Linktone Ltd. Reports Unaudited First Quarter 2013 Financial Results

Linktone Ltd. Reports Unaudited First Quarter 2013 Financial Results





SINGAPORE, June 17, 2013 /PRNewswire/ -- Linktone Ltd. (NASDAQ: LTON) ("Linktone" 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 first quarter ended March 31, 2013.

FIRST QUARTER 2013 FINANCIAL HIGHLIGHTS


US$ million, except for per ADS items and % Three months ended

March 31, December 31, March 31, % change % change
2012 2012 2013 vs Mar'12 vs Dec'12
---- ---- ---- --------- ---------

Gross Revenues $11.5 $11.2 $11.4 -1% 2%

Gross Profit 3.8 3.8 3.7 -3% -3%

Operating Income / (Loss) 3.1 (5.4) (4.6) -248% -15%

GAAP Net Income / (Loss) 3.8 (3.7) (3.8) -200% 0%
=== ==== ====

GAAP Net Income / (Loss) per ADS (Diluted) $0.09 $(0.09) $(0.09) -198% 0%
===== ====== ======


Non-GAAP Net Income/ (Loss) 3.8 6.3 (3.7) -197% -159%
=== === ====

Non-GAAP Net Income per ADS (Diluted) $0.1 $0.15 $(0.09) -197% -160%
==== ===== ======


Discussing the results, Mr. Hary Tanoesoedibjo, Group Chief Executive Officer, said, "We are pleased to report first quarter revenue near the high end of our guidance range despite a mixed performance among our various service lines. While we continue to face long-term structural and regulatory challenges in our VAS products segment as a whole, we are encouraged by the positive performance in our VAS data-related services segment driven by JAVA-based product revenue generated through a new business partnership. Furthermore, we are pleased to see continued growth momentum in our mobile games unit Letang, resulting in a sequential increase in mobile game revenue. The development of our mobile games segment has been a key strategic focus over the past year, and we have made significant strides in the development and distribution of games through the Google Play(TM) store."

"Growth in our data-related services and mobile games segments helped to partially mitigate the uneven performance from our media content, further justifying in our view the basis for our diversified, multi-platform and multi-territory media and entertainment strategy. With a healthy balance sheet, continued investment and development in our newer initiatives such as Fumubang.com, our online platform for parents, and in our e-commerce business in Singapore, Happybuys.com, we believe that we are well positioned to build a sustainable platform capable of delivering consistent growth in the year ahead."

FISCAL FIRST QUARTER 2013 UNAUDITED FINANCIAL RESULTS

Gross revenues increased 2% from the fourth quarter of 2012 to $11.4 million in the first quarter of 2013. Linktone's first 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 first quarter was as follows:

First Quarter Revenue Mix


Three months ended
------------------

US$ million, except for % December 31, March 31,

2012 2013
---- ----

% of Gross % of Gross

Revenues Revenues

Gross Gross

Revenues Revenues

VAS Data-related services $4.3 38% $4.7 41%

VAS Audio-related services 2.3 21% 1.8 16%

Media content 2.9 26% 2.5 22%

Mobile games 0.9 8% 1.7 15%

PC games 0.2 2% 0.2 2%

Social commerce 0.6 5% 0.5 4%
--- ---

Total gross revenue $11.2 100% $11.4 100%
===== === ===== ===

The shift in the Company's first quarter 2013 revenue mix compared to the fourth quarter 2012 was primarily due to an increase in VAS data-related services revenue and mobile games revenue offset by a decrease in VAS audio-related services revenue, media content revenue and social commerce revenue.

Data-related services revenue in the first quarter accounted for 41% of gross revenues, or $4.7 million, an increase of 9% from the fourth quarter of 2012. The increase over the fourth quarter of 2012 was primarily due to an increase in JAVA revenue due to a partnership with a new business partner to launch its JAVA-based games to the China market utilizing Linktone's short codes.

The breakdown of VAS data-related services revenue in the first quarter was as follows:


Three months ended
------------------

US$ million, except for % December 31, March 31,

2012 2013
---- ----

Gross % of Gross Revenues Gross % of Gross Revenues

Revenues Revenues

SMS $3.8 34% $3.6 32%

MMS 0.5 4% 0.4 4%

WAP and JAVA 0.0 0% 0.7 5%

Total Data-related services $4.3 38% $4.7 41%
==== === ==== ===
Audio-related services revenue in the first quarter accounted for 16% of gross revenues, or $1.8 million, a decrease of 22% over the fourth quarter of 2012. The decrease in audio-related revenue in the first quarter of 2013 was primarily related to a decrease in RBT revenue due to a decline in demand for RBT services in Indonesia and China.

