BEIJING, June 11 /PRNewswire-Asia/ -- Linktone Ltd. (Nasdaq: LTON), one of the leading providers of wireless interactive entertainment services to consumers in China, today announced its unaudited financial results for the first quarter ended March 31, 2009.
Results for the First Quarter
-- The Company recorded wireless value-added services ("WVAS") and other
revenues of $14.8 million, compared with $19.4 million in the fourth
quarter of 2008 and $16.5 million in the first quarter of 2008.
-- GAAP net income from continuing operations of $0.1 million, compared
with a net income from continuing operations of $1.1 million in the
fourth quarter of 2008 and a net income from continuing operations of
$1.1 million in the first quarter of 2008.
-- GAAP net income of $0.3 million, compared with a net income of $0.6
million in the fourth quarter of 2008 and a net loss of $4.2 million in
the first quarter of 2008.
-- GAAP net income per fully diluted American Depositary Share (ADS) of
$0.01, compared with a net income of $0.01 for the fourth quarter of
2008 and a net loss of $0.18 for the first quarter of 2008.
-- Non-GAAP net income* of $0.5 million, compared with a non-GAAP net
income of $2.3 million in the fourth quarter of 2008 and a non-GAAP net
loss of $4.0 million in the first quarter of 2008.
-- Non-GAAP net income per fully diluted ADS of $0.01 compared with a
non-GAAP net income of $0.05 in the fourth quarter of 2008 and a
non-GAAP net loss of $0.17 in the first quarter of 2008.
*Non-GAAP measures exclude certain share-based compensation expense and impairment charges. Please refer to the table at the end of this release titled "Non-GAAP reconciliation" which provides a reconciliation between GAAP and non-GAAP financial measures.
As previously reported, Linktone terminated its partnership agreement with the Chinese Youth League Internet, Film and Television Centre with regard to Qinghai Satellite Television and its partnership agreement with Tianjin Satellite Television ("TJSTV") in 2008. In the attached financial statements, the results of these advertising arrangements are reported separately as discontinued operations for both current and prior periods for the purpose of focusing on continuing operations and providing a consistent basis for comparing financial performance over time.
Chief Executive Officer Hary Tanoesoedibjo commented: "We are pleased to report another profitable quarter in keeping with our number one priority to return Linktone to sustainable profitability. The gross revenues for the quarter met our guidance range for the period and reflected traditional seasonality patterns in WVAS. We remain cautiously optimistic with regard to our long-term prospects given the increasing stability in our operating environment and the large-scale rollout of 3G in China. We believe strong execution in operations and prudent cost control efforts will enable us to achieve healthy, profitable growth in the future."
Mr. Tanoesoedibjo added: "With our new leadership team in place, my colleagues and I are committed to implementing actions to improve efficiency and effectiveness, positioning Linktone for long-term sustainable growth and profitability, and ultimately delivering greater value to our shareholders."
Linktone Deputy Chief Executive Officer and Chief Financial Officer, Colin Sung, stated: "Looking ahead, we intend to continue to focus on maximizing revenue, streamlining our operational efficiency and improving cost management. In addition, we are continuously monitoring the market for strategic acquisitions and alliance opportunities both domestically and internationally that will help advance our expansion strategy and accelerate our growth prospects."
First Quarter Revenue Mix
Linktone's first quarter revenue mix includes data-related services (SMS, MMS, WAP, and Java), audio-related services (IVR and CRBT) and others (casual game and enterprise services).
Data-related services revenue was $6.0 million, representing 41% of total gross revenues, compared with $11.9 million or 61% for the fourth quarter of 2008. The sequential decrease in Linktone's data-related services revenue was primarily attributable to a decrease in revenue from SMS services as a result of Linktone's decision to scale back certain cooperative projects and promotional activities for SMS and CRBT services in light of lower demand from consumers during this quarter.
Data-related services breakdowns are as follows:
-- Short Messaging Services (SMS) revenue represented 38% of gross
revenues, compared with 58% for the fourth quarter of 2008. SMS revenue
was $5.6 million for the first quarter of 2009, compared with $11.3
million for the fourth quarter of 2008.
-- Multimedia Messaging Services (MMS) revenue represented 2% of gross
revenues, compared with 2% for the fourth quarter of 2008. MMS revenue
was $0.3 million for the first quarter of 2009, compared with $0.4
million for the fourth quarter of 2008.
