LINKTONE LTD. (ADR) 
By SINGAPORE, Aug. 6, 2012 /PRNewswire-Asia-FirstCall/-- Linktone Ltd. (NASDAQ: LTON) ("the Company"), a provider of media and entertainment content and services in key strategic markets in Asia, today announced its financial results for the second quarter ended June 30, 2012.
UNAUDITED RESULTS FOR THE SECOND QUARTER
US$ million, except for per ADS items Three months ended
June 30, March 31, June 30,
2011 2012 2012
---- ---- ----
Gross Revenues $14.0 $11.6 $12.1
Gross Profit 4.7 3.8 4.4
Operating Loss (1.1) (2.1) (1.9)
GAAP Net (Loss) / Income (0.3) 3.8 8.1
==== === ===
GAAP Net (Loss) / Income per ADS (Diluted) $(0.008) $0.092 $0.198
======= ====== ======
Non-GAAP Net (Loss) / Income (0.3) 3.8 8.2
==== === ===
Non-GAAP Net (Loss) / Income per ADS (Diluted) $(0.008) $0.093 $0.199
======= ====== ======
Cash and cash equivalents and short-term investments available for sale totaled $112.1 million as of June 30, 2012, compared with $108.4 million as of March 31, 2012.
Linktone's financial results for the three months ended June 30, 2012 included the following:
Gross revenues increased 4% sequentially to $12.1 million in the second quarter of 2012, compared with $11.6 million in the first quarter of 2012. The quarter-over-quarter revenue increase was primarily attributable to the acquisition of the online news and information portal Okezone.com ("Okezone"), which contributed $0.6 million of revenue in the second quarter of 2012.
On a year-over-year basis, revenue decreased from $14.0 million in the second quarter of 2011 to $12.1 million in the second quarter of 2012. This decline was primarily attributable to the decline in VAS data-related services revenue due to the more stringent restrictions imposed by regulators in China and Indonesia and weaker than expected sales performance of movies and children's edutainment titles.
GAAP net income more than doubled to $8.1 million, or $0.20 per diluted ADS, in the second quarter of 2012, compared with GAAP net income of $3.8 million, or $0.09 per diluted ADS, in the first quarter of 2012. This compared with a GAAP net loss of $0.3 million, or $0.01 per diluted ADS, in the second quarter of 2011. The Company's second quarter 2012 net income included realized gains totaling $9.6 million related to the sale of 125 million shares of PT Global Mediacom TBK ("Global Mediacom"), an affiliate of Linktone's controlling shareholder, for $21.5 million.
"Linktone's second quarter performance underscores the importance of our ongoing efforts to diversify our business both geographically and through the strategic expansion of our service portfolio," said Hary Tanoesoedibjo, Group Chief Executive Officer. "Our second quarter gross revenues were in-line with guidance, despite soft sales in certain segments, and we reported strong bottom-line results supported by the continued execution of our multi-faceted growth strategy.
"Our acquisition of Okezone.com has provided an immediate and significant boost to our Indonesian operations. With approximately 25 million monthly unique visitors, Okezone.com is a popular source of news and general entertainment content and services for Indonesians in the country and residing abroad. The combination of our existing mobile value added content and service business and Okezone.com provides our Company with a solid platform for growth in the bourgeoning social commerce arena in Indonesia. We intend to continue developing these fundamental assets to support our pursuit of business opportunities in fast growing areas such as online and mobile social networking and E-retailing in this country of approximately 250 million.
Mr. Tanoesoedibjo concluded, "This recent acquisition has also enhanced our multi territory and multi-platform media distribution capabilities and enabled further development of our media content portfolio. The continued diversification of our service and content offering remains key to our long-term success as we work to build our business throughout the ASEAN region. With over $112 million in cash, cash equivalents and short-term available for sale investments, we believe that we are well positioned to carry out our growth strategy, meet our strategic and operational objectives and increase shareholder value."