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


Three months ended
------------------

US$ million, except for % December 31, March 31,

2012 2013
---- ----

Gross % of Gross Gross % of Gross

Revenues Revenues

Revenues Revenues

IVR $1.7 15% $1.6 14%

RBT $0.6 6% $0.2 2%

Total Audio-related services $2.3 21% $1.8 16%
==== === ==== ===
Media content revenue in the first quarter accounted for 22% of gross revenues, or $2.5 million, a 14% decrease over the fourth quarter of 2012 due to a decrease in the number of studio home entertainment titles available and better performance of theatrical titles released in the previous quarter.

Mobile games revenue in the first quarter accounted for 15% of gross revenues, or $1.7 million, an 89% increase from the fourth quarter of 2012 due to an increase in advertising revenue from mobile games.

Social commerce revenue in the first quarter accounted for 4% of gross revenues, or $0.5 million, a 17% decrease over the fourth quarter of 2012 due to a decrease in advertising revenue for Okezone.

MARGINS, EXPENSES AND BALANCE SHEET


US$ million, except for % Three months ended

March 31, December 31, March 31, % change % change
2012 2012 2013 vs Mar'12 vs Dec'12
---- ---- ---- --------- ---------

Gross profit margin 33% 34% 32%

Operating profit / (loss) margin 27% (48%) (40%)


Operating expenses $5.8 $16.0 $6.2 7% -61%

Selling and marketing expenses 1.7 1.7 1.4 -18% -18%

Product development expenses 0.9 0.5 1.1 22% 120%

General and administrative expenses 3.2 3.8 3.7 16% -3%

Provision for impairment of goodwill 0.0 9.9 0.0 0% -100%

Other operating income/ (loss) 5.1 6.7 (2.1) -141% -131%


Operating profit / (loss) 3.1 (5.4) (4.6) -248% -15%

Income / (loss) before tax 3.2 (4.9) (4.3) -234% -12%

Income tax benefit 0.1 0.7 0.1 0% -86%

GAAP net income / (loss) 3.8 (3.7) (3.8) -200% 3%
Gross profit for the first quarter of 2013 was $3.7 million, 3% lower than fourth quarter 2012, while gross profit margin decreased to 32%.

Operating expenses for the first quarter of 2013 were $6.2 million, compared to $16.0 million in the fourth quarter 2012. Operating expenses for the fourth quarter 2012 included an impairment of goodwill of $9.9 million due to the unfavorable outlook for the DVD and VAS businesses of the Company's Media Content and China VAS reporting units, respectively. Excluding the impairment expense, operating expenses for the fourth quarter 2012 were $6.1 million.

Selling and marketing expenses were $1.4 million in the first quarter of 2013, representing an 18% decrease from the fourth quarter of 2012 and in-line with the decline in media content revenue.

Product development expenses were $1.1 million in the first quarter of 2013, a significant increase from the fourth quarter of 2012, primarily due to government subsidies of $0.1 million received and recognized in the fourth quarter of 2012 and capitalization of research and development costs for the mobile games segment of $0.5 million for the fourth quarter of 2012 compared to $0.2 million capitalized for the first quarter of 2013. A net increase of such expenses of $0.2 million in first quarter of 2013 was due to higher research and development costs incurred in developing new games.

General and administrative expenses were $3.7 million in the first quarter of 2013, a decrease of 3% compared to fourth quarter 2012.

Other operating loss for the first quarterof2013was $2.1 million, compared to operating income of $6.7 million in the fourth quarter of 2012. Other operating income relates to the realized and unrealized gain in marketable securities. The decline in the first quarter of 2013 is due to fluctuations in the market prices of quoted investments.

Operating loss for the first quarterof2013was $4.6 million compared to $5.4 million in the fourth quarter of 2012 due primarily to the above-mentioned impairment of goodwill in the fourth quarter of 2012 and decline in other operating income in the first quarter of 2013.

Income tax benefit was $0.1 million for the first quarter of 2013, $0.6 million lower than the previous quarter, primarily due to deferred tax asset true up adjustment done in fourth quarter 2012 for the full financial year.

GAAP net loss increased to $3.8 million, or $0.09 per diluted ADS, in the first quarter of 2013, compared with GAAP net loss of $3.7 million, or $0.09 per diluted ADS, in the fourth quarter of 2012.

Cash and cash equivalents and short-term investments totaled $122.0 million as of March 31, 2013 compared to $125.4 million as of December 31, 2012. The $3.4 million decrease was largely attributable to the quoted marked-to-market valuation of investments held by the Company as of March 31, 2013 and utilization of cash to repurchase shares in the first quarter of 2013.

SHARE REPURCHASE ACTIVITY

During the first quarter of 2013, the Company purchased approximately 355,104 ADSs in the open market at an average price of $2.71 per ADS pursuant to the Company's previously announced buyback program.

