International Entertainment News: Linktone Reports Unaudited Fourth Quarter and Full Year 2011 Financial Results

Linktone Reports Unaudited Fourth Quarter and Full Year 2011 Financial Results

BEIJING, March 8, 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 fourth quarter and fiscal year ended December 31, 2011.

UNAUDITED RESULTS FOR THE FOURTH QUARTER

US$ million, except for per ADS items Three months ended
------------------
December 31, September 30, December 31,
2010 2011 2011
---- ---- ----
Gross Revenues $16.1 $16.6 $16.2
Gross Profit 4.6 6.6 6.0
Operating Income/(Loss) (2.4) 0.7 1.1
GAAP Net Income/(Loss) from Continuing Operations (1.7) 4.6 0.1
GAAP Net Income/(Loss) (1.4) 4.6 0.1
==== === ===
GAAP Net Income/(Loss) per ADS (Diluted) ($0.033) $0.110 $0.002
======= ====== ======

Non-GAAP Net Income/(Loss) (0.1) 4.7 0.0
==== === ===
Non-GAAP Net Income/(Loss) per ADS (Diluted) ($0.003) $0.112 $0.001
======= ====== ======
Cash and cash equivalents and short-term investments available for sale totaled $97.5 million as of December 31, 2011, compared with $92.8 million as of September 30, 2011.

Linktone's financial results for the three months ended December 31, 2011 included the following:

Gross revenues decreased 2.4% sequentially to $16.2 million in the fourth quarter of 2011, compared with $16.6 million in the third quarter. The quarter-on-quarter revenue decline was primarily attributable to the VAS data-related services revenue, which were impacted by more stringent restrictions imposed by regulators in Indonesia, and a seasonal decline in revenue from interactive voice response ("IVR") services in China.

On a year-over-year basis, revenue increased slightly from $16.1 million in the fourth quarter of 2010. This increase was primarily attributable to an increase in media content revenue, partially offset by the aforementioned decline in VAS data-related services revenue.

GAAP net income in the fourth quarter of 2011 was $0.1 million, or $0.002 per diluted ADS, compared with GAAP net income of $4.6 million, or $0.110 per diluted ADS, in the third quarter of 2011 and a GAAP net loss of ($1.4) million, or ($0.033) per diluted ADS, in the fourth quarter of 2010. The Company's third quarter 2011 net income included gains totaling $4.8 million related to the sale of $10 million of senior secured notes in Aerospace Satellite and a pooled investment fund with a value of $3.4 million.

FINANCIAL HIGHLIGHTS FOR FISCAL YEAR 2011

US$ million, except for per ADS items Twelve months ended
-------------------
December 31, December 31,
2010 2011
---- ----
Gross Revenues $71.7 $60.7
Gross Profit 22.5 22.3
Operating Income/(Loss) (2.1) 0.2
GAAP Net Income/(Loss) from Continuing Operations (0.9) 5.3
GAAP Net Income/(Loss) (0.6) 5.3
==== ===
GAAP Net Income/(Loss) per ADS (Diluted) ($0.014) $0.125
======= ======

Non-GAAP Net Income/(Loss) 0.7 5.3
=== ===
Non-GAAP Net Income/(Loss) per ADS (Diluted) $0.017 $0.126
====== ======
"Our focus through much of 2011 was on the continued expansion of our entertainment service portfolio and content distribution capabilities with the goal of positioning Linktone for sustainable, profitable growth in 2012 and over the longer-term. For the fourth quarter, revenue exceeded the high-end of our revenue projected in Q3 2011 by $1.2 million as we increased media content sales, continued to diversify our business geographically and reduced our dependence on wireless value-added services," said Hary Tanoesoedibjo, Group Chief Executive Officer. "In the fourth quarter, we grew media content revenue 56% over the third quarter and increased revenue contribution from this segment to 38% of total net revenues, from 23% in the third quarter. While our revenue base in 2012 will continue to be weighted toward WVAS, we are committed to diversifying Linktone's business and reducing revenue concentration over the longer-term through the pursuit of new growth opportunities and expansion of our presence in targeted, high growth businesses such as mobile gaming and media content distribution.

