Borqs Technologies Reports Annual Revenues of $52.5 million, an Increase of 77.7%, and Adjusted EBITDA of $4.8 million
Borqs Technologies, a global provider of 5G wireless and IoT solutions, reported strong financial results for 2022. Revenues increased by 77.7% YoY to $52.5 million, driven by increased IoT hardware sales and software service revenues. Gross profit increased by 326.6% to $11.1 million, with a gross margin of 21.2%. Adjusted EBITDA reached $4.8 million, a 138% increase compared to the previous year. The company must divest its ownership in Holu Hou Energy, LLC (HHE) as mandated by CFIUS.
Positive
Borqs Technologies reported a strong YoY revenue growth of 77.7% to $52.5 million, driven by increased IoT hardware sales and software service revenues. Gross profit increased by 326.6% to $11.1 million, with a gross margin of 21.2%. Adjusted EBITDA reached $4.8 million, a 138% increase compared to the previous year.
Negative
The divestment of Borqs Technologies' ownership in Holu Hou Energy, LLC (HHE) as mandated by CFIUS could impact the company's liquidity position and future acquisition opportunities.
05/15/2023 - 04:00 PM
Revenues reached $52.5 million , 77.7% Year-Over-Year (YOY) growth. Gross margin was 21.2% , an improvement of 1,240 basis points. Adjusted EBITDA reached $4.8 million . SANTA CLARA, Calif., May 15, 2023 (GLOBE NEWSWIRE) -- Borqs Technologies, Inc. (Nasdaq: BRQS, “Borqs”, or the “Company”), a global provider of 5G wireless and Internet of Things (IoT) solutions, today announced its financial results for the year ended December 31, 2022.
Key Financial Results (not including the results Holu Hou Energy, LLC (“HHE”) which is separately presented as Discontinued Operations)
Revenues for the year ended December 31, 2022 increased 77.7% to $52.5 million compared to $29.6 million for the year ended December 31, 2021, mainly driven by increased IoT hardware sales globally and software service revenues from a global semiconductor vendor. Gross profit for the year ended December 31, 2022 increased 326.6% to $11.1 million compared to a gross profit of $2.6 million for the year ended December 31, 2021. Gross margin was 21.2% for the year ended December 31, 2022, compared to 8.8% for the year ended December 31, 2021, an improvement of 1,240 basis points. Adjusted EBITDA for the year ended December 31, 2022, as presented below, increased 138% to $4.8 million as compared to $2 million for the year ended December 31, 2021. U.S. headquartered customers contributed 29.4% of total revenues, India represented 25.8% , China represented 30.1% and the rest of the world represented 14.7% . For a reconciliation of the non-GAAP financial measures of EBITDA and Adjusted EBITDA from the results of our continuing operations in the year 2022, please see presentation at the end of this press release.
As mandated by the Committee on Foreign Investment in the United States (“CFIUS”) on December 13, 2022, and as stipulated in the National Security Agreement signed between the Company and CFIUS on March 16, 2023, the Company must completely divest its ownership in Holu Hou Energy, LLC (“HHE”). The financial results of HHE for the year 2022 were presented under Discontinued Operations; and the company deconsolidated HHE’s financials as of December 31, 2022.
“I am very pleased with our operational performance of the past year ended with a significant growth in the revenue and increase in the gross margin. The entire Borqs team has successfully executed the expansion plans in terms of growing both IoT hardware sales and software service revenues while improving our gross margin in a challenging environment. The financial results for 2022 were in line with our expectations,” said Pat Chan, CEO of Borqs Technologies. “Also, we are very happy to have recently engaged Cantor Fitzgerald & Co., an internationally reputable investment bank, to head up the sales of our ownership in HHE.”
Mr. Chan concluded, “The divestment of the HHE, when completed, is expected to provide a large liquidity position to Borqs. Once the divestment is consummated in the coming months, we plan to evaluate acquisition opportunities. We are committed to bringing superior 5G wireless and IoT solutions to our customers worldwide. In the meantime, we will evaluate opportunities in combining our know-how and expertise in IoT with artificial intelligence (AI), robotic and cloud technologies to further strengthen our long-term competitive advantages in 2023 and beyond.”
