NQ Mobile Inc. Reports Unaudited Financial Results for the First, Second, and Third Quarters of FY 2017
BEIJING, Dec. 14, 2017 /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 first, second, and third quarters ended March 31, 2017, June 30, 2017, and September 30, 2017 respectively.
Beginning with this period for the reported results for the first, second, and third quarters of 2017, FL Mobile Jiutian Technology Co., Ltd ("FL Mobile") and the live social mobile video business of Showself (Beijing) Technology Co., Ltd ("Showself") have been classified as discontinued operations. Therefore, given the significance of FL Mobile and Showself's live social mobile video business in previous periods, to enhance the comparability of these results going forward, the figures reported in this earning release have reflected these changes and the comparable periods presented have also been adjusted retrospectively. However, given the significant effect on operating results and reported financial information related to the divestments of FL Mobile and Showself's businesses, and the classification as discontinued operations, the key financial data is quantified in the discontinued section of each quarter below.
In addition, beginning with these reported results for the first, second, and third quarters of 2017 and going forward, the Company will report its revenue streams in the following two categories: Consumer and Enterprise. Revenues from consumers will consist of revenues from advertising services and revenues from other services (including mobile security revenues, excluding mobile gaming and mobile social network revenues which are part of the FL Mobile and Showself group which has been classified as discontinued operations). Revenues from enterprises will be broken down into product and service revenues. Revenues from products will come from hardware sales to enterprise users. Revenues from services will come from technology and software development services to enterprise users.
Highlights For The Nine Months Period From January 1, 2017 to September 30, 2017
-- Net Revenues of $44.2 million for the nine months ended September 30,
2017, up slightly from $43.2 million in the same period a year ago. GAAP
Net Loss attributable to NQ Mobile for the nine months ended September
30, 2017 was $116.7 million or $1.16 per fully diluted ADS. This
included the one-time, non-cash impairment of goodwill and intangible
assets of $97.9 million during the period.
-- Non-GAAP Net Income attributable to NQ Mobile for the nine months ended
September 30, 2017 was $15.1 million or $0.15 per fully diluted ADS.
"We look forward to moving forward with our future plans in the smart car businesses," said Mr. Zemin Xu, CEO of NQ Mobile Inc. "The Company is financially positioned and strategically positioned to participate in this enormous market."
"With the Divestments closed, we can now move ahead focused on the future business opportunities and growth," said Mr. Roland Wu, CFO of NQ Mobile Inc. "We have taken great strides in readying our organization around these future opportunities and we look forward to sharing our progress in the coming year."
First Quarter 2017 Results
Revenues
Net revenues in the first quarter of 2017 decreased 26.3% year-over-year to $12.0 million from $16.3 million in the same period in 2016.
Consumer Services revenues consist of advertising and other consumer services. Advertising revenues decreased 34.1% year-over-year to $2.3 million from $3.5 million in the same period in 2016. The decrease in advertising revenues was mainly due to lower overall activity within many of the traffic-related businesses as the Company prepares to optimize its operations and focus to the smart car businesses in the future. Other services revenues decreased 48.0% year-over-year to $1.0 million from $1.9 million in the same period in 2016. The decrease in other services revenues was mainly due to lower premium consumer security revenues as a result of the Company moving away from premium subscription services to an advertising-based model.
Enterprise Product revenues decreased 15.9% year-over-year to $8.5 million from $10.1 million in the same period in 2016. The decrease in enterprise product revenues was mainly due to weakness in customer demand in the first quarter of the year compared to the same period of last year.
Cost of Revenues
Cost of revenues in the first quarter of 2017 decreased 26.1% year-over-year to $12.9 million from $17.5 million in the same period in 2016. The year-over-year decrease was mainly due to lower hardware sales within the enterprise business and lower preload costs within the consumer services segment.
Gross Loss and Gross Margin
Gross loss in the first quarter of 2017 narrowed 23.0% to $0.9 million from $1.2 million in the same period in 2016. Negative gross margin, or gross loss as a percentage of net revenues, was 7.5% for the first quarter of 2017 and 7.2% for the first quarter of 2016.
Operating Expenses
Selling and marketing expenses in the first quarter of 2017 decreased 25.7% year-over-year to $1.1 million from $1.5 million in the same period in 2016. Non-GAAP selling and marketing expenses, which exclude share-based compensation decreased 18.5% year-over-year to $1.1 million from $1.4 million in the same period in 2016. The year-over-year decrease is primarily driven by a reduction in overall staff costs and lower overall marketing and advertising expenses.
General and administrative expenses in the first quarter of 2017 decreased 48.2% year-over-year to $8.7 million from $16.8 million in the same period in 2016. Non-GAAP general and administrative expenses, which exclude share-based compensation and amortization of intangible assets arising from acquisitions, increased 3.9% year-over-year to $8.7 million from $8.4 million in the same period in 2016.
Research and development expenses in the first quarter of 2017 increased 34.3% year-over-year to $3.5 million from $2.6 million in the same period in 2016. Non-GAAP research and development expenses, which exclude share-based compensation and amortization of intangible assets arising from acquisitions, increased 49.0% to $3.4 million from $2.3 million in the same period in 2016. The increase is mainly due to the Linkmotion business and some pilot projects.
Impairment of goodwill and intangible assets in the first quarter of 2017 was $80.6 million as the result of a one-time, non-cash impairment of goodwill and intangible assets in the remaining portion of the Security and Others reporting unit upon the disposal of Showself which qualifies as held for sale as of March 31, 2017 and triggers to impairment test for the remaining portion of this reporting unit as of March 31, 2017. The goodwill impairment loss for the remaining portion of this reporting unit was $77.8 million.
Total operating expenses in the first quarter of 2017 increased 348.3% year-over-year to $93.9 million from $21.0 million in the same period in 2016 driven mostly from the one-time, non-cash impairment of goodwill and intangible assets recorded in the first quarter of 2017 of $80.6 million. Excluding the impairment of goodwill and intangible assets in the first quarter, total operating expenses decreased 36.4% year-over-year to $13.3 million from $21.0 million in the same period in 2016.