"Looking ahead, we will continue to focus on our strategic initiatives aimed at expanding Linktone's business, both in new territories and new areas of the broad multimedia marketplace. To this end, our InnoForm Group subsidiary was recently appointed as the exclusive video content distributor for our controlling shareholder PT Media Nusantara Citra Tbk ("MNC Group"), and will distribute MNC Group content including individual programs, series and television channels in targeted regions. We see great potential in this model, and are in the process of establishing an entity, which will distribute MNC-owned content and pay TV channels to markets outside Indonesia, and sell third-party content to both MNC Group and other media companies in Indonesia. MNC Group is, by far, Indonesia's largest media conglomerate, and this partnership will significantly reduce the barriers to entry for Linktone, while giving the Company a considerable competitive advantage as we establish this business in the Indonesian market. As we continue to diversify our traditional media capabilities, we are actively capturing growth opportunities within the online and mobile media segments, creating a comprehensive suite of multi-genre media distribution services for media platform owners, advertisers and potential corporate partners."

Mr. Tanoesoedibjo concluded, "Execution against our key growth initiatives remains on track, and we expect that 2012 will be a year of important progress for Linktone. We are continuing to expand our geographic reach, our content portfolio and our media distribution capabilities through organic growth and targeted investment opportunities. We are confident that through this strategy, we can further transform Linktone into a geographically diverse, multi-platform provider of multimedia content and services that span music, video, gaming and social media."

FOURTH QUARTER REVENUE MIX

Linktone's fourth quarter revenue mix includes VAS data-related services (SMS, MMS, WAP, and Java), VAS audio-related services (IVR and RBT), distribution of media content, as well as mobile and PC games. The breakdown of revenue in the fourth quarter is as follows:

Three months ended
------------------
US$ million, except for % September 30, 2011 December 31, 2011
------------------ -----------------
Gross % of Gross Gross % of Gross
Revenues Revenues
Revenues Revenues
VAS Data-related services $8.7 53% $7.3 45%
VAS Audio-related services 3.0 18% 1.6 10%
Media content 3.9 23% 6.1 38%
Mobile games 0.7 4% 0.7 4%
PC games 0.3 2% 0.5 3%
--- --- ---
Total gross revenue $16.6 100% $16.2 100%
===== === ===== ===
The shift in fourth quarter 2011 revenue mix was primarily related to an increase in media content sales in Singapore, partially offset by a decline in IVR revenue from audio-related services in China and VAS data-related revenue in Indonesia.

Data-related services revenue in the fourth quarter accounted for 45% of gross revenues, or $7.3 million, a decline of 16% from the third quarter of 2011. The sequential decline was primarily due to a decline in SMS revenue from Linktone's Indonesian operations, related to more stringent restrictions imposed by the Indonesian regulators.

The breakdown of VAS data-related services revenue in the fourth quarter is as follows:

Three months ended
------------------
US$ million, except for % September 30, 2011 December 31, 2011
------------------ -----------------
Gross % of Gross Gross % of Gross
Revenues Revenues
Revenues Revenues
SMS $7.3 44% $5.9 36%
MMS 0.9 6% 0.8 5%
WAP and JAVA 0.5 3% 0.6 4%
Total Data-related services $8.7 53% $7.3 45%
==== === ==== ===

-- Short messaging services ("SMS") decreased 19% on a sequential quarter
basis, primarily due to a $1.9 million decline in SMS revenue from
Linktone's Indonesia operations. This was partially offset by a $0.5
million increase in SMS revenue generated by Linktone's operations in
China.
Audio-related services revenue in the fourth quarter accounted for 10% of gross revenue, or $1.6 million, a 47% decline from the third quarter of 2011. The Company's audio-related services revenue in the third quarter of 2011 was driven by a seasonal increase in IVR revenue during the summer school holidays in China.

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

Media content revenue increased 56% sequentially to $6.1 million for the fourth quarter of 2011. The quarter-on-quarter revenue growth was due to a realization of deferred revenue.

