omniture

Taomee Reports First Quarter 2014 Unaudited Financial Results

2014-05-20 19:11 1229

SHANGHAI, May 20, 2014 /PRNewswire/ -- Taomee Holdings Limited (NYSE: TAOM) ("Taomee" or the "Company"), a leading children's entertainment and media company in China, today reported its unaudited financial results for the first quarter of 2014.

Highlights of the First Quarter of 2014

  • Total net revenues were US$11.7 million in the first quarter of 2014, an increase of 6.9% from US$10.9 million in the fourth quarter of 2013 and an increase of 21.9% from US$9.6 million in the first quarter of 2013. This result was above the high end of management's previous outlook of US$11.0 million to US$11.5 million.
  • Net revenues from online businesses were US$9.4 million in the first quarter of 2014, an increase of 13.6% from US$8.2 million in the fourth quarter of 2013 and an increase of 14.5% from US$8.2 million in the first quarter of 2013.
  • Net revenues from offline businesses were US$2.3 million in the first quarter of 2014, a decrease of 13.6% from US$2.7 million in the fourth quarter of 2013 and an increase of 64.6% from US$1.4 million in the first quarter of 2013.
  • Gross profit was US$8.5 million in the first quarter of 2014, an increase of 6.7% from US$8.0 million in the fourth quarter of 2013 and an increase of 16.7% from US$7.3 million in the first quarter of 2013.
  • Income from operations was US$0.5 million in the first quarter of 2014, a decrease of 74.4% from US$2.1 million in the fourth quarter of 2013 and an increase of 689.7% from US$67 thousand in the first quarter of 2013.
  • Non-GAAP net income attributable to holders of ordinary shares was US$1.2 million in the first quarter of 2014, as compared with US$2.9 million in the fourth quarter of 2013 and US$1.6 million in the first quarter of 2013.
  • Non-GAAP basic and diluted earnings per ADS[1] were US$0.03 and US$0.03, respectively, in the first quarter of 2014, as compared with US$0.08 and US$0.08, respectively, in the fourth quarter of 2013 and US$0.04 and US$0.04, respectively, in the first quarter of 2013.

[1] Each American depositary share ("ADS") represents twenty ordinary shares.

Key Operating Metrics

  • The number of active accounts ("ACA") for the Company's virtual worlds under operation in mainland China was approximately 45.1 million in the first quarter of 2014, an increase of 16.8% from 38.6 million in the fourth quarter of 2013 and an increase of 2.7% from 43.9 million in the first quarter of 2013.
  • Active paying accounts ("APA") for the Company's virtual worlds under operation in mainland China were 1.4 million in the first quarter of 2014, an increase of 7.7% from 1.3 million in the fourth quarter of 2013, but a decrease of 6.7% from 1.5 million in the first quarter of 2013.
  • Average revenue per user ("ARPU") for the Company's virtual worlds under operation in mainland China was approximately RMB39 in the first quarter of 2014, an increase of 5.4% from RMB37 in the fourth quarter of 2013 and an increase of 18.2% from RMB33 in the first quarter of 2013.
  • The number of downloads of the mobile applications operated by the Company increased by approximately 1.8 million in the first quarter of 2014, flat as compared with the fourth quarter of 2013 and a decrease of 51.4% from 3.7 million in the first quarter of 2013.

Mr. Benson Wang, co-founder and chief executive officer of Taomee, stated, "We delivered solid revenue results driven by our continued execution of our business plan in the first quarter of 2014. We continue to develop our multi-pronged growth strategies through our cross-media platform, as we believe the synergies will ultimately differentiate us from our competitors in the industry. As China's entertainment landscape begin to take shape, intellectual property coupled with diverse distribution channels will become more valuable in the marketplace."

"Our focus for 2014 is clear, and that is to further expand our franchises through an integrated multi-media network composed of gaming, television, film, comics, licensing and merchandising channels. We believe this is the most effective strategy to continue building brand loyalty while also offering different monetization opportunities. 2014 will be a pivotal year for Taomee, as we look to build a sustainable business with long-term value for our shareholders."

Unaudited Financial Results for First Quarter of 2014

Net Revenues

Total net revenues were US$11.7 million in the first quarter of 2014, an increase of 6.9% from US$10.9 million in the fourth quarter of 2013 and an increase of 21.9% from US$9.6 million in the first quarter of 2013.

