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China Techfaith Wireless (CNTF) powered by rise in handset design revenue (1Q05 earnings)

Ezra Marbach profile picture
Ezra Marbach

China Techfaith Wireless (ticker: CNTF), an independent mobile handset designer announced Q1 2005 earnings results today. There were no analyst estimates or management guidance. Details:

Q1 Results
(all percentage changes and comparisons are year on year, unless stated otherwise)

  • Net revenue rose 138% to $21.5 million, up 47% sequentially.
  • Design fees plus royalty income rose 197% to $19.6 million, up 66% sequentially.
  • Design fees rose 303% to $16.5 million, up 65% sequentially.
  • Royalty income rose 23% to $3.1 million, up 71% sequentially.
  • Component income fell 25% to $1.8 million, down 36% sequentially.
  • Gross margin was 63% versus 57%, and 60% in Q4.
  • Gross margin excluding component products was 67% versus 72%, and flat from Q4.
  • Operating expenses rose 82% to $2.5 million, up 46% sequentially.
  • Operating income rose 190% to $11.0 million, up 56% sequentially.
  • Operating margin was 51% versus 42%, and 48% in Q4.
  • Net income rose 115% to $8.3 million, up 24% sequentially.
  • Net margin was 38% versus 43%, and 45% in Q4.

Income Statement Notes

  • Revenue rose due to increases in design fees and royalty income.
  • Design fees rose due to rise of revenue contributing models and more contracts reaching revenue recognition milestones in Q1.
  • Revenue contributing models totaled 41 in Q1 versus 33 in Q4 2004.
  • Approximately 41% of the 41 revenue contributing models were designed for international brand owners.
  • Of the $19.6 million in design fees plus royalty income in Q1, approximately 74% was from international
    brand owners.
  • Component income fell due to lower sales of third-party components which included pilot run materials TechFaith purchased on behalf of customers.
  • Operating expenses rose due to increases in G&A, R&D, and sales and marketing expenses.
  • Company recorded a $1.3 million of change in fair value of call option in relation to convertible notes issued.
  • Net margin

This article was written by

Ezra Marbach profile picture
Ezra Marbach is a former investment banker who lived in Beijing in 2002-03 where he studied Mandarin Chinese and worked for a venture capitalist. Ezra previously worked for Internet-based venture capital firm UniversityAngels.com. Prior to that, he worked in the corporate finance department of Gerard Klauer Mattison, a NY-based boutique investment bank. Ezra graduated from Cornell University.

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