BEIJING, August 19, 2011 /PRNewswire-Asia-FirstCall/ -- Linktone Ltd. (NASDAQ: LTON), a provider of media and entertainment content and services in key strategic markets in Asia, today announced its financial results for the second quarter ended June 30, 2011.
UNAUDITED RESULTS FOR THE SECOND QUARTER | |||||||
Three months ended | |||||||
US$ million, except for per ADS items | June 30, 2010 |
| March 31, 2011 |
| June 30, 2011 | ||
Gross Revenues | $16.9 | $13.9 | $14.0 | ||||
Gross Profit | 5.8 | 4.9 | 4.7 | ||||
(Loss) from Continuing Operations | (0.8) | (0.5) | (1.1) | ||||
GAAP Net Income/(Loss) from Continuing Operations | 0.1 | 0.9 | (0.3) | ||||
GAAP Net Income/(Loss) | 0.1 | 0.9 | (0.3) | ||||
GAAP Net Income/(Loss) per ADS (Diluted) | $0.00 | $0.02 | ($0.01) | ||||
Non-GAAP Net Income/(Loss) | 0.0 | 0.9 | (0.3) | ||||
Non-GAAP Net Income/(Loss) per ADS (Diluted) | $0.00 | $0.02 | ($0.01) | ||||
Cash and cash equivalents as well as short-term investments available for sale totaled $96.3 million, or $2.28 per diluted ADS, as of June 30, 2011, compared with $97.4 million as of March 31, 2011.
Linktone's financial results for the three months ended June 30, 2011 included the following:
Gross revenues for the second and first quarters of 2011 were comparable. On a year-over-year basis, revenues declined due primarily to constraints implemented by the telecom network operators in the People's Republic of China ("PRC") in 2011 regarding SMS services, as well as a decline in revenue from the media content segment experienced by the Company's majority owned subsidiary InnoForm Group.
GAAP net income declined on a sequential quarter basis as the first quarter of 2011 included gains from: Foreign exchange, reversal of provision against trade receivables, the open market sale of $10 million senior secured notes in Aerospace Satellite ("Aerospace notes") and higher interest income from a larger holding of Aerospace notes.
"Our second quarter gross revenues were in line with our previous guidance, despite continued pressure in our data-related services business," said Hary Tanoesoedibjo, Group Chief Executive Officer. "Our overall business in China remains stable, and we are encouraged by the growth we are seeing in the data-related services business in our Indonesia operations. For these reasons, we believe that we are likely to achieve our third quarter outlook of stable revenues even though we expect the telecom network operators in the PRC to continue their policy tightening. To help offset the instability within the PRC mobile market, we remain focused on diversifying our revenue base, enhancing our product offering, and expanding our geographic footprint in strategically targeted locations throughout Asia."
Linktone also today announced that it plans to resume its American Depositary Share (ADS) repurchase program, approved by its Board of Directors in August 2006. Based on purchases made following the 2006 authorization, the Company has approximately $10 million remaining under this repurchase program. Linktone intends to purchase up to $5 million of ADSs over the next 180 days, with additional purchases to be considered after that time.
The Company plans to purchase ADSs from time to time on the open market. The share repurchase program does not obligate Linktone to purchase any specific amount of its ADSs and may be suspended or extended at any time at the Company's discretion. The share repurchase program will be implemented and executed in compliance with all relevant laws, rules and requirements relating to the repurchase by the Company of its own shares. This program will be funded from the Company's available cash and operating cash flow.
SECOND QUARTER REVENUE MIX
Linktone's second quarter revenue mix includes VAS data-related services (SMS, MMS, WAP, and Java), VAS audio-related services (IVR and CRBT), sales of media content, and mobile and PC games. The breakdown of revenue in the second quarter was as follows:
Three months ended | |||||||||
US$ million, except for % | March 31, 2011 | June 30, 2011 | |||||||
Gross | % of Gross Revenues | Gross | % of Gross Revenues | ||||||
Revenues | Revenues | ||||||||
Data-related services | $7.1 | 51% | $7.3 | 53% | |||||
Audio-related services | 2.1 | 15% | 2.7 | 19% | |||||
Media content | 3.7 | 27% | 3.1 | 22% | |||||
Mobile games | 0.6 | 4% | 0.6 | 4% | |||||
PC games | 0.4 | 3% | 0.3 | 2% | |||||
Total gross revenue | $13.9 | 100% | $14.0 | 100% | |||||
The shift in second quarter 2011 revenue mix was primarily related to a decline in media content revenue, partially offset by an increase in IVR revenue from audio-related services.