Non-GAAP operating expenses, which exclude share-based compensation, the amortization of intangible assets arising from acquisitions, and impairment of goodwill and intangible assets in the first quarter of 2017 increased 9.8% year-over-year to $13.2 million from $12.0 million in the same period in 2016 due to the reasons detailed above in each respective operating expense category.
Share-based compensation expenses
Share-based compensation expenses, which were allocated to related operating cost and expenses line items, amounted to $0.1 million in the first quarter of 2017, compared to $8.1 million in the corresponding period in 2016, mainly due to a one-time immediately vested awards granted in the first quarter of 2016 and no new grants during the period.
Loss from Operations
Loss from operations in the first quarter of 2017 was $94.8 million, compared with $22.1 million in the same period in 2016, which was greatly impacted by the one-time, non-cash impairment of goodwill and intangible assets of $80.6 million in the first quarter of 2017. Excluding the impact of the impairment of goodwill and intangible assets in the first quarter of 2017, loss from operations was $14.2 million, compared with $22.1 million in the same period in 2016.
Non-GAAP loss from operations, which excludes share-based compensation, amortization of intangible assets arising from acquisitions, and impairment of goodwill and intangible assets, was $13.6 million compared to $12.4 million in the same period in 2016.
Foreign Exchange gain/ (loss), and Interest Expenses
Foreign exchange gain was $0.2 million in the first quarter of 2017, compared with a loss of $0.02 million in the same quarter of the previous year, which was affected by fluctuations in the foreign exchange rates. Interest expenses were $6.4 million in the first quarter of 2017, compared with $1.8 million in the same quarter a year ago. Interest expenses were primarily derived from interest expense related to convertible debts, offset by the interest income from certain term deposits.
Realized gain on Disposal of a Subsidiary
In the first quarter of 2017, we recorded a gain from the disposal of a subsidiary of $1.0 million, which was primarily driven by one-time non-cash gain related to the disposal of one of our enterprise businesses.
Income Tax
Income tax benefit was $0.5 million in the first quarter of 2017, compared with income tax benefit of $0.4 million in the same period in 2016.
Discontinued Operations
The Company presents FL Mobile and Showself's live social mobile video business as assets/liabilities held for sale on the balance sheets and as discontinued operation on the statements of operations for the quarter ended March 31, 2017 and also applied to all comparative periods presented. The total net revenues, net income attributable to us, and net income attributable to our non-controlling interests from FL Mobile for the three months ended March 31, 2017 was $35.9 million, $3.9 million, and $2.3 million, respectively. The total net revenues, net income attributable to us, and net income attributable to our non-controlling interests from Showself for the three months ended March 31, 2017 was $27.7 million, $3.0 million, and $1.5 million, respectively. Income from discontinued operations, net of income tax, was $10.7 million in the first quarter of 2017 compared to $14.5 million in the same period in 2016, the decrease in income from discontinued operations was due to the increase of customer acquisition cost.
Net Loss
Net loss attributable to NQ Mobile was $71.4 million in the first quarter of 2017, compared with net loss of $7.8 million in the same period in 2016. Non-GAAP net income attributable to NQ Mobile, which excludes share-based compensation, interest expenses related to convertible debts and fair value change of derivative liability, amortization of intangible assets arising from acquisitions, impairment losses from goodwill, intangible assets and investment, and income tax provision related to the amortization of intangible assets arising from acquisitions and impairment loss from goodwill, intangible assets and investment, was $15.7 million in the first quarter of 2017, compared with non-GAAP net income attributable to NQ Mobile of $5.4 million in the same period in 2016.
Cash and Cash Equivalents and Term Deposits
Cash and cash equivalents and term deposits amounted to $270.4 million as of March 31, 2017.
Cash Flow
Net cash flow used in operations for the first quarter of 2017 was $13.8 million.
Second Quarter 2017 Results
Revenues
Net revenues in the second quarter of 2017 increased 15.3% year-over-year to $14.7 million from $12.7 million in the same period in 2016.
Consumer Services revenues consist of advertising and other consumer services. Advertising revenues decreased 48.6% year-over-year to $2.6 million from $5.0 million in the same period in 2016. The decrease in advertising revenues was mainly due to lower overall activity within many of the traffic-related businesses as the Company prepares to optimize its operations and focus to the smart car businesses in the future. Other services revenues decreased 38.8% year-over-year to $0.9 million from $1.5 million in the same period in 2016. The decrease in other services revenues was mainly due to lower premium consumer security revenues as a result of the Company moving away from premium subscription services to an advertising based model.
Enterprise Product revenues increased 96.4% year-over-year to $11.1 million from $5.6 million in the same period in 2016. The increase in enterprise product revenues was mainly due to stronger overall hardware sales at Trustek.
Cost of Revenues
Cost of revenues in the second quarter of 2017 increased 31.6% year-over-year to $15.4 million from $11.7 million in the same period in 2016. The year-over-year increase was mainly due to higher hardware sales within the enterprise business and higher customer acquisition costs within the consumer services segment.
Gross Loss and Gross Margin
Gross loss in the second quarter of 2017 was $0.7 million compared with a gross profit of $1.1 million in the same period in 2016. Negative gross margin, or gross loss as a percentage of net revenues, was 4.5% for the second quarter of 2017.
Operating Expenses
Selling and marketing expenses in the second quarter of 2017 decreased 45.2% year-over-year to $1.3 million from $2.3 million in the same period in 2016. Non-GAAP selling and marketing expenses, which exclude share-based compensation decreased 33.3% year-over-year to $1.3 million from $2.0 million in the same period in 2016. The year-over-year decrease is primarily driven by a reduction in overall staff costs and lower overall marketing and advertising expenses.
