InfoSonics Reports Third Quarter 2011 Results and Record Gross Margin

SAN DIEGO, November 10, 2011 – InfoSonics Corporation (NASDAQ: IFON) a developer and manufacturer of wireless handset solutions serving Latin America, Europe and Asia Pacific, today announced results for its third quarter ended September 30, 2011.

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“For the second consecutive quarter, our gross margin percentage hit another record high,” said Joseph Ram, president and CEO of InfoSonics.  “For the third quarter ended September 30, 2011, our gross margin was 17.0%, up from the previous record of 14.3% set in our second quarter ended June 30, 2011.  This reflects the continuing progress we are making in our transformation from being primarily a distributor of wireless handsets to being a developer, manufacturer and seller of our own proprietary handsets.  Sales of our own verykool® branded products grew 163% during the third quarter over the same quarter of the prior year and comprised 83% of our total revenue for the quarter compared to only 28% in the prior year.  For the nine months year-to-date, our verykool® revenues are up 92% over the prior year.”

Commenting further, Mr. Ram noted, “We are pleased with our performance this quarter as we shipped 142% more verykool® wireless handsets compared to the same quarter of the prior year.  As a result of an improved product mix, our average selling price rose by 7%.  On a sequential performance basis, in addition to the significant improvement this quarter in our gross margin, we held our operating expenses level and were able to reduce our quarterly loss by 50%.  We introduced 2 new models during the third quarter, and have more planned for the fourth quarter.  We remain focused in our efforts to return InfoSonics to profitability.”

InfoSonics reported net sales for the third quarter of 2011 of $7.2 million, compared to $8.2 million for the third quarter of 2010.  The decrease in net sales was due to a $4.7 million reduction in the company’s distribution sales.  This decrease was partially offset by a $3.7 million increase in net sales of the company’s verykool branded products.

The company’s gross profit margin in the third quarter of 2011 was 17.0% compared to 6.6% in the third quarter of 2010.  The improvement in gross margin reflects a higher percentage of total sales derived from the company’s verykool® product line which generate higher margins than the legacy distribution business.

Operating expenses in the third quarter of 2011 were $1.6 million compared to $2.5 million in the third quarter of 2010.  Selling, general and administrative expenses in the third quarter of 2011 of $1.3 million declined by 40% from $2.1 million in the third quarter of 2010.  The decline is attributable to reductions in variable expenses linked to the decline in the company’s distribution sales, a $100,000 reversal of bad debt reserves and reduction of other fixed operational costs, including the closure earlier this year of the company’s Miami distribution center.  Research and development expenses of $384,000 were down slightly from $406,000 in the third quarter of the prior year.

The net loss for the third quarter of 2011 was $413,000, or $0.03 per share, compared to a net loss of $2.0 million, or $0.14 per share, in the third quarter of 2010.

The company ended the third quarter of 2011 with $13.5 million in cash and cash equivalents, a decrease of $0.9M from the second quarter of 2011.  This amount, together with an additional $1.0M generated through reductions in accounts receivable, was invested in inventories and deposits in advance of fulfillment of existing and anticipated sales orders in the fourth quarter.  At September 30, 2011, the company had $18.9 million of net working capital and no outstanding indebtedness.



About Infosonics Corporation

InfoSonics is a provider of wireless handsets and related products to carriers and distributors in Latin America and Asia Pacific. The Company distributes products supplied by OEMs and also 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 www.infosonics.com and at www.verykool.net.

 

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 new China 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 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; (6) 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.

Contact:

Vernon A. LoForti

Chief Financial Officer

vern.loforti@infosonics.com

858-373-1675