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are supplemental non-GAAP financial measures exclusive of certain items to facilitate management’s review of the comparability of our core operating results on a period to period basis because such items are not related to our ongoing core operating results as viewed by management. EBITDA and Adjusted EBITDA are not measures of net income or cash flows as determined by GAAP. We define EBITDA as net income plus income taxes, net interest expense, depreciation and amortization, and Adjusted EBITDA as EBITDA minus other non-operation expense.
We believe EBITDA and Adjusted EBITDA are useful because they allow us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above in arriving at EBITDA and Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. EBITDA and Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP, or as an indicator of our operating performance or liquidity. Certain items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of EBITDA and Adjusted EBITDA. In prior periods, the Company has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. Our computations of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
About Borqs Technologies, Inc.
Forward-Looking Statements and Additional Information
Investor Contact:
Sandra DouIR@borqs.com www.borqs.com
BORQS TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands of US dollar (“$”), unless otherwise stated) As of December 31, 2021 2022 $ $ ASSETS Current assets: Cash and cash equivalents 6,117 11,305 Restricted cash 211 32 Time deposits - 1,436 Accounts receivable, net (net of allowance of $13,049 and $12,881 as of December 31, 2021 and 2022, respectively) 2,262 3,482 Inventories, net 6,760 4,235 Prepaid expenses and other current assets, net (net of allowance of $11,327 and $11,383 as of December 31, 2021 and 2022, respectively) 13,640 7,501 Current assets held for sale 2,220 - Total current assets 31,210 27,991 Non-current assets: Property and equipment, net 724 1,024 Construction in progress 94 - Intangible assets, net 978 - Right of use asset 1,674 704 Deferred tax assets 471 424 Non-current assets held for sale 18,101 - Total non-current assets 22,042 2,152 Total assets 53,252 30,143 LIABILITIES AND SHAREHOLDERS’ EQUITY(DEFICIT) Current liabilities: Accounts payable 9,449 7,071 Accrued expenses and other payables 27,648 23,938 Contract liabilities - current 7,308 3,951 Lease liabilities - current 1,032 536 Amount due to related parties-current 2,492 746 Income tax payable 399 7 Short-term bank and other borrowings 361 - Long-term bank borrowings - current portion 1,250 - Contingent consideration-current 1,392 - Convertible notes 9,990 1,691 Current liabilities held for sale 3,070 - Total current liabilities 64,391 37,940 Non-current liabilities: Unrecognized tax benefits 2,174 1,990 Deferred tax liabilities 1,011 909 Lease liabilities – non-current 754 39 Other payable – non-current - 417 Contingent consideration – non-current 389 - Other non-current liabilities 15 - Non-current liabilities held for sale 1,804 - Total non-current liabilities 6,147 3,355 Total liabilities 70,538 41,295 Commitments and contingencies Shareholders’ deficit: Ordinary shares (no par value; unlimited shares authorized; 10,209,481 shares and 57,182,633 shares issued and outstanding as of December 31, 2021 and 2022, respectively *) - - Additional paid-in capital 262,271 310,267 Subscriptions receivable (15,287 ) (14,378 ) Statutory reserve 1,901 1,901 Accumulated deficit (271,040 ) (305,072 ) Accumulated other comprehensive loss (1,091 ) (3,512 ) Total Borqs Technologies, Inc. shareholders’ deficit (23,246 ) (10,794 ) Non-controlling interest 5,960 (358 ) Total shareholders’ deficit (17,286 ) (11,152 ) Total liabilities, noncontrolling interest and shareholders’ deficit 53,252 30,143
*Giving retroactive effect to the reverse split on June 27, 2022
