GigaMedia Announces Fourth-Quarter and Full Year 2017 Financial Results

TAIPEI, , March 29, 2018 /PRNewswire/ -- GigaMedia Limited (NASDAQ: GIGM) today announced its unaudited financial results for the fourth quarter and full year of 2017.

"After the efforts in recent years in cleaning up the Company's balance sheet and streamlining its operations, GigaMedia is now operating with a healthy margin, efficient marketing expenditures and disciplined overhead costs," stated GigaMedia Limited Chief Executive Officer James Huang.

Fourth Quarter and Full Year Overview

• Consolidated 4Q revenues decreased 11.98% quarter-over-quarter and 0.49% year-over-year. Full year revenues increased 29.26% to $11.6 million compared to $9.0 million in 2016.
• Gross profit decreased 30.89% comparing to 3Q 2017, but increased 2.65% comparing to the prior year fourth quarter, to approximately $1.0 million. Full year gross profit increased by $1.7 million or 34.45% to $6.5 million. Gross margin rate for full year of 2017 was 56.04%, slightly increased from 53.87% last year.
• Operating expenses in 4Q, excluding a reclassification from non-operating income of $1.7 million related to the ArcheAge transaction in 2Q 2017, slightly decreased 1.24% from prior quarter. Full year operating expenses, excluding impairment losses and the ArcheAge income, decreased by $1.3 million or 13.24% to $8.7 million from $10.0 million.
• Income from operations for 4Q, excluding the reclassification from non-operating income of the $1.7 million ArcheAge income, decreased to a loss $0.7 million from a loss $0.3 million in 3Q, mainly due to lower revenues in 4Q. Full year operating loss, if excluding impairment losses and the ArcheAge income, were a loss of $2.2 million for 2017, representing a loss reduction of $3.0 million.
• Consolidated general and administrative expenses in 4Q decreased by 17.31% quarter-on-quarter and by 10.89% year-over-year. Full year consolidated general and administrative expenses slightly increased by 2.07%.
• Income tax benefit of $1.7 million in this quarter was related to a reversal of deferred income tax liabilities originally accrued for certain withholding obligations.
• Adjusted EBITDA for the year ended December 31, 2017 was a loss of $1.1 million, compared to adjusted EBITA of $7.2 million loss in the prior year.

Unaudited Consolidated Financial Results

GigaMedia Limited is a diversified provider of online games. GigaMedia's online games business FunTown develops and operates a suite of games in Taiwan and Hong Kong, with focus on online games and other digital entertainments.

Unaudited consolidated results of GigaMedia are summarized in the table below.

For the Fourth Quarter

Fourth-Quarter Financial Results

• Consolidated revenues for the fourth quarter of 2017 decreased 11.98% quarter-on-quarter from $2.3 million to $2.0 million and slightly decreased by 0.49% year-over-year.
• Consolidated gross profit decreased 30.89% quarter-on-quarter from $1.5 million to $1.0 million and increased 2.65% year-over-year.
• Consolidated operating expenses were $0.02 million in the fourth quarter of 2017. A decrease of $1.8 million from the third quarter of 2017 is mainly due to a reclassification from non-operating income of $1.7 million related to the ArcheAge transaction, already recognized in the second quarter of 2017. It also reflected the effective budgeting and cost management on general and administrative expenses. A slight increase in selling and marketing expenses from $0.6 million in the third quarter of 2017 to $0.7 million in the fourth quarter of 2017 is mainly due to the launch of a new game in mid-December 2017.
• Consolidated income (loss) from operation of the fourth quarter of 2017 was an income of $1.0 million, compared to a loss of $ 0.3 million in the last quarter. The improvement from loss to income was mainly due to the reclassification of the ArcheAge income of $1.7 million.
• Game division, excluding the reclassification of the ArcheAge income, almost reached break-even point, with an operating loss $0.3 million in this quarter, comparing both to an income of $0.2 million of the third quarter of 2017 and a loss of $3.5 million in the same period of last year.
• Income tax benefit of the fourth quarter of 2017 was $1.7 million. The benefit was related to a reversal of deferred income tax liabilities originally accrued for certain withholding obligations.
• Consolidated net income of the fourth quarter of 2017 was a net income of $1.1 million compared to a net loss of $2.8 million in the fourth quarter of 2016.
• Cash and cash equivalents in the fourth quarter of 2017 accounted for $63.7 million, which decreased 0.2% from $63.8 million in the third quarter of 2017.
• Consolidated EBITDA for the fourth quarter of 2017 was a loss of $0.8 million compared to a loss of $0.3 million in the third quarter of 2017 and a loss of $3.9 million in the fourth quarter of 2016.

