Stocks to Track -NQ Mobile Inc (ADR) (NYSE:NQ)
On Thursday, NQ Mobile Inc (ADR) (NYSE:NQ) closed at $4.07 with trading volume of 399,540 shares. The company gained 2.01% with market capitalization of 382.78M. During the year the lowest point at which share traded is $3.03 and hit the highest point at $5.35.
NQ Mobile Inc. (NQ), a leading global provider of mobile internet services, recently declared its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2016.
Fourth Quarter 2016 Results:
Revenues
Net revenues in the fourth quarter of 2016 reduced 25.70% year-over-year to $94.70M from $127.50M in the same period in 2015. Apart from NationSky from the comparable period, net revenues raised 3.80% year-over-year from the same period in 2015.
Mobile value added service revenues raised 4.40% year-over-year to $53.60M from $51.40M in the same period in 2015. The increase in mobile value added service revenue was mainly attributable to the growth in live mobile social video platform revenue growth. The noteworthy increase in live mobile social video platform revenues was mainly driven by the rapid growth of Showself’s several applications. The overall Showself business in our live video platforms was up 79.30% contrast with the same period in 2015. This strength was mostly offset by year-over-year declines in the mobile security business. The decrease in consumer mobile security revenues was mainly because of the fact that the Company has been moving its focus away from premium mobile security services and moving that business to an advertising-based business model. The mobile game business slightly declined year-over-year mainly because of the timing of new game launches in the period.
Advertising revenues rose 24.10% year-over-year to $27.30M from $22.0M in the same period in 2015. The increase was mainly because of continued expansion of advertising networks and the consolidation of Launcher, a business we obtained control of and merged at the end of the Q1 2016. Apart from Launcher, since this was merged starting in 2016, advertising revenues raised 19.50% year-over-year contrast to the same period in 2015.
Enterprise mobility revenues reduced 73.90% year-over-year to $13.60M from $52.10M in the same period in 2015. This decrease is mainly because of the divestment of NationSky which no longer contributed results starting in the first quarter of 2016. Apart from NationSky from the comparable period, enterprise mobility revenues reduced 14.50% year-over-year from the same period in 2015 mainly because of the Company focusing less on hardware procurement overall.
Other revenues reduced 91.6% year-over-year to $0.20M from $2.0M in the same period in 2015. Other revenues are generated mainly by providing technical contract services to third parties and fluctuate as such business is driven by individual projects.
Cost of Revenues
Cost of revenues in the fourth quarter of 2016 reduced 24.20% year-over-year to $79.50M from $104.90M in the same period in 2015. Apart From NationSky from the comparable period, cost of revenues raised 7.30% year-over-year from the same period in 2015. The year-over-year increase was mainly because of higher revenue sharing costs and user acquisition costs associated with our live mobile social video platform businesses and mobile gaming business.
Gross Profit and Gross Margin
Gross profit in the fourth quarter of 2016 reduced 32.70% to $15.20M from $22.60M in the same period in 2015. Apart from NationSky in the comparable period, gross profit reduced 11.30% year-over-year from the same period in 2015. Gross margin, or gross profit as a percentage of net revenues, was 16.0% in the fourth quarter of 2016, contrast with 17.70% in the same period in 2015 and 18.80% apart from NationSky in the comparable period.
Operating Expenses
Selling and marketing expenses in the fourth quarter of 2016 reduced 36.50% year-over-year to $3.90M from $6.20M in the same period in 2015. Non-GAAP selling and marketing expenses, which exclude share-based compensation reduced 36.70% year-over-year to $4.0M from $6.30M in the same period in 2015. The year-over-year decrease is mainly because of the impact of the NationSky divestment. Apart From NationSky from the comparable period, selling and marketing expenses reduced 20.40% year-over-year from the same period in 2015, and non-GAAP selling and marketing expenses reduced 20.90% year-over-year from the same period in 2015 mainly driven by reduced staff costs in addition to lower marketing and advertising spend.
General and administrative expenses in the fourth quarter of 2016 reduced 49.40% year-over-year to $13.80M from $27.20M in the same period in 2015. Non-GAAP general and administrative expenses, which exclude share-based compensation and amortization of intangible assets arising from acquisitions, reduced 41.90% year-over-year to $12.90M from $22.10M in the same period in 2015. Apart from NationSky from the comparable period, general and administrative expenses reduced 49.10% year-over-year from the same period in 2015 mainly because of a reduction in performance-related compensation expenses and non-GAAP general and administrative expenses reduced 41.50% from the same period in 2015 mainly because of similar reasons.