MARGINS, EXPENSES AND BALANCE SHEET

US$ million, except for margin items Three months ended
December 31, September 30, December 31,
2010 2011 2011
Gross profit margin 29% 41% 37%
Operating income/(loss) margin (15%) 4% 7%

Operating expenses $6.9 $6.0 $4.9
Selling and marketing expenses 1.4 2.5 1.8
Product development expenses 0.7 0.6 0.9
Other general and administrative expenses 3.7 2.9 3.9
Income tax expense (0.4) 0.1 0.9
The drivers behind Linktone's key operating benchmarks and changes in balance sheet items for the fourth quarter of 2011 include the following:

-- Gross profit margin decreased from 41% to 37% on a sequential-quarter
basis. Third quarter gross margins benefitted from above-average margins
generated by the Company's subsidiary, PT Linktone.
-- Operating margin increased on a sequential-quarter basis, primarily due
to a reversal of a contingent consideration payable in one of the
operating companies in China.
-- Selling and marketing expenses decreased on a sequential-quarter basis,
in-line with the declines in SMS and IVR revenue.
-- Other general and administrative expenses increased $1.0m on a
sequential-quarter basis due to a write-off of unrecoverable and other
debtors in China.
-- Income tax expense increased due to a valuation allowance in deferred
tax asset on one of the operating companies in China.
-- Cash and cash equivalents and short-term investments available for sale,
totaled $97.5 million as of December 31, 2011. The $4.8 million net
increase from the third quarter of 2011 was attributable to a $4.4
million revaluation gain on short-term investments.
SHARE REPURCHASE ACTIVITY

Linktone purchased shares of its stock on the open market under the Company's previously announced buyback program. During the fourth quarter, the Company purchased approximately 1.05 million ADS at an average price of $1.31 per ADS. Through December 31, 2011, Linktone purchased a total of 1.1 million ADS at an average price of $1.29 per ADS.

FIRST QUARTER 2012 OUTLOOK

For the first quarter ending March 31, 2012, Linktone anticipates gross revenues to be in the range of $11 million to $13 million.

DISCLAIMER REGARDING UNAUDITED FINANCIAL RESULTS

Investors should note that the Company has not yet finalized its consolidated financial results for fiscal year 2011. The financial information of the Company presented above is unaudited and may differ materially from the audited financial statements of the Company for fiscal year 2011, which will be included in the Company's Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission.

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 provisions for impairment and related 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 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; 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 realize meaningful returns from its acquisitions or strategic partnerships or may be required to record additional provisions for impairments in the value of the Company's investments in such acquisitions or partnerships; 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 or Wendy Sun
linktone@thepiacentegroup.com

Tel: 212-481-2050

LINKTONE LTD.
-------------

CONSOLIDATED BALANCE SHEETS
---------------------------

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

December 30, December 31,
------------ ------------
2010 2011
---- ----
(audited) (unaudited)
-------- ----------
Assets
------
Current assets:
---------------
Cash and cash equivalents 58,875,399 40,921,818
------------------------- ---------- ----------
Restricted cash 573,784 603,088
--------------- ------- -------
Short-term investments 33,809,913 56,584,958
---------------------- ---------- ----------
Accounts receivable, net 17,889,593 19,424,233
------------------------ ---------- ----------
Tax refund receivable 2,767,084 1,041,679
--------------------- --------- ---------
Inventory 2,304,716 1,881,749
--------- --------- ---------
Deposits and other current assets 6,584,246 6,807,266
--------------------------------- --------- ---------
Deferred tax assets 1,254,529 368,622
------------------- --------- -------
Total current assets 124,059,264 127,633,413
-------------------- ----------- -----------

Property and equipment, net 11,796,390 11,195,432
--------------------------- ---------- ----------
Intangible assets, net 11,546,227 9,420,308
---------------------- ---------- ---------
Goodwill 40,483,355 40,483,355
-------- ---------- ----------
Non-current assets held for sale 819,578 814,878
-------------------------------- ------- -------
Deferred tax assets 72,480 361,244
------------------- ------ -------
Other long-term assets 2,499,426 161,584
---------------------- --------- -------

Total assets 191,276,720 190,070,214
------------ ----------- -----------

Liabilities and shareholders' equity
------------------------------------
Current liabilities:
--------------------
Taxes payable 3,696,039 4,088,188
------------- --------- ---------
Accounts payable, accrued liabilities and
other payables 24,045,406 14,996,743
----------------------------------------- ---------- ----------
Short-term loan 4,191,591 4,781,181
--------------- --------- ---------
Deferred revenue 402,139 387,149
---------------- ------- -------
Deferred tax liabilities 1,078,403 163,066
------------------------ --------- -------
Total current liabilities 33,413,578 24,416,327
------------------------- ---------- ----------

