NQ Mobile Inc (NQ) Earnings: Q4 EPS of $0.22; Revenue of $67.90M

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from $17.4 million in 2012. Non-GAAP selling and marketing expenses were $23.5 million in fiscal year 2013, up 56.1% from $15.1 million in 2012. The increase was primarily due to increased marketing and advertising spending, higher staff costs from salary and headcount increases and higher travelling and entertainment expenses.

General and administrative expenses were $77.0 million in fiscal year 2013, up 109.4% from $36.8 million in 2012. Non-GAAP general and administrative expenses were $23.9 million in fiscal year 2013, up 47.4% from $16.2 million in 2012.  The increase was primarily due to higher share-based compensation expenses, higher staff cost from salary and headcount increases, higher legal and professional fees and higher consulting fees.

Research and development expenses were $17.4 million in fiscal year 2013, up 81.9% from $9.6 million in 2012. Non-GAAP research and development expenses were $15.4 million in fiscal year 2013, up 89.6% from $8.1 million in 2012. The increase was primarily due to higher staff costs from salary and headcount increases, higher share-based compensation expenses and higher office related expenses.

(Loss)/Income from operations and Operating Margin

Loss from operations, or operating loss, for fiscal year 2013, was $4.5 million, down from income of $2.3 million in 2012. Non-GAAP income from operations for fiscal year 2013, increased 98.7% year-over-year to $53.3 million from $26.8 million in 2012. Excluding operating income contribution of $6.5 million from NationSky, non-GAAP income from operations increased 83.4% year-over-year to $46.8 million with the margin of 32.5%.

Foreign Exchange Gain, Interest Income, and Other Income

Foreign exchange gain was $1.8 million in fiscal year 2013, compared with a gain of $0.07 million in 2012. Foreign exchange gain was primarily attributable to the appreciation of RMB against US$. Interest income was $0.6 million in fiscal year 2013, compared with $3.2 million in 2012. The decrease in interest income was primarily contributed by forfeited interest income of $1.6 million due to early termination of term deposits and the $1.7 million of interest expenses related to the convertible debt issued in the fourth quarter of 2013. Other incomes was $2.1 million in 2013 mainly due to the re-measurement of Yinlong investment and government subsidies, down from other income of $3.4 million in 2012 mainly due to the gain of $2.9 million associated with the re-measurement of the previously held equity interest in FL Mobile upon the acquisition date in 2012. The loss from the change in fair value of the embedded call option of the convertible debt was $1.1 million.

Income Tax

Income tax expense was $1.1 million, compared with an income tax expense of $0.4 million in 2012.  The increase in tax expenses were mainly due to income increases from the Group’s PRC subsidiaries.

Net Income/(Loss)

Net loss attributable to NQ Mobile for fiscal year 2013 was $2.8 million, down from net income of $9.4 million in 2012, mainly due to the significant increase in share-based compensation expense recorded in the fiscal year of 2013. Non-GAAP net income attributable to NQ Mobile for fiscal year 2013, increased 70.1% year-over-year to $57.8 million from $34.0 million in 2012.

Other Business Updates and Significant Events

Special Committee investigation on Short Seller Allegations

As previously disclosed on October 25, 2013, the Company’s board of directors has formed a special committee (the “Special Committee”), comprised of four independent directors of the Company, to conduct an independent review of allegations raised by a short-seller research company. On November 1, 2013, the Company announced that the Special Committee retained the global law firm of Shearman & Sterling LLP to advise it in connection with its independent review, and Shearman & Sterling LLP in turn engaged Deloitte & Touche Financial Advisory Services Limited as forensic accountants to assist it in the matter.  The Company intends to report on the special committee’s investigation in conjunction with the filing of its annual report on Form 20-F.

NQ Mobile Share Repurchase

During the fourth quarter, NQ Mobile purchased $4.7 million worth of stock on the open market, or a total of 393,980 ADS. Till the end of 2013, the Company purchased $8.0 million worth of stock on the open market, or a total of 929,249 ADS. At the end of 2013, the Company has $27million remaining on the existing $35 million authorized share buyback program.

The Company accounts for repurchased ordinary shares under the cost method and include such treasury stock as a component of the common shareholders’ equity. Cancellation of treasury stock is recorded as a reduction of ordinary shares, additional paid-in-capital and retained earnings, as applicable. An excess of purchase price over par value is allocated to additional paid-in-capital first with any

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