KongZhong Corporation Reports Third Quarter 2014 Unaudited Financial Results
BEIJING, Nov. 24, 2014 /PRNewswire/ -- KongZhong Corporation (NASDAQ: KZ), a leading online games publisher and developer in the PRC, today announced its unaudited financial results for the third quarter ended September 30, 2014.
Third Quarter 2014 Financial Highlights
- Total revenues were US$ 60.14 mn, an increase of 3.9% from the second quarter of 2014 and 36.4% from the same period last year.
- Total gross profit was US$ 23.83 mn, an increase of 24.8% from the same period last year.
- Net income was US$ 3.50 mn, including US$ 1.32 mn impairment on intangible assets and US$2.00 mn cost method impairment on long-term investments. Diluted net income per American Depositary Shares ("ADS") was US$ 0.08.
- Non-GAAP net income was US$ 7.79 mn. Non-GAAP diluted net income per ADS was US$ 0.17 (Non-GAAP Financial Measures are described and reconciled to the corresponding GAAP measures in the section titled "Non-GAAP Financial Measures").
- As of September 30, 2014, the Company had US$ 232.75 mn in cash and cash equivalents, term deposits, held-to-maturity securities, available-for-sale securities and restricted cash or US$ 5.11 per ADS in cash and cash equivalents, term deposits, held-to-maturity securities, available-for-sale securities and restricted cash.
- On October 17, 2014, the Company announced that its Board of Directors had declared a special one-time cash dividend of US$0.022 per ordinary share, or US$0.88 per ADS for record holders of the Company's ordinary shares and holders of the Company's ADS as of the close of business on October 27, 2014.
The Company's Chairman and Chief Executive Officer Leilei Wang said, "Due to delays in the release of our new smartphone mobile games, we under performed our previously given guidance for US GAAP and Non-GAAP NPAT. Nonetheless, the Company still returned to solid profitability in 3Q14 compared to 2Q14. This was driven by stable performance in our Internet Game business as we continued to release new updates for World of Tanks and Guild Wars 2 stabilized around a core loyal player base. In mobile games, at the end of 3Q14 we released our self-developed mobile game, "Rush Three Kingdoms" which has become a consistent performing game in the China market and in November 2014, we released "My Cutest Princess" a licensed game from Japan. We expect to release 1 to 2 high quality mobile games to the market per quarter for the foreseeable future."
| Three Months Ended |
|||||
| September 30, |
June 30, |
September 30, |
|||
| 2013 |
2014 |
2014 |
|||
| US$ in thousands |
US$ in thousands |
US$ in thousands |
|||
| Revenues |
44,084 |
57,870 |
60,139 |
||
| Internet Games |
21,370 |
32,022 |
32,446 |
||
| Mobile Games |
4,702 |
10,537 |
11,396 |
||
| WVAS |
18,012 |
15,311 |
16,297 |
||
| Sales Tax |
1,506 |
503 |
502 |
||
| Internet Games |
1,191 |
277 |
300 |
||
| Mobile Games |
37 |
33 |
111 |
||
| WVAS |
278 |
193 |
91 |
||
| Cost of Revenue |
23,483 |
32,871 |
35,809 |
||
| Internet Games |
9,851 |
16,126 |
17,353 |
||
| Mobile Games |
2,355 |
5,933 |
5,846 |
||
| WVAS |
11,277 |
10,812 |
12,610 |
||
| Gross Profit |
19,095 |
24,496 |
23,828 |
||
| Internet Games |
10,328 |
15,619 |
14,793 |
||
| Mobile Games |
2,310 |
4,571 |
5,439 |
||
| WVAS |
6,457 |
4,306 |
3,596 |
||
| Gross Margin |
43% |
42% |
40% |
||
| Internet Games |
48% |
49% |
46% |
||
| Mobile Games |
49% |
43% |
48% |
||
| WVAS |
36% |
28% |
22% |
||
Revenues
Total revenues for the third quarter of 2014 were US$ 60.14 mn, an increase of 3.9% from the second quarter of 2014 and 36.4% from the same period of last year.
Internet Games Revenues
Internet Game ("Net Game") revenues were US$ 32.45 mn in the third quarter of 2014, an increase of 1.3% from the second quarter of 2014 and 51.8% from the same period of last year, as we saw stable financial performance from our key Internet Game titles, War Saga and Guild Wars 2 compared to the 2Q14 period.
