CNTF

China TechFaith Wireless Communication Technology Limited (CNTF)

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China TechFaith Wireless Communication Technology Limited (CNTF)

Q4 2012 Earnings Call

March 12, 2013, 08:00 am ET

Executives

David Pasquale - Global IR Partners

Ouyang Yuping - CFO

Jay Ji - Director, IR

Analysts

Presentation

Operator

Good day, ladies and gentlemen and welcome to the Quarter Four China TechFaith Earnings Call. My name is Ian; I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions) And as a reminder, the call is being recorded for replay purposes.

I would like to hand the call over to Mr. David Pasquale of Global IR Partners. Please proceed, sir.

David Pasquale

Thank you, Operator. Welcome everyone to China TechFaith’s fourth quarter 2012 and full-year 2012 financial results conference call. Joining us today from the company are, Chief Financial Officer, Ms. Ouyang Yuping and SVP, Mr. Jay Ji.

We will have time for your questions after a review of the quarter’s and full-year results and the company’s outlook. If you have not yet received a copy of today’s results release, please email Global IR Partners at cntf@globalirpartners.com, or you can get a copy of the release off of the Investor Relations section of TechFaith’s website.

The company’s attorneys advise that this call will contain forward-looking statements. These statements are made under the Safe Harbor provisions of 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, confident, outlook and similar statements.

TechFaith may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Form’s 20-F and 6-K, and it’s annual report to shareholders, in press releases and in other written materials and in oral statements made by its officers, directors or employees to third parties.

Statements that are not historical facts, including statements about TechFaith’s beliefs and expectations are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Potential risks and uncertainties include, but are not limited to those risks outlined in TechFaith’s filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F.

TechFaith undertakes no obligation to update any forward-looking statement except as required under applicable law. All information provided on today’s conference call is as of today’s date. References to U.S. GAAP are the Generally Accepted Accounting Principles as practiced in the United States of America and references to dollars are to the lawful currency of United States of America.

At this time, I would like to now turn the call over to our SVP, Mr. Jay Ji. Please go ahead, sir.

Jay Ji

Thank you, David and welcome to our fourth quarter and full-year 2012 financial results conference call. Hopefully, everyone had a chance to review our earnings release.

This was a challenging year for TechFaith as we faced deep unit volume reduction in our mobile phone business. Competition remained high across the board which added further average selling price pressure. Adding to this difficult environment was continued headwind of a weak global economy.

Against that and [consumables] backdrop TechFaith worked to show our business up and to remain focused on our long-term initiatives. Areas we could control we did. This includes maintenance due to the operating control which led to a certain areas that percentage reduction in operating expenses for the full-year 2012. We also kept our gross margin healthy at 23% for the full-year.

We expect a high competition and challenges to remain in our core markets as we move through 2013. We have confidence in our ability to weather the storm, however, based on the scale of our ongoing operations, the help of our balance sheet and the company’s rich history of delivery and innovations to customers and carriers. Our focus is on driving an improvement in margin and profitability. This is in line with our overall growth of increasing shareholder value.

In terms of specific results, full-year 2012 revenue was $137.7 million compared to $323.8 million for the full-year 2011 and we experienced at the start of 2012 continue through the year we were negatively impacted by steep unit volume reduction in our mobile business and a shift to android based devices. We continue to make progress in our higher margin niche offerings but this was not enough to offset the material declines in the other segments of our business.

As a result of the material decline in unit and revenue, we experienced a net loss of $3.3 million in 2012, compared to net income of $27.1 million for the full-year of 2011. For the full-year 2012, ODP business contributed about 42% of our total revenue or about $57.8 million. This reflects the steep unit decline and the move to Android based devices I noted a second ago.

Geographically, after China, we have benefited from Latin America, the EU market, Russia and some East Asian markets. As a percentage of revenue, 93% of our revenue for the full-year came from the domestic China market and the 7% came from international markets. This compares last year when 98% of our revenue came from the domestic China market and 2% from international markets. We continue to build our brand internationally by participating in different exhibitions in Dubai, Singapore, Spain and the United States. We have also integrated all our branded mobile devices results under our 17FOX brand. This integration is expected to result in greater efficiencies such a consistent marketing campaign.

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