NQ Mobile's CEO Discusses Q2 2012 Results - Earnings Call Transcript

NQ Mobile Inc. (NQ)

Q2 2012 Earnings Conference Call

August 9, 2012 08:00 AM ET

Executives

Mattan Lurie - Investor Relations

Henry Yu Lin - Co-founder, Chairman and Co-Chief Executive Officer

Omar Khan - Co-Chief Executive Officer

Vincent Shi - Co-Founder and Chief Operating Officer

Suhai Ji - Chief Financial Officer

Will Yiwei Jiang - Chief Strategy Officer

Analysts

Andy Yeung – Oppenheimer

Mark Murphy – Piper Jaffray

Mike Walkley – Canaccord-Genuity

Fred Ziegel – Topeka Capital Markets

Presentation

Operator

Welcome to NQ Mobile’s Second Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. (Operator Instruction) Please be advised, this conference is being recorded, today, August 09, 2012. I would now like to turn the conference over to your speaker today Mattan Lurie, NQ Mobile investor relations. Thank you sir. Please go ahead.

Mattan Lurie

Hello everyone and welcome to NQ Mobile’s second quarter 2012 earnings conference call. The company’s earnings results were released earlier today and are available on the company’s IR website ir.nq.com as well as on Newswire Services. Today, you will hear opening remarks and NQ Mobile’s Co-CEOs Dr. Henry Yu Lin and Omar Khan, followed by our Chief Financial Officer Suhai Ji who will take you through the company’s operational and financial results of the second quarter 2012 and give guidance to the third quarter and full year 2012. After their prepared remarks Dr. Lin, Mr. Khan. Mr. Ji and our Chief Strategy Officer Will Jiang will be available to answer your questions. Before we continue please note that the discussion today will contain certain forward looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from our current expectations. NQ Mobiles does not assume any obligation to update any forward-looking statements except as required under applicable law. Also, please note that some of the information to be discussed includes non-GAAP financial measures as defined in regulation sheet. The most directly comparable U.S. GAAP financial measures and information reconciling these non-GAAP financial measures the NQ Mobiles financial results prepared in accordance with U.S. GAAP are included in NQ Mobiles earnings release which has been posted on the company’s website at ir.nq.com. Finally, as a reminder this conference is being recorded. In addition, a webcast of this conference call will be available on NQ Mobiles investor relations website.

I will now turn the call over to NQ Mobiles Founder, Chairman and Co-CEO, Dr. Lin.

Henry Yu Lin

Thank you and welcome to everyone on the call. I am pleased to report that NQ Mobile delivered a solid second quarter with record revenues. Excluding $1.4 million revenue contribution from the NationSky acquisition, our revenues reached $18.6 million against exceeding the high end of early previously issued guidance. We also achieved another milestone in our in second quarter. As our registered user accounts surpassed the 200 million mark, nearing doubling from one year ago. (inaudible) backdrop of a continued global economic uncertainty. Our business and user base growth has maintained growth momentum. And we continue to benefit from the record increase in global smart phone shipments and customer awareness and demand for mobile security and proxy solutions. The strong growth in our user base is also clear the elevation of the global expansion strategy and invested user acquisition channel and models.

In the second quarter, we continued our customer business by launching more innovative products such as NQ Mobile Vault. We also expanded into enterprise business by completing the acquisition of NationSky and establish partnership with industry leaders such as TDMobility. Our international business, has also been gaining strong momentum and now already accounted for more than half our consumer mobile internet service revenue. With that I’d like to hand the call over to my partner and NQ Mobile’s Co-CEO Omar Khan who will give you more details about the three departments in our business.

Omar Khan

Thank you Henry and hello everyone in the call. Before I get into more details on NQ Mobiles business I must echo Henry on the enormous market opportunity that we are faced with despite the uncertain global economic outlook. Two of our biggest growth drivers are global smartphone shipment and the consumer awareness and adoption of mobile security and privacy solutions, both of which are in a rapid rise. For example, the latest IBC data shows that in the second quarter of 2012 approximately 154 million smartphones were shipped, a 42% increase year-over-over among which over 68% or 105 million were android smartphones. Android smartphones are the largest and fastest growing segment with over 100% growth. Third-party research from (inaudible) also forecasted mobile security will turn into a $3 billion market opportunity by 2015 and over 20% of smartphones and tablets will have mobile security software pre-installed by 2015. Thus it is quite obvious that we are still at an early stage of the mobile security market evolution and we want to ensure that NQ Mobile is well positioned to capture disproportionate amount of this opportunity.

In the second quarter, there are few things that we are particularly proud of. First, I would like to cover our new products. I am proud to report that our product teams have been extremely busy in the second quarter. We officially launched our newest consumer product NQ Mobile Vault which is a privacy protection application that enables you to just encrypt and protect their personal data and communications. NQ Mobile Vault has been getting rave reviews and has already won several awards and accolades. NQ Mobile Vault continues to gain strong user traction with over 4.2 million downloads of registered users with a very high level of active engagement.

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