LINKTONE LTD. (ADR) 
By SINGAPORE, Nov. 12, 2012 /PRNewswire-FirstCall/ -- Linktone Ltd. (NASDAQ: LTON 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 third quarter ended September 30, 2012.
THIRD QUARTER 2012 FINANCIAL HIGHLIGHTS
US$ million, except for per ADS items and % Three months ended
September 30, June 30, September 30, % change % change
2011 2012 2012 vs Sep'11 vs Jun'12
---- ---- ---- --------- ---------
Gross Revenues $16.6 $12.1 $12.1 -27% 0%
Gross Profit 6.6 4.4 4.4 -33% 0%
Operating Income / (Loss) 0.7 (1.9) (2.1) -400% 11%
GAAP Net Income 4.6 8.1 12.1 163% 49%
=== === ====
GAAP Net Income per ADS (Diluted) $0.11 $0.20 $0.29 164% 45%
===== ===== =====
Non-GAAP Net Income 4.7 8.2 12.1 157% 48%
=== === ====
Non-GAAP Net Income per ADS (Diluted) $0.11 $0.20 $0.30 173% 50%
===== ===== =====
THIRD QUARTER 2012 OPERATIONAL HIGHLIGHTS
Commenting on the results, Mr. Hary Tanoesoedibjo, Group Chief Executive Officer said, "Against a backdrop of ongoing regulatory and macroeconomic headwinds which impacted certain of our business segments, we delivered gross revenues within our guidance range and robust bottom-line growth. While our operational performance was mixed, with sequential growth in mobile games and VAS audio-related services offset by a decline in revenue from VAS data-related services and online games and social commerce, our underlying business remains healthy and we continued to make significant strides with our multi-faceted growth strategy in the first nine months of 2012."
"We have made progress recently in terms of both expanding our digital properties and product offering. In China, we launched Fumubang.com, where our simple mission is to enhance the joy of parenting. We aim for Fumubang.com to be a leading platform for the new generation of parents in China's first-tier cities. The site offers a wide range of content, applications, e-commerce and social networking options centered on child care, family services, health care and pregnancy, education and training as well as family entertainment."
"Earlier in the year, PT Linktone acquired Okezone.com, Indonesia's third most popular news and entertainment website, which we have successfully merged with PT Linktone's mobile operation. The combination of these businesses provides us with a significant presence in both the online and mobile arena, and increases our reach to the millions of users at home and on the go. In addition, during the third quarter, we rolled out mobile games for Android-based smartphones, further strengthening our offering and expanding our potential gaming customer base. We also began to offer a greater variety of mobile games via the Google Play store, allowing us to further expand our multi-million user base outside of China, primarily in America, Europe and Asia."
"The expansion of our multi-platform, multi-territory strategy for media content is also on track in Southeast Asia. Indonesia remains a key focus for Linktone. Through PT InnoForm, we are tapping into the enormous demand in Indonesia for entertainment content across all platforms, while also leveraging our relationship with our parent company, Global Mediacom, the largest media conglomerate in the country."
"With the continued development of our digital properties, social commerce, mobile gaming and multimedia content distribution, we have laid the foundation for a truly diversified, multi-platform and multi-territory media and entertainment business. We will continue to invest in new services and content to further strengthen and diversify the scope and depth of our portfolio and revenue streams. With a healthy balance sheet and a clear strategy in place, we remain confident in our ability to deliver sustainable growth and increasing shareholder value over time."
FISCAL THIRD QUARTER 2012 UNAUDITED FINANCIAL RESULTS
Gross revenues remained flat at $12.1 million in the third quarter of 2012. On a year-over-year basis, gross revenues decreased from $16.6 million in the third quarter of 2011. This decline was primarily attributable to the decline in VAS data-related services revenue due to the more stringent restrictions imposed by regulators in Indonesia and weaker than expected sales performance of movies and children's edutainment titles.