BORQS TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Amounts in thousands of US dollar (“$”), unless otherwise stated) For the years ended December 31 2021 2022 $ $ Net Revenues: Software 10,732 13,080 Hardware 18,829 39,457 Total net revenues 29,561 52,537 Software (9,429 ) (6,149 ) Hardware (17,526 ) (35,272 ) Total cost of revenues (26,955 ) (41,421 ) Total gross profit (loss) 2,606 11,116 Operating expenses: Sales and marketing expenses (151 ) (341 ) General and administrative expenses (23,558 ) (7,186 ) Research and development expenses (5,294 ) (4,524 ) Total operating expenses (29,003 ) (12,051 ) Other operating income 247 148 Operating income (loss) (26,150 ) (787 ) Interest income 3 47 Interest expense (11,680 ) (11,732 ) Other income 2,376 240 Other expense (3,207 ) (2,123 ) Gain (loss) on disposal of subsidiary (303 ) - Contingency (loss) reversal 3,277 - Gain (loss) on debt settlement (17,199 ) 217 Loss related to equity financing - (3,669 ) Change in fair value of contingent consideration for the acquisition of HHE (111 ) - Loss on additional acquisition cost to HHE in shares - (5,950 ) Loss on deconsolidation of a subsidiary - (3,610 ) Foreign exchange gain (loss) (2,661 ) (1,519 ) Income (loss) from continuing operations, before income taxes (55,655 ) (28,886 ) Income tax (expense) benefit 445 (59 ) Net income (loss) from continuing operations (55,210 ) (28,945 ) Discontinued operations Income (loss) from operations of discontinued entities (1,392 ) (9,916 ) Net income (loss) (56,602 ) (38,861 ) Net income (loss) attributable to non-controlling interest – continuing operations (54 ) (190 ) Net income (loss) attributable to non-controlling interest – discontinued operations (683 ) (4,639 ) Net income (loss) attributable to Borqs Technologies, Inc. (55,865 ) (34,032 ) Net income (loss) attributable to ordinary shareholders (55,865 ) (34,032 )
BORQS TECHNOLOGIES, INC. EBITDA & ADJUSTED EBITDA RECONCILIATION (Amounts in thousands of US dollar (“$”), unless otherwise stated) For the years ended December 31 2021 2022 $ $ Net income (loss) (56,602 ) (38,861 ) Income (loss) on discontinued operations (1,392 ) (9,916 ) Net income (loss) from continuing operations (55,210 ) (28,945 ) Interest expense (11,680 ) (11,732 ) Income tax (expense) benefit 445 (59 ) Depreciation and amortization (2,233 ) (1,803 ) Other expense(non-operational) (3,207 ) (2,123 ) Other income(non-operational) 2,376 240 Foreign exchange gain (loss) (2,661 ) (1,519 ) EBITDA (38,250 ) (11,949 ) - - Write-off of historical inventory (non-cash) (1,268 ) (332 ) write-off and provision of doubtful assets (non-cash) (1,757 ) (20 ) Stock-based compensation (non-cash) (17,533 ) (3,386 ) Defaulted debt settlement charges (non-cash) (17,199 ) 217 One-off consulting expenses for financing activities (2,100 ) - Contingency loss on disposal of subsidiary (non-cash) (303 ) - Change in fair value for acquisition (non-cash) (111 ) - Loss related to equity financing - (3,669 ) Loss on deconsolidation of HHE - (3,610 ) Loss on additional acquisition cost to HHE in shares - (5,950 ) Adjusted EBITDA 2,021 4,801
What were Borqs Technologies' revenue growth and gross profit for 2022?
Borqs Technologies reported a YoY revenue growth of 77.7% to $52.5 million and a gross profit increase of 326.6% to $11.1 million for 2022.
What was the gross margin for Borqs Technologies in 2022?
Borqs Technologies achieved a gross margin of 21.2% in 2022.
What was the Adjusted EBITDA for Borqs Technologies in 2022?
Borqs Technologies reported an Adjusted EBITDA of $4.8 million for 2022, a 138% increase compared to the previous year.
What is the impact of the divestment of Holu Hou Energy, LLC on Borqs Technologies?
The divestment of Borqs Technologies' ownership in Holu Hou Energy, LLC (HHE) as mandated by CFIUS could impact the company's liquidity position and future acquisition opportunities.
