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Zoom Technologies Reports Second Quarter 2012 Results

Mr. Lei Gu, Chairman & CEO of ZOOM, provided the following insight. "Our growth in sales revenue reflects the execution of our plan to sell more whole phones, with particular emphasis on our branded products. As we continue to grow our sales, we will continue to expand our gross profit. We believe that our increased revenues are reflective of customers' increased receptivity of our comprehensive ODM (original design and manufacturing) solutions, and our increased brand recognition." Chairman Gu also pointed out that our increased revenues are indicative of our staying power not only as a manufacturer, but as a recognizable brand.

For the second quarter of 2012, ZOOM reported a net income of $0.4 million compared to $1.5 million in the same period in 2011. Net income for the first quarter of 2012 was $0.6 million. Net income in the second quarter of 2012 as compared to the same quarter in 2011 was down $1.1 million. Our decreased net income in 2012 relative to the same quarter in 2011 is indicative of a highly competitive market where gross margins have become very slim. The second quarter net income for 2012 as compared to first quarter income was down $0.2 million. The slight decrease is reflective of our increased general and administrative costs and non-cash based equity compensation. We expect to continue to grow our top line revenue by increasing our sales volume. In conjunction with our increased revenues, we expect per unit costs to decrease as we strengthen our bargaining power with our suppliers. We also expect that we will experience more economies of scale relative to our general and administrative expenses as we grow our revenue in future quarters.

Gross profit for the second quarter of 2012 of $8.3 million increased significantly compared to $5.9 million in the second quarter of 2011. Gross profit as percentage of revenue for the first quarter of 2012 was 8.4% as compared to 10.2% for the same quarter a year ago. Net margin was reduced to 0.4% in the second quarter of 2012 from 2.6% in the same quarter last year. Again, our decrease in gross and net profit margins are related to the highly competitive market; however, we expect these margins to improve as our increased production volumes will strengthen our bargaining power with our suppliers and we look forward to capturing more profitable ODM business in the coming quarters.

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