INVESTING ACTIVITY

The Company did not engage in any trading with respect to short-term investments during the first quarter of 2013.

SECOND QUARTER FISCAL 2013 OUTLOOK

For the second quarter ending June 30, 2013, Linktone anticipates gross revenues to be in the range of $10 million to $12 million. These forecasts reflect the Company's current and preliminary view, which is subject to change.

INCOME STATEMENT RECLASSIFICATION

During 2012, based on the terms of new contracts during the year, we determined that it is more appropriate to present RBT revenue from these new contracts on a net basis, net of payment to operators instead of gross basis. For consistency, comparative quarter balances have also been revised on a similar basis to enhance the comparability of information presented.

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 of goodwill, 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):
Candy Cheung, Senior Associate
Taylor Rafferty
Tel: +852 3196 3712
Email: linktone@king-worldwide.com

Investor Relations (US):
Mahmoud Siddig, Managing Director
Taylor Rafferty
Tel: 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, March 31,
------------ ---------

2012 2013
---- ----

(audited) (unaudited)
-------- ----------

Assets
------

Current assets:
---------------

Cash and cash equivalents 35,041,672 33,591,877
------------------------- ---------- ----------


Restricted cash - -
--------------- --- ---

Short-term investments 90,318,579 88,378,812
---------------------- ---------- ----------

Accounts receivable, net 14,287,247 14,393,021
------------------------ ---------- ----------

Tax refund receivable 906,197 620,706
--------------------- ------- -------

Inventories 1,848,552 1,947,614
----------- --------- ---------

Due from related parties 1,756,401 1,768,551
------------------------ --------- ---------

Deferred tax assets 732,987 789,739
------------------- ------- -------

Deposits and other current assets 6,065,370 6,580,762
--------------------------------- --------- ---------

Total current assets 150,957,005 148,071,082
-------------------- ----------- -----------


Property and equipment, net 11,760,831 11,481,893
--------------------------- ---------- ----------

Non-current assets held for sale - -
-------------------------------- --- ---

Intangible assets, net 8,114,889 7,817,956
---------------------- --------- ---------

Goodwill 29,571,982 29,571,982
-------- ---------- ----------

Deferred tax assets 729,386 725,525
------------------- ------- -------

Other long-term assets 3,280,479 2,292,447
---------------------- --------- ---------


Total assets 204,414,572 199,960,885
------------ ----------- -----------


Liabilities and shareholders' equity
------------------------------------

Current liabilities:
--------------------

Account payable, accrued liabilities
and other payables 16,405,947 16,440,552
------------------------------------ ---------- ----------

Due to related parties 456,765 875,654
---------------------- ------- -------

Short-term loan 6,122,924 6,621,271
--------------- --------- ---------

Taxes payable 1,879,355 1,857,241
------------- --------- ---------

Deferred revenue 421,723 403,940
---------------- ------- -------

Deferred tax liabilities 516,977 462,771
------------------------ ------- -------

Total current liabilities 25,803,691 26,661,429
------------------------- ---------- ----------






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


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


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


December 31, March 31,
------------ ---------

2012 2013
---- ----

(audited) (unaudited)
-------- ----------

Long-term liabilities
---------------------

Deferred tax liabilities 2,182,299 2,165,468
------------------------ --------- ---------

Long term loan - -
-------------- --- ---

Other long-term liabilities 1,258,030 952,278
--------------------------- --------- -------


Total liabilities 29,244,020 29,779,175
----------------- ---------- ----------


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, 2012 and
410,566,008shares issued and
407,073,715shares outstanding as at March 31,
2013, respectively) 42,144 42,144
---------------------------------------------- ------ ------

137,902,242 137,927,719

Additional paid-in capital
--------------------------

Treasury stock (1,905,608) (2,868,518)
-------------- ---------- ----------

Statutory reserves 2,499,512 2,499,512
------------------ --------- ---------

Accumulated other comprehensive income:
---------------------------------------

Unrealized gain on investment in marketable
securities - -
------------------------------------------- --- ---

Cumulative translation adjustments 11,407,104 11,488,055
---------------------------------- ---------- ----------

Accumulated income / (losses) 5,407,903 1,636,730
----------------------------- --------- ---------

Total Linktone Ltd's shareholders' equity 155,353,297 150,725,642
----------------------------------------- ----------- -----------


Noncontrolling interest 19,817,255 19,456,068
----------------------- ---------- ----------

Total equity 175,170,552 170,181,710
------------ ----------- -----------


Total liabilities and equity 204,414,572 199,960,885
---------------------------- ----------- -----------






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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------

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


Three months ended
------------------

March 31, December 31, March 31,
--------- ------------ ---------

2012 2012 2013
---- ---- ----

(unaudited) (unaudited) (unaudited)
---------- ---------- ----------

Gross revenues 11,484,348 11,156,409 11,406,364
-------------- ---------- ---------- ----------

