InfoSonics Reports Third Quarter 2012 Results

SAN DIEGO, March 22, 2013 – InfoSonics Corporation (NASDAQ: IFON), the provider of verykool® wireless handset solutions, today announced results for its fourth quarter ended December 31, 2012.

“There are both positive and negative aspects to our fourth quarter results,” said Joseph Ram, president and CEO of InfoSonics.  “We were pleased to report a 57% growth in sales in the fourth quarter compared to the preceding third quarter, along with record sales in our core Latin American market and record total unit shipments for both the fourth quarter and the year as a whole.  However, our gross profit margin was lower than the third quarter and we incurred higher R&D, marketing and carrier certification expenses which resulted in the loss for the quarter.  Our gross margin was impacted by more aggressive pricing and special customer incentives formulated to stimulate sales, some of which may benefit future quarters.  Our operating expenses included a high level of R&D spending as we invested heavily in a new line of ruggedized smartphones.  The concurrent development of these models over the last two quarters required an expansion of our team.  But now that the work is mostly behind us, we have reduced the size of the team and recorded a restructuring reserve in the quarter as we streamline all our China operations.  We have also taken steps to reduce our other operating expenses.  Beginning with the second quarter of 2013, we expect approximately $1.5 million in annual savings from these collective actions compared to the fourth quarter 2012 run-rate.”

Expanding his comments, Mr. Ram noted, “We are encouraged by the pace of orders in the first quarter of 2013.  In addition, our R&D investment will enable us to launch a number of new smartphones during the second quarter of 2013 and we are expanding our sales efforts into the U.S. market.  We remain committed to our strategy.”

InfoSonics reported net sales for the fourth quarter of 2012 of $8.4 million, which represented a $3.5 million, or 29%, decline from $11.9 million for the fourth quarter of 2011.  The reason for the decline was the absence of low-margin Samsung distribution sales in the fourth quarter of 2012 compared to $3.5 million in distribution sales in the fourth quarter of 2011.  The Company transitioned away from this low-margin business in March 2012.  The Company noted that although sales of verykool® products were flat compared to the prior year quarter, unit shipments increased 73%.  The average selling price per unit declined 42% as a result of a shift in product mix to lower‑end products and more aggressive pricing during the quarter.  Net sales for the year ended December 31, 2012 amounted to $34.3 million, which represented a $0.6 million, or 2%, decrease from $34.9 million for the 2011 year.  Net sales of verykool® products during 2012 grew by $10.1 million, or 47%, compared to 2011, but were more than offset by a $10.7 million decline in distribution sales.

Gross profit margin as a percent of sales in the fourth quarter of 2012 improved to 16.0% compared to 13.5% in the 2011 fourth quarter, primarily as a result of the absence of low-margin distribution sales in the 2012 third quarter.  Gross profit in the fourth quarter of 2012 was $1.4 million, a 16% decline from $1.6 million in the 2011 fourth quarter.  Gross profit for the year ended December 31, 2012 amounted to $6.8 million, a $2.3 million, or 50%, increase from $4.5 million for the 2011 year.  The gross profit margin as a percent of sales for 2012 improved to 19.9% from 13.0% in the prior year period, also reflecting the significant decline in low-margin distribution sales during the year.

Operating expenses in the fourth quarter of 2012 were $2.5 million, an increase of 28% compared to $2.0 million in the 2011 fourth quarter.  This reflects an 18% increase in SG&A expenses primarily attributable to increases in marketing expenses and increased compensation for new employees and contractors.  In addition, R&D expenses rose by 64% primarily as a result of expansion of the Company’s China-based development team and a $100,000 accrual for the restructuring planned for the first quarter of 2013.   For similar reasons, operating expenses for the year ended December 31, 2012 amounted to $9.3 million, a 32% increase from $7.1 million for the 2011 year.

The net loss for the fourth quarter of 2012 was $1.2 million, or $0.08 per share, compared to a net loss of $359,000, or $0.03 per share, in the fourth quarter of 2011.  The net loss for both years ended December 31, 2012 and 2011 amounted to $2.5 million, or $0.18 per share.

At December 31, 2012, the Company had $6.2 million in cash, restricted cash and cash equivalents, $16.2 million of net working capital and no outstanding indebtedness.  Cash balances declined by $4.1 million compared to the September 30, 2012 balances primarily as a result of the growth in receivables generated by the significantly higher level of sales in the fourth quarter, as well as the loss for the quarter.

About InfoSonics Corporation
InfoSonics is a provider of wireless handsets and related products to OEMs, carriers and distributors in Latin America, Europe, Africa, Asia Pacific and the United States.  The Company designs, develops, manufactures, markets, sells and provides after-sales support for its own proprietary line of products under the verykool® and other private label brands.   Additional information can be found on our corporate website at and

Except for the factual statements made herein, the information contained in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks, uncertainties and assumptions that are difficult to predict.  Words and expressions reflecting optimism, satisfaction or disappointment with current prospects, as well as words such as “believes,” “hopes,” “intends,” “estimates,” “expects,” “projects,” “plans,” “anticipates” and variations thereof, or the use of future tense, identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Such forward-looking statements are not guarantees of performance and our actual results could differ materially from those contained in such statements. Factors that could cause or contribute to such differences include, without limitation: (1) intense competition internationally, including competition from alternative business models, such as manufacturer-to-carrier sales, which may lead to reduced prices, lower sales, lower gross margins, extended payment terms with customers, increased capital investment and interest costs, bad debt risks and product supply shortages; (2) the ability of the Company’s R&D group to develop new verykool® handsets and successfully introduce them into new emerging markets; (3) extended general economic downturn in world markets; (4) inability to secure adequate supply of competitive products on a timely basis and on commercially reasonable terms; (5) the ability of the Company to maintain and improve its gross margins despite intense competition; (6) foreign exchange rate fluctuations, devaluation of a foreign currency, adverse governmental controls or actions, political or economic instability, or disruption of a foreign market, including, without limitation, the imposition, creation, increase or modification of tariffs, taxes, duties, levies and other charges and other related risks of our international operations which could significantly increase selling prices of our products to our customers and end-users; (7) the ability to attract new sources of profitable business from expansion of products or services or risks associated with entry into new markets, including geographies, products and services; (8) an interruption or failure of our information systems or subversion of access or other system controls may result in a significant loss of business, assets, or competitive information; (9) significant changes in supplier terms and relationships, disruptions in production at contract manufacturers or shortages in product supply; (10) loss of business from one or more significant customers; (11) customer and geographical accounts receivable concentration risk and other related risks; (12) rapid product improvement and technological change resulting in inventory obsolescence; (13) uncertain political and economic conditions internationally, including terrorist or military actions; (14) the loss of a key executive officer or other key employees and the integration of new employees; (15) changes in consumer demand for multimedia wireless handset products and features; (16) our failure to adequately adapt to industry changes and to manage potential growth and/or contractions; (17) seasonal buying patterns; (18) the resolution of any litigation for or against the Company; (19) the ability of the Company to have access to adequate capital to fund its operations; and (20) the ability of the Company to generate taxable income in future periods. Reference is also made to other factors detailed from time to time in our periodic reports filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this release and we undertake no obligation to publicly update any forward-looking statements to reflect new information, events or circumstances after the date of this release.


Vernon A. LoForti
Chief Financial Officer