Net online business revenues were US$9.4 million in the first quarter of 2014, an increase of 13.6% from US$8.2 million in the fourth quarter of 2013 and an increase of 14.5% from US$8.2 million in the first quarter of 2013. The quarter-over-quarter (QoQ) increase was primarily due to the seasonality of more non-school days in the first quarter. The year-over-year (YoY) increase was mainly driven by the continued revenue growth of our core virtual worlds.

Net offline business revenues were US$2.3 million in the first quarter of 2014, a decrease of 13.6% from US$2.7 million in the fourth quarter of 2013 and an increase of 64.6% from US$1.4 million in the first quarter of 2013. The QoQ decrease was primarily due to a decrease in licensing business partially offset by an increase in interactive toy business. The YoY increase was primarily due to the revenue contribution from the Company's interactive toys business.

Cost of Services

Total cost of services was US$3.2 million in the first quarter of 2014, an increase of 7.6% from US$2.9 million in the fourth quarter of 2013 and an increase of 38.6% from US$2.3 million in the first quarter of 2013.

Online business related costs were US$1.9 million in the first quarter of 2014, a decrease of 5.3% as compared with US$2.0 million in the fourth quarter of 2013 and an increase of 10.4% from US$1.7 million in the first quarter of 2013. The QoQ decrease was primarily due to a decrease in payroll expenses. The YoY increase was primarily due to an increase in royalties related to our operation of certain third-party developed virtual worlds

Offline business related costs were US$1.3 million in the first quarter of 2014, an increase of 36.9% from US$0.9 million in the fourth quarter of 2013 and an increase of 132.3% from US$0.5 million in the first quarter of 2013. The QoQ and YoY increases were primarily due to an increase in costs related to our interactive toy business.

Gross Profit and Gross Margin

Gross profit was US$8.5 million in the first quarter of 2014, an increase of 6.7% from US$8.0 million in the fourth quarter of 2013 and an increase of 16.7% from US$7.3 million in the first quarter of 2013.

Gross margin was 73.0% in the first quarter of 2014, as compared with 73.2% in the fourth quarter of 2013 and 76.3% in the first quarter of 2013.

Gross margin for the online business was 79.4% in the first quarter of 2014, as compared with 75.3% in the fourth quarter of 2013 and 78.6% in the first quarter of 2013.

Gross margin for the offline business was 47.3% in the first quarter of 2014, as compared with 66.8% in the fourth quarter of 2013 and 62.7% in the first quarter of 2013.

Total Operating Expenses

Total operating expenses were US$8.0 million in the first quarter of 2014, an increase of 34.8% from US$5.9 million in the fourth quarter of 2013 and an increase of 10.5% from US$7.3 million in the first quarter of 2013.

  • Product development expenses were US$3.2 million in the first quarter of 2014, a decrease of 13.8% from US$3.7 million in the fourth quarter of 2013 and a decrease of 2.8% from US$3.3 million in the first quarter of 2013. The QoQ decrease was primarily due to a decrease in online business payroll expense and outsourcing expense, partially offset by an increase in interactive toy design fees. The YoY decrease was primarily due to a decrease in payroll expenses, partially offset by an increase in interactive toy design fees.
  • Sales and marketing expenses were US$2.0 million in the first quarter of 2014, a decrease of 15.4% from US$2.4 million in the fourth quarter of 2013 and an increase of 18.1% from US$1.7 million in the first quarter of 2013. The QoQ decrease was primarily due to a decrease in animation related and promotional expenses. The YoY increase was primarily due to an increase in advertising expenses.
  • General and administrative expenses were US$3.6 million in the first quarter of 2014, an increase of 8.9% from US$3.3 million in the fourth quarter of 2013 and an increase of 22.3% from US$3.0 million in the first quarter of 2013. The QoQ increase was primarily due to an increase in professional fees. The YoY increase was primarily due to the increased indirect tax costs related to intercompany service charges.
  • Impairment of intangible assets was US$0.1 million in the first quarter of 2014, related to the remaining term of Magic Haqi II, a co-developed 3D game of which the Company obtained a three-year exclusive license right in 2012 and commercially launched in the fourth quarter of 2012.

Income from Operations

Income from operations was US$0.5 million in the first quarter of 2014, a decrease of 74.4% from US$2.1 million in the fourth quarter of 2013 and an increase of 689.7% from US$67 thousand in the first quarter of 2013.