Linktone's third quarter revenue mix included VAS data-related services (SMS, MMS, WAP, and Java), VAS audio-related services (IVR and RBT), distribution of media content, mobile and PC games as well as social commerce. The breakdown of revenue in the third quarter was as follows:
Third Quarter Revenue Mix
Three months ended
------------------
US$ million, except for % June 30, September 30,
2012 2012
---- ----
Gross % of Gross Revenues Gross % of Gross Revenues
Revenues Revenues
VAS Data-related services $5.2 43% $4.8 40%
VAS Audio-related services 2.7 22% 2.9 24%
Media content 2.7 22% 2.7 22%
Mobile games 0.6 5% 1.2 10%
PC games 0.3 3% 0.1 1%
Social commerce 0.6 5% 0.4 3%
--- ---
Total gross revenue $12.1 100% $12.1 100%
===== === ===== ===
The shift in the Company's third quarter 2012 revenue mix was primarily related to the increase in mobile games revenue, partially offset by a decline in VAS data-related revenue in both China and Indonesia.
Data-related services revenue in the third quarter accounted for 40% of gross revenues, or $4.8 million, a decline of 8% from the second quarter of 2012. The sequential decline was primarily due to a decrease in SMS revenue from Linktone's China and Indonesian operations.
The breakdown of VAS data-related services revenue in the third quarter was as follows:
Three months ended
------------------
US$ million, except for % June 30, September 30,
2012 2012
---- ----
Gross % of Gross Revenues Gross % of Gross Revenues
Revenues Revenues
SMS $4.1 34% $3.7 31%
MMS 0.9 7% 0.9 7%
WAP and JAVA 0.2 2% 0.2 2%
Total Data-related services $5.2 43% $4.8 40%
==== === ==== ===
Audio-related services revenue in the third quarter accounted for 24% of gross revenues, or $2.9 million, a 7% increase over the second quarter of 2012. The sequential increase in audio-related services revenue was driven by the seasonal increase in IVR revenue in China during the summer school holidays.
The breakdown of VAS audio-related services revenue in the third quarter was as follows:
Three months ended
------------------
US$ million, except for % June 30, September 30,
2012 2012
---- ----
Gross % of Gross Revenues Gross % of Gross Revenues
Revenues Revenues
IVR $1.7 14% $2.0 17%
RBT 1.0 8% $0.9 7%
Total Audio-related services $2.7 22% $2.9 24%
==== === ==== ===
Media content revenue in the third quarter accounted for 22% of gross revenues, or $2.7 million, consistent with the second quarter of 2012.
Mobile games revenue in the third quarter accounted for 10% of gross revenues, or $1.2 million, an approximately 100% increase from the second quarter of 2012. This increase was mainly driven by development of games for the Android platform.
Social commerce revenue generated by Okezone.com, which was acquired in the second quarter, accounted for 3% of gross revenues, or $0.4 million for the third quarter of 2012.
MARGINS, EXPENSES AND BALANCE SHEET
US$ million, except for % Three months ended
September 30, June 30, September 30, % change % change
2011 2012 2012 vs Sep'11 vs Jun'12
---- ---- ---- --------- ---------
Gross profit margin 40% 36% 36%
Operating profit / (loss) margin 4% (16%) (17%)
Operating expenses $6.0 $6.3 $6.6 10% 5%
Selling and marketing expenses 2.5 1.8 2.0 -20% 11%
Product development expenses 0.6 0.8 1.0 67% 25%
General and administrative expenses 2.9 3.7 3.6 24% -3%
Operating profit / (loss) 0.7 (1.9) (2.1) -400% 11%
Income before tax 5.2 7.5 11.5 121% 53%
Income tax expense / (benefit) 0.1 (0.4) (0.1) -200% -75%
GAAP Net Income 4.6 8.1 12.1 163% 49%
Gross profit for the third quarter 2012 was $4.4 million, in-line with the previous quarter, and gross profit margin remained unchanged on a sequential basis at 36%.
Operating expenses for the third quarter 2012 were $6.6 million, an increase of 5% quarter-over-quarter.
Selling and marketing expenses were $2.0 million for the third quarter of 2012, representing an 11% increase quarter-over-quarter, due to increased spending on advertising and promotions in support of film distribution, in-line with the increase in theatrical revenue under media content.
Product development expenses were $1.0 million in the third quarter of 2012, representing a 25% increase quarter-over-quarter, primarily due to government subsidies of $0.2 million received and recognized in the second quarter of 2012.
General and administrative expenses were $3.6 million in the third quarter of 2012, 3% lower than the previous quarter.
