Fourth Quarter 2014 Financial Highli ghts
-
Total revenues for the fourth quarter of 2014 increased 3.4% from the third quarter of 2014 and increased 43.5% from the same period last year to
US$ 61.64 mn , exceeding the guidance range ofUS$ 59 mn to US$ 60 mn . -
Total gross profit was
US$ 26.68 mn , an increase of 11.9% from the third quarter of 2014 and 22.8% from the same period last year, exceeding the guidance range ofUS$ 24 mn to US$ 25 mn . -
Net income was
US$ 9.07 mn , diluted net income per American Depositary Shares ('ADS') wasUS$ 0.19 , in line with the guidance range ofUS$ 9 mn to US$ 10 mn . -
Non-GAAP net income was
US$ 10.05 mn . Non-GAAP diluted net income per ADS wasUS$ 0.22 (Non-GAAP Financial Measures are described and reconciled to the corresponding GAAP measures in the section titled 'Non-GAAP Financial Measures'), in line with the guidance range ofUS$ 10 mn to US$ 11 mn . -
As of
December 31 2014, the Company hadUS$ 188.20 mn in cash and cash equivalents, term deposits, held-to-maturity securities, available-for-sale securities and restricted cash orUS$ 4.06 per ADS in cash and cash equivalents, term deposits, held-to-maturity securities, available-for-sale securities and restricted cash, net of aUS$ 42.4 mn short-term bank loan used to obtain US dollars to fund the one-time special dividend distributed inOctober 2014 . The mark to fair value of the Company's strategic stake inOurgame was priced as ofDecember 31, 2014 atHK$ 2.64 per ordinary share (orUS$ 20.01 mn ) compared to theHK$ 3.59 per share price as ofMarch 10, 2015 (orUS$ 27.20 mn ), and the Company reclassified the investment as available-for-sale securities.
Full Year 2014 Financial Highli ghts
-
Total revenues were
US$ 227.60 mn for the full year of 2014 compared toUS$ 173.65 mn in 2013 representing 31.1% YoY growth. Of which Internet games revenues wereUS$ 118.10 mn in 2014 compared toUS$ 93.79 mn in 2013 representing 25.9% YoY growth, Mobile games revenues wereUS$ 45.04 mn in 2014 compared toUS$ 16.91 mn in 2013 representing 166.4% YoY growth and WVAS revenues wereUS$ 64.46 mn in 2014 compared toUS$ 62.95 mn in 2013 representing 2.4% YoY growth. - Full year gross margin was 43.2% compared to 44.5% in 2013. Of which Internet games gross margin was 48.0%, Mobile games gross margin was 49.0% and WVAS gross margin was 30.4%.
-
Net income in 2014 was
US$ 22.59 mn compared toUS$ 20.66 mn in 2013, representing 9.3% YoY growth. Net income in 2014 included a$1.32 mn impairment loss on intangible assets andUS$ 2.0 mn impairment loss on long-term investments. -
Non-GAAP net income was
US$ 29.90 mn compared to 2013 full year Non-GAAP net income ofUS$ 28.87 mn , representing 3.6% YoY growth. (Non-GAAP Financial Measures are described and reconciled to the corresponding GAAP measures in the section titled 'Non-GAAP Financial Measures').
The Company's Chairman and Chief Executive Officer,
Business Highlights
- Internet Game Business Highlights
Key games under operations highlights
-- War Saga: World of Tanks is expected to be the primary contributor to Internet game revenues, supplemented by the 2nd War Saga game, World of Warplanes. World of Tanks is preparing to celebrate its 4th anniversary in
-- ArenaNet: The developer of Guild Wars 2, announced the first expansion for the game, 'Hearts of Thorns', on
Internet game pipeline highlights
-- World of Warships, the 3rd War Saga game, is expected to begin closed beta testing to Chinese players in 2Q15.
-- The Chronicles of Dragon Wing, a newly licensed 3D Turn-based Tactical Battle Game, will begin closed beta testing in 2Q15.