Share of Profit from Equity Method Investment

Share of profit from equity method investment was US$42 thousand in the first quarter of 2014, as compared with US$0.1 million in the fourth quarter of 2013 and US$0.3 million in the first quarter of 2013.

Net Income

Net income attributable to holders of ordinary shares was US$0.5 million in the first quarter of 2014, as compared with US$1.7 million in the fourth quarter of 2013 and US$1.0 million in the first quarter of 2013.

Basic and diluted earnings per ADS were US$0.01 and US$0.01, respectively, in the first quarter of 2014, as compared with US$0.05 and US$0.05 respectively in the fourth quarter of 2013 and US$0.03 and US$0.03, respectively in the first quarter of 2013.

Non-GAAP net income attributable to holders of ordinary shares was US$1.2 million in the first quarter of 2014, as compared with US$2.9 million in the fourth quarter of 2013 and US$1.6 million in the first quarter of 2013.

Non-GAAP basic and diluted earnings per ADS were US$0.03 and US$0.03, respectively, in the first quarter of 2014, as compared with US$0.08 and US$0.08, respectively, in the fourth quarter of 2013 and US$0.04 and US$0.04, respectively, in the first quarter of 2013.

Cash and Cash Equivalents

As of March 31, 2014, the Company had US$107.9 million of cash and cash equivalents, as compared with US$114.3 million as of December 31, 2013. The decrease was mainly due to US$6.0 million cash used for share repurchase from the open market during the quarter.

Capital Expenditures

Capital expenditures in the first quarter of 2014 were US$0.5 million, as compared with US$0.3 million in the fourth quarter of 2013, and US$0.3 million in the first quarter of 2013. Capital expenditures were used primarily for (i) purchase of computer hardware and equipment, (ii) purchase of intangible assets and (iii) purchase of franchises and online game licensing rights for our pipeline.

Share-based Compensation

Share-based compensation was US$0.6 million for the first quarter of 2014 as compared with US$0.7 million in the fourth quarter of 2013 and US$0.6 million in the first quarter of 2013.

Share Repurchase Program

During the first quarter of 2014, Taomee repurchased 1,055,536 ADSs. As of March 31, 2014, the Company has repurchased a total of 2,119,713 ADSs under the Company's share repurchase program at an average price of approximately US$4.9 per ADS.

Recent Business Highlights

  • In March 2014, Taomee entered into a license agreement with IGG Singapore Pte. Ltd. ("IGG"), pursuant to which Taomee granted IGG three-year exclusive operating rights for the English version of Reverse World, an ARPG mobile game, in Singapore, North America, Europe, Africa, and Oceania (except Australia).
  • Taomee also entered into a license agreement with CJ E&M Netmarble ("CJ"), pursuant to which Taomee granted CJ three-year exclusive operating rights of Reverse World in Republic of Korea and Japan. It is our understanding that CJ intends to distribute Reverse World through the KAKAO Talk channel, which is similar to Tencent's Wechat and Facebook's Whatsapp.

Outlook for Second Quarter of 2014

Net revenues of the second quarter of 2014 are expected to be in the range of US$10.5 million to US$11.0 million, which represents year-over-year decrease of approximately 9% to 13%. This forecast reflects the Company's current and preliminary view of the operating results, and is subject to future changes.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States, or GAAP, this press release presents non-GAAP net income attributable to the Company's shareholders and non-GAAP earnings per ADS by excluding share-based compensation and impairment charges from net income attributable to the Company's shareholders and from the calculation of earnings per ADS. The Company believes these non-GAAP financial measures are important to help investors understand the Company's operating and financial performance compare business trends among different reporting periods on a consistent basis and assess the Company's core operating results. The use of the above non-GAAP financial measures has certain limitations. Share-based compensation charge has been and will continue to be incurred and is not reflected in the presentation of the non-GAAP financial measures; it should be considered in the overall evaluation of our results. None of the non-GAAP measures is a measure of net income attributable to the Company's shareholders, operating profit, operating performance or liquidity presented in accordance with GAAP. We compensate for these limitations by providing the relevant disclosure of our share-based compensation and impairment charges in our reconciliations to the most directly comparable GAAP financial measures, which should be considered when evaluating our performance. These non-GAAP financial measures should be considered in addition to financial measures prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP. Reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure is set forth at the end of this release.