Financial Position

GigaMedia maintained its solid financial position with cash and cash equivalents, and restricted cash accounted for $64.2 million approximately $5.8 per share as of December 31, 2017. The short-term debt remained zero, compared to $2.5 million as of the fourth quarter of 2016 and the total liabilities decreased $1.8 million quarter-on-quarter from $6.8 million to $5.0 million.

 For the Full Year 2017

• Consolidated revenues for the year ended December 31, 2017 was $11.6 million, compared to $9.0 million in the last year. Gross profit was $6.5 million, compared to $4.8 million last year.
• Consolidated gross profit for the year ended December 31, 2017 was $6.5 million, compared to $4.8 million last year.
• Consolidated loss from operations for 2017 was a loss of $0.5 million, compared to a loss of $7.1 million in the last year. The loss reduction was mainly attributable to the decreases in marketing expenses and impairment losses, as well as the income from transferring the license right of ArcheAge to XL Games Inc.
• Consolidated net Income (loss) for 2017 was $1.1 million, compared to a loss of $6.0 million in the same period last year. Earnings per share for the year ended December 31, 2017 was $0.10, compared to loss per share of $0.55 last year.

Business Outlook

The following forward-looking statements reflect GigaMedia's expectations as of March 29, 2018. Given potential changes in economic conditions and consumer spending, the evolving nature of online games, and various other risk factors, including those discussed in the Company's 2016 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission as referenced below, actual results may differ materially.

GigaMedia CEO James Huang stated: "We are continually looking for high gross profit games, focusing on smart spending on commercial advertisements to achieve high efficiency on marketing expense. With these the strategies, we can see the improvements now.  

To look over the past two years, the management has been clearing up assets, trying to keep more cash on hand. We are persistently searching for investment targets with high potentials to expand our business and drive higher revenue for our shareholders."

Use of Non-GAAP Measures

To supplement GigaMedia's consolidated financial statements presented in accordance with US GAAP, the company uses the following measure defined as non-GAAP by the SEC: EBITDA. Management believes that EBITDA (earnings before interest, taxes, depreciation, and amortization) is a useful supplemental measure of performance because it excludes certain non-cash items such as depreciation and amortization and that EBITDA is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. EBITDA is not a recognized earnings measure under GAAP and does not have a standardized meaning. Non-GAAP measures such as EBITDA should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, other financial measures prepared in accordance with GAAP. A limitation of using EBITDA is that it does not include all items that impact the company's net income for the period. Reconciliations to the GAAP equivalents of the non-GAAP financial measures are provided on the attached unaudited financial statements.

About the Numbers in This Release

Quarterly results

All quarterly results referred to in the text, tables and attachments to this release are unaudited. The financial statements from which the financial results reported in this press release are derived have been prepared in accordance with U.S. GAAP, unless otherwise noted as "non-GAAP," and are presented in U.S. dollars.

Q&A

For Q&A regarding the fourth quarter and full year 2017 performance upon the release, investors may send the questions via email to IR@gigamedia.com.tw, and the responses will be replied individually.

About GigaMedia

Headquartered in Taipei, Taiwan, GigaMedia Limited (Singapore registration number: 199905474H) is a diversified provider of online games. GigaMedia's online games business develops and operates a suite of games in Taiwan and Hong Kong, with focus on browser/mobile games and social casino games. More information on GigaMedia can be obtained from www.gigamedia.com.

The statements included above and elsewhere in this press release that are not historical in nature are "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding expected financial performance (as described without limitation in the "Business Outlook" section and in quotations from management in this press release) and GigaMedia's strategic and operational plans. These statements are based on management's current expectations and are subject to risks and uncertainties and changes in circumstances. There are important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, including but not limited to, our ability to license, develop or acquire additional online games that are appealing to users, our ability to retain existing online game players and attract new players, and our ability to launch online games in a timely manner and pursuant to our anticipated schedule. Further information on risks or other factors that could cause results to differ is detailed in GigaMedia's Annual Report on Form 20-F filed in April 2017 and its other filings with the United States Securities and Exchange Commission.

(Tables to follow)

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