors sections of the Company’s filings with the
Securities and Exchange Commission for additional information
identifying important factors that could cause actual results to
differ materially from those anticipated in the forward-looking
statements. Except as expressly required by applicable securities
law, the Company disclaims any obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise.
This release includes non-GAAP adjusted net
income. These non-GAAP measures are not in accordance with,
or an alternative for, measures prepared in accordance with
generally accepted accounting principles and may be different from
non-GAAP measures used by other companies. In addition, these
non-GAAP measures are not based on any comprehensive set of
accounting rules or principles. The Company believes that non-GAAP
measures have limitations in that they do not reflect all of the
amounts associated with the Company’s results of operations as
determined in accordance with GAAP and that these measures should
only be used to evaluate the Company’s results of operations in
conjunction with the corresponding GAAP measures.
The Company believes that the presentation of
non-GAAP measures when shown in conjunction with the corresponding
GAAP measures, provides useful information to investors and
management regarding financial and business trends relating to its
financial condition and its historical and projected results of
operations.
For its internal budgeting process, the
Company’s management uses financial statements that do not include,
when applicable, share-based compensation expense, amortization of
acquisition-related intangible assets,
acquisition-related/divestiture costs, significant asset
impairments and restructurings, significant litigation settlements
and other contingencies, significant gains and losses on
investments, the income tax effects of the foregoing and
significant tax matters. The Company’s management also uses the
foregoing non-GAAP measures, in addition to the corresponding GAAP
measures, in reviewing the financial results of the Company. In
prior periods, the Company has excluded other items that it no
longer excludes for purposes of its non-GAAP financial measures.
From time to time in the future there may be other items that the
Company may exclude for purposes of its internal budgeting process
and in reviewing its financial results. For additional information
on the items excluded by the Company from one or more of its
non-GAAP financial measures, refer to the Form 8-K regarding this
release furnished today to the Securities and Exchange
Commission.
Investor Contact:
Sandra DouInvestor Relations Sr. ManagerBorqs
Technologies, Inc.sandra.dou@borqs.net
www.borqs.com
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