-- Auto Club Revolution, a free to play simulation auto racing game, will begin closed beta testing to Chinese players in 2Q15.
-- Blitzkrieg 3, an asymmetric real time strategy military game, will undertake alpha testing to Chinese players in 2Q15.
-- World of Tank Generals, a card based strategy cross platform military game, will begin its first alpha test to Chinese players in 2Q15.
- Mobile Game Business Highlights
1Q15 Overview
-- No new mobile game launches with smartphone game revenues driven mainly by 5 main games under operation including (1) Rush Three Kingdoms (Three Kingdoms themed Real Time Strategy) (2) My Princess is Cutest (Puzzle / Card RPG) and (3) General Three Kingdoms (Mobile Battle RPG)
For 2Q15 and beyond, we have the following mobile games in our pipeline .
-- Three Kingdoms themed 3D Action RPG from Chinese studio (Expected release 2Q15)
-- Western Fantasy themed Card Battle Game from Chinese studio (Expected release 2Q15)
-- Western Fantasy themed 3D mobile MOBA from Chinese studio (Expected release 2Q15)
-- Tank Battle Action RPG from Korean studio (Expected release 2Q15)
-- Western Fantasy themed 3D Action RPG co-development with
-- Three Kingdoms themed Side-scrolling Action RPG co-development with
-- Western Fantasy themed Real Time Strategy (RTS) and Tower Defense game (2Q15 or 3Q15)
-- Kuiba 3D Action RPG (Expected release 2nd half 2015)
-- At least 10 other mobile games under development internally, licensed or in discussions to license for 2nd half 2015 and 2016 release.
Three Months Ended | |||||
December 31, | September 30, | December 31, | |||
2013 | 2014 | 2014 | |||
US$ in thousands | US$ in thousands | US$ in thousands | |||
Revenues | 42,962 | 59,637 | 61,637 | ||
Internet Games | 24,524 | 32,146 | 29,446 | ||
Mobile Games | 4,882 | 11,285 | 15,178 | ||
WVAS | 13,556 | 16,206 | 17,013 | ||
Cost of Revenue | 21,246 | 35,809 | 34,962 | ||
Internet Games | 10,873 | 17,353 | 15,892 | ||
Mobile Games | 1,436 | 5,846 | 7,148 | ||
WVAS | 8,937 | 12,610 | 11,922 | ||
Gross Profit | 21,716 | 23,828 | 26,675 | ||
Internet Games | 13,651 | 14,793 | 13,554 | ||
Mobile Games | 3,446 | 5,439 | 8,030 | ||
WVAS | 4,619 | 3,596 | 5,091 | ||
Gross Margin | 51% | 40% | 43% | ||
Internet Games | 56% | 46% | 46% | ||
Mobile Games | 71% | 48% | 53% | ||
WVAS | 34% | 22% | 30% |
Revenues
Total revenues for the fourth quarter of 2014 were
Internet Games Revenues
Internet Game ('Net Game') revenues were
For the fourth quarter of 2014, mainland
Three Months Ended | |||
December 31, 2013 | September 30, 2014 | December 31, 2014 | |
MAU | 1,641k | 2,207k | 1,840k |
APA | 271k | 343k | 327k |
ARPU | 183 | 193 | 185 |
Internet game revenues made up 47.8% of total revenues in the fourth quarter of 2014.
Mobile Games Revenues
Total mobile game revenues were
Total mobile game revenues made up 24.6% of total revenues in the third quarter of 2014.
WVAS Revenues
WVAS revenues were
WVAS made up 27.6% of total revenues in the fourth quarter of 2014.
Gross Profit
Total gross profit for the fourth quarter of 2014 was
Total gross margin was 43.3% in the fourth quarter of 2014.
