COGO Group Inc. (COGO) reported third quarter of 2010 earnings per share from continuing operations of 12 cents, missing the Zacks Consensus Estimate of 13 cents. Cogo posted revenues of $100.2 million, up 22.1% year-over-year.
56.4% of total sales were sourced from digital media (including the mobile handsets business), representing a 14.4% increase year-over-year. 24.8% of total revenues were generated from telecommunications equipment, representing a 22.4% increase year-over-year. 17.5% of revenues came from Industrial Applications Business, which grew 58.5% compared to the third quarter of 2009. The company’s service business contributed 1.3% of total sales.
Gross profit for the quarter was $14.2 million, up 19.9% from the corresponding quarter of last year. Gross margin for second quarter was 14.2%, compared to 14.4% reported for the year-ago quarter.
The total number of Cogo customers surpassed 1,500 during the quarter, reaching 1,520, up almost 50% since the beginning of 2008. Total revenue is split about 68% and 32% between Blue Chip and SME respectively, and it is expected to move gradually to a 50/50 ratio over the next few years.
Average Revenue per User (ARPU) from blue-chip customers in the third quarter was $785 thousand, up 7% sequentially and up 3% from the prior year period. ARPU from SME customers in the third quarter was $22 thousand, up 6% sequentially and 25% year-over-year. SME ARPU is up 45% since the beginning of 2009.
In the third quarter, telecom business continued to perform better than expected due to the continued roll-out of China Mobile’s PTN network and fiber builds.
The company exited the quarter with about $80 million in net cash or about $2 per share. During the third quarter, operating cash flow was $5.4 million and the company utilized $2.1 million for M&A and $365 thousand for buybacks. The M&A payout was the last Mega Smart payment.
In the third quarter, inventory turnover increased from 41 days to 47 days, accounts receivable days fell from 91 to 82 and our accounts payable days were up slightly at 13 from 12.
For the fourth quarter of 2010, The company expects revenue to be in the range of $107-$108 million, and diluted non-GAAP EPS diluted to be 22-23 cents. At the midpoint of this range, projected revenue growth in the fourth quarter would be around 22% and would deliver nearly 24% annual revenue growth in 2010 versus 2009.
Cogo Group, Inc., through its subsidiaries, provides customized module design solutions, focusing on the digital media, telecommunications equipment, and industrial business end-markets in China.
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