Data-related services revenue was $7.3 million, representing 53% of gross revenues, compared with $7.1 million, or 51% of gross revenues for the first quarter of 2011. The sequential increase was primarily due to improvement in SMS revenue generated by Linktone's Indonesia operations. This was partially offset by the decline in SMS revenue from Linktone's PRC operations, which was impacted by ongoing policy tightening at China Mobile Communications Corporation ("CMCC") and China United Telecommunications Corporation ("CU"), two of the key telecom network operators with which Linktone partners in the PRC, and a decline in WAP and JAVA revenue.
The breakdown of data-related services revenue in the second quarter was as follows:
Three months ended | |||||||||
US$ million, except for % | June 30, 2011 | March 31, 2011 | |||||||
Gross | % of Gross Revenues | Gross | % of Gross Revenues | ||||||
Revenues | Revenues | ||||||||
SMS | $5.6 | 40% | $6.1 | 44% | |||||
MMS | 0.7 | 5% | 0.8 | 6% | |||||
WAP and JAVA | 0.8 | 6% | 0.4 | 3% | |||||
Total Data-related services | $7.1 | 51% | $7.3 | 53% | |||||
Audio-related services accounted for 19% of gross revenues, or $2.7 million, compared with 15% of gross revenues, or $2.1 million, for the first quarter of 2011. The sequential quarter increase was primarily due to an increase from IVR revenues, following the strategic initiation of interactive adolescent-focused programs with TV media partners.
The breakdown of audio-related services revenue in the second quarter was as follows:
Three months ended | |||||||||
US$ million, except for % | March 31, 2011 | June 30, 2011 | |||||||
Gross | % of Gross Revenues | Gross | % of Gross Revenues | ||||||
Revenues | Revenues | ||||||||
IVR | $1.6 | 11% | $2.0 | 14% | |||||
CRBT | 0.5 | 4% | 0.7 | 5% | |||||
Total Audio-related services | $2.1 | 15% | $2.7 | 19% | |||||
Media content revenue declined sequentially due to a lack of strong titles from a major studio and continued aggressive competition from parallel imported DVD titles from lower cost distributors.
MARGINS, EXPENSES AND BALANCE SHEET | |||||||
US$ million, except for margin items | Three months ended | ||||||
June 30, 2010 |
| March 31, 2011 |
| June 30, 2011 | |||
Gross profit margin | 35% | 35% | 34% | ||||
Operating loss margin | (5%) | (4%) | (8%) | ||||
Operating expenses | $6.6 | $5.5 | $5.8 | ||||
Selling and marketing expenses | 2.7 | 2.2 | 2.2 | ||||
Product development expenses | 0.7 | 0.5 | 0.6 | ||||
Other general and administrative expenses | 3.2 | 2.8 | 3.0 | ||||
Income tax expense/(benefit) | (0.0) | 0.1 | 0.1 | ||||
The drivers behind Linktone's key operating benchmarks and changes in balance sheet items for the second quarter of 2011 include the following:
THIRD QUARTER 2011 OUTLOOK
USE OF NON-GAAP FINANCIAL MEASURES
The reconciliation of GAAP measures with non-GAAP measures for net income or loss and net income or loss per diluted ADS included in this press release is set forth after the attached unaudited financial information. Linktone believes that the supplemental presentation of adjusted net income or loss and net income or loss per diluted ADS, adjusted to exclude the effect of share-based compensation expense and provisions for impairment and their reversals, 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 Linktone'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 accompanying this press release.
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 in 2008. In the attached unaudited financial information, 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.
ABOUT LINKTONE LTD.
Linktone Ltd. (the "Company") is a provider of rich and engaging services and content to a wide range of traditional and new media consumers and enterprises in Mainland China, Indonesia, Malaysia, Hong Kong and Singapore. Linktone focuses on media, entertainment, communication and edutainment products, which are promoted through the Company's strong nationwide distribution networks, integrated service platforms and multiple marketing sales channels, as well as through the networks of leading mobile operators in Mainland China and Indonesia.
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 Asian markets outside of the PRC; changes in the policies of the PRC Ministry of Industry and Information and/or the telecom operators in the PRC 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; Linktone's ability to cost-effectively market its services and products; the risk that Linktone will not be able to compete effectively in the telecom value-added services market in the PRC or any new markets it enters such as the VAS market in Southeast Asia and the market for edutainment and entertainment products, for whatever reason, including competition or changes in the regulatory environment; the risk that Linktone will not be able to realize meaningful returns from its acquisitions or strategic partnerships or may be required to record additional provisions for impairments in the value of the Company's investments in such acquisitions or partnerships; the risk that Linktone will not be able to effectively manage entities that it acquires or effectively utilize their resources; 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.
