BEIJING, Nov. 30 /PRNewswire-Asia-FirstCall/ -- Linktone Ltd. , one of the leading providers of wireless interactive entertainment services to consumers in China, today announced its unaudited financial results for the third quarter ended September 30, 2009.
Results for the Third Quarter -- Wireless value-added services ("WVAS") and other revenues of $13.8 million, compared with $18.3 million in the second quarter of 2009 and $16.6 million in the third quarter of 2008. -- GAAP net income of $0.7 million, compared with net income of $0.9 million in the second quarter of 2009 and a net loss of $2.3 million in the third quarter of 2008. -- GAAP net income from continuing operations of $0.6 million, compared with net income from continuing operations of $0.7 million in the second quarter of 2009 and net income from continuing operations of $1.5 million in the third quarter of 2008. -- GAAP net income per fully diluted American Depositary Share ("ADS") of $0.02, compared with net income of $0.02 for the second quarter of 2009 and a net loss of $0.06 for the third quarter of 2008. -- Non-GAAP net income* of $0.4 million, compared with non-GAAP net income of $0.9 million in the second quarter of 2009 and a non-GAAP net loss of $1.6 million in the third quarter of 2008. -- Non-GAAP net income per fully diluted ADS of $0.01, compared with non-GAAP net income per fully diluted ADS of $0.02 in the second quarter of 2009 and a non-GAAP net loss per fully diluted ADS of $0.04 in the third quarter of 2008. *Non-GAAP measures exclude certain share-based compensation expense and impairment charges. Please refer to the table at the end of this release titled "Non-GAAP Reconciliation" which provides a reconciliation between GAAP and non-GAAP financial measures.
Chief Executive Officer Hary Tanoesoedibjo said, "Linktone was able to continue its profitability despite lower than expected revenues due to our accomplishments in broadening our value-added services platform and maintaining stringent cost controls. During the third quarter, we recognized revenue and profit from our Indonesia VAS project, which represents the first phase of our Southeast Asia expansion strategy. In order to capitalize on extensive growth opportunities in the Southeast Asian market, we will continuously focus on building our core competitive strengths and cultivating strong partnerships in the region."
Deputy Chief Executive Officer and Chief Financial Officer, Colin Sung, stated, "We have always been highly selective in pursuing strategic alliances and expansion opportunities. We believe that our continued focus on international expansion, enhanced content offerings and utilization of distribution channels will position us well on all fronts as we strive toward our goal of achieving sustainable profitability. Operational efficiency and prudent cost management will also continue to be at the forefront of our agenda as we proceed into 2010."
Third Quarter Revenue Mix
Linktone's third quarter revenue mix includes data-related services (SMS, MMS, WAP, and Java), audio-related services (IVR and CRBT) and others (casual game and enterprise services).
Data-related services revenue was $7.8 million, representing 57% of total gross revenues, compared with $10.6 million or 58% of total gross revenues for the second quarter of 2009. The sequential decrease in Linktone's data-related services revenue was primarily attributable to decreased SMS services revenue resulting from fewer revenue sharing projects with mobile phone manufacturers, which was due to stricter policies, and the decrease also resulted from a lower level of revenue generation from Linktone's promotional activities conducted via media channels.
Data-related services breakdowns are as follows: -- Short Messaging Services ("SMS") revenue represented 54% of gross revenues, compared with 55% for the second quarter of 2009. SMS revenue was $7.4 million for the third quarter of 2009, compared with $10.1 million for the second quarter of 2009. -- Multimedia Messaging Services ("MMS") revenue was $0.1 million for the third quarter of 2009, representing 1% of gross revenues. This was unchanged from the second quarter of 2009. -- Wireless Application Protocol ("WAP") and Java Gaming ("Java") revenue represented 2% of gross revenues compared with 2% for the second quarter of 2009. WAP and Java revenue was $0.3 million for the third quarter of 2009, compared with $0.4 million for the second quarter of 2009.
Audio-related services accounted for 36% of gross revenues, or $4.9 million, compared with 39%, or $7.1 million, for the second quarter of 2009. The sequential decrease was primarily due to a decrease in IVR revenue due to decreased returns from media advertising during the quarter.
Audio-related service breakdowns are as follows: -- Interactive Voice Response Services ("IVR") revenue decreased to 24% of gross revenues, compared with 32% for the second quarter of 2009. IVR revenue was $3.3 million for the third quarter of 2009, compared with $5.8 million for the second quarter of 2009. -- Color Ring-Back Tones ("CRBT") revenue increased to 12% of gross revenues, compared with 7% for the second quarter of 2009. CRBT revenue was $1.6 million for the third quarter of 2009, compared with $1.3 million for the second quarter of 2009.