SECOND QUARTER REVENUE MIX
Linktone's second quarter revenue mix included VAS data-related services (SMS, MMS, WAP, and Java), VAS audio-related services (IVR and RBT), distribution of media content, mobile and PC games as well as social commerce. The breakdown of revenue in the second quarter was as follows:
Three months ended
------------------
US$ million, except for % March 31, 2012 June 30, 2012
-------------- -------------
Gross % of Gross Revenues Gross % of Gross Revenues
Revenues Revenues
VAS Data-related services $5.7 49% $5.2 43%
VAS Audio-related services 2.2 19% 2.7 22%
Media content 2.8 24% 2.7 22%
Mobile games 0.6 5% 0.6 5%
PC games 0.3 3% 0.3 3%
Social Commerce 0.0 0% 0.6 5%
--- ---
Total gross revenue $11.6 100% $12.1 100%
===== === ===== ===
The shift in the Company's second quarter 2012 revenue mix was primarily related to the increase in RBT revenue from VAS audio-related services in China and the addition of social commerce revenue from the acquisition of Okezone, partially offset by a decline in VAS data-related revenue in China.
Data-related services revenue in the second quarter accounted for 43% of gross revenues, or $5.2 million, a decline of 9% from the first quarter of 2012. The sequential decline was primarily due to a decrease in SMS revenue from Linktone's China operations, partially offset by an increase in SMS revenue from Linktone's Indonesian operations primarily resulting from an SMS polling contest held in connection with the Indonesian Idol television program in the second quarter.
The breakdown of VAS data-related services revenue in the second quarter was as follows:
Three months ended
------------------
US$ million, except for % March 31, 2012 June 30, 2012
-------------- -------------
Gross % of Gross Revenues Gross % of Gross Revenues
Revenues Revenues
SMS $4.7 40% $4.1 34%
MMS 0.7 6% 0.9 7%
WAP and JAVA 0.3 3% 0.2 2%
Total Data-related services $5.7 49% $5.2 43%
==== === ==== ===
Audio-related services revenue in the second quarter accounted for 22% of gross revenues, or $2.7 million, a 23% increase over the first quarter of 2012. The sequential increase in audio-related services revenue was driven by an increase in RBT revenue due to market expansion into new regions in China.
The breakdown of VAS audio-related services revenue in the second quarter was as follows:
Three months ended
------------------
US$ million, except for % March 31, 2012 June 30, 2012
-------------- -------------
Gross % of Gross Revenues Gross % of Gross Revenues
Revenues Revenues
IVR $1.6 14% $1.7 14%
RBT 0.6 5% $1.0 8%
Total Audio-related services $2.2 19% $2.7 22%
==== === ==== ===
Media content revenue decreased 4% sequentially to $2.7 million for the second quarter of 2012, largely due to a weak performance of movies and children's edutainment titles.
Social commerce revenue generated by Okezone, which was acquired in the second quarter, accounted for 5% of gross revenues, or $0.6 million for the second quarter of 2012.
MARGINS, EXPENSES AND BALANCE SHEET
US$ million, except for margin items Three months ended
June 30, March 31, June 30,
2011 2012 2012
Gross profit margin 34% 33% 36%
Operating loss margin (8%) (18%) (16%)
Operating expenses $5.8 $5.8 $6.3
Selling and marketing expenses 2.2 1.7 1.8
Product development expenses 0.6 0.9 0.8
Other general and administrative expenses 3.0 3.2 3.7
Income tax expense / (benefit) 0.1 (0.1) (0.4)
The drivers behind Linktone's key operating benchmarks and changes in balance sheet items for the second quarter of 2012 include the following:
-- Gross profit margin increased from 33% to 36% on a sequential-quarter
basis primarily due to improved margins generated by the Company's
subsidiary, PT Linktone, resulting from increased sales, and also from
the acquisition of Okezone.
-- Operating loss margin decreased on a sequential-quarter basis primarily
due to improved gross profit margins generated by PT Linktone.
-- Selling and marketing expenses increased $0.1 million on a
sequential-quarter basis due to increased spending in IVR/RBT promotion,
in-line with the increase in RBT revenue.
