NQ Mobile (NQ) Reports Q2 EPS of $0.01; Updates on the FL Mobile Divestment

NQ Mobile (NYSE: NQ) reported Q2 EPS of $0.01, versus ($0.08) reported last year. Revenue for the quarter came in at $83.7 million, versus $102.1 million reported last year.

Non-GAAP net income attributable to NQ Mobile for the second quarter of 2016 was $7.6 million or $0. 08 per fully diluted ADS, compared to non-GAAP net income attributable to NQ Mobile of $7.0 million in the same period a year ago.

Updates on the FL Mobile Divestment

In a press release on August 9, 2016, the Company announced that pursuant to (i) the binding framework agreement announced on August 26, 2015 between the Company and Beijing Jinxin Rongda Investment Management Co. Ltd. ("Beijing Jinxin"), a subsidiary of Tsinghua Holdings Co. Ltd.; and (ii) the share purchase agreement announced on May 17, 2016 among Shenzhen Prince New Materials Co., Ltd., a company listed on the Shenzhen Stock Exchange (stock code: 002735), Dr. Vincent Wenyong Shi, the chairman and chief operating officer of the Company, Beijing Jinxin Hengrui Investment Center (Limited Partnership) ("Jinxin Hengrui"), a limited partnership established in the PRC which Beijing Jinxin is a general partner and Xinjiang NQ Mobile Venture Capital Investment Co., Ltd. ("Xinjiang NQ"), a consolidated affiliated entity of the Company and the direct holder of the Company's stake in FL Mobile Jiutian Technology Co., Ltd. ("FL Mobile") (the transactions contemplated thereunder, the "FL Mobile Divestment"), the Company recently entered into a series of definitive agreements with several investors to dispose a portion of the Company's stake in FL Mobile, including (i) the sale of 12% of FL Mobile's equity interests to Xinjiang Yinghe Equity Investment Management Limited Partnership ("Xinjiang Yinghe") for a consideration of RMB600 million, (ii) the sale of 3.53% of FL Mobile's equity interests to Nantong Jinxin Haoyue Investment Center (Limited Partnership), an affiliate of Jinxin Hengrui, for a consideration of RMB176.5 million, (iii) the sale of 3% of FL Mobile's equity interests to Nantong Jinxin Huatong Equity Investment Center (Limited Partnership), an affiliate of Jinxin Hengrui, for a consideration of RMB150 million and (iv) the sale of 1% of FL Mobile's equity interests to Tibet Zhuohua Capital Management Co., Ltd. for a consideration of RMB50 million. These transactions value the entire FL Mobile's business at RMB5 billion, the same as contemplated in previous agreements in FL Mobile Divestment.

The Company expects to receive 50% of the total consideration from Xinjiang Yinghe within 60 business days from the date of the agreement, and the remaining 50% of the total consideration will be received by the Company upon satisfaction of certain conditions and the completion of the FL Mobile Divestment. With respect to the other three transactions, the Company expects to receive 60% of the total consideration from each investor within 15 business days from the date of the respective agreements, and the remaining 40% by the end of 2016.

In addition, Xinjiang Yinghe is an affiliate of the management of FL Mobile, thus the transaction between Xinjiang NQ and Xinjiang Yinghe qualifies as a related party transaction and has been approved by the Company's audit committee. Furthermore, following the completion of these transactions, the Company's beneficial ownership in FL Mobile will decrease to approximately 45% of the equity interest from approximately 65% of the equity interest as previously disclosed in the press release on May 17, 2016. All parties related to the FL Mobile divestment have been notified of these changes.

To date, the Company has received the first payment of RMB525 million from Jinxin Hengrui pursuant to the sale of 13.13% equity interest in FL Mobile as previously disclosed in a press release issued on May 6, 2016. In the third quarter, the Company has also received the first payment of RMB440 million from Dr. Vincent Shi pursuant to the sale of 22% equity interest in FL Mobile as previously disclosed in a press release issued on March 24, 2016. The Company has also received part of the first payment from Jinxin Huatong of approximately RMB50 million so far in the third quarter pursuant to the sale of 3% equity interest in FL Mobile as previously disclosed in a press release issued on August 9, 2016.

For earnings history and earnings-related data on NQ Mobile (NQ) click here.

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