For the third quarter of 2014, mainland China online game operations achieved average monthly active users ("MAUs") of 2.2 mn and aggregated monthly paying accounts ("APAs") of 343k with monthly average revenue per user ("ARPU") of RMB 193.
| Three Months Ended |
|||
| September 30, 2013 |
June 30, 2014 |
September 30, 2014 |
|
| MAU |
1,745k |
2,616k |
2,207k |
| APA |
270k |
427k |
343k |
| ARPU |
158 |
152 |
193 |
Internet game revenues made up 54.0% of total revenues in the third quarter of 2014.
Mobile Games Revenues
Total mobile game revenues were US$ 11.40 mn, an 8.2% increase from the second quarter of 2014, and a 142.4% increase from the same period of last year.
Total mobile game revenues made up 18.9% of total revenues in the third quarter of 2014.
WVAS Revenues
WVAS revenues were US$ 16.30 mn, a 6.4% increase from the second quarter of 2014, but a 9.5% decrease from the same period of last year.
WVAS made up 27.1% of total revenues in the third quarter of 2014.
Gross Profit
Total gross profit for the third quarter of 2014 was US$ 23.83 mn, a 2.7% decrease from the second quarter of 2014, but a 24.8% increase from the same period last year.
Total gross margin was 39.6% in the third quarter of 2014.
Internet Game Gross Profit
Internet game gross profit was US$ 14.79 mn, a 5.3% decrease from the second quarter of 2014. Internet game gross margin was 45.6% compared to 48.8% in the second quarter of 2014 due to higher costs associated with revenue share and license fees to our Internet game developer partners.
Mobile Game Gross Profit
Mobile games gross profit was US$ 5.44 mn, a 19.0% increase from the second quarter of 2014. Mobile games gross margin was 47.7% compared to 43.4% in the second quarter of 2014. The increase in mobile game gross margins reflects increased contribution from newly release smartphone games on the iOS platform.
WVAS Gross Profit
WVAS gross profit was US$ 3.60 mn, a 16.5% decrease from the second quarter of 2014. WVAS gross margin was 22.1% compared to 28.1% in the second quarter of 2014.
Operating Expenses
Total operating expenses in the third quarter of 2014 were US$ 21.11 mn compared to US$ 25.98 mn in the second quarter of 2014. Third quarter operating expenses included US$ 1.32 mn impairment on intangible assets.
Product development expenses in the third quarter of 2014 were US$ 6.58 mn compared to US$ 6.51 mn in the second quarter of 2014.
Sales and marketing expenses in the third quarter of 2014 were US$ 10.70 mn compared to US$ 16.01 mn in the second quarter of 2014. Sales and marketing expenses receded from second quarter levels, when the Company launched one-time promotional activities associated with the commercial release of Guild Wars 2 and World of Warplanes.
General and administrative expenses in the third quarter of 2014 were US$ 2.50 mn compared to US$ 3.46 mn in the second quarter of 2014. The decrease in G&A was due to a decline in stock based compensation and office expenses in 3Q14.
The Company's total headcount in the third quarter of 2014 was 1,151 staff compared to 1,201 staff at the end of the second quarter of 2014.
Earnings
US GAAP net income and diluted income per ADS were US$ 3.50 mn and US$ 0.08, respectively. Non-GAAP net income and earnings per ADS were US$ 7.79 mn and US$ 0.17, respectively.
Total ADS on a diluted basis outstanding during the third quarter of 2014 were 46.64 mn, compared to 47.31 mn outstanding during the second quarter of 2014.
| For the purpose of earnings |
Number during three |
Number during three |
| ADS (in mns) |
45.52 |
45.56 |
| Add: Dilution impact from |
0.56 |
0.46 |
| Warrants issued to business partners |
1.23 |
0.62 |
| ADS on diluted basis |
47.31 |
46.64 |
Balance Sheet
As of September 30, 2014, the Company had US$ 232.75 mn in cash and cash equivalents, term deposits, held-to-maturity securities, available-for-sale securities and restricted cash or US$ 5.11 per ADS in cash and cash equivalents, term deposits, held-to-maturity securities, available-for-sale securities and restricted cash.
Business Outlook (For the fourth quarter ending December 31, 2014)
The Company expects total revenues for the fourth quarter of 2014 to be within the range of US$ 59 mn to US$ 60 mn. The Company expects total gross profit to be within the range of US$ 24 mn to US$ 25 mn. We expect net income to be US$ 9 mn to US$ 10 mn and Non-GAAP net income is expected to be US$ 10 mn to US$ 11 mn.