Investor Relations
The Piacente Group, Inc.
Lee Roth or Wendy Sun
linktone@thepiacentegroup.com
Tel: 212-481-2050
LINKTONE LTD. | |||
CONSOLIDATED BALANCE SHEETS | |||
(In U.S. dollars, except share data) | |||
December 31, | June 30, | ||
2010 | 2011 | ||
(audited) | (unaudited) | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | 58,875,399 | 53,442,499 | |
Restricted cash | 573,784 | 587,181 | |
Short-term investments | 33,809,913 | 42,894,765 | |
Accounts receivable, net | 17,889,593 | 17,132,820 | |
Tax refund receivable | 2,767,084 | 932,393 | |
Inventory | 2,304,716 | 2,640,989 | |
Deposits and other current assets | 6,584,246 | 7,222,743 | |
Deferred tax assets | 1,254,529 | 1,133,139 | |
Total current assets | 124,059,264 | 125,986,529 | |
Property and equipment, net | 11,796,390 | 12,198,825 | |
Intangible assets, net | 11,546,227 | 10,936,440 | |
Goodwill | 40,483,355 | 40,483,355 | |
Non-current assets held for sale | 819,578 | 819,578 | |
Deferred tax assets | 72,480 | 121,693 | |
Other long-term assets | 2,499,426 | 4,003,144 | |
Total assets | 191,276,720 | 194,549,564 | |
Liabilities and shareholders' equity | |||
Current liabilities: | |||
Taxes payable | 3,696,039 | 3,917,348 | |
Accounts payable, accrued liabilities and other payables | 24,045,406 | 23,586,183 | |
Short-term loan | 4,191,591 | 5,353,686 | |
Loan payable | |||
Deferred revenue | 402,139 | 465,307 | |
Deferred tax liabilities | 1,078,403 | 993,586 | |
Total current liabilities | 33,413,578 | 34,316,110 | |
Long-term liabilities | |||
Deferred tax liabilities | 1,743,466 | 1,748,006 | |
Other long term liabilities | 2,412,068 | 871,911 | |
Total liabilities | 37,569,112 | 36,936,027 | |
Shareholders' equity | |||
Linktone Ltd. shareholders' equity: | |||
Ordinary shares ($0.0001 par value; 500,000,000 shares authorized, 421,130,130 shares and 421,435,030 shares issued and outstanding as of December 31, 2010 and June 30, 2011, respectively) | 42,113 | 42,144 | |
Additional paid-in capital | 137,581,956 | 137,671,518 | |
Statutory reserves | 2,466,165 | 2,466,165 | |
Accumulated other comprehensive income: | |||
Unrealized gain on investment in marketable securities | 2,376,723 | 3,646,067 | |
Cumulative translation adjustments | 9,306,938 | 11,456,484 | |
Accumulated losses | (19,689,371) | (19,134,379) | |
Non-controlling interest | 21,623,084 | 21,465,538 | |
Total shareholders' equity | 153,707,608 | 157,613,537 | |
Total liabilities and shareholders' equity | 191,276,720 | 194,549,564 | |
LINKTONE LTD. | ||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||||
| ||||||
| Three months ended | Six months ended | ||||
| June 30, | March 31, | June 30, | June 30, | June 30, | |
2010 | 2011 | 2011 | 2010 | 2011 | ||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||
Gross revenues | 16,871,810 | 13,942,210 | 13,953,731 | 35,829,694 | 27,895,941 | |
Sales tax | (484,488) | (227,600) | (554,433) | (1,081,203) | (782,033) | |
Net revenues | 16,387,322 | 13,714,610 | 13,399,298 | 34,748,491 | 27,113,908 | |
Cost of revenue | (10,558,399) | (8,770,399) | (8,649,314) | (23,988,801) | (17,419,713) | |
Gross profit | 5,828,923 | 4,944,211 | 4,749,984 | 10,759,690 | 9,694,195 | |
Operating expenses: |
|
|
|
|
| |
Product development | (717,857) | (545,191) | (646,967) | (1,538,984) | (1,192,158) | |
Selling and marketing | (2,705,862) | (2,165,032) | (2,182,177) | (4,803,037) | (4,347,209) | |
Other general and administrative | (3,227,486) | (2,787,383) | (3,039,046) | (5,250,181) | (5,826,429) | |
Provisions for impairment | 58,628 | 37,975 | 38,455 | 73,276 | 76,430 | |
Total operating expenses | (6,592,577) | (5,459,631) | (5,829,735) | (11,518,926) | (11,289,366) | |
(Loss) from continuing operations | (763,654) | (515,420) | (1,079,751) | (759,236) | (1,595,171) | |