Operating loss for the third quarter of 2012 was $2.1 million, an increase of 11% quarter-over-quarter. Operating loss margin was 17%, compared to 16% in the previous quarter, primarily due to higher operating expenses.
Income tax benefit was $0.1 million for the third quarter of 2012, a decrease of 75% quarter-over-quarter as there was a reversal in the second quarter of 2012 for an over provision for withholding tax amounting to $0.3 million.
GAAP net income increased to $12.1 million, or $0.29 per diluted ADS, in the third quarter of 2012, compared with GAAP net income of $8.1 million, or $0.20 per diluted ADS, in the second quarter of 2012. This compared with a GAAP net income of $4.6 million, or $0.11 per diluted ADS, in the third quarter of 2011. The Company's third quarter 2012 net income included realized gains from the sale of certain shares of PT Global Mediacom TBK ("Global Mediacom"), the parent company of Linktone, as discussed below under the heading "Investing Activity".
Cash and cash equivalents and short-term investments totaled $123.0 million as of September 30, 2012 compared to $112.1 million as of June 30, 2012.
The $10.9 million net increase over the second quarter of 2012 was largely attributable to an increase in the quoted marked-to-market valuation of the investments held by the Company as of September 30, 2012.
INVESTING ACTIVITY
Linktone sold 157 million shares of Global Mediacom in the third quarter of 2012 for gross proceeds of $28.1 million and realized a gain on the sale of $13.2 million.
Linktone purchased 24 million shares of PT Media Nusantara Citra TBK and 23 million shares of PT MNC Sky Vision TBK in the third quarter of 2012 for $11.0 million.
FOURTH QUARTER FISCAL 2012 OUTLOOK
For the fourth quarter ending December 31, 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 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/ 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 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):
Mahmoud Siddig, Managing Director
Taylor Rafferty
Tel: +852-3196-3712
Email: linktone@king-worldwide.com
Investor Relations (US):
Bryan Degnan, Senior Associate
Taylor Rafferty
Tel: +1-212-889-4350
Email: linktone@king-worldwide.com
- Financial Tables to Follow -
LINKTONE LTD.
-------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In U.S. dollars, except share data)
-----------------------------------
December 31, September 30,
------------ -------------
2011 2012
---- ----
(audited) (unaudited)
-------- ----------
Assets
------
Current assets:
---------------
Cash and cash equivalents 40,921,818 54,062,926
------------------------- ---------- ----------
Restricted cash 603,088 -
--------------- ------- ---
Short-term investments 56,584,958 68,971,386
---------------------- ---------- ----------
Accounts receivable, net 17,048,783 15,412,712
------------------------ ---------- ----------
Tax refund receivable 1,177,761 445,167
--------------------- --------- -------
Inventories 1,881,749 1,855,271
----------- --------- ---------
Due from related parties 2,375,450 1,654,858
------------------------ --------- ---------
Deferred tax assets 486,176 483,833
------------------- ------- -------
Deposits and other current assets 5,702,726 5,721,825
--------------------------------- --------- ---------
Total current assets 126,782,509 148,607,978
-------------------- ----------- -----------
Property and equipment, net 11,195,432 11,543,215
--------------------------- ---------- ----------
Non-current assets held for sale 814,878 853,981
-------------------------------- ------- -------
Intangible assets, net 9,525,908 8,456,205
---------------------- --------- ---------
Goodwill 40,483,355 40,516,426
-------- ---------- ----------
Deferred tax assets 369,706 400,601
------------------- ------- -------
Other long-term assets 1,024,442 2,128,627
---------------------- --------- ---------
Total assets 190,196,230 212,507,033
------------ ----------- -----------
Liabilities and shareholders' equity
------------------------------------
Current liabilities:
--------------------
Account payable, accrued liabilities and other payables 14,980,545 16,170,155
------------------------------------------------------- ---------- ----------
Due to related parties 16,198 40,989
---------------------- ------ ------
Short-term loan 4,781,181 7,071,217
--------------- --------- ---------
Taxes payable 4,088,188 2,068,007
------------- --------- ---------
Deferred revenue 387,149 422,124
---------------- ------- -------
Deferred tax liabilities 126,034 120,808
------------------------ ------- -------
Total current liabilities 24,379,295 25,893,300
------------------------- ---------- ----------
LINKTONE LTD.
