Linktone Ltd. Reports Unaudited First Quarter 2013 Financial Results

SINGAPORE, June 17, 2013 /PRNewswire/ --  Linktone Ltd. (NASDAQ: LTON) ("Linktone" or the "Company"), a provider of media and entertainment content and services in key strategic markets in Asia, today announced its unaudited financial results for the first quarter ended March 31, 2013.

FIRST QUARTER 2013 FINANCIAL HIGHLIGHTS

US$ million, except for per ADS items and %


Three months ended






March 31,
2012


December 31,
2012


March 31,
2013

% change
vs Mar'12

% change
vs Dec'12

Gross Revenues


$11.5


$11.2


$11.4

-1%

2%

Gross Profit


3.8


3.8


3.7

-3%

-3%

Operating Income / (Loss)


3.1


(5.4)


(4.6)

-248%

-15%

GAAP Net Income / (Loss)


3.8


(3.7)


(3.8)

-200%

0%

GAAP Net Income / (Loss)  per ADS (Diluted)


$   0.09


$   (0.09)


$  (0.09)

-198%

0%












Non-GAAP Net Income/ (Loss)


3.8


6.3


(3.7)

-197%

-159%

Non-GAAP Net Income per ADS (Diluted)


$   0.1


$   0.15


$   (0.09)

-197%

-160%

Discussing the results, Mr. Hary Tanoesoedibjo, Group Chief Executive Officer, said, "We are pleased to report first quarter revenue near the high end of our guidance range despite a mixed performance among our various service lines.  While we continue to face long-term structural and regulatory challenges in our VAS products segment as a whole, we are encouraged by the positive performance in our VAS data-related services segment driven by JAVA-based product revenue generated through a new business partnership.   Furthermore, we are pleased to see continued growth momentum in our mobile games unit Letang, resulting in a sequential increase in mobile game revenue.  The development of our mobile games segment has been a key strategic focus over the past year, and we have made significant strides in the development and distribution of games through the Google PlayTM store."

"Growth in our data-related services and mobile games segments helped to partially mitigate the uneven performance from our media content, further justifying in our view the basis for our diversified, multi-platform and multi-territory media and entertainment strategy.  With a healthy balance sheet, continued investment and development in our newer initiatives such as Fumubang.com, our online platform for parents, and in our e-commerce business in Singapore, Happybuys.com, we believe that we are well positioned to build a sustainable platform capable of delivering consistent growth in the year ahead."

FISCAL FIRST QUARTER 2013 UNAUDITED FINANCIAL RESULTS

Gross revenues increased 2% from the fourth quarter of 2012 to $11.4 million in the first quarter of 2013.  Linktone's first quarter revenue mix included VAS data-related services (SMS, MMS, WAP, and Java), VAS audio-related services (IVR and RBT), distribution of media content, mobile and PC games as well as social commerce. The breakdown of revenue in the first quarter was as follows:

First Quarter Revenue Mix




Three months ended


US$ million, except for %



December 31,

2012


March 31,

2013






% of Gross

Revenues




% of Gross

Revenues




Gross

Revenues



Gross

Revenues


VAS Data-related services



$4.3


38%


$4.7


41%

VAS Audio-related services



2.3


21%


1.8


16%

Media content



2.9


26%


2.5


22%

Mobile games



0.9


8%


1.7


15%

PC games



0.2


2%


0.2


2%

Social commerce



0.6


5%


0.5


4%

Total gross revenue



$11.2


100%


$11.4


100%












The shift in the Company's first quarter 2013 revenue mix compared to the fourth quarter 2012 was primarily due to an increase in VAS data-related services revenue and mobile games revenue offset by a decrease in VAS audio-related services revenue, media content revenue and social commerce revenue.

Data-related services revenue in the first quarter accounted for 41% of gross revenues, or $4.7 million, an increase of 9% from the fourth quarter of 2012.  The increase over the fourth quarter of 2012 was primarily due to an increase in JAVA revenue due to a partnership with a new business partner to launch its JAVA-based games to the China market utilizing Linktone's short codes.  

The breakdown of VAS data-related services revenue in the first quarter was as follows:




Three months ended

US$ million, except for %



December 31,

2012


March 31,

2013




Gross


% of Gross Revenues


Gross


% of Gross Revenues




Revenues



Revenues


SMS



$3.8


34%


$3.6


32%

MMS



0.5


4%


0.4


4%

WAP and JAVA



0.0


0%


0.7


5%

Total Data-related services



$4.3


38%


$4.7


41%

Audio-related services revenue in the first quarter accounted for 16% of gross revenues, or $1.8 million, a decrease of 22% over the fourth quarter of 2012. The decrease in audio-related revenue in the first quarter of 2013 was primarily related to a decrease in RBT revenue due to a decline in demand for RBT services in Indonesia and China.  