Conference Call
KongZhong's management will hold a conference call and webcast to discuss the results at 7:30 PM Eastern Standard Time (EST) on Monday, November 24, 2014 (8:30 AM Beijing/Hong Kong time, Tuesday, November 25, 2014)
The conference call will be available live via webcast on the Investor Relations section of KongZhong's website at http://ir.kongzhong.com. The archive replay will be available on the website shortly after the call.
The company welcomes all interested parties to participate in the live conference call. The dial-in details are as below:
| - U.S. Toll Free Dial-in Number: |
+1 800 742 9301 |
| - U.S. Dial-in Number: |
+1 845 507 1610 |
| - Hong Kong Toll Free Dial-in Number: |
800 906 648 |
| - Hong Kong Dial-in Number: |
+852 3051 2792 |
| - Mainland China Dial-in Number: |
800 870 0210, 400 120 3170 |
| - International Dial-in Number: |
+61 2 8373 3610 |
| Passcode: 2777 2594 |
|
The live conference call via webcast and archive replay will be available on the Investor Relations section of KongZhong's website at http://ir.kongzhong.com.
A dial-in replay of the conference call will be available until December 2, 2014:
| - U.S. Toll Free Dial-in Number: |
+1 855 452 5696 |
| - U.S. Dial-in Number: |
+1 646 254 3697 |
| - Hong Kong Toll Free Dial-in Number: |
800 963 117 |
| - Hong Kong Dial-in Number: |
+852 3051 2780 |
| - Mainland China Dial-in Number: |
800 870 0205, 400 602 2065 |
| - International Dial-in Number: |
+61 2 8199 0299 |
| Passcode: 2777 2594 |
|
About KongZhong
KongZhong Corporation (NASDAQ: KZ), listed on Nasdaq in 2004, is a leading online game developer and operator in China. KongZhong operates three main business units, namely Internet Games, Mobile Games and WVAS. Under Internet Games, KongZhong operates the largest Chinese military gaming platform under the "WAR SAGA" brand, which includes games such as World of Tanks, World of Warplanes and World of Battleships. On May 15, 2014, KongZhong officially launched the most-anticipated 3D fantasy MMORPG Guild Wars 2 in China. KongZhong has the exclusive publishing rights for World of Tanks, World of Warplanes and World of Battleships, Guild Wars 2, Auto Club Revolution, Blitzkrieg 3 and other titles in Mainland China.
KongZhong entered the smartphone game industry in 2011 through an acquisition of smartphone game engine and has expanded its mobile game development team across 4 cities across Mainland China. KongZhong offers popular mobile games in China and overseas with over 10 smartphone games across various genres being under development, including RPG, RTS, military, fantasy and etc. For more information, please visit http://ir.kongzhong.com.
Safe Harbor Statements
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding trends in the wireless value-added services, wireless media, mobile games and online games industries and our future results of operations, financial condition and business prospects. Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends and our results may differ materially from those expressed or implied in these forward looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to, continued competitive pressure in China's wireless value-added services, wireless media, mobile games and online games industries and the effect of such pressure on revenues; our ability to develop new products that are commercially successful; unpredictable changes in technology, consumer demand and usage preferences in the markets we operate; our ability to protect our intellectual property rights; the short operating history of certain of our business segments, in particular the online games segment; the state of and any change in our relationship with China's telecommunications operators; our dependence on the billing systems of telecommunications operators for our performance; the outcome of our investment of operating income generated from the WVAS segment into the development of our wireless Internet, mobile games and online games segments; changes in the regulations or policies of the Ministry of Industry and Information Technology and other government authorities relevant to our businesses; and changes in political, economic, legal and social conditions in China, including the Chinese government's policies with respect to economic growth, foreign exchange, foreign investment and entry by foreign companies into China's telecommunications and online games markets. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release.