LINKTONE LTD.
-------------

CONSOLIDATED BALANCE SHEETS
---------------------------

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

December 30, December 31,
------------ ------------
2010 2011
---- ----
(audited) (unaudited)
-------- ----------
Long-term liabilities
---------------------
Deferred tax liabilities 1,743,466 2,598,300
------------------------ --------- ---------
Other long term liabilities 2,412,068 579,566
--------------------------- --------- -------

Total liabilities 37,569,112 27,594,193
----------------- ---------- ----------

Shareholders' equity
--------------------
Linktone Ltd. shareholders' equity:
-----------------------------------
Ordinary shares ($0.0001 par value; 500,000,000
shares 42,113 42,144
authorized, 421,130,130 shares and 410,422,650 shares
issued and outstanding as of December 31, 2010 and
December 31, 2011, respectively)
-------------------------------
Additional paid-in capital 137,581,956 137,745,875
-------------------------- ----------- -----------
Treasury stock - (1,425,204)
-------------- --- ----------
Statutory reserves 2,466,165 2,466,165
------------------ --------- ---------
Accumulated other comprehensive income:
---------------------------------------
Unrealized gain on investment in marketable
securities 2,376,723 4,453,157
------------------------------------------- --------- ---------
Cumulative translation adjustments 9,306,938 10,973,973
---------------------------------- --------- ----------
Accumulated losses (19,689,371) (14,425,929)
------------------ ----------- -----------
Noncontrolling interest 21,623,084 22,645,840
----------------------- ---------- ----------
Total shareholders' equity 153,707,608 162,476,021
-------------------------- ----------- -----------

Total liabilities and shareholders' equity 191,276,720 190,070,214
------------------------------------------ ----------- -----------

LINKTONE LTD.
-------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
--------------------------------------------------------------
(In U.S. dollars, except share data)
-----------------------------------

Three months ended Twelve months ended
------------------ -------------------
Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
-------- -------- -------- -------- --------
2010 2011 2011 2010 2011
---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (audited) (unaudited)
---------- ---------- ---------- -------- ----------
Gross revenues 16,104,539 16,553,244 16,227,988 71,708,025 60,677,173
-------------- ---------- ---------- ---------- ---------- ----------
Sales tax (503,868) (271,940) (537,775) (2,087,121) (1,591,748)
--------- -------- -------- -------- ---------- ----------
Net revenues 15,600,671 16,281,304 15,690,213 69,620,904 59,085,425
------------ ---------- ---------- ---------- ---------- ----------
Cost of services (11,025,110) (9,654,775) (9,689,057) (47,137,394) (36,763,545)
---------------- ----------- ---------- ---------- ----------- -----------
Gross profit 4,575,561 6,626,529 6,001,156 22,483,510 22,321,880
------------ --------- --------- --------- ---------- ----------
Operating expenses:
-------------------
Product development (690,866) (571,098) (906,077) (2,811,783) (2,669,333)
------------------- -------- -------- -------- ---------- ----------
Selling and marketing (1,376,221) (2,467,365) (1,751,683) (8,377,743) (8,566,257)
--------------------- ---------- ---------- ---------- ---------- ----------
Other general and administrative (3,650,808) (2,866,581) (3,945,197) (12,325,334) (12,638,207)
-------------------------------- ---------- ---------- ---------- ----------- -----------
Reversal of contingent consideration payable - - 1,618,816 - 1,618,816
-------------------------------------------- --- --- --------- --- ---------
Reversal / (provision) for impairment (1,212,455) (66,005) 100,000 (1,102,265) 110,425
------------------------------------- ---------- ------- ------- ---------- -------
Total operating expenses, net (6,930,350) (5,971,049) (4,884,141) (24,617,125) (22,144,556)
----------------------------- ---------- ---------- ---------- ----------- -----------
Income/(loss) from operations (2,354,789) 655,480 1,117,015 (2,133,615) 177,324
----------------------------- ---------- ------- --------- ---------- -------
Interest income 244,596 388,830 337,137 2,278,593 2,311,919
--------------- ------- ------- ------- --------- ---------
Other income / (loss) 206,031 (606,100) (281,669) 701,884 (264,934)
--------------------- ------- -------- -------- ------- --------
Gain on sales of short-term investments - 4,754,020 409,299 - 5,363,319
--------------------------------------- --- --------- ------- --- ---------
Income/(loss) before tax (1,904,162) 5,192,230 1,581,782 846,862 7,587,628
------------------------ ---------- --------- --------- ------- ---------
Income tax benefit/(expense) 357,380 (146,500) (939,791) (1,439,261) (1,299,981)
---------------------------- ------- -------- -------- ---------- ----------
Less: Net income attributable to non- controlling
interest (156,235) (426,128) (553,143) (301,582) (1,024,205)
------------------------------------------------- -------- -------- -------- -------- ----------
Net income/(loss) from continuing operations (1,703,017) 4,619,602 88,848 (893,981) 5,263,442
-------------------------------------------- ---------- --------- ------ -------- ---------
Net income from discontinued operations 315,256 - - 315,256 -
--------------------------------------- ------- --- --- ------- ---
Net income/(loss) (1,387,761) 4,619,602 88,848 (578,725) 5,263,442
----------------- ---------- --------- ------ -------- ---------
Other comprehensive income/(loss): 2,685,026 (5,544,486) 5,870,589 4,237,689 3,536,428
---------------------------------- --------- ---------- --------- --------- ---------
Comprehensive income/(loss) 1,297,265 (924,884) 5,959,437 3,658,964 8,799,870
--------------------------- --------- -------- --------- --------- ---------

