TechFaith (CNTF) Reports First Quarter 2010 Financial Results

BEIJING — (Marketwire) — 05/19/10 — China Techfaith Wireless Communication Technology Limited (NASDAQ: CNTF) (“TechFaith” or the “Company”) today announced its unaudited financial results for the first quarter ended March 31, 2010.

For the first quarter of 2010, TechFaith reported net revenue of US$60.9 million (RMB 415.8 million), a 1.8% increase compared to US$59.8 million (RMB 408.3 million) in the fourth quarter of 2009 and a 25.1% increase compared to US$48.7 million (RMB 332.9 million) in the same period of last year. Gross margin for the first quarter of 2010 improved to 22.0% compared to 16.1% in the previous quarter and 18.1% in the same quarter last year. Net income attributable to Techfaith for the first quarter of 2010 was US$6.9 million (RMB47.1 million), compared to US$3.1 million (RMB21.2 million) in the fourth quarter of 2009, and US$2.1 million (RMB14.4 million) in the same quarter of last year.

Starting with this quarter, TechFaith will report its financial results in three segments. The original developed products (“ODP”) segment, which focuses on selling products designed by the Company, will include revenue from product sales and handset design. The brand name phone sales segment will include revenue from selling phones under licensed brands or brands owned by the Company’s subsidiary QIGI&BODEE Technology (Beijing) Co., Ltd. (“QIGI”). The game segment will include revenue from the Company’s online and mobile games.

Ouyang Yuping, TechFaith’s CFO, said, “We achieved our highest revenues level in this quarter since the Company was founded, and one of the highest net income levels by focusing on higher margin opportunities and cost controls. We increased our overall gross margin from 18.1% for the first quarter of 2009 and 16.1% for the fourth quarter of 2009 to 22.0% in the first quarter of 2010. We also achieved another company record in our ODP business, where we sold more than a half million units of mobile phones and data cards for revenues of US$54.4 million (RMB 371.4 million). The higher selling price of mobile phones helped gross margin improve from 15.5% to 18.7% in our ODP business. We expect continued growth in our ODP business as we are launching several new high-end products in China and overseas. Results also benefited from our acquisition of QIGI, which had revenues of US$5.2 million (RMB35.5 million) and a gross margin of 39.5% in the first quarter of 2010, led by higher margin brand name mobile phone products. We also continued to expand our mobile game and online game business, where we generated a combined US$1.3 million (RMB 8.9million) revenues with a 94.4% gross margin in the first quarter.”

Dong Defu, TechFaith’s Chairman and CEO, commented, “Overall, our businesses are performing well entering the second quarter. In our ODP business, we have nearly forty mid- to high-end mobile phone models based on HSDPA, EVDO, TD-SCDMA, and GSM technologies ready to launch. We expect further improvements in our ODP business to contribute to improvements in our gross margin. We are also excited about the upcoming launch of two global brands for handsets – Barbie and Disney. We expect to launch both branded mobile phones this summer through our subsidiary Glomate Mobile (Beijing) Co., Ltd., to target girls and teenage users. We continue to evaluate other brands for opportunities in niches ranging from sporting to fashion and luxury. Also central to our continued success is QIGI, already a leading smart phone brand in China, which focuses on enterprise users and the operator tailored market. QIGI plans to promote a series of larger display mobile phones, with features such as Windows Mobile based or Android based operating systems for businesses users based on HASDPA, EVDO, TD-SCDMA, and GSM technologies. For our mobile and online game business, we are on track to launch additional mobile and online gaming titles this year, with the goal of building out our catalog and establishing a larger audience among loyal game players.”

Second Quarter 2010 Outlook

TechFaith currently expects revenue to be in the range of US$62 million to US$65 million for the second quarter of 2010, with a gross margin level similar to the first quarter of 2010. This forecast reflects TechFaith’s current and preliminary view, which is subject to change.

Investor Conference Call / Webcast Details

TechFaith will hold a conference call on Wednesday, May 19, 2010 at 7:00 p.m. U.S. Eastern Time (7:00 a.m. May 20, 2010 in Beijing), is +1-617-597-5359. The conference call passcode is 59609619. A live webcast of the conference call will also be available on TechFaith’s website at www.techfaithwireless.com.

A replay of the call will be available approximately 2 hours after the conclusion of the live call through 11:30 p.m. U.S. Eastern Time on May 26, 2010, (11:30 a.m., March 27, 2010 in Beijing) by telephone at +1-617-801-6888. To access the replay, use passcode 44810686. A webcast replay will also be available at www.techfaithwireless.com.