General and administrative expenses in the second quarter of 2017 increased 90.8% year-over-year to $13.6 million from $7.1 million in the same period in 2016. The increase in G&A expenses came mostly from the increase in share-based compensation expenses in the period. Non-GAAP general and administrative expenses, which exclude share-based compensation and amortization of intangible assets arising from acquisitions, increased 42.5% year-over-year to $8.3 million from $5.9 million in the same period in 2016. The increase in Non-GAAP G&A expenses mainly due to increase in legal, professional and consulting fees in the period.
Research and development expenses in the second quarter of 2017 increased 3.1% year-over-year to $3.5 million from $3.4 million in the same period in 2016. Non-GAAP research and development expenses, which exclude share-based compensation and amortization of intangible assets arising from acquisitions, increased 12.7% to $3.5 million from $3.1 million in the same period in 2016. The increase is mainly due to the Linkmotion business and some pilot projects.
Total operating expenses in the second quarter of 2017 increased 43.1% year-over-year to $18.3 million from $12.8 million in the same period in 2016.
Non-GAAP operating expenses, which exclude share-based compensation, the amortization of intangible assets arising from acquisitions, and impairment of goodwill and intangible assets in the second quarter of 2017 increased 20.4% year-over-year to $13.1 million from $10.9 million in the same period in 2016.
Share-based compensation expenses
Share-based compensation expenses, which were allocated to related operating cost and expenses line items, amounted to $5.1 million in the second quarter of 2017, compared to $1.1 million in the corresponding period in 2016. The increase was mainly due to the issuance of new restricted shares pursuant to incentives and employment contracts.
Loss from Operations
Loss from operations in the second quarter of 2017 was $19.0 million, compared with $11.7 million in the same period in 2016.
Non-GAAP loss from operations, which excludes share-based compensation, amortization of intangible assets arising from acquisitions, and impairment of goodwill and intangible assets, was $13.5 million compared to $8.7 million in the same period in 2016.
Foreign Exchange gain/ (loss), and Interest Expenses
Foreign exchange gain was $0.2 million in the second quarter of 2017, compared with a loss of $0.3 million in the same quarter of the previous year, which was affected by fluctuations in the foreign exchange rates. Interest expenses were $6.4 million in the second quarter of 2017, compared with $1.8 million in the same quarter a year ago. Interest expenses were primarily derived from interest expense related to convertible debts, offset by the interest income from certain term deposits.
Income Tax
Income tax benefit was $0.2 million in the second quarter of 2017, compared with income tax benefit of $0.3 million in the same period in 2016.
Discontinued Operations
The Company presents FL Mobile and Showself's live social mobile video business as assets/liabilities held for sale on the balance sheets and as discontinued operation on the statements of operations for the quarter ended June 30, 2017 and also applied to all comparative periods presented. The total net revenues, net income attributable to us, and net income attributable to our non-controlling interests from FL Mobile for the three months ended June 30, 2017 was $42.2 million, $2.3 million, and $1.3 million, respectively. The total net revenues, net income attributable to us, and net income attributable to our non-controlling interests from Showself for the three months ended June 30, 2017 was $29.3 million, $3.3 million, and $1.7 million, respectively. Income from discontinued operations, net of income tax, was $8.6 million in the second quarter of 2017 compared to $18.4 million in the same period in 2016, mainly due to the increase of customer acquisition cost.
Net (Loss)/Income
Net Loss attributable to NQ Mobile was $20.9 million in the second quarter of 2017, compared with a net income of $0.5 million in the same period in 2016. Non-GAAP net loss attributable to NQ Mobile, which excludes share-based compensation, interest expenses related to convertible debts and fair value change of derivative liability, amortization of intangible assets arising from acquisitions, impairment losses from goodwill, intangible assets and investment, and income tax provision related to the amortization of intangible assets arising from acquisitions and impairment loss from goodwill, intangible assets and investment, was $4.9 million in the second quarter of 2017, compared with non-GAAP net income attributable to NQ Mobile of $6.8 million in the same period in 2016.
Cash and Cash Equivalents and Term Deposits
Cash and cash equivalents and term deposits amounted to $243.6 million as of June 30, 2017.
Cash Flow
Net cash used in operations for the second quarter of 2017 was 27.1million.
Third Quarter 2017 Results
Revenues
Net revenues in the third quarter of 2017 increased 23.7% year-over-year to $17.5 million from $14.1 million in the same period in 2016.
Consumer Services revenues consist of advertising and other consumer services. Advertising revenues decreased 45.2% year-over-year to $2.3 million from $4.2 million in the same period in 2016. The decrease in advertising revenues was mainly due to lower overall activity within many of the traffic-related businesses as the Company prepares to optimize its operations and focus to the smart car businesses in the future. Other services revenues decreased 15.5% year-over-year to $1.2 million from $1.4 million in the same period in 2016. The decrease in other services revenues was mainly due to lower premium consumer security revenues as a result of the Company moving away from premium subscription services to an advertising based model.
Enterprise Product revenues increased 71.4% year-over-year to $13.8 million from $8.0 million in the same period in 2016. The increase in enterprise product revenues was mainly due to stronger overall hardware sales at Trustek.
Cost of Revenues
Cost of revenues in the third quarter of 2017 increased 17.5% year-over-year to $16.9 million from $14.4 million in the same period in 2016. The year-over-year increase was mainly due to higher hardware sales within the enterprise business and higher customer acquisition costs within the consumer services segment.
Gross Profit/Loss and Gross Margin
Gross Profit in the third quarter of 2017 was $0.6 million compared with a gross loss of $0.3 million in the same period in 2016. Gross margin, or gross profit as a percentage of net revenues, was 3.3% for the third quarter of 2017.
Operating Expenses
Selling and marketing expenses in the third quarter of 2017 decreased 32.7% year-over-year to $1.2 million from $1.8 million in the same period in 2016. Non-GAAP selling and marketing expenses, which exclude share-based compensation decreased 34.3% year-over-year to $1.2 million from $1.8 million in the same period in 2016. The year-over-year decrease is primarily driven by a reduction in overall staff costs and lower overall marketing and advertising expenses.