-- Product development expenses decreased $0.1 million on a
sequential-quarter basis due to government subsidies received.
-- Other general and administrative expenses increased $0.5 million on a
sequential-quarter basis arising from the acquisition of Okezone.
-- Income tax benefit was higher on a sequential-quarter basis due to the
reversal of an excess withholding tax provision.
-- Cash and cash equivalents and short-term investments available for sale
totaled $112.1 million as of June 30, 2012. The $3.7 million net
increase over the first quarter of 2012 was largely attributable to a
$6.2 million unrealized gain in the mark-to-market of the 157 million
shares of Global Medicom and 708 million shares of PT Bhakti Investama
TBK, the parent company of Global Mediacom ("Bhakti Investama"), held by
the Company as of June 30, 2012.
INVESTING ACTIVITY
Linktone sold 125 million shares of Global Mediacom in the second quarter of 2012 for gross proceeds of $21.5 million and realized a gain on the sale of $9.6 million.
Linktone purchased 708 million shares of Bhakti Investama TBK in the second quarter of 2012 for $33.8 million.
THIRD QUARTER 2012 OUTLOOK
For the third quarter ending September 30, 2012, Linktone anticipates gross revenues to be in the range of $12 million to $14 million. These forecasts reflect the Company's current and preliminary view, which is subject to change.
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 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 or loss and Non-GAAP net income or loss per diluted ADS, adjusted to exclude the effect of share-based compensation expense and gain on recovery of bad debt 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, 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.
Investor Relations
The Piacente Group, Inc.
Lee Roth
linktone@thepiacentegroup.com
Tel: 212-481-2050
LINKTONE LTD.
-------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In U.S. dollars, except share data)
-----------------------------------
December 31, June 30,
------------ --------
2011 2012
---- ----
(audited) (unaudited)
-------- ----------
Assets
------
Current assets:
---------------
Cash and cash equivalents 40,921,818 37,023,167
------------------------- ---------- ----------
Restricted cash 603,088 601,742
--------------- ------- -------
Short-term investments 56,584,958 75,055,574
---------------------- ---------- ----------
Accounts receivable, net 17,048,783 15,868,111
------------------------ ---------- ----------
Tax refund receivable 1,177,761 454,315
--------------------- --------- -------
Inventories 1,881,749 1,817,316
----------- --------- ---------
Due from related parties 2,375,450 2,412,325
------------------------ --------- ---------
Deferred tax assets 486,176 489,765
------------------- ------- -------
Deposits and other current assets 5,702,726 5,259,646
--------------------------------- --------- ---------
Total current assets 126,782,509 138,981,961
-------------------- ----------- -----------
Property and equipment, net 11,195,432 11,096,690
--------------------------- ---------- ----------
Non-current assets held for sale 814,878 822,933
-------------------------------- ------- -------
Intangible assets, net 9,525,908 8,952,221
---------------------- --------- ---------
Goodwill 40,483,355 40,516,855
-------- ---------- ----------
Deferred tax assets 369,706 386,861
------------------- ------- -------
Other long-term assets 1,024,442 1,701,330
---------------------- --------- ---------
Total assets 190,196,230 202,458,851
------------ ----------- -----------
Liabilities and shareholders' equity
------------------------------------
Current liabilities:
--------------------
Account payable, accrued liabilities
and other payables 14,980,545 15,686,594
------------------------------------ ---------- ----------
Due to related parties 16,198 -
---------------------- ------ ---
Short-term loan 4,781,181 5,736,928
--------------- --------- ---------
Taxes payable 4,088,188 2,047,054
------------- --------- ---------
Deferred revenue 387,149 445,817
---------------- ------- -------
Deferred tax liabilities 126,034 129,517
------------------------ ------- -------
Total current liabilities 24,379,295 24,045,910
------------------------- ---------- ----------
LINKTONE LTD.