The breakdown of VAS audio-related services revenue in the first quarter was as follows:




Three months ended

US$ million, except for %



December 31,

2012


March 31,

2013




Gross


% of Gross

Revenues


Gross


% of Gross

Revenues




Revenues



Revenues


IVR



$1.7


15%


$1.6


14%

RBT



$0.6


6%


$0.2


2%

Total Audio-related services



$2.3


21%


$1.8


16%

Media content revenue in the first quarter accounted for 22% of gross revenues, or $2.5 million, a 14% decrease over the fourth quarter of 2012 due to a decrease in the number of studio home entertainment titles available and better performance of theatrical titles released in the previous quarter.

Mobile games revenue in the first quarter accounted for 15% of gross revenues, or $1.7 million, an 89% increase from the fourth quarter of 2012 due to an increase in advertising revenue from mobile games.

Social commerce revenue in the first quarter accounted for 4% of gross revenues, or $0.5 million, a 17% decrease over the fourth quarter of 2012 due to a decrease in advertising revenue for Okezone.

MARGINS, EXPENSES AND BALANCE SHEET

US$ million, except for %




Three months ended






March 31,
2012


December 31,
2012


March 31,
2013

% change
vs Mar'12

% change
vs Dec'12

Gross profit margin




33%


34%


32%



Operating profit / (loss) margin




27%


(48%)


(40%)














Operating expenses




$5.8


$16.0


$6.2

7%

-61%

Selling and marketing expenses




1.7


1.7


1.4

-18%

-18%

Product development expenses




0.9


0.5


1.1

22%

120%

General and administrative expenses


3.2


3.8


3.7

16%

-3%

Provision for impairment of goodwill

0.0


9.9


0.0

0%

-100%

Other operating income/ (loss)




5.1


6.7


(2.1)

-141%

-131%












Operating profit / (loss)




3.1


(5.4)


(4.6)

-248%

-15%

Income / (loss) before tax




3.2


(4.9)


(4.3)

-234%

-12%

Income tax benefit




0.1


0.7


0.1

0%

-86%

GAAP net income / (loss)




3.8


(3.7)


(3.8)

-200%

3%

Gross profit for the first quarter of 2013 was $3.7 million, 3% lower than fourth quarter 2012, while gross profit margin decreased to 32%.

Operating expenses for the first quarter of 2013 were $6.2 million, compared to $16.0 million in the fourth quarter 2012. Operating expenses for the fourth quarter 2012 included an impairment of goodwill of $9.9 million due to the unfavorable outlook for the DVD and VAS businesses of the Company's Media Content and China VAS reporting units, respectively.  Excluding the impairment expense, operating expenses for the fourth quarter 2012 were $6.1 million

Selling and marketing expenses were $1.4 million in the first quarter of 2013, representing an 18% decrease from the fourth quarter of 2012 and in-line with the decline in media content revenue. 

Product development expenses were $1.1 million in the first quarter of 2013, a significant increase from the fourth quarter of 2012, primarily due to government subsidies of $0.1 million received and recognized in the fourth quarter of 2012 and capitalization of research and development costs for the mobile games segment of $0.5 million for the fourth quarter of 2012 compared to $0.2 million capitalized for the first quarter of 2013. A net increase of such expenses of $0.2 million in first quarter of 2013 was due to higher research and development costs incurred in developing new games. 

General and administrative expenses were $3.7 million in the first quarter of 2013, a decrease of 3% compared to fourth quarter 2012.

Other operating loss for the first quarter of 2013 was $2.1 million, compared to operating income of $6.7 million in the fourth quarter of 2012. Other operating income relates to the realized and unrealized gain in marketable securities.  The decline in the first quarter of 2013 is due to fluctuations in the market prices of quoted investments.

Operating loss for the first quarter of 2013 was $4.6 million compared to $5.4 million in the fourth quarter of 2012 due primarily to the above-mentioned impairment of goodwill in the fourth quarter of 2012 and decline in other operating income in the first quarter of 2013. 

Income tax benefit was $0.1 million for the first quarter of 2013, $0.6 million lower than the previous quarter, primarily due to deferred tax asset true up adjustment done in fourth quarter 2012 for the full financial year.