-- Wireless Application Protocol (WAP) and Java Gaming (Java) revenue
represented 1% of gross revenues compared with 1% for the fourth
quarter of 2008. WAP and Java revenue was $0.1 million for the first
quarter of 2009, compared with $0.2 million for the fourth quarter of
2008.
Audio-related services accounted for 56%, or $8.3 million of total revenues, compared with 36% or $7.0 million for the fourth quarter of 2008. The sequential increase was primarily due to an increase in revenue from interactive voice response services as a result of the continuing popularity of interactive programs broadcast over local radio stations.
Audio-related service breakdowns are as follows:
-- Interactive Voice Response services (IVR) revenue increased to 48% of
gross revenues, compared with 22% for the fourth quarter of 2008. IVR
revenue was $7.1 million for the first quarter of 2009, compared with
$4.3 million for the fourth quarter of 2008.
-- Color Ring-Back Tones (CRBT) revenue decreased to 8% of gross revenues,
compared with 14% for the fourth quarter of 2008. CRBT revenue was
$1.2 million for the first quarter of 2009, compared with $2.7 million
for the fourth quarter of 2008.
Margins, Expenses and Balance Sheet
Linktone's key operating benchmarks and balance sheet items for the first quarter of 2009 include the following:
-- Gross margin was 35% of net revenues, or gross revenues minus business
tax, compared with 47% for the fourth quarter of 2008 and 49% for the
first quarter of 2008. The sequential decrease in gross margin was
primarily due to higher revenue share to business partners for certain
popular radio programs in IVR services which accounted for a greater
proportion of total revenue in the first quarter of 2009.
-- Operating profit was 0.4% of net revenues, compared with operating
profit of 7% for the fourth quarter of 2008 and 9% for the first
quarter of 2008. The sequential decrease in operating profit was due
to lower contributions from higher margin services such as SMS given
the significant decrease in SMS revenue during the quarter.
-- Operating expenses totaled $4.9 million, compared with $7.4 million for
the fourth quarter of 2008 and $6.4 million for the first quarter of
2008. The sequential decrease was due to lower selling, marketing and
other general and administrative expenses as discussed below.
-- Selling and marketing expenses were $1.9 million, compared with $3.9
million for the fourth quarter of 2008 and $2.9 million for the first
quarter of 2008. The sequential decrease was due to decreased spending
on media advertising which was generating unsatisfactory returns.
-- Product development expenses were $1.0 million, compared with $0.9
million for the fourth quarter of 2008 and $0.8 million for the first
quarter of 2008.
-- Other general and administrative expenses were $2.0 million, compared
with $2.6 million for the fourth quarter of 2008 and $2.7 million for
the first quarter of 2008. The sequential decrease was primarily due
to lower office rental and related costs as a result of the Company
relocation in Beijing in mid-January 2009, lower stock option
compensation charges and lower professional fees incurred.
-- Interest expense was $0.2 million in the first quarter of 2009
primarily due to a foreign exchange loss of $0.4 million from
translating the Singapore dollar denominated loan into United States
dollars, which is the Company's reporting currency.
-- Net income from discontinued operations of $0.3 million was due to the
reversal of certain bad and doubtful accounts receivable provisions as
cash was subsequently received from these customers.
-- Cash and cash equivalents, as well as short-term investments available
for sale, totaled $101.0 million at March 31, 2009, compared with $96.0
million at December 31, 2008. The increase in cash and cash equivalents
was primarily due to the positive cash flow from continuing operations
of about $1.7 million and a $3.5 million refund received from TJSTV for
prepaid annual advertising fees for the period from October to December
2008 reflecting the termination of the agreement in September 2008.
-- Days sales outstanding (DSOs) for continuing operations, the average
length of time required for the Company to receive payment for services
delivered, were 109 days as of the end of the first quarter of 2009,
compared with 82 days as of the end of the fourth quarter of 2008.
Second Quarter 2009 Outlook
For the second quarter ending June 30, 2009, Linktone expects gross revenues to be approximately $17 million to $18 million.
Use of Non-GAAP Financial Measures
The reconciliation of GAAP measures with non-GAAP measures for net loss and net loss per fully-diluted ADS included in this press release is set forth after the attached financial statements. Linktone believes that the supplemental presentation of adjusted net loss and net loss per fully diluted ADS, excluding the effect of share-based compensation expense and provisions for impairment, provides meaningful non-GAAP financial measures to help investors understand and compare business trends among different reporting periods on a consistent basis, independently of share-based compensation and items not indicative of the Company's future ongoing operating results. Thus, the non-GAAP financial measures provide investors with another method for assessing Linktone's operating results in a manner that is focused on the performance of its ongoing operations. Linktone management also uses non-GAAP financial measures to plan and forecast results for future periods. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP results with non-GAAP results located after the financial statements.