-------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In U.S. dollars, except share data)
-----------------------------------
December 31, September 30,
------------ -------------
2011 2012
---- ----
(audited) (unaudited)
-------- ----------
Long-term liabilities
---------------------
Deferred
tax
liabilities 2,761,348 2,536,361
----------- --------- ---------
Long
term
loan 511,878 132,661
---- ------- -------
Other
long-
term
liabilities 67,688 49,655
----------- ------ ------
Total
liabilities 27,720,209 28,611,977
----------- ---------- ----------
Shareholders' equity
--------------------
Linktone Ltd. shareholders' equity:
-----------------------------------
Ordinary
shares and 421,435,030
($0.0001 410,422,650 shares
par shares issued
value; outstanding and
500,000,000 as 409,243,820
shares of outstanding
authorized, December as
421,435,030 31, at
shares 2011 September
issued 42,144 42,144
----------------------------------- ------ ------
Additional
paid-
in
capital 137,745,875 137,872,254
---------- ----------- -----------
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 3,315,824
---------- --------- ---------
Cumulative
translation
adjustments 10,973,973 11,296,216
----------- ---------- ----------
Accumulated
income
/
(losses) (14,425,929) 9,503,920
----------- ----------- ---------
Noncontrolling
interest 22,645,840 20,942,693
-------------- ---------- ----------
Total
shareholders'
equity 162,476,021 183,895,056
------------- ----------- -----------
Total
liabilities
and
shareholders'
equity 190,196,230 212,507,033
------------- ----------- -----------
LINKTONE LTD.
-------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
----------------------------------------------
(In U.S. dollars, except share data)
-----------------------------------
Three months ended Nine months ended
------------------ -----------------
September 30, June 30, September 30, September 30, September 30,
------------- -------- ------------- ------------- -------------
2011 2012 2012 2011 2012
---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ---------- ----------
Gross revenues 16,553,244 12,143,963 12,062,287 44,449,185 35,814,598
-------------- ---------- ---------- ---------- ---------- ----------
Sales tax (271,940) (234,570) (239,401) (1,053,973) (652,147)
--------- -------- -------- -------- ---------- --------
Net revenues 16,281,304 11,909,393 11,822,886 43,395,212 35,162,451
------------ ---------- ---------- ---------- ---------- ----------
Cost of services (9,654,775) (7,552,964) (7,390,833) (27,074,488) (22,586,095)
---------------- ---------- ---------- ---------- ----------- -----------
Gross profit 6,626,529 4,356,429 4,432,053 16,320,724 12,576,356
------------ --------- --------- --------- ---------- ----------
Operating expenses:
-------------------
Product development (571,098) (757,641) (988,882) (1,763,256) (2,672,340)
------------------- -------- -------- -------- ---------- ----------
Selling and marketing (2,467,365) (1,819,751) (1,957,381) (6,814,574) (5,524,779)
--------------------- ---------- ---------- ---------- ---------- ----------
General and administrative (2,866,581) (3,712,352) (3,606,083) (8,693,010) (10,494,175)
-------------------------- ---------- ---------- ---------- ---------- -----------
(Provision for impairment)/Gain on recovery of bad debt (66,005) - - 10,425 -
------------------------------------------------------- ------- --- --- ------ ---
Total operating expenses, net (5,971,049) (6,289,744) (6,552,346) (17,260,415) (18,691,294)
----------------------------- ---------- ---------- ---------- ----------- -----------
Income / (Loss) from operations 655,480 (1,933,315) (2,120,293) (939,691) (6,114,938)
------------------------------- ------- ---------- ---------- -------- ----------
Interest income 388,830 479,033 397,621 1,974,782 1,303,526
--------------- ------- ------- ------- --------- ---------
Dividend income from short-term investment - - 364,027 - 364,027
------------------------------------------ --- --- ------- --- -------
Gain on sale of investment 4,754,020 9,626,768 13,184,186 4,954,020 27,938,014
-------------------------- --------- --------- ---------- --------- ----------
Other income / (loss) (606,100) (661,561) (304,251) 16,735 (1,261,228)