GAAP net loss increased to $3.8 million, or $0.09 per diluted ADS, in the first quarter of 2013, compared with GAAP net loss of $3.7 million, or $0.09 per diluted ADS, in the fourth quarter of 2012.

Cash and cash equivalents and short-term investments totaled $122.0 million as of March 31, 2013 compared to $125.4 million as of December 31, 2012.  The $3.4 million decrease was largely attributable to the quoted marked-to-market valuation of investments held by the Company as of March 31, 2013 and utilization of cash to repurchase shares in the first quarter of 2013.

SHARE REPURCHASE ACTIVITY

During the first quarter of 2013, the Company purchased approximately 355,104 ADSs in the open market at an average price of $2.71 per ADS pursuant to the Company's previously announced buyback program.

INVESTING ACTIVITY

The Company did not engage in any trading with respect to short-term investments during the first quarter of 2013.

SECOND QUARTER FISCAL 2013 OUTLOOK

For the second quarter ending June 30, 2013, Linktone anticipates gross revenues to be in the range of $10 million to $12 million. These forecasts reflect the Company's current and preliminary view, which is subject to change.

INCOME STATEMENT RECLASSIFICATION

During 2012, based on the terms of new contracts during the year, we determined that it is more appropriate to present RBT revenue from these new contracts on a net basis, net of payment to operators instead of gross basis.   For consistency, comparative quarter balances have also been revised on a similar basis to enhance the comparability of information presented.

USE OF NON-GAAP FINANCIAL MEASURES

The reconciliation of GAAP measures with non-GAAP measures for net income and net income per diluted ADS included in this press release is set forth after the attached unaudited financial information.  Linktone believes that the supplemental presentation of Non-GAAP net income and Non-GAAP net income per diluted ADS, adjusted to exclude the effect of share-based compensation expense and provision for impairment of goodwill, 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.

ABOUT LINKTONE LTD.

Linktone Ltd. 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 People's Republic of China ("PRC") and diversify its revenue base; changes in the policies of the relevant government regulators or telecom network operators in China and Indonesia 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 applicable 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 governmental authorities, could adversely affect Linktone's financial condition and results of operations; the risk that Linktone will not be able to realize meaningful returns from investments it makes, including its acquisitions or strategic partnerships, or may be required to record provisions for impairments in the value of the Company's investments; 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 and the other markets in which it operates including the VAS market in Indonesia and the market for edutainment and entertainment products and social commerce, for whatever reason, including competition or changes in the regulatory environment; 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.

CONTACTS:

Investor Relations (HK):
Candy Cheung, Senior Associate
Taylor Rafferty
Tel: +852 3196 3712
Email: linktone@king-worldwide.com

Investor Relations (US):
Mahmoud Siddig, Managing Director
Taylor Rafferty
Tel: 212-889-4350
Email: linktone@king-worldwide.com

- Financial Tables to Follow




LINKTONE LTD.



CONSOLIDATED BALANCE SHEETS



(In U.S. dollars, except share data)




December 31,

March 31,


2012

2013



(audited)

(unaudited)


Assets




Current assets:




Cash and cash equivalents

35,041,672

33,591,877






Restricted cash

-

-


Short-term investments

90,318,579

88,378,812


Accounts receivable, net

14,287,247

14,393,021


Tax refund receivable

906,197

620,706


Inventories

1,848,552

1,947,614


Due from related parties

1,756,401

1,768,551


Deferred tax assets

732,987

789,739


Deposits and other current assets

6,065,370

6,580,762


Total current assets

150,957,005

148,071,082






Property and equipment, net

11,760,831

11,481,893


Non-current assets held for sale

-

-


Intangible assets, net

8,114,889

7,817,956


Goodwill

29,571,982

29,571,982


Deferred tax assets

729,386

725,525


Other long-term assets

3,280,479

2,292,447






Total assets

204,414,572

199,960,885






Liabilities and shareholders' equity




Current liabilities:




Account payable, accrued liabilities and other payables

16,405,947

16,440,552


Due to related parties

456,765

875,654


Short-term loan

6,122,924

6,621,271


Taxes payable

1,879,355

1,857,241


Deferred revenue

421,723

403,940


Deferred tax liabilities

516,977

462,771


Total current liabilities

25,803,691

26,661,429


 


LINKTONE LTD.