Conference Call

The Company will host a conference call and live webcast at 8:00 a.m. ET (New York) on Tuesday, May 20, 2014 (which is 8:00 p.m. in China on Tuesday, May 20, 2014). A brief presentation to accompany the conference call will be available on the Company's IR website (http://ir.taomee.com/phoenix.zhtml?c=243417&p=irol-reportsannual) before the call.

The dial-in details for the live conference call are:

Conference ID:

34634974

U.S. toll-free:

+1-866-519-4004

Hong Kong toll-free:

800-930-346

International:

+65-6723-9381

China Mainland:

400-620-8038

Passcode:

Taomee

A live webcast and archive of the conference call will be available on the Investor Relations section of Taomee's website at http://www.media-server.com/m/p/qxtuof9d. A telephone replay of the call will be available after the conclusion of the conference call at 11:00 a.m. ET on May 20, 2014 through 09:59 a.m. ET, May 28, 2014. The dial-in details for the telephone replay are:

Conference ID:

34634974

International:

+612-8199-0299

China:

400-6322-162

About Taomee Holdings Limited

Taomee Holdings Limited ("Taomee" or "the Company") is China's leader in children's entertainment and media. Its award winning content offerings are both engaging and educational, endearing it to children, as well as to parents and teachers. The Company was founded in 2007 with the mission to bring joy and inspiration to children. Its popular character franchises, including SEER and MOLE'S WORLD, are distributed online via virtual worlds, web games and mobile applications, as well as through traditional media, including animated box office films, TV series, books and consumer products, most notably interactive toys and trading cards. Its online community regularly achieves top search ranking in China, Hong Kong and Taiwan. Taomee has been consistently recognized for its leadership and innovative contributions to the children's market, including accolades from China's Ministry of Culture and the China Animation Association.

For more information, please visit: http://www.taomee.com/en_taomee.html
- Visit online virtual world communities at www.61.com
- Watch animations and films at http://v.61.com/
- Download mobile games and applications at http://m.61.com/
- Share with other parents and caregivers at http://mama.61.com/

Safe Harbor Statements

This press release contains statements that may constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. Among other things, the management's quotations and outlook information contain forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Potential risks and uncertainties include, but are not limited to: the Company's business strategies and initiatives as well as business plans; future business development, results of operations and financial condition; expected changes in revenues and certain cost or expense items; expectations with respect to increased revenue growth and the Company's ability to sustain profitability; the Company's services and products under development or planning; the Company's ability to attract users and further enhance the Company's brand recognition; and trends and competition in the children's entertainment and media market and industry, including those for online entertainment. Further information regarding these and other risks is included in Taomee's annual report on Form 20-F and other documents filed with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of the press release, and the Company undertakes no obligation to update any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as required under applicable law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, the Company cannot assure you that their expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.

For further information, please contact

Angela Wang
Taomee Holdings Limited
+86-21-61280056 Ext 8651
ir@taomee.com


Taomee Holdings Limited - Unaudited Consolidated Balance Sheets






In USD


In USD


March 31


December 31


2014


2013

ASSETS




Current assets:




Cash and cash equivalents

$ 107,892,293


$ 114,250,772

Short term investment

2,993,773


2,992,343

Accounts receivable, net

2,241,671


2,387,747

Inventory

721,685


196,757

Income tax recoverable

622,478


402,460

Due from related parties

2,296,576


2,242,382

Prepayments and other current assets

4,262,809


2,904,695

Deferred tax assets, current

4,128,708


4,166,088

Total current assets

125,159,993


129,543,244





Investment in equity investees

14,255,765


14,047,509

Property and equipment, net

1,826,746


1,840,419

Prepayments for land use rights and building purchase

2,989,652


3,008,520

Acquired intangible assets

1,057,541


1,252,572

Other assets

2,346760


1,496,242

Total assets

$ 147,636,457


$ 151,188,506





LIABILITIES AND EQUITY








Current liabilities:




Accounts payable

$ 2,350,381


$ 1,549,908

Advance from customers

8,380,110


6,960,857

Due to related parties

313,381


369,983

Deferred revenue

12,587,980


12,340,821

Deferred tax liabilities, current

1,742,359


1,758,134

Accrued expenses and other current liabilities

5,451,834


6,279,858

Total current liabilities

30,826,045


29,259,561





Equity




Taomee Holdings Limited shareholders' equity




Ordinary shares ($0.00002 par value; 875,000,000
shares authorized; 745,555,104 and 741,126,859
shares issued; 719,230,564 and 735,913,039
outstanding as of March 31, 2014 and December 31,
2013, respectively)