Internet Game Gross Profit
Internet game gross profit was
Mobile Game Gross Profit
Mobile games gross profit was
WVAS Gross Profit
WVAS gross profit was
Operating Expenses
Total operating expenses in the fourth quarter of 2014 were
Product development expenses in the fourth quarter of 2014 were
Sales and marketing expenses in the fourth quarter of 2014 were
General and administrative expenses in the fourth quarter of 2014 were
The Company's total headcount in the fourth quarter of 2014 was stable at 1,091 staff compared to 1,151 staff at the end of the third quarter of 2014.
Earnings
US GAAP net income and diluted income per ADS were
Total ADS on a diluted basis outstanding during the fourth quarter of 2014 were 46.59 mn, compared to 46.64 mn outstanding during the third quarter of 2014.
For the purpose of earnings per share calculation | Number during three months ended September 30, 2014 | Number during three months ended December 31, 2014 |
ADS (in mns) | 45.56 | 46.34 |
Add: Dilution impact from options and nonvested shares | 0.46 | 0.25 |
Warrants issued to business partners | 0.62 | 0.00 |
ADS on diluted basis | 46.64 | 46.59 |
Balance Sheet
As of
The Company's strategic investment in
Business Outlook (For the first quarter ending
The Company expects total revenues for the first quarter of 2015 to be within the range of
Conference Call
The conference call will be available live via webcast on the Investor Relations section of
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: | +1 866 519 4004 |
- U.S. Dial-in Number: | +1 845 675 0437 |
- Hong Kong Toll Free Dial-in Number: | 800 906 601 |
- Hong Kong Dial-in Number: | +852 30186771 |
- Mainland China Dial-in Number: | 800 819 0121, 400 620 8038 |
- International Dial-in Number: | +65 6723 9381 |
Passcode: | 8036 5830 |
The live conference call via webcast and archive replay will be available on the Investor Relations section of
A dial-in replay of the conference call will be available until
- 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 0206, 400 602 2065 |
- International Dial-in Number: | +61 2 8199 0299 |
Passcode: | 8036 5830 |
About
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
KongZhong Contacts
Investor Contact
Chief Financial Officer
Investor Relations
Tel.: (+86-10) 8857.6000
E-mail: ir@kongzhong.com
Media Contact
Xingran Chen
Public Relations
Tel.: (+86-10) 8857.6000
E-mail:chenxingran@kongzhong.com
KongZhong Corporation | ||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||
(Unaudited, US$ in thousands, except per share and share data) | ||||||
Three Months Ended | ||||||
December 31, | September 30, | December 31, | ||||
2013 | 2014 | 2014 | ||||
Revenues | 42,962 | 59,637 | 61,637 | |||
Cost of revenues | 21,246 | 35,809 | 34,962 | |||
Gross profit | 21,716 | 23,828 | 26,675 | |||
Operating expenses | ||||||
Product development | 6,819 | 6,580 | 6,083 | |||
Sales and marketing | 6,520 | 10,702 | 9,076 | |||
General and administrative | 2,356 | 2,502 | 4,236 | |||
Impairment loss on intangible assets | - | 1,323 | - | |||
Total operating expenses | 15,695 | 21,107 | 19,395 | |||
Government subsidy | 1,371 | 198 | 480 | |||
Income from operations | 7,392 | 2,919 | 7,760 | |||
Interest income | 2,170 | 2,835 | 1,891 | |||
Interest expense | - | - | (176) | |||
Impairment loss on cost method investment | - | (2,000) | - | |||
Imputed interest on long-term liabilities | (150) | (150) | (150) | |||
Exchange gain | 898 | 8 | 385 | |||
Income before tax expense | 10,310 | 3,612 | 9,710 | |||
Income tax expense | 284 | 109 | 641 | |||
Net income | 10,026 | 3,503 | 9,069 | |||