KongZhong Contacts
Investor Contact
Jay Chang
Chief Financial Officer
Liddy Li
Investor Relations
Tel.: (+86-10) 8857.6000
E-mail: [email protected]
Media Contact
Xingran Chen
Public Relations
Tel.: (+86-10) 8857.6000
E-mail: [email protected]
| KongZhong Corporation |
|||||||
| Condensed Consolidated Statements of Comprehensive Income |
|||||||
| (Unaudited, US$ in thousands, except per share and share data) |
|||||||
| Three Months Ended |
|||||||
| September 30, |
June 30, |
September 30, |
|||||
| 2013 |
2014 |
2014 |
|||||
| Revenues |
44,084 |
57,870 |
60,139 |
||||
| Sales tax |
1,506 |
503 |
502 |
||||
| Net revenues |
42,578 |
57,367 |
59,637 |
||||
| Cost of revenues |
23,483 |
32,871 |
35,809 |
||||
| Gross profit |
19,095 |
24,496 |
23,828 |
||||
| Operating expenses |
|||||||
| Product development |
6,991 |
6,510 |
6,580 |
||||
| Sales and marketing |
10,942 |
16,009 |
10,702 |
||||
| General and administrative |
2,029 |
3,463 |
2,502 |
||||
| Impairment loss on intangible assets |
1,562 |
- |
1,323 |
||||
| Total operating expenses |
21,524 |
25,982 |
21,107 |
||||
| Government subsidy |
- |
267 |
198 |
||||
| (Loss) income from operations |
(2,429) |
(1,219) |
2,919 |
||||
| Interest income |
1,685 |
1,751 |
2,835 |
||||
| Impairment loss on cost method investment |
2,000 |
- |
2,000 |
||||
| Imputed interest on long-term liabilities |
150 |
150 |
150 |
||||
| Exchange gain (loss) |
210 |
(316) |
8 |
||||
| Investment income |
26 |
- |
- |
||||
| (Loss) income before tax expense |
(2,658) |
66 |
3,612 |
||||
| Income tax expense |
23 |
- |
109 |
||||
| Net (loss) income |
(2,681) |
66 |
3,503 |
||||
| Earnings per ADS, basic |
(0.06) |
0.00 |
0.08 |
||||
| Earnings per ADS, diluted |
(0.06) |
0.00 |
0.08 |
||||
| Weighted average ADS outstanding (million) |
43.50 |
45.52 |
45.56 |
||||
| Weighted average ADS used in diluted EPS calculation (million) |
43.50 |
47.31 |
46.64 |
||||
| Net (loss) income |
(2,681) |
66 |
3,503 |
||||
| Other comprehensive income |
1,915 |
10,561 |
2,079 |
||||
| Total comprehensive (loss) income |
(766) |
10,627 |
5,582 |
||||
| KongZhong Corporation |
|||||||
| Condensed Consolidated Balance Sheets |
|||||||
| (Unaudited, US$ in thousands) |
|||||||
| As of September 30, |
As of June 30, |
As of September 30, |
|||||
| 2013 |
2014 |
2014 |
|||||
| Assets |
|||||||
| Current assets |
|||||||
| Cash and cash equivalents |
104,528 |
68,506 |
114,654 |
||||
| Term deposits |
3,873 |
5,021 |
2,781 |
||||
| Available-for-sale securities |
- |
28,444 |
30,447 |
||||
| Held-to-maturity securities |
49,248 |
92,045 |
48,297 |
||||
| Accounts receivable (net) |
22,690 |
23,245 |
24,805 |
||||
| Restricted cash |
10,570 |
- |
- |
||||
| Other current assets |
6,993 |
8,093 |
10,195 |
||||
| Total current assets |
197,902 |
225,354 |
231,179 |
||||
| Non-current assets |
|||||||
| Rental deposits |
557 |
890 |
1,321 |
||||
| Intangible assets (net) |
78,545 |
74,223 |
60,507 |
||||
| Property and equipment (net) |
6,498 |
7,048 |
6,402 |
||||
| Long-term investments |
2,000 |
2,000 |
- |
||||
| Goodwill |
89,568 |
89,497 |
89,524 |
||||
| Restricted cash |
36,588 |
36,560 |
36,571 |
||||
| Total non-current assets |
213,756 |
210,218 |
194,325 |
||||
| Total assets |
411,658 |
435,572 |
425,504 |
||||
| Liabilities and Shareholders' Equity |
|||||||
| Current Liabilities |
|||||||
| Accounts payable |
43,307 |
35,016 |
31,581 |
||||
| Deferred revenue |
3,245 |
15,984 |
9,475 |
||||
| Other current liabilities |
25,790 |
22,427 |
18,494 |
||||
| Total current liabilities |
72,342 |
73,427 |
59,550 |
||||
| Non-current Liabilities |
|||||||
| Other long-term liabilities |
19,110 |
9,560 |
9,710 |
||||
| Total liabilities |
91,452 |
82,987 |
69,260 |
||||
| Shareholders' equity |
320,206 |
352,585 |
356,244 |
||||
| Total liabilities and shareholders' equity |
411,658 |
435,572 |
425,504 |
||||
| KongZhong Corporation |