General and administrative expenses in the third quarter of 2017 decreased 46.6% year-over-year to $6.7 million from $12.6 million in the same period in 2016. Non-GAAP general and administrative expenses, which exclude share-based compensation and amortization of intangible assets arising from acquisitions, decreased 23.7% year-over-year to $6.6 million from $8.6 million in the same period in 2016.
Research and development expenses in the third quarter of 2017 decreased 19.4% year-over-year to $2.6 million from $3.2 million in the same period in 2016. Non-GAAP research and development expenses, which exclude share-based compensation and amortization of intangible assets arising from acquisitions, decreased 20.6% year-over-year to $2.5 million from $3.1 million in the same period in 2016. The decrease is mainly due to lower overall spend associated with consumer and traffic related businesses as the Company shifts its focus to the smart car businesses in the future.
Impairment of goodwill and intangible assets in the third quarter of 2017 was $17.3 million as the result of a one-time, non-cash impairment of goodwill and intangible assets in the remaining portion of the Security and Others reporting unit.
Total operating expenses in the third quarter of 2017 increased 58.1% year-over-year to $27.7 million from $17.5 million in the same period in 2016. The increase was due to the impairment of goodwill and intangible assets from the remaining portion of the Security and Others reporting unit.
Non-GAAP operating expenses, which exclude share-based compensation, the amortization of intangible assets arising from acquisitions, and impairment of goodwill and intangible assets in the third quarter of 2017 decreased 24.4% year-over-year to $10.2 million from $13.5 million in the same period in 2016.
Share-based Compensation Expenses
Share-based compensation expenses, which were allocated to related operating cost and expense line times, amounted to $0.2 million in the third quarter of 2017, compared to $3.4 million in the corresponding period in 2016.
Loss from Operations
Loss from operations in the third quarter of 2017 was $27.2 million, compared to $17.8 million in the same period in 2016.
Non-GAAP loss from operations, which excludes share-based compensation, amortization of intangible assets arising from acquisitions, and impairment of goodwill and intangible assets, was $9.4 million compared to $12.8 million in the same period in 2016.
Foreign Exchange gain/(loss), and Interest Expenses
Foreign exchange gain was $0.3 million in the third quarter of 2017, compared with a loss of $0.3 million in the same quarter of the previous year, which was affected by fluctuations in the foreign exchange rates. Interest expenses were $6.4 million in the third quarter of 2017, compared to $1.9 million in the same quarter a year ago. Interest expenses were primarily derived from interest expenses related to convertible debts, offset by the interest income from certain term deposits.
Income Tax
Income tax benefit was $0.6 million in the third quarter of 2017, compared with income tax benefit of $1.0 million in the same period in 2016.
Discontinued Operations
The Company presents FL Mobile and Showself's live social mobile video business as assets/liabilities held for sale on the balance sheets and as discontinued operation on the statements of operations for the quarter ended September 30, 2017 and also applied to all comparative periods presented. The total net revenues, net income attributable to us, and net income attributable to our non-controlling interests from FL Mobile for the three months ended September 30, 2017 was $43.5 million, $2.0 million, and $1.8 million, respectively. The total net revenues, net income attributable to us, and net income attributable to our non-controlling interests from Showself for the three months ended September 30, 2017 was $32.8 million, $4.6 million, and $2.2 million, respectively. Income from discontinued operations, net of income tax, was $10.6 million in the third quarter of 2017 compared to $14.7 million in the same period in 2016, mainly due to the increase of customer acquisition cost.
Net (Loss)/Income
Net Loss attributable to NQ Mobile was $24.4 million in the third quarter of 2017, compared with $9.0 million in the same period in 2016. Non-GAAP net income attributable to NQ Mobile, which excludes share-based compensation, interest expenses related to convertible debts and fair value change of derivative liability, amortization of intangible assets arising from acquisitions, impairment losses from goodwill, intangible assets and investment, and income tax provision related to the amortization of intangible assets arising from acquisitions and impairment loss from goodwill, intangible assets and investment, was $4.3 million in the third quarter of 2017, compared with non-GAAP net loss attributable to NQ Mobile of $0.2 million in the same period in 2016.
Cash, Cash Equivalents, Term Deposits and Restricted Cash
Cash, cash equivalents, term deposits, and restricted cash amounted to $248.8 million as of September 30, 2017.
Cash Flow
Net cash used in operations for the third quarter of 2017 was $11.7 million.
Other Significant Events
Completion of the FL Mobile Divestment and the Sale of Showself's Live Social Video Business
The Company announced in a press release on December 14, 2017 that it had completed the divestment of FL Mobile and sale of Showself's Live Social Video Business. The Company received in aggregate a total of approximately RMB3,320 million, consisting of approximately RMB1,550 million in cash and RMB1,770 million in a senior note, which together totals 100% of the agreed upon price pursuant to the definitive agreements with Tongfang Investment Fund Series SPC (the "Investor"), an affiliate of Tongfang Securities Limited, a part of Tsinghua Tongfang. The key terms of the senior note include an interest payment of 8% per annum for 12 months, and may be extended for another 12 months at the Company's option, and can be redeemed early by the Investor for principle plus accrued interest in cash payments to the Company at any time.
Buyback Program
The Company announced on November 13, 2017 that its board of directors has authorized a buyback program under which the Company may repurchase up to $150 million of its shares or early partial redemption of the convertible notes over the next 12 months. The repurchases may be made from time to time on the open market, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on market conditions and in accordance with all applicable rules and regulations. The Company plans to fund the repurchases made under this plan from existing cash on hand.