Basic income/(loss) per ordinary share:
---------------------------------------
Continuing operations (0.00) 0.01 0.00 (0.00) 0.01
--------------------- ----- ---- ---- ----- ----
Discontinued operations 0.00 0.00 0.00 0.00 0.00
----------------------- ---- ---- ---- ---- ----
Total net income/(loss) (0.00) 0.01 0.00 (0.00) 0.01
-------------------------- ----- ---- ---- ----- ----
Diluted income/(loss) per ordinary share:
-----------------------------------------
Continuing operations (0.00) 0.01 0.00 (0.00) 0.01
--------------------- ----- ---- ---- ----- ----
Discontinued operations 0.00 0.00 0.00 0.00 0.00
----------------------- ---- ---- ---- ---- ----
Total net income/(loss) (0.00) 0.01 0.00 (0.00) 0.01
-------------------------- ----- ---- ---- ----- ----

LINKTONE LTD.
-------------
NON-GAAP RECONCILIATION
-----------------------
(In U.S. dollars, except share data)
-----------------------------------

Three months ended Twelve months ended
------------------ -------------------
Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
-------- -------- -------- -------- --------
2010 2011 2011 2010 2011
---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ---------- ----------

Net income/(loss) (1,387,761) 4,619,602 88,848 (578,725) 5,263,442
----------------- ---------- --------- ------ -------- ---------
Stock based compensation expense 52,490 37,179 37,178 204,949 133,917
-------------------------------- ------ ------ ------ ------- -------
Provision / (reversal) for impairment 1,212,455 66,005 (100,000) 1,102,265 (110,425)
------------------------------------- --------- ------ -------- --------- --------
Non-GAAP net income/(loss) (122,816) 4,722,786 26,026 728,489 5,286,934
-------------------------- -------- --------- ------ ------- ---------

Non-GAAP diluted income/(loss) per share (0.00) 0.01 0.00 0.00 0.01
---------------------------------------- ----- ---- ---- ---- ----
Non-GAAP diluted income/(loss) per ADS (0.00) 0.11 0.00 0.02 0.13
-------------------------------------- ----- ---- ---- ---- ----
Number of shares used in diluted per-
share calculation 421,130,130 421,315,394 416,210,858 420,980,146 420,088,521
------------------------------------- ----------- ----------- ----------- ----------- -----------
Number of ADSs used in diluted per-share
calculation 42,113,013 42,131,539 41,621,086 42,098,015 42,008,852
---------------------------------------- ---------- ---------- ---------- ---------- ----------

SOURCE Linktone Ltd.

Linktone Ltd.

-------
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International Entertainment News

Thursday, March 08, 2012

Linktone Reports Unaudited Fourth Quarter and Full Year 2011 Financial Results

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