Today's Conference Call
As previously announced, Linktone management plans to host a conference call to discuss its first quarter 2009 financial results at 9:00 p.m. Eastern Time on June 10, 2009 (6:00 p.m. Pacific Time on June 10, 2009 and 9:00 a.m. Beijing/Hong Kong Time on June 11, 2009). The dial-in number for the call is 877-941-2068 for U.S. callers and 480-629-9712 for international callers. Management will be on the call to discuss the quarterly results and highlights and to answer questions from participants. A replay of the call will be available through June 24, 2009. To access the replay, U.S. callers should dial 800-406-7325 and enter passcode 4083486; international callers should dial 303-590-3030 and enter the same passcode.
Additionally, a live webcast of this call will be available on the Linktone web site at http://www.linktone.com/press_release.jsp . An archived replay of the call will be available for 90 days.
About Linktone Ltd.
Linktone Ltd. is one of the leading providers of wireless interactive entertainment services to consumers in China. Linktone provides a diverse portfolio of services to wireless consumers and corporate customers, with a particular focus on media, entertainment and communications. These services are promoted through the Company's strong distribution network, integrated service platform and multiple marketing sales channels, as well as through the networks of the mobile operators in China. Through in-house development and alliances with international and local branded content partners, the Company develops, aggregates, and distributes innovative and engaging products to maximize the breadth, quality and diversity of its offerings.
Forward-Looking Statements
This press release contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these
forward-looking statements by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," and similar statements. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: Linktone's ability to expand into the ASEAN market, including the Indonesian market, and create synergies with MNC; changes in the policies of the PRC Ministry of Industry and Information and/or the telecom operators in China or in the manner in which the operators interpret and enforce such policies, including policies which reduce the prices the Company may charge customers; the risk that other changes in Chinese laws and regulations, including without limitation tax and media-related laws or laws relating to the usage of telecom value-added services, or in application thereof by relevant PRC governmental authorities, could adversely affect Linktone's financial condition and results of operations; the risk that Linktone will not be able to compete effectively in the telecom value-added services market in China and any new markets it enters for whatever reason, including competition from other service providers or penalties or suspensions for violations of the policies of the telecom operators; the risk that Linktone will not be able to realize meaningful returns from strategic partnerships, including its planned strategic cooperation with MNC, or may be required to record additional provisions for impairments in the value of the Company's investments in such partnerships; the risk that Linktone will not be able to develop and effectively market innovative services; the risk that Linktone will not be able to effectively control its operating expenses in future periods or make expenditures that effectively differentiate Linktone's services and brand; and the risks outlined in Linktone's filings with the Securities and Exchange Commission, including its registration statement on Form F-1 and annual report on Form 20-F. Linktone does not undertake any obligation to update this forward-looking information, except as required under applicable law.
For more information, please contact:
Investor Relations
Serena Shi
Linktone Ltd.
Tel: +86-10-6539-6802
Email: serena.shi@linktone.com
The Piacente Group, Inc.
Brandi Piacente, brandi@thepiacentegroup.com
Kristen McNally, kristen@thepiacentegroup.com
Tel: +1-212-481-2050
LINKTONE LTD.