-------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In U.S. dollars, except share data)
-----------------------------------
December 31, June 30,
------------ --------
2011 2012
---- ----
(audited) (unaudited)
-------- ----------
Long-term liabilities
---------------------
Deferred tax liabilities 2,761,348 2,609,833
------------------------ --------- ---------
Long term loan 511,878 258,176
-------------- ------- -------
Other long-term liabilities 67,688 53,164
--------------------------- ------ ------
Total liabilities 27,720,209 26,967,083
----------------- ---------- ----------
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, 2011 and 421,435,030
shares issued and 409,243,820
outstanding as at June 30, 2012,
respectively) 42,144 42,144
------------------------------------- ------ ------
Additional paid-in capital 137,745,875 137,846,780
-------------------------- ----------- -----------
Treasury stock (1,425,204) (1,578,050)
-------------- ---------- ----------
Statutory reserves 2,466,165 2,500,055
------------------ --------- ---------
Accumulated other comprehensive income: - -
--------------------------------------- --- ---
Unrealized gain on investment in
marketable securities 4,453,157 6,613,606
-------------------------------- --------- ---------
Cumulative translation adjustments 10,973,973 10,921,150
---------------------------------- ---------- ----------
Accumulated losses (14,425,929) (2,557,616)
------------------ ----------- ----------
Noncontrolling interest 22,645,840 21,703,699
----------------------- ---------- ----------
Total shareholders' equity 162,476,021 175,491,768
-------------------------- ----------- -----------
Total liabilities and shareholders'
equity 190,196,230 202,458,851
----------------------------------- ----------- -----------
LINKTONE LTD.
-------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
--------------------------------------------------------------
(In U.S. dollars, except share data)
-----------------------------------
Three months ended Six months ended
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
-------- --------- -------- -------- --------
2011 2012 2012 2011 2012
---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ---------- ----------
Gross revenues 13,953,731 11,608,348 12,143,963 27,895,941 23,752,311
-------------- ---------- ---------- ---------- ---------- ----------
Sales tax (554,433) (178,176) (234,570) (782,033) (412,746)
--------- -------- -------- -------- -------- --------
Net revenues 13,399,298 11,430,172 11,909,393 27,113,908 23,339,565
------------ ---------- ---------- ---------- ---------- ----------
Cost of services (8,649,314) (7,642,298) (7,552,964) (17,419,713) (15,195,262)
---------------- ---------- ---------- ---------- ----------- -----------
Gross profit 4,749,984 3,787,874 4,356,429 9,694,195 8,144,303
------------ --------- --------- --------- --------- ---------
Operating expenses:
-------------------
Product development (646,967) (925,817) (757,641) (1,192,158) (1,683,458)
------------------- -------- -------- -------- ---------- ----------
Selling and marketing (2,182,177) (1,747,647) (1,819,751) (4,347,209) (3,567,398)
--------------------- ---------- ---------- ---------- ---------- ----------
Other general and administrative (3,039,046) (3,175,740) (3,712,352) (5,826,429) (6,888,092)
-------------------------------- ---------- ---------- ---------- ---------- ----------
Gain on recovery of bad debt 38,455 - - 76,430 -
---------------------------- ------ --- --- ------ ---
Total operating expenses, net (5,829,735) (5,849,204) (6,289,744) (11,289,366) (12,138,948)
----------------------------- ---------- ---------- ---------- ----------- -----------
Loss from operations (1,079,751) (2,061,330) (1,933,315) (1,595,171) (3,994,645)
-------------------- ---------- ---------- ---------- ---------- ----------
Interest income 672,107 426,872 479,033 1,585,952 905,905
--------------- ------- ------- ------- --------- -------
Gain on sale of investment - 5,127,060 9,626,768 200,000 14,753,828
-------------------------- --- --------- --------- ------- ----------
Other income / (loss) 132,440 (295,416) (661,561) 622,835 (956,977)
--------------------- ------- -------- -------- ------- --------
Income/ (loss) before tax (275,204) 3,197,186 7,510,925 813,616 10,708,111
------------------------- -------- --------- --------- ------- ----------
Income tax benefit/(expense) (72,145) 68,841 366,621 (213,690) 435,462
---------------------------- ------- ------ ------- -------- -------
Less: Net (income)/loss attributable to non-
controlling interest 1,069 497,713 227,026 (44,934) 724,739
-------------------------------------------- ----- ------- ------- ------- -------
Net income/ (loss) (346,280) 3,763,740 8,104,572 554,992 11,868,312
------------------ -------- --------- --------- ------- ----------
Other comprehensive income/ (loss): 2,810,647 18,318,978 (16,211,351) 3,210,325 2,107,627
----------------------------------- --------- ---------- ----------- --------- ---------
Comprehensive income/ (loss) 2,464,367 22,082,718 (8,106,779) 3,765,317 13,975,939
---------------------------- --------- ---------- ---------- --------- ----------
Basic income per ordinary share:
--------------------------------
Total net income/ (loss) (0.00) 0.01 0.02 0.00 0.03
--------------------------- ----- ---- ---- ---- ----
Diluted income per ordinary share:
----------------------------------
Total net income/ (loss) (0.00) 0.01 0.02 0.00 0.03
--------------------------- ----- ---- ---- ---- ----
LINKTONE LTD.