Research and development expenses in the fourth quarter of 2016 reduced 13.0% year-over-year to $6.80M from $7.80M in the same period in 2015. Non-GAAP research and development expenses, which exclude share-based compensation and amortization of intangible assets arising from acquisitions, reduced 10.0% to $6.80M from $7.60M in the same period in 2015. Apart from NationSky from the comparable period, research and development expenses raised 34.70% year-over-year from the same period in 2015, and non-GAAP research and development expenses raised 43.30% year-over-year from the same period in 2015, mainly because of the Linkmotion business and some pilot projects, in addition to the consolidation of Launcher.
Impairment of goodwill and intangible assets in the fourth quarter of 2016 was $98.90M as the result of a one-time, non-cash impairment of goodwill and intangible assets. The Company has three reporting units counting Mobile Games and Advertising, Enterprise Mobility, and Security and Others. There was impairment of $8.10M from the Enterprise Mobility reporting unit. The Security and Others reporting unit consists of mobile security, live mobile social video platforms, and internet traffic related businesses. There was impairment of $90.80M from the Security and Others reporting unit from the internet traffic related businesses within this reporting unit.
Total operating expenses in the fourth quarter of 2016 raised 199.30% year-over-year to $123.40M from $41.20M in the same period in 2015 driven mostly from the one-time, non-cash impairment of goodwill and intangible assets recorded in the fourth quarter of $98.90M. Apart from the impairment of goodwill and intangible assets in the fourth quarter, total operating expenses reduced 40.6% year-over-year to $24.50M from $41.20M in the same period in 2015. Apart from NationSky and the impairment of goodwill and intangible assets in the fourth quarter from the comparable period, total operating expenses reduced 33.90% year-over-year from the same period in 2015.
Non-GAAP operating expenses, which exclude share-based compensation, the amortization of intangible assets arising from acquisitions, and impairment of goodwill and intangible assets in the fourth quarter of 2016 reduced 34.30% year-over-year to $23.60M from $36.0M in the same period in 2015. Apart from NationSky from the comparable period, total non-GAAP operating expenses reduced 25.50% year-over-year in the same period in 2015.
Share-based compensation expenses
Share-based compensation expenses, which were allocated to related operating cost and expenses line items, amounted to $0.10M in the fourth quarter of 2016, contrast to $4.40M in the corresponding period in 2015.
Loss/Income from Operations and Operating Margin
Loss from operations in the fourth quarter of 2016 was $108.20M, contrast with $18.70M in the same period in 2015, which was greatly influenced by the one-time, non-cash impairment of goodwill and intangible assets of $98.90M in the fourth quarter. Apart From the impact of the impairment of goodwill and intangible assets in the fourth quarter of 2016, loss from operations was $9.30M, contrast with $18.70M in the same period in 2015.
Non-GAAP loss from operations, which excludes share-based compensation, amortization of intangible assets arising from acquisitions, and impairment of goodwill and intangible assets, was $5.90M contrast to $10.80M in the same period in 2015. Non-GAAP operating margin, or non-GAAP income from operations as a percentage of net revenues was -6.20%, contrast with -8.50% in the same period in 2015.
Foreign Exchange loss, Interest Expenses and Other Income
Foreign exchange loss was $0.20M in the fourth quarter of 2016, contrast with a loss of $0.60M in the same quarter of the previous year, which was affected by fluctuations in the foreign exchange rates. Interest expenses were $6.10M in the fourth quarter of 2016, contrast with $1.50M in the same quarter a year ago. Interest expenses were mainly derived from interest expense related to convertible debts, offset by the interest income from certain term deposits.
Realized Loss on Disposal of a Partner
In the fourth quarter of 2016, we recorded a loss from the disposal of a partner of $3.0M, which was mainly driven by one-time non-cash losses related to the disposal of a partner.
Impairment Loss
In the fourth quarter of 2016, we recognized impairment losses of $12.20M, mainly driven by one-time non-cash write-downs of long-term investments.
Income Tax
Income tax benefit was $1.60M in the fourth quarter of 2016, contrast with income tax expense of $6.10M in the same period in 2015.
Net Income/Loss
Net Loss attributable to NQ Mobile was $124.50M in the fourth quarter of 2016, contrast with net income of $19.90M in the same period in 2015. Non-GAAP net loss attributable to NQ Mobile, which excludes share-based compensation, interest expenses related to convertible debts, amortization of intangible assets arising from acquisitions, impairment losses from goodwill, intangible assets and investment, and income tax provision related to the amortization of intangible assets arising from acquisitions and impairment loss from goodwill, intangible assets and investment, was $3.40M in the fourth quarter of 2016, contrast with non-GAAP net income attributable to NQ Mobile of $42.50M in the same period in 2015.
Cash and Cash Equivalents, Term Deposits and Restricted Cash
Cash and cash equivalents, term deposits and restricted cash together amounted to $318.20M as of December 31, 2016.
Cash Flow
Net cash flow used in operations for the fourth quarter of 2016 was $4.0M.