CONSOLIDATED BALANCE SHEETS
(In U.S. dollars, except share data)
December 31, March 31,
2008 2009
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalents 81,593,823 86,548,254
Short-term investments 14,372,646 14,493,855
Accounts receivable, net 15,245,030 12,003,720
Tax refund receivable 1,240,718 1,266,110
Loan receivable from a related party 7,984,450 7,562,400
Deposits and other current assets 5,106,901 1,882,411
Deferred tax assets 1,479,554 1,514,165
Total current assets 127,023,122 125,270,915
Property and equipment, net 1,031,543 872,921
Intangible assets, net 171,238 154,919
Goodwill 14,584,212 14,584,212
Deferred tax assets 116,235 92,165
Other long-term assets 476,368 448,347
Total assets 143,402,718 141,423,479
Liabilities and shareholders' equity
Current liabilities:
Taxes payable 4,097,447 3,865,522
Accounts payable, accrued liabilities
and other payables 10,796,440 8,648,563
Deferred revenue 210,833 194,374
Deferred tax liabilities 87,947 80,056
Total current liabilities 15,192,667 12,788,515
Total liabilities 15,192,667 12,788,515
Shareholders' equity
Ordinary shares ($0.0001 par value;
500,000,000 shares authorized,
420,636,230 shares issued and
outstanding as of December 31, 2008
and March 31,2009) 42,063 42,063
Additional paid-in capital 137,560,175 137,731,746
Statutory reserves 2,466,165 2,466,165
Accumulated other comprehensive income:
Cumulative translation adjustments 7,363,186 7,270,909
Accumulated losses (19,221,538) (18,875,919)
Total shareholders' equity 128,210,051 128,634,964
Total liabilities and shareholders'
equity 143,402,718 141,423,479
LINKTONE LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In U.S. dollars, except share data)
Three months ended
March 31, December 31, March 31,
2008 2008 2009
(unaudited) (unaudited) (unaudited)
Gross revenues 16,532,115 19,401,719 14,775,690
Sales tax (605,657) (768,974) (499,281)
Net revenues 15,926,458 18,632,745 14,276,409
Cost of services (8,156,721) (9,926,816) (9,299,707)
Gross profit 7,769,737 8,705,929 4,976,702
Operating expenses:
Product development (782,226) (910,207) (962,344)
Selling and marketing (2,907,037) (3,875,868) (1,934,102)
Other general and
administrative (2,708,253) (2,573,934) (2,022,922)
Total operating expenses (6,397,516) (7,360,009) (4,919,368)
Income from operations 1,372,221 1,345,920 57,334
Interest income (including
interest income of $64,773
and $73,148 from a related
party loan for the three
months ended December 31,
2008 and March 31, 2009
respectively)/(expense) (18,958) 737,037 (168,511)
Other income/(expense) 165,796 (38,757) 177,581
Other-than-temporary
impairment loss on
investments -- (1,476,937) --
Income before tax 1,519,059 567,263 66,404
Income tax benefit/(expense) (382,114) 514,236 13,102
Net income from continuing
operations 1,136,945 1,081,499 79,506
Net income/(loss) from
discontinued operations (5,344,200) (465,607) 266,113
Net income/(loss) (4,207,255) 615,892 345,619
Other comprehensive
income/(loss): 1,577,959 162,310 (92,277)
Comprehensive income/(loss) (2,629,296) 778,202 253,342
Basic income/(loss) per
ordinary share:
Continuing operations 0.00 0.00 0.00
Discontinued operations (0.02) (0.00) 0.00
Total net income/(loss) (0.02) 0.00 0.00
Diluted income/(loss) per
ordinary share:
Continuing operations 0.00 0.00 0.00
Discontinued operations (0.02) (0.00) 0.00
Total net income/(loss) (0.02) 0.00 0.00
Basic income/(loss) per ADS:
Continuing operations 0.04 0.02 0.00
Discontinued operations (0.22) (0.01) 0.01
Total net income/(loss) (0.18) 0.01 0.01
Diluted income/(loss) per ADS:
Continuing operations 0.04 0.02 0.00
Discontinued operations (0.22) (0.01) 0.01
Total net income/(loss) (0.18) 0.01 0.01
Weighted average ordinary
shares:
Basic 240,291,330 420,636,230 420,636,230
Diluted 240,291,330 420,712,455 420,933,080
Weighted average ADSs:
Basic 24,029,133 42,063,623 42,063,623
Diluted 24,029,133 42,071,246 42,093,308
LINKTONE LTD.
NON-GAAP RECONCILIATION
(In U.S. dollars, except share data)
Three months ended
March 31, December 31, March 31,
2008 2008 2009
(unaudited) (unaudited) (unaudited)
Net income/(loss) (4,207,255) 615,892 345,619
Stock based compensation
expense 213,333 175,500 171,571
Other-than-temporary impairment
loss on investments -- 1,476,937 --
Non-GAAP net income/(loss) (3,993,922) 2,268,329 517,190
Non-GAAP diluted
income/(loss) per share (0.02) 0.01 0.00
Non-GAAP diluted
income/(loss) per ADS (0.17) 0.05 0.01
Number of shares used in
diluted per-share calculation 240,291,330 420,712,455 420,933,080
Number of ADSs used in
diluted per-share calculation 24,029,133 42,071,246 42,093,308