Subsequent to the announcement on November 13, 2017, the Company provided an update to its buyback program. On November 20, 2017, the Company announced it had negotiated with Zhongzhi Hi-Tech Overseas Investment Limited ("Zhongzhi") for an early partial redemption of the convertible note and reached an agreement to redeem $88 million of the principal amount of the convertible notes issued to Zhongzhi in October 2016. In addition, the Company and Zhongzhi agreed that if Zhongzhi converts the remaining $132 million of convertible notes to the Company's American Depository Shares ("ADS") on or before March 31, 2018, the conversion price will be revised to $5.00 per ADS. If Zhongzhi converts the remaining $132 million of convertible notes after March 31, 2018 to the note's maturity the conversion price will remain $6.00 per ADS.
NQ Mobile Files Form 20-F for the year 2016
As announced on April 26, 2017, the Company filed its annual report for the year ended December 31, 2016 on Form 20-F with the Securities and Exchange Commission. The annual report, which contains the unqualified audited financial statements for the three years ended December 31, 2016, can be accessed and downloaded through the investor relations section of the Company's website at http://ir.nq.com.
Conference Call Information
NQ Mobile's management team will hold an earnings conference call to discuss its results and outlook at 7:30 PM U.S. Eastern Time on Thursday, December 14, 2017 (8:30 AM Beijing/Hong Kong Time on Friday, December 15, 2017).
The dial-in details for the conference call are:
U.S. Toll Free: 1-866-519-4004
International: 1-845-675-0437
United Kingdom: +44 203-621-4779
China Mainland: 4006208038 or 8008190121
Conference ID: 5391237
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 Thursday, December 14, 2017 through December 21, 2017. The dial-in details for the replay are:
U.S. Toll Free: +1-855-452-5696
International: +1-646-254-3697
Conference ID: 32786286
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.
Follow us on Twitter @NQMobileIR.
About NQ Mobile
NQ Mobile Inc. (NYSE: NQ) is a leading global provider of mobile Internet services. NQ Mobile's portfolio of offerings includes mobile game publishing platforms, mobile advertising platforms, mobile entertainment applications and platforms, mobile security and productivity applications and other mobile applications. 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, income from operations and net loss attributable to NQ Mobile, which are adjusted from results based on GAAP to exclude share-based compensation expenses, interest expenses related to convertible debts and fair value change of derivative liability, amortization of intangible assets arising from acquisitions, and impairment losses and taxes impact. The Company also uses non-GAAP fully diluted earnings per ADS, which is the non-GAAP net (loss)/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, income from operations and net loss attributable to NQ Mobile, excluding share-based compensation expenses, interest expenses related to convertible debts and fair value change of derivative liability, amortization of intangible assets arising from acquisitions, and impairment losses and taxes impact are that these items has been and may continue to be a significant 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.
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.
INVESTOR RELATIONS:
NQ Mobile Inc.
Email: investors@nq.com
Phone:
+1 469 310 5281
+86 10 6452 2017
Twitter : @NQMobileIR
NQ MOBILE INC.
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
(In thousands)
As of
-----
September 30, June 30, March 31, December 31,
2017 2017 2017 2016
---- ---- ---- ----
US$ US$ US$ US$
ASSETS
Current assets:
Cash and cash equivalents 9,896 13,661 44,616 43,220
Term deposits 228,065 229,978 225,830 223,728
Restricted cash 10,848 - - -
Accounts receivable, net of allowance of US$21,790, 11,086 12,721 12,324 16,148
US$20,481, US$18,544 and US$16,423 as of September 30,
June 30, March 31, 2017 and December 31, 2016 respectively
Inventory 3,878 1,707 3,784 1,922
Deferred tax assets, current portion - - - 188
Prepaid expenses and other current assets, net of allowance of 31,264 35,561 35,710 33,907
US$7,257, US$7,160, US$7,076 and US$7,144 as of
September 30, June 30, March 31, 2017 and December 31,
2016, respectively
Assets held for sale classified as current assets 365,299 361,423 356,260 176,585
------- ------- ------- -------
Total current assets 660,336 655,051 678,524 495,698
------- ------- ------- -------
Non-current assets:
Equity investments, net 86,018 85,792 75,733 67,911
Property and equipment, net 2,548 2,650 2,689 2,798
Intangible assets, net 1,872 5,089 5,549 9,067
Goodwill 6,512 20,639 20,279 118,851
Deferred tax assets, non-current portion 1,865 1,582 1,461 1,427
Consideration prepaid for acquiring an investee 1,354 1,354 990 4,081
Other non-current assets 3,591 3,303 232 1,003
Assets held for sale classified as non-current assets - - - 152,792
--- --- --- -------
Total Assets 764,096 775,460 785,457 853,628
======= ======= ======= =======
LIABILITIES
Current liabilities:
Advance from customers 3,012 1,202 993 852
Accounts payable 6,827 7,877 8,672 8,537
Deferred revenue 4,528 4,413 4,358 4,626
Consideration received from shareholder 48,625 47,638 46,776 46,521
Consideration received from investors 28,355 28,587 28,182 -
Accrued expenses and other current liabilities 8,375 15,414 20,700 20,039
Tax payable 2,797 2,980 2,965 2,946
Short term borrowing 5,850 2,850 2,850 2,850
Liabilities held for sale classified as current liabilities 55,133 55,232 62,362 73,272
------ ------
Total current liabilities 163,502 166,193 177,858 159,643
------- ------- ------- -------
Non-current liabilities:
Derivative liability of contingent interest 9,716 8,336 5,419 7,205
Convertible debt, net of unamortized debt issuance costs and 212,403 210,553 208,766 207,040
derivative liability of contingent interest
Deferred tax liabilities 1,721 2,136 2,446 3,247
Liabilities held for sale classified as non-current liabilities - - - 729
--- ---
Total Liabilities 387,342 387,218 394,489 377,864
------- ------- ------- -------
EQUITY
NQ Mobile Inc.'s shareholders' equity 299,777 312,065 317,292 385,843
Non-controlling interest 76,977 76,177 73,676 89,921
------ ------
Total equity 376,754 388,242 390,968 475,764
------- ------- ------- -------
Total Liabilities and Equity 764,096 775,460 785,457 853,628
======= ======= ======= =======
NQ MOBILE INC.