--------------------- -------- -------- -------- ------ ----------
Income before tax 5,192,230 7,510,925 11,521,290 6,005,846 22,229,401
----------------- --------- --------- ---------- --------- ----------
Income tax benefit/(expense) (146,500) 366,621 94,767 (360,190) 530,229
---------------------------- -------- ------- ------ -------- -------
Less: Net (income)/loss attributable to non-controlling interest (426,128) 227,026 445,482 (471,062) 1,170,221
---------------------------------------------------------------- -------- ------- ------- -------- ---------
Net income 4,619,602 8,104,572 12,061,539 5,174,594 23,929,851
---------- --------- --------- ---------- --------- ----------
Other comprehensive income/ (loss): (5,544,486) (16,211,351) (2,922,717) (2,334,161) (815,090)
----------------------------------- ---------- ----------- ---------- ---------- --------
Comprehensive income/ (loss) (924,884) (8,106,779) 9,138,822 2,840,433 23,114,761
---------------------------- -------- ---------- --------- --------- ----------
Basic income per ordinary share:
--------------------------------
Total net income 0.01 0.02 0.03 0.01 0.06
---------------- ---- ---- ---- ---- ----
Diluted income per ordinary share:
----------------------------------
Total net income 0.01 0.02 0.03 0.01 0.06
---------------- ---- ---- ---- ---- ----
LINKTONE LTD.
-------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
----------------------------------------------
(In U.S. dollars, except share data)
-----------------------------------
Three months ended Nine months ended
------------------ -----------------
September 30, June 30, September 30, September 30, September 30,
------------- -------- ------------- ------------- -------------
2011 2012 2012 2011 2012
---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ---------- ----------
Basic income per ADS:
---------------------
Total net income 0.11 0.20 0.29 0.12 0.58
---------------- ---- ---- ---- ---- ----
Diluted income per ADS:
-----------------------
Total net income 0.11 0.20 0.29 0.12 0.58
---------------- ---- ---- ---- ---- ----
Weighted average ordinary shares:
---------------------------------
Basic 421,435,030 409,243,820 409,243,820 421,374,720 409,310,634
----- ----------- ----------- ----------- ----------- -----------
Diluted 421,435,030 409,244,813 409,545,439 421,426,519 409,332,320
------- ----------- ----------- ----------- ----------- -----------
Weighted average ADSs:
----------------------
Basic 42,143,503 40,924,382 40,924,382 42,137,472 40,931,063
----- ---------- ---------- ---------- ---------- ----------
Diluted 42,143,503 40,924,481 40,954,544 42,142,652 40,933,232
------- ---------- ---------- ---------- ---------- ----------
LINKTONE LTD.
-------------
NON-GAAP RECONCILIATION
-----------------------
(In U.S. dollars, except share data)
-----------------------------------
Three months ended Nine months ended
------------------ -----------------
September 30, June 30, September 30, September 30, September 30,
------------- -------- ------------- ------------- -------------
2011 2012 2012 2011 2012
---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ---------- ----------
Net income 4,619,602 8,104,572 12,061,539 5,174,594 23,929,851
---------- --------- --------- ---------- --------- ----------
Stock based
compensation
expense 37,179 50,037 25,475 96,739 125,549
------------- ------ ------ ------ ------ -------
Provision for
impairment/(Gain
on recovery of
bad debt) 66,005 - - (10,425) -
----------------- ------ --- --- ------- ---
Non-GAAP net
income 4,722,786 8,154,609 12,087,014 5,260,908 24,055,400
------------ --------- --------- ---------- --------- ----------
Non-GAAP diluted
income per share 0.01 0.02 0.03 0.01 0.06
----------------- ---- ---- ---- ---- ----
Non-GAAP diluted
income per ADS 0.11 0.20 0.30 0.12 0.59
---------------- ---- ---- ---- ---- ----
Number of shares
used in diluted
per-share
calculation 421,435,030 409,244,813 409,545,439 421,426,519 409,332,320
---------------- ----------- ----------- ----------- ----------- -----------
Number of ADSs
used in diluted
per-share
calculation 42,143,503 40,924,481 40,954,544 42,142,652 40,933,232
---------------- ---------- ---------- ---------- ---------- ----------
SOURCE Linktone Ltd.