-------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
--------------------------------------------------------------
(In U.S. dollars, except share data)
-----------------------------------
Three months ended Six months ended
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
-------- --------- -------- -------- --------
2011 2012 2012 2011 2012
---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ---------- ----------
Basic income per ADS:
---------------------
Total net income/ (loss) (0.01) 0.09 0.20 0.01 0.29
--------------------------- ----- ---- ---- ---- ----
Diluted income per ADS:
-----------------------
Total net income/ (loss) (0.01) 0.09 0.20 0.01 0.29
--------------------------- ----- ---- ---- ---- ----
Weighted average ordinary shares:
---------------------------------
Basic 421,435,030 409,444,996 409,444,996 421,344,065 409,444,996
----- ----------- ----------- ----------- ----------- -----------
Diluted 421,435,030 409,447,242 409,447,242 421,422,569 409,447,242
------- ----------- ----------- ----------- ----------- -----------
Weighted average ADSs:
----------------------
Basic 42,143,503 40,944,500 40,944,500 42,134,407 40,944,500
----- ---------- ---------- ---------- ---------- ----------
Diluted 42,143,503 40,944,724 40,944,724 42,142,257 40,944,724
------- ---------- ---------- ---------- ---------- ----------
LINKTONE LTD.
-------------
NON-GAAP RECONCILIATION
-----------------------
(In U.S. dollars, except share data)
-----------------------------------
Three months ended Six months ended
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
-------- --------- -------- -------- --------
2011 2012 2012 2011 2012
---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ---------- ----------
Net income/ (loss) (346,280) 3,763,740 8,104,572 554,992 11,868,312
------------------ -------- --------- --------- ------- ----------
Stock based compensation expense 37,179 50,867 50,037 59,560 100,904
-------------------------------- ------ ------ ------ ------ -------
Gain on recovery of bad debt (38,455) - - (76,430) -
---------------------------- ------- --- --- ------- ---
Non-GAAP net income/ (loss) (347,556) 3,814,607 8,154,609 538,122 11,969,216
--------------------------- -------- --------- --------- ------- ----------
Non-GAAP diluted income/ (loss) per share (0.00) 0.01 0.02 0.00 0.03
----------------------------------------- ----- ---- ---- ---- ----
Non-GAAP diluted income/ (loss) per ADS (0.01) 0.09 0.20 0.01 0.29
--------------------------------------- ----- ---- ---- ---- ----
Number of shares used in diluted per-share calculation 421,435,030 409,447,242 409,447,242 421,422,569 409,447,242
------------------------------------------------------ ----------- ----------- ----------- ----------- -----------
Number of ADSs used in diluted per-share calculation 42,143,503 40,944,724 40,944,724 42,142,257 40,944,724
---------------------------------------------------- ---------- ---------- ---------- ---------- ----------
SOURCE Linktone Ltd.