Sales tax (178,176) (156,110) (146,751)
--------- -------- -------- --------

Net revenues 11,306,172 11,000,299 11,259,613
------------ ---------- ---------- ----------

Cost of services (7,518,298) (7,229,643) (7,542,248)
---------------- ---------- ---------- ----------

Gross profit 3,787,874 3,770,656 3,717,365
------------ --------- --------- ---------

Operating expenses: -
------------------- ---

Product development (925,817) (532,145) (1,118,153)
------------------- -------- -------- ----------

Selling and marketing (1,747,647) (1,666,594) (1,440,218)
--------------------- ---------- ---------- ----------

General and administrative (3,175,740) (3,828,948) (3,659,843)
-------------------------- ---------- ---------- ----------

-
---

-
---

Provision for impairment of goodwill (9,928,373) -
------------------------------------ ---------- ---

Total operating expenses, net (5,849,204) (15,956,060) (6,218,214)
----------------------------- ---------- ----------- ----------

Other operating income / (loss) 5,127,060 6,742,971 (2,084,999)
------------------------------- --------- --------- ----------

Income / (Loss) from operations 3,065,730 (5,442,433) (4,585,848)
------------------------------- --------- ---------- ----------

Interest income 426,872 201,433 378,868
--------------- ------- ------- -------

Other income / (loss) (295,416) 379,246 (48,558)
--------------------- -------- ------- -------

Income / (Loss) before tax 3,197,186 (4,861,754) (4,255,538)
-------------------------- --------- ---------- ----------

Income tax benefit/(expense) 68,841 730,379 123,178
---------------------------- ------ ------- -------

Less: Net (income)/loss attributable to non-
controlling interest 497,713 460,631 361,187
-------------------------------------------- ------- ------- -------

Net income / (Loss) 3,763,740 (3,670,744) (3,771,173)
------------------- --------- ---------- ----------

Other comprehensive income/ (loss): 18,318,978 (3,107,880) 80,949
----------------------------------- ---------- ---------- ------

Comprehensive income / (Loss) 22,082,718 (6,778,624) (3,690,224)
----------------------------- ---------- ---------- ----------


Basic income / (loss) per ordinary share:
-----------------------------------------

Total net income / (loss) 0.01 (0.01) (0.01)
---------------------------- ---- ----- -----

Diluted income / (loss) per ordinary share:
-------------------------------------------

Total net income / (loss) 0.01 (0.01) (0.01)
---------------------------- ---- ----- -----



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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------

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


Three months ended
------------------

March 31, December 31, March 31,
--------- ------------ ---------

2012 2012 2013
---- ---- ----

(unaudited) (unaudited) (unaudited)
---------- ---------- ----------

Basic income / (loss) per ADS:
------------------------------

Total net income / (loss) 0.09 (0.09) (0.09)
---------------------------- ---- ----- -----

Diluted income / (loss) per ADS:
--------------------------------

Total net income / (loss) 0.09 (0.09) (0.09)
---------------------------- ---- ----- -----


Weighted average ordinary shares:
---------------------------------

Basic 409,444,996 408,831,048 405,214,541
----- ----------- ----------- -----------

Diluted 409,447,242 410,566,008 407,073,715
------- ----------- ----------- -----------


Weighted average ADSs:
----------------------

Basic 40,944,500 40,883,105 40,521,454
----- ---------- ---------- ----------

Diluted 40,944,724 41,056,601 40,707,371
------- ---------- ---------- ----------


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

NON-GAAP RECONCILIATION
-----------------------

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


Three months ended
------------------

March 31, December 31, March 31,
--------- ------------ ---------

2012 2012 2013
---- ---- ----

(unaudited) (unaudited) (unaudited)
---------- ---------- ----------


Net income / loss 3,763,740 (3,670,744) (3,771,173)
----------------- --------- ---------- ----------

Stock based compensation expense 50,867 25,475 25,475
-------------------------------- ------ ------ ------

Provision for impairment of
goodwill - 9,928,373 -
--------------------------- --- --------- ---

Non-GAAP net income 3,814,607 6,283,104 (3,745,698)
------------------- --------- --------- ----------


Non-GAAP diluted income per share 0.01 0.02 (0.01)
--------------------------------- ---- ---- -----

Non-GAAP diluted income per ADS 0.09 0.15 (0.09)
------------------------------- ---- ---- -----

Number of shares used in diluted
per-share calculation 409,447,242 410,566,008 407,073,715
-------------------------------- ----------- ----------- -----------

Number of ADSs used in diluted per-
share calculation 40,944,724 41,056,601 40,707,371
----------------------------------- ---------- ---------- ----------


SOURCE Linktone Ltd.

Linktone Ltd.


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