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except for share and per share data)
Three months ended
------------------
September 30, June 30, March 31, September 30, June 30, March 31,
2016
2017 2017 2017 2016 2016
----
US$ US$ US$ US$ US$ US$
Net Revenues
Consumer
-Advertising 2,317 2,594 2,308 4,225 5,043 3,501
-Other services 1,191 919 998 1,410 1,501 1,920
Enterprise
-Sales of product 13,790 11,092 8,481 8,047 5,649 10,083
-Service 186 86 217 456 554 788
--- --- --- --- --- ---
Total net revenues 17,484 14,691 12,004 14,138 12,747 16,292
Cost of revenues* (16,906) (15,358) (12,910) (14,393) (11,667) (17,469)
------- ------- ------- ------- ------- -------
Gross profit/ (loss) 578 (667) (906) (255) 1,080 (1,177)
--- ---- ---- ---- ----- ------
Operating expenses:
Selling and marketing expenses* (1,194) (1,258) (1,126) (1,773) (2,296) (1,515)
General and administrative expenses* (6,715) (13,570) (8,720) (12,579) (7,113) (16,844)
Research and development expenses* (2,573) (3,505) (3,482) (3,194) (3,399) (2,592)
Impairment of goodwill and intangible assets (17,254) - (80,604) - - -
------- --- ------- --- --- ---
Total operating expenses (27,736) (18,333) (93,932) (17,546) (12,808) (20,951)
------- ------- ------- ------- ------- -------
Loss from operations (27,158) (19,000) (94,838) (17,801) (11,728) (22,128)
------- ------- ------- ------- ------- -------
Interest expense (6,428) (6,393) (6,385) (1,947) (1,794) (1,800)
Foreign exchange gain /(loss), net 266 217 159 (291) (283) (22)
Realized gain on disposal of a subsidiary - - 1,038 - - -
Investment (loss) /income , net (17) 47 5 770 (352) 936
Investment impairment loss (2,091) - - - - -
Fair value change of derivative liability (1,381) (2,917) 1,786 - - -
Other income, net 542 521 631 824 859 352
--- --- --- --- --- ---
Loss before income taxes (36,267) (27,525) (97,604) (18,445) (13,298) (22,662)
------- ------- ------- ------- ------- -------
Income tax benefit 572 201 481 999 292 423
--- --- --- --- --- ---
Net loss from continuing operation (35,695) (27,324) (97,123) (17,446) (13,006) (22,239)
------- ------- ------- ------- ------- -------
Discontinued operations:
Income from discontinued operations 10,567 8,572 10,702 14,696 18,355 14,467
(net of income tax benefit/(expense) of
US$ 1,211, US$197, US$(24), US$ 367,
US$(665) and US$(2,617) for three
months ended September 30, 2017, June
30, 2017, March 31, 2017, September
30, 2, 016June 30, 2016 and March 31,
2016 respectively)
Net (loss)/income (25,128) (18,752) (86,421) (2,750) 5,349 (7,772)
------- ------- ------- ------ ----- ------
Net loss/(income) attributable to the
non-controlling interest
Net loss attributable to the non- 4,670 852 18,843 700 671 994
controlling interest from continuing
operation
Net income attributable to the non- (3,969) (2,976) (3,774) (6,972) (5,512) (1,052)
controlling interest from discontinued
operation
Net (loss)/income attributable to (24,427) (20,876) (71,352) (9,022) 508 (7,830)
NQ Mobile Inc.
Net (loss)/income (25,128) (18,752) (86,421) (2,750) 5,349 (7,772)
Other comprehensive income/(loss): 11,402 9,503 5,326 (4,658) (17,880) 3,495
foreign currency translation adjustment
Comprehensive loss (13,726) (9,249) (81,095) (7,408) (12,531) (4,277)
------- ------ ------- ------ ------- ------
Comprehensive (income)/loss (800) (2,501) 14,115 (5,765) (3,095) (479)
attributable to non-controlling interest
Comprehensive loss attributable (14,526) (11,750) (66,980) (13,173) (15,626) (4,756)
to NQ Mobile Inc.
Net (loss)/earnings per Class A and (0.0481) (0.0414) (0.1429) (0.0182) 0.0010 (0.0160)
Class B common share, basic & diluted
Net loss per Class A and Class B (0.0611) (0.0525) (0.1567) (0.0338) (0.0252) (0.0435)
common share from continuing
operations, basic & diluted
Net earnings per Class A and Class 0.0130 0.0111 0.0138 0.0156 0.0262 0.0275
B common share from discontinued
operations, basic & diluted
Net (loss)/earnings per ADS, basic & (0.2405) (0.2070) (0.7145) (0.0910) 0.0050 (0.0800)
diluted
Net loss per ADS from continuing (0.3055) (0.2625) (0.7835) (0.1690) (0.1260) (0.2175)
operations, basic & diluted
Net earnings per ADS from 0.0650 0.0555 0.0690 0.0780 0.1310 0.1375
discontinued operations, basic & diluted
Weighted average number of common shares
outstanding:
490,111,171 488,601,213
Basic & Diluted 507,475,590 504,407,621 499,461,680 495,837,463
*Share-based compensation expenses included in:
Cost of revenues 7 8 103 (10) 9 10
Selling and marketing expenses 7 (54) 20 (33) 330 158
General and administrative expenses 163 5,233 - 3,424 686 7,871
Research and development expenses - (66) 3 (16) 27 28
Total 177 5,121 126 3,365 1,052 8,067
NQ MOBILE INC.
