SGOCO Group, Ltd.
Q1 2013 Earnings Call Transcript
Published:
- Operator:
- Ladies and gentlemen, thank you for standing by. Welcome to the SGOCO Group First Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session and instructions will be provided at that time. (Operator Instructions) At this time, I would now like to turn the conference over to Serena Wu, Investor Relations for SGOCO. Please go ahead.
- Serena Wu:
- Thank you, operator. Good morning, everyone and thank you for joining us on SGOCO’s first quarter 2013 earnings conference call. My name is Serena Wu, and I am the Investor Relations Manager of the company. Also joining me on today’s call are Mr. David Xu, CFO of SGOCO Group, and Mr. (Tony Zhao), Finance Manager of SGOCO Group. Before we get started, I would like to remind everyone that this conference call may contain forward-looking statements, which are subject to risks and uncertainties. Our earnings release issued on June 10 and our SEC filings, including our most recent Annual Report, contain additional information about factors that could cause actual results to differ from management expectations. All amounts noted in this conference call are in U.S. dollars unless otherwise noted. The company does not assume any obligations to update information discussed in this conference call or in its filing. Now, I would like to turn the call over to Mr. David Xu, the CFO of the company.
- David Xu:
- Thank you, Serena. Hi everyone. We are very pleased to announce that SGOCO's started the year 2013 with a solid year-over-year growth for both of its revenue and profit. For the first quarter of 2013, SGOCO achieved its topline growth of 58% and bottom line growth of around 88%, on a year-over-year basis, as compared with the first quarter of 2012. Our business has entered its one year anniversary since we have started our manufacturing facility in November 2011. Hence we do see that the first quarter of 2013 in the first comparable quarter after our business model transitioned to its light-asset business model. In the management's view, we believe that the solid operational results demonstrate that the light-asset business model has provided SGOCO with great flexibility and scalability in growing itself and in translating the sales increase into higher bottom line growth. With that, I will hand the call back to Serena, who will discuss in greater detail of our financial results on behalf of the management. Back to you, Serena.
- Serena Wu:
- Thank you, David. For the first quarter of 2013, our total revenue was $54.5 million which increased by 58% from $34.5 million from the first quarter of last year. The increase was mainly due to our sign-ups with a few large local distributor clients as well as sales increase from other application products together with a sales increase in larger-sized monitors with higher prices, offset by a sales decrease of smaller-sized monitors for the quarter. As a revenue breakdown for the quarter, $36.6 million or 67.1% of total revenues were generated from SGOCO's own branded product sales; $6.5 million or 12% of total revenues were generated from OEM customers; and $11.4 million or 20.9% of total revenues were derived from sales of other application products. Starting from the fourth quarter of 2012, the Company has started to source orders for higher margin application products in order to diversify its revenue streams. Gross profit for the first quarter of 2013 increased 39.6% to $3.7 million from $2.7 million from the same quarter of last year. Gross margin for the quarter was 6.9%, as compared with 7.8% for the first quarter of 2012. The overall gross margin continued to be negatively impacted by the increased fees charged by Chinese authorities for recycling imported monitors in addition to the overall price decreases in monitors due to competitive market condition. During the first quarter of 2013, SGOCO brand sales had a gross margin of 6.6%. OEM businesses had a gross margin of 6.9% and sales of other application products had a gross margin of 7.8%. Selling, general and administrative expenses for the first quarter of 2013 were $1.1 million, which roughly remain at the same level as the first quarter of last year of around $1 million. The slight year-over-year increase is due to increase in both transportation cost and staff salaries and welfare, offset by a decrease in share-based compensation expenses. Operating income totalled $2.7 million for the quarter or 4.9% of total revenues, as compared to $1.7 million, or 4.8% of total revenues for the first quarter of 2012. Net income for the quarter was $1.7 million, which grew 87.5% from $900,000 from the first quarter of 2012. The net income margins were 3.2% and 2.7% for the three months ended March 31, 2013 and 2012, respectively. We reported earnings per share as $0.10 for the first quarter of 2013, which compared to $0.05 in the first quarter of 2012. Moving to the balance sheet as of March 31, 2013, the Company held $5.7 million in cash and cash equivalents as compared to $11.5 million at the end of 2012. Our cash position decreased as a result of our significant inventory build-up and advances made to suppliers in order to meet our client's delivery schedules in the following quarter. As of March 31, 2013, our inventory position increased to $12.3 million from $5.7 million at the end of last quarter. On March 31, 2013, we had working capital of $79.9 million and our current ratio was 3.01. The strong balance sheet will continue to support SGOCO in the transition of its business model. With that, I would like to conclude the management presentation and open up the floor for questions and answers. Operator, please?
- Operator:
- Ladies and gentlemen, we will now conduct a question-and-answer session. (Operator Instructions) And we have no questions at this time.
- Serena Wu:
- Okay. Well, thank you all for joining us on the conference call today. If you have any follow-up questions, please feel free to contact us by e-mail or by the phone number provided through our website at www.sgocogroup.com. We look forward to speaking with you again. Thank you and good bye.
- Operator:
- Thank you. Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and you may now disconnect your lines.