Earnings per ADS, basic | 0.22 | 0.08 | 0.20 | |||
Earnings per ADS, diluted | 0.21 | 0.08 | 0.19 | |||
Weighted average ADS outstanding (million) | 45.32 | 45.56 | 46.34 | |||
Weighted average ADS used in diluted EPS calculation (million) | 46.85 | 46.64 | 46.59 | |||
Net income | 10,026 | 3,503 | 9,069 | |||
Other comprehensive income (loss) | 2,043 | 2,079 | (7,873) | |||
Total comprehensive income | 12,069 | 5,582 | 1,196 |
KongZhong Corporation | ||||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||
(Unaudited, US$ in thousands, except per share and share data) | ||||||||
Twelve Months Ended | ||||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
Revenues | 173,654 | 227,596 | ||||||
Cost of revenues | 96,400 | 129,279 | ||||||
Gross profit | 77,254 | 98,317 | ||||||
Operating expenses | ||||||||
Product development | 26,402 | 25,107 | ||||||
Sales and marketing | 26,674 | 42,523 | ||||||
General and administrative | 8,976 | 12,565 | ||||||
Impairment loss on intangible assets | 1,562 | 1,323 | ||||||
Total operating expenses | 63,614 | 81,518 | ||||||
Government subsidy | 2,176 | 1,139 | ||||||
Income from operations | 15,816 | 17,938 | ||||||
Interest income | 6,764 | 8,865 | ||||||
Interest expense | (93) | (295) | ||||||
Impairment loss on cost method investment | (2,000) | (2,000) | ||||||
Imputed interest on long-term liabilities | (600) | (600) | ||||||
Exchange gain (loss) | 1,487 | (272) | ||||||
Income before tax expense | 21,374 | 23,636 | ||||||
Income tax expense | 712 | 1,048 | ||||||
Net income | 20,662 | 22,588 | ||||||
Earnings per ADS, basic | 0.48 | 0.49 | ||||||
Earnings per ADS, diluted | 0.47 | 0.48 | ||||||
Weighted average ADS outstanding (million) | 42.87 | 45.70 | ||||||
Weighted average ADS used in diluted EPS calculation (million) | 43.79 | 46.89 | ||||||
Net income | 20,662 | 22,588 | ||||||
Other comprehensive income | 8,945 | 1,968 | ||||||
Total comprehensive income | 29,607 | 24,556 |
KongZhong Corporation | ||||||
Condensed Consolidated Balance Sheets | ||||||
(Unaudited, US$ in thousands) | ||||||
As of December 31, | As of September 30, | As of December 31, | ||||
2013 | 2014 | 2014 | ||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | 123,428 | 114,654 | 105,093 | |||
Term deposits | 4,449 | 2,781 | 16,907 | |||
Available-for-sale securities | - | 30,447 | 20,014 | |||
Held-to-maturity securities | 51,866 | 48,297 | 24,359 | |||
Accounts receivable (net) | 17,231 | 24,805 | 30,244 | |||
Restricted cash | - | - | 53,376 | |||
Other current assets | 7,762 | 10,195 | 19,070 | |||
Total current assets | 204,736 | 231,179 | 269,063 | |||
Non-current assets | ||||||
Rental deposits | 796 | 1,321 | 1,445 | |||
Intangible assets (net) | 78,727 | 60,507 | 55,510 | |||
Property and equipment (net) | 5,843 | 6,402 | 5,659 | |||
Long-term investments | 2,000 | - | - | |||
Goodwill | 90,267 | 89,524 | 90,019 | |||
Restricted cash | 36,871 | 36,571 | 10,885 | |||
Total non-current assets | 214,504 | 194,325 | 163,518 | |||
Total assets | 419,240 | 425,504 | 432,581 | |||
Liabilities and Shareholders' Equity | ||||||
Current Liabilities | ||||||
Accounts payable | 39,514 | 31,581 | 31,600 | |||
Short-term bank loan (including short-term bank loan of the consolidated VIE without recourse to KongZhong Corporation of $nil, $nil and $nil as of December 31, 2013, September 30, 2014 and December 31, 2014, respectively) | - | - | 42,429 | |||
Deferred revenue | 2,262 | 9,475 | 4,652 | |||
Other current liabilities | 25,595 | 18,494 | 22,110 | |||
Total current liabilities | 67,371 | 59,550 | 100,791 | |||