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except for share and per share data)
Nine months ended Six months ended
September 30, September 30, June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
US$ US$ US$ US$
Net Revenues
Consumer
-Advertising services 7,219 12,769 4,902 8,544
-Other services 3,108 4,831 1,917 3,421
Enterprise
-Sales of product 33,363 23,779 19,573 15,732
-Service 489 1,798 303 1,342
--- ----- --- -----
Total net revenues 44,179 43,177 26,695 29,039
Cost of revenues* (45,174) (43,529) (28,268) (29,136)
------- ------- ------- -------
Gross loss (995) (352) (1,573) (97)
---- ---- ------ ---
Operating expenses:
Selling and marketing expenses* (3,578) (5,584) (2,384) (3,811)
General and administrative expenses* (29,005) (36,536) (22,290) (23,957)
Research and development expenses* (9,560) (9,185) (6,987) (5,991)
Impairment of goodwill and intangible
assets (97,858) - (80,604) -
------- --- ------- ---
Total operating expenses (140,001) (51,305) (112,265) (33,759)
-------- ------- -------- -------
Loss from operations (140,996) (51,657) (113,838) (33,856)
-------- ------- -------- -------
Interest expense (19,206) (5,541) (12,778) (3,594)
Foreign exchange gain /(loss), net 642 (596) 376 (305)
Realized gain on disposal of a subsidiary 1,038 - 1,038 -
Investment income 35 1,354 52 584
Investment impairment loss (2,091) - - -
Fair value change of derivative liability (2,512) - (1,131) -
Other income, net 1,694 2,035 1,152 1,211
----- ----- ----- -----
Loss before income taxes (161,396) (54,405) (125,129) (35,960)
-------- ------- -------- -------
Income tax benefit 1,254 1,714 682 715
----- ----- --- ---
Net loss from continuing operation (160,142) (52,691) (124,447) (35,245)
-------- ------- -------- -------
Discontinued operations:
Income from discontinued operations (net of income tax 29,841 47,518 19,274 32,822
benefit/(expense) of US$ 1,384, US$ (2,915) ,US$173,
US$(3,282) for nine months ended September 30, 2017, and
September 30, 2016 and six months ended June 30, 2017, and
June 30, 2016respectively)
Net loss (130,301) (5,173) (105,173) (2,423)
-------- ------ -------- ------
Net loss/(income) attributable to the non-controlling interest
Net loss attributable to the non-
controlling interest 24,365 2,365 19,695 1,665
from continuing operation
Net income attributable to the non-
controlling (10,719) (13,536) (6,750) (6,564)
interest from discontinued operation
Net loss attributable to NQ Mobile Inc. (116,655) (16,344) (92,228) (7,322)
======== ======= ======= ======
Net loss (130,301) (5,173) (105,173) (2,423)
Other comprehensive income/(loss): foreign 26,231 (19,043) 14,829 (14,385)
currency translation adjustment
Comprehensive loss (104,070) (24,216) (90,344) (16,808)
-------- ------- ------- -------
Comprehensive loss/(income) attributable to non- 10,814 (9,339) 11,614 (3,574)
controlling interest
---
Comprehensive loss attributable to NQ Mobile Inc. (93,256) (33,555) (78,730) (20,382)
------- ------- ------- -------
Net loss per Class A and Class B common share,
basic (0.2315) (0.0333) (0.1837) (0.0150)
& diluted
Net loss per Class A and Class B common
share (0.2695) (0.1024) (0.2087) (0.0686)
from continuing operations, basic & diluted
Net earnings per Class A and Class B common 0.0380 0.0691 0.0250 0.0536
share from discontinued operations, basic &
diluted
Net loss per ADS, basic & diluted (1.1575) (0.1665) (0.9185) (0.0750)
Net loss per ADS from continuing operations,
basic & (1.3475) (0.5120) (1.0435) (0.3430)
diluted
Net earnings per ADS from discontinued operations, basic & 0.1900 0.3455 0.1250 0.2680
diluted
Weighted average number of common shares outstanding:
-Basic & Diluted 503,810,985 491,532,385 501,948,313 489,356,192
*Share-based compensation expenses
included in:
Cost of revenues 118 9 111 19
Selling and marketing
expenses (27) 455 (34) 488
General and administrative
expenses 5,396 11,981 5,233 8,557
Research and development
expenses (63) 39 (63) 55
Total 5,424 12,484 5,247 9,119
NQ MOBILE INC.
NON-GAAP MEASURE RECONCILIATIONS
(In thousands, except for share and per share data)
Three months ended
------------------
September 30, June 30, March 31, September 30, June 30, March 31
2017 2017 2017 2016 2016 2016
----
US$ US$ US$ US$ US$ US$
Selling and marketing
expenses under GAAP (1,194) (1,258) (1,126) (1,773) (2,296) (1,515)
Adjustment (a) 7 (54) 20 (33) 330 158
--- --- --- --- --- ---
Non-GAAP selling and
marketing expenses (1,187) (1,312) (1,106) (1,806) (1,966) (1,357)
====== ====== ====== ====== ====== ======
General and administrative
expenses under GAAP (6,715) (13,570) (8,720) (12,579) (7,113) (16,844)
Adjustment (a) 163 5,233 - 3,424 686 7,871
Adjustment (c) - - - 565 577 577
--- --- --- --- --- ---
Non-GAAP general and
administrative expenses (6,552) (8,337) (8,720) (8,590) (5,850) (8,396)
====== ====== ====== ====== ====== ======
Research and development
expenses under GAAP (2,573) (3,505) (3,482) (3,194) (3,399) (2,592)
Adjustment (a) - (66) 3 (16) 27 28
Adjustment (c) 114 114 114 114 305 305
--- --- --- --- --- ---
Non-GAAP research and
development expenses (2,459) (3,457) (3,365) (3,096) (3,067) (2,259)