|||||
| Condensed Consolidated Statements of Cash Flows |
|||||
| (Unaudited, US$ in thousands) |
|||||
| Nine Months Ended |
|||||
| September 30, |
September 30, |
||||
| 2013 |
2014 |
||||
| Cash Flows From Operating Activities |
|||||
| Net income |
10,635 |
13,519 |
|||
| Adjustments to reconcile net income to net cash provided |
|||||
| Depreciation and amortization |
3,924 |
15,415 |
|||
| Imputed interest on long-term liabilities |
450 |
450 |
|||
| Impairment loss on cost method investment |
2,000 |
2,000 |
|||
| Impairment loss on intangible assets |
1,813 |
1,323 |
|||
| Share-based compensation |
1,283 |
1,318 |
|||
| Changes in operating assets and liabilities |
3,715 |
(4,050) |
|||
| Net Cash Provided by Operating Activities |
23,820 |
29,975 |
|||
| Cash Flows From Investing Activities |
|||||
| Purchase of intangible assets |
(1,565) |
(98) |
|||
| Purchase of term deposits |
(18,803) |
(2,610) |
|||
| Proceeds from disposal of term deposits |
15,232 |
4,237 |
|||
| Long-term investment |
- |
(16,380) |
|||
| Purchase of held-to-maturity securities |
(211,193) |
(166,880) |
|||
| Proceeds from disposal of held-to-maturity securities |
180,124 |
170,075 |
|||
| Purchase of property and equipment |
(4,906) |
(3,076) |
|||
| Restricted cash |
(10,351) |
- |
|||
| Net Cash Used in Investing Activities |
(51,462) |
(14,732) |
|||
| Cash Flows From Financing Activities |
|||||
| Proceeds from exercise of employee stock options |
815 |
434 |
|||
| Deferred payments for acquisition of business |
(3,000) |
(2,881) |
|||
| Deferred payments for intangible assets |
(5,463) |
(20,829) |
|||
| Repurchase of ordinary shares |
(10,124) |
(12) |
|||
| Proceeds from exercise of warrants |
27,820 |
- |
|||
| Proceeds from bank borrowing |
9,000 |
- |
|||
| Repayment of bank borrowing |
(9,057) |
- |
|||
| Net Cash Provided by (Used in) Financing Activities |
9,991 |
(23,288) |
|||
| Effect of foreign exchange rate changes |
1,484 |
(729) |
|||
| Net decrease in Cash and Cash Equivalents |
(16,167) |
(8,774) |
|||
| Cash and Cash Equivalents, Beginning of Period |
120,695 |
123,428 |
|||
| Cash and Cash Equivalents, End of Period |
104,528 |
114,654 |
|||
| Non-GAAP Financial Measures |
|||||||
| To supplement the unaudited condensed statements of comprehensive income presented in accordance with US GAAP, the Company uses non-GAAP financial measures (Non-GAAP Financial Measures) of net income and net income per diluted ADS, which are adjusted from results based on GAAP to exclude certain infrequent or unusual or non-cash based expenses, gains and losses. The Non-GAAP Financial Measures are provided as additional information to help both management and investors compare business trends among different reporting periods on a consistent and more meaningful basis and enhance investors' overall understanding of the Company's current financial performance and prospects for the future. |
|||||||
| (US$ in thousands, except per share and share data) |
|||||||
| Three Months Ended |
|||||||
| September 30, |
June 30, |
September 30, |
|||||
| 2013 |
2014 |
2014 |
|||||
| GAAP net (loss) income |
(2,681) |
66 |
3,503 |
||||
| Share-based compensation |
284 |
768 |
217 |
||||
| Impairment loss on cost method investment |
2,000 |
- |
2,000 |
||||
| Impairment loss on intangible assets |
1,562 |
- |
1,323 |
||||
| Imputed interest on long-term liabilities |
150 |
150 |
150 |
||||
| Amortization of intangibles |
185 |
462 |
599 |
||||
| Non-GAAP net income |
1,500 |
1,446 |
7,792 |
||||
| Weighted average ADS used in diluted EPS |
43.50 |
47.31 |
46.64 |
||||
| Non-GAAP diluted net income per ADS |
0.03 |
0.03 |
0.17 To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/kongzhong-corporation-reports-third-quarter-2014-unaudited-financial-results-300000120.html |
||||
SOURCE KongZhong Corporation
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