Non-current Liabilities | ||||||
Other long-term liabilities | 19,260 | 9,710 | 9,860 | |||
Total liabilities | 86,631 | 69,260 | 110,651 | |||
Shareholders' equity | 332,609 | 356,244 | 321,930 | |||
Total liabilities and shareholders' equity | 419,240 | 425,504 | 432,581 |
KongZhong Corporation | |||||
Condensed Consolidated Statements of Cash Flows | |||||
(Unaudited, US$ in thousands) | |||||
Twelve Months Ended | |||||
December 31, | December 31, | ||||
2013 | 2014 | ||||
Cash Flows From Operating Activities | |||||
Net income | 20,662 | 22,588 | |||
Adjustments to reconcile net income to net cash provided by | |||||
Depreciation and amortization | 4,988 | 21,523 | |||
Loss(gain) on disposal of property and equipment | 31 | (7) | |||
Provision for bad debt | 342 | 317 | |||
Imputed interest on long-term liabilities | 600 | 600 | |||
Impairment loss on cost method investment | 2,000 | 2,000 | |||
Impairment loss on intangible assets | 1,813 | 1,323 | |||
Share-based compensation | 1,574 | 1,548 | |||
Changes in operating assets and liabilities | 3,720 | (18,823) | |||
Net Cash Provided by Operating Activities | 35,730 | 31,069 | |||
Cash Flows From Investing Activities | |||||
Purchase of intangible assets | (1,565) | (98) | |||
Purchase of term deposits | (20,824) | (18,521) | |||
Proceeds from disposal of term deposits | 16,711 | 6,078 | |||
Long-term investment | - | (16,380) | |||
Purchase of held-to-maturity securities | (259,537) | (191,038) | |||
Proceeds from disposal of held-to-maturity securities | 226,240 | 218,358 | |||
Proceeds from disposal of property and equipment | - | 7 | |||
Purchase of property and equipment | (4,969) | (3,122) | |||
Release of restricted cash | - | 15,000 | |||
Addition of restricted cash | - | (42,402) | |||
Net Cash Used in Investing Activities | (43,944) | (32,118) | |||
Cash Flows From Financing Activities | |||||
Proceeds from exercise of employee stock options | 849 | 437 | |||
Deferred payments for acquisition of business | (3,000) | (2,881) | |||
Deferred payments for intangible assets | (6,588) | (21,828) | |||
Repurchase of ordinary shares | (10,124) | (12) | |||
Proceeds from exercise of warrants | 27,820 | 5,940 | |||
Proceeds from bank borrowing | 9,000 | 42,429 | |||
Repayment of bank borrowing | (9,000) | - | |||
Dividends paid to shareholders | - | (40,999) | |||
Net Cash Provided by (Used in) Financing Activities | 8,957 | (16,914) | |||
Effect of foreign exchange rate changes | 1,990 | (372) | |||
Net increase (decrease) in Cash and Cash Equivalents | 2,733 | (18,335) | |||
Cash and Cash Equivalents, Beginning of Period | 120,695 | 123,428 | |||
Cash and Cash Equivalents, End of Period | 123,428 | 105,093 |
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. The Non-GAAP Financial Measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. In addition, the Company's calculation of the Non-GAAP Financial Measures may be different from the calculation used by other companies, and therefore comparability may be limited. For the periods presented, the Company's non-GAAP net income and non-GAAP net income per diluted ADS exclude, as applicable, the amortization of intangibles, share-based compensation expense, imputed interest on long-term liabilities, impairment loss on cost method investment and intangible assets, as well as is adjusted for the dilution impact on ADS numbers from stock options, non-vested shares and warrants. Reconciliation of the Company's Non-GAAP financial measures to the GAAP financial measures is set forth below. |
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