Fiscal Year 2016 Results:
Revenues
Net revenues for the fiscal year 2016 reduced 15.60% year-over-year to $343.10M from $406.70M in 2015. Apart From Nationsky from the comparable period, net revenues raised 19.70% year-over-year from the same period in 2015.
Mobile value added service revenues for the fiscal year 2016 raised 43.10% year-over-year to $199.80M from $139.60M in 2015. The increase in mobile value added service revenues was mainly attributable to the growth in live mobile social video platform revenue growth and mobile gaming revenue growth which represented 108.80% and 16.70% of the total year-over-year growth respectively. The strong growth in live mobile social video revenues and mobile gaming revenues was partially offset by a year-over-year decrease in consumer mobile security revenues, which offset 25.40% of the total year-over-year growth. The noteworthy increase in live mobile social video platform revenues was mainly driven by the rapid growth of Showself’s several applications. The overall Showself business in our live video platforms was up 145.0% contrast to the same period in 2015. The increase in mobile gaming revenues was mainly the result of the growth of FL Mobile’s new games in addition to the consolidation of Hetu, a partner. Mobile gaming revenues grew 13.60% contrast with the same period in 2015.
Advertising revenues for the fiscal year 2016 rose 44.0% year-over-year to $103.30M from $71.70M in 2015. The increase was mainly because of the continued expansion of advertising networks and the consolidation of Launcher, a business we obtained control of and merged at the end of Q1 2016. Apart from Launcher, since this was merged starting in 2016, advertising revenues raised 35.0% year-over-year contrast to the same period in 2015.
Enterprise mobility revenues for the fiscal year 2016 reduced 79.40% year-over-year to $39.20M from $190.0M in 2015. The decrease was mainly because of the divestment of NationSky which no longer contributed to the results starting in the first quarter of 2016. Apart from NationSky from the comparable period, enterprise mobility revenues reduced 44.0% year-over-year from the same period in 2015 as the Company focuses less on hardware procurement overall.
Other revenues for the fiscal year 2016 reduced 86.10% year-over-year to $0.70M from $5.40M in 2015. Other revenues are generated mainly by providing technical contract services to third parties and fluctuate as such business is driven by individual projects.
Cost of Revenues
Cost of revenues for the fiscal year 2016 reduced 18.30% year-over-year to $261.10M from $319.40M in the same period in 2015. Apart from NationSky from the comparable period, cost of revenues raised 20.10% year-over-year from the same period in 2015. The year-over-year increase was mainly because of higher revenue sharing and user acquisition costs corresponding to higher revenue growth in the live social video platform businesses in addition to mobile gaming.
Gross Profit and Gross Margin
Gross profit for the fiscal year 2016 reduced 6.1% to $82.0M from $87.30M in 2015. Apart From NationSky from the comparable period, gross profit raised 18.50% year-over-year from the same period in 2015. Gross margin, or gross profit as a percentage of net revenues, was 23.90% for the fiscal year 2016, contrast with 21.50% in 2015 and 24.10% apart from NationSky in the comparable period.
Operating Expenses
Selling and marketing expenses for the fiscal year 2016 reduced 25.30% year-over-year to $20.0M from $26.80M in 2015. Non-GAAP selling and marketing expenses for the fiscal year 2016, which exclude share-based compensation, reduced 25.0% year-over-year to $19.60M from $26.10M in 2015. The year-over-year decrease was mainly because of the impact of the NationSky Divestment. Apart from NationSky from the comparable period, selling and marketing expenses reduced 7.70% year-over-year from the same period in 2015, and non-GAAP selling and marketing expenses reduced 6.70% year-over-year from the same period in 2015.
General and administrative expenses for the fiscal year 2016 reduced 19.70% year-over-year to $52.60M from $65.50M in 2015. Non-GAAP general and administrative expenses for the fiscal year 2015, which exclude share-based compensation and the amortization of intangible assets arising from acquisitions, reduced 18.1% year-over-year to $37.90M from $46.30M in 2015. Apart From NationSky from the comparable period, general and administrative expenses reduced 17.5% year-over-year from the same period in 2015, and non-GAAP general and administrative expenses reduced 14.8% year-over-year from the same period in 2015 mainly because of a reduction in compensation costs in addition to a reduction in the allowance for bad debt expense contrast to the comparable period.
Research and development expenses for the fiscal year 2016 reduced 23.0% year-over-year to $22.40M from $29.0M in 2015. Non-GAAP research and development expenses for the fiscal year 2016, which exclude share-based compensation and the amortization of intangible assets arising from acquisitions, reduced 25.40% to $21.60M from $29.0M in 2015. This year-over-year decrease is mainly because of the divestment of NationSky. Apart from NationSky from the comparable period, research and development expenses raised 16.90% year-over-year from the same period in 2015, and non-GAAP research and development expenses raised 14.50% year-over-year from the same period in 2015, mainly because of the Linkmotion business and some pilot projects, in addition to the consolidation of Launcher.