Other services accounted for 7% of gross revenues, or $1.1 million, compared with 3%, or $0.6 million, for the second quarter of 2009. Other services in the third quarter of 2009 included a fee of $0.7 million for technical advisory services relating to WVAS provided by Linktone to a related party in Indonesia for the period from March to September 2009.
Margins, Expenses and Balance Sheet
Linktone's key operating benchmarks and balance sheet items for the third quarter of 2009 include the following:
-- Gross margin increased to 39% of net revenues, or gross revenues minus business tax, compared with 34% for the second quarter of 2009. The sequential increase was primarily due to relatively higher profit margin service fees from Linktone's Indonesia VAS project. Gross margin was 53% for the third quarter of 2008. -- Operating loss was 1% of net revenues, compared with operating profit of 1% for the second quarter of 2009 and operating profit of 8% for the third quarter of 2008. The sequential decrease was primarily attributable to decreased returns from Linktone's spending in traditional media channels to promote its services. -- Operating expenses decreased to $5.2 million, compared with $5.7 million for the second quarter of 2009 and $7.1 million for the third quarter of 2008. -- Selling and marketing expenses were $3.1 million, compared with $2.3 million for the second quarter of 2009 and $4.0 million for the third quarter of 2008. The sequential increase was primarily due to an increase in spending in traditional media channels. -- Product development expenses were $0.9 million, compared with $1.0 million for the second quarter of 2009 and $0.9 million for the third quarter of 2008. -- Other general and administrative expenses decreased to $1.6 million, compared with $2.4 million for the second quarter of 2009 and $2.2 million for the third quarter of 2008. The sequential decrease was primarily due to higher professional fees incurred in connection with annual reporting and filing for 2008 and severance costs paid to former officers in the second quarter of 2009 and a reversal of long aging provisions for certain liabilities. -- Reversal of provision for impairment was $0.4 million in the third quarter of 2009, representing cash collected from a loan receivable against which a full provision of the total loan balance was made in 2007. -- Cash and cash equivalents, as well as short-term investments available for sale, totaled $97.2 million on September 30, 2009, compared with $99.7 million on June 30, 2009. The decrease in cash and cash equivalents was primarily due to a further loan drawdown of $0.8 million by a related party and negative operating cash flow of $1.7 million. The above-referenced loan had an outstanding principal balance of $1.9 million on September 30, 2009, which is secured and earns interest at a rate of 10% per annum. Interest is payable on the loan on a quarterly basis. -- Days Sales Outstanding for Continuing Operations ("DSO"), the average length of time required for Linktone to receive payment for services delivered, was 112 days as of September 30, 2009, compared with 83 days as of June 30, 2009. Fourth Quarter 2009 Outlook
For the fourth quarter ending December 31, 2009, Linktone anticipates gross revenues to be in the range of $14 million to $15 million.
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 fully diluted ADS included in this press release is set forth after the attached financial statements. Linktone believes that the supplemental presentation of adjusted net income or loss and net income or loss per fully diluted ADS, excluding 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 located after the financial statements.
Discontinued Operations
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 financial statements, 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.
Today's Conference Call
As previously announced, Linktone management plans to host a conference call to discuss its third quarter 2009 financial results at 8:00 p.m. Eastern Time on November 30, 2009 (5:00 p.m. Pacific Time on November 30, 2009 and 9:00 a.m. Beijing/Hong Kong Time on December 1, 2009). The dial-in number for the call is 877-941-2068 for U.S. callers and 480-629-9712 for international callers. The management team will be on the call to discuss the quarterly results and highlights and to answer questions from participants. A replay of the call will be available through December 14, 2009. To access the replay, U.S. callers should dial 800-406-7325 and enter passcode 4185223; international callers should dial 303-590-3030 and enter the same passcode.
Additionally, a live webcast of this call will be available on the Linktone web site at http://www.linktone.com/webcasts.jsp . An archived replay of the call will be available for 90 days.
About Linktone Ltd.
Linktone Ltd. is one of the leading providers of wireless interactive entertainment services to consumers in China. Linktone provides a diverse portfolio of services to wireless consumers and corporate customers, with a particular focus on media, entertainment and communications. These services are promoted through the Company's strong distribution network, integrated service platform and multiple marketing sales channels, as well as through the networks of the mobile operators in China. Through in-house development and alliances with international and local branded content partners, the Company develops, aggregates, and distributes innovative and engaging products to maximize the breadth, quality and diversity of its offerings.