CONSOLIDATED BALANCE SHEETS



(In U.S. dollars, except share data)




December 31,

March 31,


2012

2013



(audited)

(unaudited)


Long-term liabilities




Deferred tax liabilities

2,182,299

2,165,468


Long term loan

-

-


Other long-term liabilities

1,258,030

952,278






Total liabilities

29,244,020

29,779,175






Shareholders' equity




Linktone Ltd. shareholders' equity:




     Ordinary shares ($0.0001 par value; 500,000,000 shares authorized, 421,435,030 shares issued and 410,422,650 shares outstanding as of December 31, 2012 and 410,566,008shares issued and 407,073,715shares outstanding as at March 31, 2013, respectively)

42,144

42,144


 

Additional paid-in capital

137,902,242

137,927,719


Treasury stock

(1,905,608)

(2,868,518)


Statutory reserves

2,499,512

2,499,512


Accumulated other comprehensive income:




Unrealized gain on investment in marketable securities

-

-


Cumulative translation adjustments

11,407,104

11,488,055


Accumulated income / (losses)

5,407,903

1,636,730


Total Linktone Ltd's shareholders' equity

155,353,297

150,725,642






Noncontrolling interest

19,817,255

19,456,068


Total equity

175,170,552

170,181,710






Total liabilities and equity

204,414,572

199,960,885


 


LINKTONE LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In U.S. dollars, except share data)



Three months ended


March 31,

December 31,

March 31,

2012

2012

2013

(unaudited)

(unaudited)

(unaudited)

Gross revenues

11,484,348

11,156,409

11,406,364

Sales tax

(178,176)

(156,110)

(146,751)

Net revenues

11,306,172

11,000,299

11,259,613

Cost of services

(7,518,298)

(7,229,643)

(7,542,248)

Gross profit

3,787,874

3,770,656

3,717,365

Operating expenses:


-


    Product development

(925,817)

(532,145)

(1,118,153)

    Selling and marketing

(1,747,647)

(1,666,594)

(1,440,218)

   General and administrative

(3,175,740)

(3,828,948)

(3,659,843)




-



-


 Provision for impairment of goodwill


(9,928,373)

-

Total operating expenses, net

(5,849,204)

(15,956,060)

(6,218,214)

Other operating income / (loss)

5,127,060

6,742,971

(2,084,999)

Income / (Loss) from operations

3,065,730

(5,442,433)

(4,585,848)

Interest income

426,872

201,433

378,868

Other income / (loss)

(295,416)

379,246

(48,558)

Income / (Loss) before tax

3,197,186

(4,861,754)

(4,255,538)

Income tax benefit/(expense)

68,841

730,379

123,178

Less: Net (income)/loss attributable to non- controlling interest

497,713

460,631

361,187

Net income / (Loss)

3,763,740

(3,670,744)

(3,771,173)

Other comprehensive income/ (loss):

18,318,978

(3,107,880)

80,949

Comprehensive income / (Loss)

22,082,718

(6,778,624)

(3,690,224)





Basic income / (loss) per ordinary share:




   Total net income / (loss)

0.01

(0.01)

(0.01)

Diluted income / (loss) per ordinary share:




   Total net income / (loss)

0.01

(0.01)

(0.01)

 

LINKTONE LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In U.S. dollars, except share data)



Three months ended


March 31,

December 31,

March 31,

2012

2012

2013

(unaudited)

(unaudited)

(unaudited)

Basic income / (loss) per ADS:




   Total net income / (loss)

0.09

(0.09)

(0.09)

Diluted income / (loss) per ADS:




   Total net income / (loss)

0.09

(0.09)

(0.09)





Weighted average ordinary shares:




   Basic

409,444,996

408,831,048

405,214,541

   Diluted

409,447,242

410,566,008

407,073,715





Weighted average ADSs:




   Basic

40,944,500

40,883,105

40,521,454

   Diluted

40,944,724

41,056,601

40,707,371


LINKTONE LTD.

NON-GAAP RECONCILIATION

(In U.S. dollars, except share data)




Three months ended


March 31,

December 31,

March 31,

2012

2012

2013

(unaudited)

(unaudited)

(unaudited)





Net income / loss

3,763,740

(3,670,744)

(3,771,173)

Stock based compensation expense

50,867

25,475

25,475

Provision for impairment of goodwill

-

9,928,373

-

Non-GAAP net income

3,814,607

6,283,104

(3,745,698)





Non-GAAP diluted income per share

0.01

0.02

(0.01)

Non-GAAP diluted income per ADS

0.09

0.15

(0.09)

Number of shares used in diluted per-share calculation

409,447,242

410,566,008

407,073,715

Number of ADSs used in diluted per-share calculation

40,944,724

41,056,601

40,707,371

 

SOURCE Linktone Ltd.




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