Impairment of goodwill and intangible assets for the fiscal year 2016 was $98.90M as the result of a one-time, non-cash impairment of goodwill and intangible assets mostly from traffic related consumer businesses. The Company has three reporting units counting Mobile Games and Advertising, Enterprise Mobility, and Security and others. There was impairment of $8.10M from the Enterprise Mobility reporting unit. The Security and Others reporting unit consists of mobile security, live mobile social video platforms, and internet traffic related businesses. There was impairment of $90.80M from the Security and Others reporting unit from the internet traffic related businesses within this reporting unit.
Total operating expenses for the fiscal year 2016 raised 59.90% year-over-year to $193.80M from $121.20M in 2015 driven mostly from the one-time, non-cash impairment of goodwill and intangible assets recorded during the year of $98.90M. Apart from the impairment of goodwill and intangible assets, total operating expenses reduced 21.7% year-over-year to $94.90M from $121.20M in the same period in 2015. Apart from NationSky and impairment of goodwill and intangible assets from the comparable period, total operating expenses for the fiscal year 2016 reduced 9.10% year-over-year from the comparable period.
Non-GAAP operating expenses, which exclude share-based compensation expenses, the amortization of intangible assets arising from acquisitions, and impairment of goodwill and intangible assets, reduced 21.9% year-over year to $79.10M from $101.30M in 2015. Apart From NationSky from the comparable period, non-GAAP operating expenses reduced 6.20% year-over-year from the comparable period.
Share-based compensation expenses
Share-based compensation expenses, which were allocated to related operating cost and expenses line items, reduced 23.90% year-over-year to $12.60M from $16.60M in 2015. The decrease in share-based compensation expenses was mainly because of less performance-based share options and equity granted in relation to acquisitions and performance in comparable periods.
Loss/Income from Operations and Operating Margin
Loss from operations for the fiscal year 2016 was $111.80M million, contrast with $33.90M in fiscal year 2015, which was greatly influenced by the one-time, non-cash impairment of goodwill and intangible assets of $98.90M for the fiscal year 2016. Apart from the impact of the impairment of goodwill and intangible assets for the fiscal year 2016, loss from operations was $12.90M, contrast with $33.90M in the same period in 2015.
Non-GAAP income from operations for the fiscal year 2016, which excludes share-based compensation, intangible assets arising from acquisitions, and impairment of goodwill and intangible assets, was $13.40M contrast to a Non-GAAP loss from operations of $6.0M in 2015. Non-GAAP operating margin or non-GAAP income from operations as a percentage of net revenues for the fiscal year 2016 was 3.90% contrast to -1.50% in 2015.
Foreign Exchange Loss, Interest Expenses/Income
Foreign exchange loss was $0.01M for the fiscal year 2016, contrast with $1.70M in 2015. The loss in foreign exchange was mainly attributable to the fluctuation in foreign exchange rates. Interest expenses were $11.0M for the fiscal year 2016, contrast with $4.70M in 2015. Interest expenses were mainly derived from interest expense related to convertible debts, offset by the interest income from certain term deposits.
Realized Loss on Disposal of a Partner
For the fiscal year 2016, we recorded a loss from the disposal of a partner of $3.0M, which was mainly driven by one-time non-cash losses related to the disposal of a partner.
Impairment Loss
In the fiscal year 2016, we recognized impairment losses of $12.20M, mainly driven by one-time non-cash write-downs of long-term investments.
Income Tax
Income tax benefit was $0.40M for the fiscal year 2016, contrast with income tax expense of $9.20M in 2015.
Net Loss/Income
Net Loss attributable to NQ Mobile was $140.80M for the fiscal year 2016, contrast with $1.30M in 2015.
Non-GAAP net income attributable to NQ Mobile, which excludes share-based compensation, interest expenses related to convertible debts, amortization of intangible assets arising from acquisition, impairment losses from goodwill, intangible assets and investments and income tax provision related to the amortization of intangible assets arising from acquisitions and impairment loss from goodwill, intangible assets and investment was $8.50M for the fiscal year 2016, contrast with $49.30M in 2015.
Cash Flow
Net cash used in operating activities for the fiscal year 2016 was $40.60M.
Technical Analysis:
The Company has price-to-cash ratio of 1.12 and EPS ratio of 0.04. The company net profit margin is 0.90% and gross profit margin is 23.70%. The stock has shown quarterly performance of 20.06% and a half-year performance stands at 1.24%. The stock price is moving up from its 20 days moving average with 5.15% and isolated positively from 50 days moving average with 4.66%.
Analyst recommendation for this stock stands at 2.00.