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 China, including the Indonesian market, and create synergies with MNC; changes in the policies of the PRC Ministry of Industry and Information and/or the telecom operators in China or in the manner in which the operators interpret and enforce such policies, including policies which reduce the prices the Company may charge customers and current and future restrictions on the ability of Linktone to enter into profit sharing arrangements with mobile phone manufacturers to embed its services; 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; the risk that Linktone will not be able to compete effectively in the telecom value-added services market in China or any new markets it enters, for whatever reason, including competition from other service providers or penalties or suspensions for violations of the policies of the telecom operators; the risk that Linktone will not be able to realize meaningful returns from strategic partnerships or may be required to record additional provisions for impairments in the value of the Company's investments in such partnerships; uncertainty as to the popularity of the Major League Baseball ("MLB") content being licensed by MLB Advanced Media, L.P. ("MLBAM") or the profitability of the license and partnership arrangements between Linktone and MLBAM or the partnership arrangements with China National Radio Mobile Media (Beijing) Co. Ltd.; the ability of Linktone to successfully launch and maintain the licensed MLB web sites and other services such as mobile video content in a cost-effective manner or at all; the risk that Linktone will not be able to develop and effectively market innovative services; the risk that Linktone will not be able to effectively control its operating expenses in future periods or make expenditures that effectively differentiate Linktone's services and brand; 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.
For more information, please contact: Investor Relations Serena Shi Linktone Ltd. Tel: +86-10-6539-6802 Email: Serena.shi@linktone.com The Piacente Group, Inc. Brandi Piacente Email: brandi@thepiacentegroup.com Kristen McNally Email: kristen@thepiacentegroup.com Tel: +1-212-481-2050 LINKTONE LTD. CONSOLIDATED BALANCE SHEETS (In U.S. dollars, except share data) December 31, September 30, 2008 2009 (audited) (unaudited) Assets Current assets: Cash and cash equivalents 81,593,823 78,860,555 Short-term investments 14,372,646 18,293,981 Accounts receivable, net 15,245,030 12,726,294 Tax refund receivable 1,240,718 1,419,078 Loans receivable from related parties 7,984,450 10,067,850 Deposits and other current assets 5,106,901 2,750,547 Deferred tax assets 1,479,554 1,444,063 Total current assets 127,023,122 125,562,368 Property and equipment, net 1,031,543 639,420 Intangible assets, net 171,238 122,346 Goodwill 14,584,212 14,584,212 Deferred tax assets 116,235 215,579 Other long-term assets 476,368 392,303 Total assets 143,402,718 141,516,228 Liabilities and shareholders' equity Current liabilities: Taxes payable 4,097,447 3,374,592 Accounts payable, accrued liabilities and other payables 10,796,440 7,390,482 Deferred revenue 210,833 307,291 Deferred tax liabilities 87,947 179,317 Total current liabilities 15,192,667 11,251,682 Total liabilities 15,192,667 11,251,682 Shareholders' equity Ordinary shares ($0.0001 par value; 500,000,000 shares authorized, 420,636,230 shares and 420,756,430 issued and outstanding as of December 31, 2008 and September 30, 2009) 42,063 42,075 Additional paid-in capital 137,560,175 137,776,590 Statutory reserves 2,466,165 2,466,165 Accumulated other comprehensive income: Cumulative translation adjustments 7,363,186 7,212,587 Accumulated losses (19,221,538) (17,232,871) Total shareholders' equity 128,210,051 130,264,546 Total liabilities and shareholders' equity 143,402,718 141,516,228 LINKTONE LTD. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (In U.S. dollars, except share data) Three months ended Nine months ended September June September September September 30, 2008 30, 2009 30, 2009 30, 2008 30, 2009 (unaudited)(unaudited) (unaudited)(unaudited) (unaudited) Gross revenues 16,586,641 18,254,195 13,828,853 47,624,083 46,858,738 Sales tax (632,288) (688,923) (492,831) (1,751,145) (1,681,035) Net revenues 15,954,353 17,565,272 13,336,022 45,872,938 45,177,703 Cost of services (7,481,147)(11,613,627) (8,185,538)(23,910,814)(29,451,273) Gross profit 8,473,206 5,951,645 5,150,484 21,962,124 15,726,430 Operating expenses: Product development (917,231) (989,118) (931,718) (2,389,121) (2,530,779) Selling and marketing (4,029,935) (2,286,112) (3,150,756) (9,132,388) (7,370,970) Other general and admini- strative (2,202,707) (2,440,520) (1,553,203) (7,327,540) (6,016,645) Reversal of provision for impairment -- -- 395,257 -- -- Total operating expenses (7,149,873) (5,715,750) (5,240,420)(18,849,049)(15,918,394) Income/(Loss) from operations 1,323,333 235,895 (89,936) 3,113,075 (191,964) Interest income (including interest income of $79,775 and $132,687 from related party loans for the three months ended June 30, 2009 and Sept- ember 30, 2009 respectively) 520,920 645,635 691,334 1,095,556 1,168,458 Other income 84,570 156,104 19,253 319,371 352,938 Income before tax 1,928,823 1,037,634 620,651 4,528,002 1,329,432 Income tax expense (472,439) (315,319) (26,797) (1,296,224) (329,014) Net income from continuing operations 1,456,384 722,315 593,854 3,231,778 1,000,418 Net income/ (loss) from discontinued operations (3,779,477) 186,412 140,467 (20,345,470) 988,249 Net income/ (loss) (2,323,093) 908,727 734,321 (17,113,692) 1,988,667 Other comprehensive income/(loss): 39,112 20,926 (79,248) 2,483,761 (150,599) Comprehensive income/(loss) (2,283,981) 929,653 655,073 (14,629,931) 1,838,068 Basic income/ (loss) per ordinary share: Continuing operations 0.00 0.00 0.00 0.01 0.01 Discontinued operations (0.01) 0.00 0.00 (0.06) 0.00 Total net income/(loss) (0.01) 0.00 0.00 (0.05) 0.01 Diluted income/ (loss) per ordinary share: Continuing operations 0.00 0.00 0.00 0.01 0.01 Discontinued operations (0.01) 0.00 0.00 (0.06) 0.00 Total net income/(loss) (0.01) 0.00 0.00 (0.05) 0.01 Basic income/ (loss) per ADS: Continuing operations 0.03 0.02 0.02 0.09 0.03 Discontinued operations (0.09) 0.00 0.00 (0.57) 0.02 Total net income/(loss) (0.06) 0.02 0.02 (0.48) 0.05 Diluted income/ (loss) per ADS: Continuing operations 0.03 0.02 0.02 0.09 0.03 Discontinued operations (0.09) 0.00 0.00 (0.57) 0.02 Total net income/(loss) (0.06) 0.02 0.02 (0.48) 0.05 Weighted average ordinary shares: Basic 420,636,230 420,636,230 420,756,430 358,722,891 420,651,200 Diluted 420,636,230 421,179,097 421,619,227 358,722,891 421,221,535 Weighted average ADSs: Basic 42,063,623 42,063,623 42,075,643 35,872,289 42,065,120 Diluted 42,063,623 42,117,910 42,161,923 35,872,289 42,122,154 LINKTONE LTD. NON-GAAP RECONCILIATION (In U.S. dollars, except share data) Three months ended Nine months ended September June September September September 30, 2008 30, 2009 30, 2009 30, 2008 30, 2009 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Net income/ (loss) (2,323,093) 908,727 734,321 (17,113,692) 1,988,667 Stock based compensation expense 161,941 (18,657) 51,673 552,635 223,244 Provision/ (Reversal of provision) for impairment 602,512 -- (395,257) 6,617,458 (395,257) Non-GAAP net income/(loss) (1,558,640) 890,070 390,737 (9,943,599) 1,816,654 Non-GAAP diluted income/(loss) per share (0.00) 0.00 0.00 (0.03) 0.00 Non-GAAP diluted income/(loss) per ADS (0.04) 0.02 0.01 (0.28) 0.04 Number of shares used in diluted per-share calculation 420,636,230 421,179,097 421,619,227 358,722,891 421,221,535 Number of ADSs used in diluted per-share calculation 42,063,623 42,117,910 42,161,923 35,872,289 42,122,154
Linktone Ltd.
CONTACT: Investor Relations, Serena Shi of Linktone Ltd.,
+86-10-6539-6802, Serena.shi@linktone.com; or Brandi Piacente,
brandi@thepiacentegroup.com, or Kristen McNally, kristen@thepiacentegroup.com,
both of The Piacente Group, Inc., +1-212-481-2050, for Linktone Ltd.
Web site: http://www.linktone.com/webcasts.jsp