14,911


14,823

Treasury stock (at cost)

Additional paid-in capital

(7,212,059)

74,716,506


(1,198,904)

73,757,483

Retained earnings

45,350,696


44,853,977

Accumulated other comprehensive income

3,791,133


4,342,755

Taomee Holdings Limited shareholders' equity

116,661,187


121,770,134

Noncontrolling interests

149,225


158,811

Total equity

$ 116,810,412


$ 121,928,945





TOTAL LIABILITIESAND EQUITY

$ 147, 636,457


$ 151,188,506

Taomee Holdings Limited - Unaudited Consolidated Statements of Operations




In USD, except for share data

For three months ended



March 31,


December 31,


March 31,



2014


2013


2013

Revenues:







Online business, net


$ 9,373,070


$ 8,250,969


$ 8,183,073

Offline business, net


2,323,759


2,689,419


1,411,829

Total net revenues


11,696,829


10,940,388


9,594,902








Cost of services







Online business


(1,929,671)


(2,037,443)


(1,748,437)

Offline business


(1,223,634)


(894,106)


(526,726)

Total cost of services


(3,153,305)


(2,931,549)


(2,275,163)








Gross profit


8,543,524


8,008,839


7,319,739








Operating income (expenses):







Product development


(3,202,027)


(3,713,467)


(3,294,735)

Sales and marketing


(2,039,257)


(2,411,269)


(1,727,418)

General and administrative


(3,642,791)


(3,345,688)


(2,977,947)

Impairment loss on

acquired intangible assets


(116,114)


(180,263)


-

Other operating income


984,567


3,703,897


747,208

Total operating expenses


(8,015,622)


(5,946,790)


(7,252,892)








Income from operations


527,902


2,062,049


66,847








Interest income


592,635


632,310


760,734

Other income (expenses), net


(583,216)


275,363


132,446

Impairment loss on investment in an equity investee


-


(370,407)


-

Income before income taxes and share of profit in equity method investments


537,321


2,599,315


960,027








Income tax expense


(92,286)


(996,509)


(250,717)








Share of profit in equity method investments


42,098


101,778


250,642

Net income


487,133


1,704,584


959,952








Less: Net loss attributable to non-controlling interest


(9,586)


(27,590)


(1,663)








Net income attributable to holders of ordinary shares


$ 496,719


$ 1,732,174


$ 961,615

Earnings per ADS







-Basic


$ 0.01


$ 0.05


$ 0.03

-Diluted


$ 0.01


$ 0.05


$ 0.03

Weighted average number of shares used in calculation







- Basic


722,760,411


735,651,537


732,203,457

- Diluted


737,488,586


747,574,587


747,888,335

Weighted average number of ADS used in calculation







- Basic


36,138,021


36,782,577


36,610,173

- Diluted


36,874,429


37,378,729


37,394,417

Taomee Holdings Limited - Unaudited Consolidated Other Comprehensive Income



In USD,

For three months ended


March 31,

2014


December 31,

2013


March 31,

2013

Net income

$ 487,133


$ 1,704,584


$ 959,952

Other comprehensive income/(loss), net of tax






Foreign currency translation adjustments

(551,622)


524,181


146,178







Comprehensive income/(loss)

(64,489)


2,228,765


1,106,130

Comprehensive income/(loss) attributable to noncontrolling interest

(9,586)


(27,590)


(1,663)







Comprehensive income/(loss) attributable to Taomee Holdings Limited

$ (54,903)


$ 2,256,355


$ 1,107,793


Taomee Holdings Limited - Reconciliation of Non-GAAP and GAAP Results




In USD, except for share data

For three months ended



March 31,


December 31,


March 31,



2014


2013


2013

Reconciliation from Non-GAAP measures to GAAP measures














Non-GAAP net income attributable to holders of ordinary shares


$ 1,183,394


$ 2,943,531


$ 1,581,546

Share-based compensation


(570,561)


(660,687)


(619,931)

Impairment loss on acquired intangible assets


(116,114)


(180,263)


-

Impairment loss on investment in an equity investee


-


(370,407)


-

GAAP net income attributable to holders of ordinary shares


$ 496,719


$ 1,732,174


$ 961,615








Non-GAAP diluted earnings per ADS







-Basic


$ 0.03


$ 0.08


$ 0.04

-Diluted


$ 0.03


$ 0.08


$ 0.04

Source: Taomee Holdings Limited
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