====== ====== ====== ====== ====== ======
Loss from
operations under
GAAP (27,158) (19,000) (94,838) (17,801) (11,728) (22,128)
Adjustment (a) 177 5,121 126 3,365 1,052 8,067
Adjustment (c) 358 351 556 1,626 1,954 1,674
Adjustment (d) 17,254 - 80,604 - - -
------ --- ------ --- --- ---
Non-GAAP loss from
operations (9,369) (13,528) (13,552) (12,810) (8,722) (12,387)
====== ======= ======= =======
Net (loss)/income attributable to
NQ Mobile Inc. under GAAP (71,352) (7,830)
(24,427) (20,876) (9,022) 508
Adjustment (a) 177 5,121 126 3,365 1,052 8,067
Adjustment (b) 8,730 10,204 5,440 2,653 2,338 2,330
Adjustment (c) 1,067 1,063 1,853 3,325 3,681 3,400
Adjustment (d) 19,345 - 80,604 - - -
Adjustment (e) (570) (454) (924) (502) (818) (593)
---- ---- ---- ---- ---- ----
Non-GAAP net income/(loss)
attributable to NQ Mobile
Inc. 4,322 (4,942) 15,747 6,761 5,374
(181)
Non- GAAP weighted average number of diluted ADS
outstanding:
-Basic 101,495,118 100,881,524 99,892,336 99,167,493 98,022,234 97,720,243
-Diluted 101,896,886 100,881,524 100,506,191 99,167,493 99,404,207 98,910,564
Non-GAAP earnings/
(loss) per ADS, basic 0.0426 (0.0490) 0.1576 (0.0018) 0.0690 0.0550
Non-GAAP earnings/
(loss) per ADS, diluted 0.0424 (0.0490) 0.1567 (0.0018) 0.0680 0.0543
Adjustment to
exclude the
share-based
compensation
expenses for
(a) each period
Adjustment to
exclude the
interest
expenses
related to
convertible
debt and fair
value change
of derivative
(b) liability
Adjustment to
exclude the
amortization
of intangible
assets arising
from
(c) acquisitions
Adjustment to
exclude
impairment
loss from
goodwill,
intangible
assets arising
from
acquisitions
(d) and investment
To adjust
income tax
provision
related to
item (c) and
(d). Deferred
tax
liabilities
was recognized
along with
intangible
assets
recognized
related to
acquisitions.
The
amortization
and impairment
of such
intangible
assets
resulted in
reversal of
corresponding
deferred tax
liabilities
that impact
deferred
income tax
expense. Other
non-GAAP to
GAAP
reconciling
items have no
income tax
(e) effect *
*The
reconciliation
items (a) and
(b) were
recorded in
entities in
tax free
jurisdictions
hence no
income tax
implications.
NQ MOBILE INC.
NON-GAAP MEASURE RECONCILIATIONS
(In thousands, except for share and per share data)
Nine months ended Six months ended
September 30, September 30, June 30, June 30,
2017 2016 2017 2016
---- ---- ----
US$ US$ US$ US$
Selling and
marketing
expenses
under GAAP (3,578) (5,584) (2,384) (3,811)
Adjustment (a) (27) 455 (34) 488
Non-GAAP
selling and
marketing
expenses (3,605) (5,129) (2,418) (3,323)
======
General and
administrative
expenses
under GAAP (29,005) (36,536) (22,290) (23,957)
Adjustment (a) 5,396 11,981 5,233 8,557
Adjustment (c) - 1,719 - 1,154
Non-GAAP
general and
administrative
expenses (23,609) (22,836) (17,057) (14,246)
=======
Research and
development
expenses
under GAAP (9,560) (9,185) (6,987) (5,991)
Adjustment (a) (63) 39 (63) 55
Adjustment (c) 342 724 228 610
Non-GAAP
research and
development
expenses (9,281) (8,422) (6,822) (5,326)
======
Loss from
operations
under GAAP (140,996) (51,657) (113,838) (33,856)
Adjustment (a) 5,424 12,484 5,247 9,119
Adjustment (c) 1,265 5,254 907 3,628
Adjustment (d) 97,858 - 80,604 -
Non-GAAP loss
from
operations (36,449) (33,919) (27,080) (21,109)
=======
Net loss
attributable
to NQ Mobile
Inc. under
GAAP (116,655) (16,344) (92,228) (7,322)
Adjustment (a) 5,424 12,484 5,247 9,119
Adjustment (b) 24,374 7,321 15,644 4,668
Adjustment (c) 3,983 10,406 2,916 7,081
Adjustment (d) 99,949 - 80,604 -
Adjustment (e) (1,948) (1,913) (1,378) (1,411)
Non-GAAP net
income
attributable to
NQ Mobile Inc. 15,127 11,954 10,805 12,135
======
Non- GAAP weighted
average number of
diluted ADS
outstanding:
-Basic 100,762,197 98,306,477 100,389,663 97,871,238
-Diluted 101,305,512 99,561,290 100,980,038 99,157,386
Non-GAAP
earnings per
ADS, basic 0.1501 0.1216 0.1076 0.1240
Non-GAAP
earnings per
ADS, diluted 0.1493 0.1201 0.1070 0.1224
Adjustment to
exclude the
share-based
compensation
expenses for
(a) each period
Adjustment to
exclude the
interest
expenses
related to
convertible
debt and fair
value change
of derivative
(b) liability
Adjustment to
exclude the
amortization
of intangible
assets
arising from
(c) acquisitions
Adjustment to
exclude
impairment
loss from
goodwill,
intangible
assets
arising from
acquisitions
and
(d) investment
To adjust
income tax
provision
related to
item (c) and
(d). Deferred
tax
liabilities
was
recognized
along with
intangible
assets
recognized
related to
acquisitions.
The
amortization
and
impairment of
such
intangible
assets
resulted in
reversal of
corresponding
deferred tax
liabilities
that impact
deferred
income tax
expense.
Other non-
GAAP to GAAP
reconciling
items have no
income tax
(e) effect *
*The
reconciliation
items (a) and
(b) were
recorded in
entities in
tax free
jurisdictions
hence no
income tax
implications.
View original content:http://www.prnewswire.com/news-releases/nq-mobile-inc-reports-unaudited-financial-results-for-the-first-second-and-third-quarters-of-fy-2017-300571716.html
SOURCE NQ Mobile Inc.
