News Press Releases

Borqs Technologies Reports Annual Revenues of $52.5 million, an Increase of 77.7%, and Adjusted EBITDA of $4.8 million

May 15, 2023

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.
Borqs Technologies (Nasdaq: BRQS, “Borqs”, or the “Company”) is a global leader in software and products for the IoT, providing customizable, differentiated, and scalable Android-based smart connected devices and cloud service solutions. Borqs has achieved leadership and customer recognition as an innovative end-to-end IoT solutions provider leveraging its strategic chipset partner relationships as well as its broad software and IP portfolio. Borqs’ unique strengths include its Android Licenses which enabled the Company to develop a software IP library covering chipset software, Android enhancements, domain specific usage, and system performance optimization, suitable for large and low volume customized products, and is also currently in development of 5G products for phones and hotspots.
Website: www.borqs.com.

Forward-Looking Statements and Additional Information
This press release includes “forward-looking statements” that involve risks and uncertainties that could cause actual results to differ materially from what is expected. Words such as “forecasts”, “expects”, “believes”, “anticipates”, “intends”, “estimates”, “predicts”, “seeks”, “may”, “might”, “plan”, “possible”, “should”, “estimates” and variations and similar words and expressions are intended to identify such forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Such forward-looking statements relate to future events or future results, based on currently available information and reflect our management’s current beliefs. Many factors could cause actual events or results to differ materially from the events and results discussed in the forward-looking statements, including the possibility that the positive financial results from the proposed divestment as described herein may not be realized, and the negative impact of the COVID-19 pandemic on the Company’s supply chain, revenues and overall results of operations, so the reader is advised to refer to the Risk Factors sections of the Company’s filings with the Securities and Exchange Commission for additional information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. Except as expressly required by applicable securities law, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Investor Contact:

Sandra Dou
Vice President of Corporate Finance
Borqs Technologies, Inc.
IR@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