Interest income, net of financial expenses | 758,767 | 913,845 | 672,107 | 1,302,014 | 1,585,952 | |
Other income/(loss) | 88,376 | 490,395 | 132,440 | 85,880 | 622,835 | |
Gain on disposal of investments | - | 200,000 | - | - | 200,000 | |
Income/(Loss) before tax | 83,489 | 1,088,820 | (275,204) | 628,658 | 813,616 | |
Income tax benefit/(expense) | 14,636 | (141,545) | (72,145) | (394,536) | (213,690) | |
Less: Net income attributable to non-controlling interest | (30,983) | (46,003) | 1,069 | (65,969) | (44,934) | |
Net income/(loss) from continuing operations | 67,142 | 901,272 | (346,280) | 168,153 | 554,992 | |
Net income/(loss) from discontinued operations | - | - | - | - | - | |
Net income/(loss) | 67,142 | 901,272 | (346,280) | 168,153 | 554,992 | |
Other comprehensive income/(loss): | 159,093 | 399,678 | 2,810,647 | 179,897 | 3,210,325 | |
Comprehensive income/(loss) | 226,235 | 1,300,950 | 2,464,367 | 348,050 | 3,765,317 | |
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Basic income / (loss) per ordinary share: |
|
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|
|
| |
Continuing operations | 0.00 | 0.00 | (0.00) | 0.00 | 0.00 | |
Discontinued operations | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |
Total net income / (loss) | 0.00 | 0.00 | (0.00) | 0.00 | 0.00 | |
Diluted income / (loss) per ordinary share: | ||||||
Continuing operations | 0.00 | 0.00 | (0.00) | 0.00 | 0.00 | |
Discontinued operations | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |
Total net income / (loss) | 0.00 | 0.00 | (0.00) | 0.00 | 0.00 | |
Basic income / (loss) per ADS: | ||||||
Continuing operations | 0.00 | 0.02 | (0.01) | 0.00 | 0.01 | |
Discontinued operations | 0.00 | 0.00 | (0.00) | 0.00 | 0.00 | |
Total net income / (loss) | 0.00 | 0.02 | (0.01) | 0.00 | 0.01 | |
Diluted income / (loss) per ADS: | ||||||
Continuing operations | 0.00 | 0.02 | (0.01) | 0.00 | 0.01 | |
Discontinued operations | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |
Total net income / (loss) | 0.00 | 0.02 | (0.01) | 0.00 | 0.01 | |
Weighted average ordinary shares: |
|
|
|
|
| |
Basic | 421,130,130 | 421,193,281 | 421,435,030 | 421,058,885 | 421,344,065 | |
Diluted | 421,420,025 | 421,285,286 | 421,435,030 | 421,410,028 | 421,422,569 | |
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Weighted average ADSs: |
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| |
Basic | 42,113,013 | 42,119,328 | 42,143,503 | 42,105,888 | 42,134,407 | |
Diluted | 42,142,003 | 42,128,529 | 42,143,503 | 42,141,003 | 42,142,257 | |
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LINKTONE LTD. | ||||||
NON-GAAP RECONCILIATION | ||||||
(In U.S. dollars, except share data) | ||||||
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Three months ended | Six months ended | |||||
June 30, | March 31, | June 30, | June 30, | June 30, | ||
2010 | 2011 | 2011 | 2010 | 2011 | ||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||
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Net income/(loss) | 67,142 | 901,272 | (346,280) | 168,153 | 554,992 | |
Stock based compensation expense | 23,054 | 22,381 | 37,179 | 99,969 | 59,560 | |
Reversal for impairment | (58,628) | (37,975) | (38,455) | (73,276) | (76,430) | |
Non-GAAP net income/(loss) | 31,568 | 885,678 | (347,556) | 194,846 | 538,122 | |
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Non-GAAP diluted income/(loss) per share | 0.00 | 0.00 | (0.00) | 0.00 | 0.00 | |
Non-GAAP diluted income/(loss) per ADS | 0.00 | 0.02 | (0.01) | 0.00 | 0.01 | |
Number of shares used in diluted per-share calculation | 421,420,025 | 421,285,286 | 421,435,030 | 421,410,028 | 421,422,569 | |
Number of ADSs used in diluted per-share calculation | 42,142,003 | 42,128,529 | 42,143,503 | 42,141,003 | 42,142,257 | |
