- Q1 Net Revenue: $63.3 million (a year-on-year increase of 5.1%)
- Q1 Net Income attributable to Cogo Group, Inc.: $1.6 million GAAP and $4.5 million Non-GAAP
- Q1 EPS Diluted attributable to Cogo Group, Inc.: $0.04 GAAP and $0.12 Non-GAAP with a year-on-year decrease of 36.8%
- Company provides Q2 guidance of $70-72 million in revenue and Non-GAAP EPS attributable to Cogo Group, Inc. of $0.14-$0.15
SHENZHEN, China, May 6 /PRNewswire-FirstCall/ -- Cogo Group, Inc. (Nasdaq: COGO), a leading provider of customized design solutions for the technology manufacturing sector in China, today announced unaudited financial results for its first quarter of 2009. The Company reported quarterly revenue of $63.3 million, up 5.1% year-over-year, compared to $60.2 million reported in the first quarter of 2008.
Net income attributable to Cogo Group, Inc. for the first quarter of 2009 was $1.6 million, down 70.6% from $5.3 million in the same period last year, with Non-GAAP net income attributable to Cogo Group, Inc. of $4.5 million, down 40.9% over the same period last year. Earnings per share ('EPS') Diluted attributable to Cogo Group, Inc. on a U.S. GAAP basis was $0.04, and Non-GAAP EPS Diluted attributable to Cogo Group, Inc. (which excludes share-based compensation expense and acquisition related costs including amortization of intangible assets and recognized deferred taxation) was $0.12, down 36.8% from the first quarter of 2008.
Key Financial Indicators
(all numbers in USD thousands, except Earnings per share data)
Percent
Q1 2009(1) Q1 2008(1) Change
Net Revenue $63,268 $60,189 5.1%
Cost of Sales $54,276 $48,439 12.1%
Gross Profit $8,992 $11,750 -23.5%
Net Operating Expenses $7,576 $7,052 7.4%
Income from Operations $1,416 $4,698 -69.9%
Net Income Attributable to Cogo
Group, Inc.(2) $1,555 $5,281 -70.6%
EPS Diluted Attributable to Cogo Group,
Inc. $0.04 $0.13 -69.2%
Non-GAAP EPS Diluted attributable to
Cogo Group, Inc. $0.12 $0.19 -36.8%
(1) The US dollar amounts are calculated based on the conversion rate of
USD1 to RMB6.8329 as of March 31, 2009 and USD1 to RMB7.012 as of March
31, 2008.
(2) Included in the Q1 2009 net income attributable to Cogo Group, Inc.
was an amount of $2.1 million in respect of share-based compensation
expense in accordance with Statement of Financial Accounting Standards of
No. 123 (revised 2004), Share-Based Payment ('SFAS 123R') and $0.9 million
acquisition related costs including amortization of purchased intangible
assets and recognized deferred taxation. Non-GAAP net income attributable
to Cogo Group, Inc., excluding the effects of share-based compensation
expense and acquisition related costs, was $4.5 million or $0.12 Non-GAAP
EPS Diluted attributable to Cogo Group, Inc. Included in the Q1 2008 net
income was an amount of $1.6 million for share-based compensation expense
in accordance with SFAS 123R and $0.8 million acquisition related costs
including amortization of purchased intangible assets and recognized
deferred taxation.
Recent Developments
The Company is currently finalizing the acquisition of Mega Smart, a pioneer in China's developing industrial applications market in the electric grid and 'smart meter' segments. Management expects the acquisition to significantly enhance the Company's product offerings and fuel its growth in China's rapidly expanding industrial sector, which is currently benefiting from a large, broad-based government infrastructure stimulus plan. Cogo expects a smooth integration of Mega Smart's sales team once the acquisition is finalized. The newly combined workforce is expected to be able to immediately leverage the company's current customer base, which consists of over 1,200 companies.
Jeffrey Kang, Chairman & Chief Executive Officer, Cogo Group, Inc. said, 'We expect this transaction to close in the second quarter of 2009, and we are excited to integrate the Mega Smart team into the Cogo sales platform. We are increasingly convinced that this acquisition will be a very cost effective and efficient way to benefit from the rapidly growing industrial business market within China.'
Financial Results
Net revenue for the first quarter was $63.3 million, an increase of 5.1% compared to $60.2 million reported for the first quarter of last year. The net revenue breakdown is as follows: $21.8 million, or 34.5% of total revenue for mobile handsets, representing a 10.7% decrease year-over-year; $16.2 million, or 25.6% of total revenue for telecommunications equipment, representing a 0.8% increase year-over-year; and $17.7 million, or 27.9% of total revenue for digital media products, representing an increase of 1.8% year-over-year. The Company's service business contributed $0.7 million in net revenues for the first quarter and accounted for approximately 1.1% of total net revenue. Also during the quarter, the Company generated $6.9 million in revenue, or 10.9% of total revenue, from component sales relating to industrial business, which includes industrial solutions targeted at the electrical grid and railway sectors.
Cost of sales, which includes the aggregate purchase of components from suppliers and the direct cost of services, was $54.3 million compared to $48.4 million, representing an increase of 12.1% year-over-year. Gross profit for the first quarter was $9.0 million, down 23.5% compared to the $11.8 million during the first quarter of last year. Gross margin for the first quarter decreased to 14.2%, compared to 19.5% reported during the first quarter of 2008, due to the unfavorable product mix reflecting growing demands in the lower gross margin, low-end segment of the handset market.
Selling, general and administrative expenses totaled $5.2 million, down 7.8%, compared to $5.7 million reported for the first quarter of last year. The decrease was attributable to a reduction in the charge of allowance for doubtful accounts and share-based compensation expense of $0.2 million and $0.4 million, respectively. Research and development (R&D) expenses increased by 70.9% to $2.3 million compared to $1.4 million in the first quarter of 2008. The increase was mainly attributable to share-based compensation awards granted during the first quarter of 2009 which increased share-based compensation cost of $0.8 million as compared to the corresponding period in 2008.
Income from operations was $1.4 million, down 69.9% as compared to $4.7 million for the first quarter of 2008. Operating margin for the first quarter was 2.2% versus 7.8% for the first quarter of 2008. Excluding the effects of share-based compensation and acquisition-related costs including amortization of purchased intangible assets, operating margin would have been 7.3% for the first quarter of 2009, compared to 12.0% for the same period in 2008. The effective tax rate for the first quarter of 2009 was 11.3%, compared to 8.2% for the same period in 2008. Included in the income tax expense for the quarter ended March 31, 2009 was a deferred income tax benefit of $0.2 million as a result of the amortization of purchased intangible assets of $1.1 million. Noncontrolling interests' share of income was $0.04 million as compared to $nil during the same period in 2008.
Net income attributable to Cogo Group, Inc. for the first quarter was $1.6 million or EPS Diluted attributable to Cogo Group, Inc. of $0.04 on a U.S. GAAP basis, compared to net income attributable to Cogo Group, Inc. of $5.3 million, or EPS Diluted attributable to Cogo Group, Inc. of $0.13 in the first quarter of 2008.
