Sky-mobi Limited Announces Unaudited Financial Results for the Fiscal First Quarter 2013GlobeNewswire
HANGZHOU, China, Aug. 12, 2012 (GLOBE NEWSWIRE) -- Sky-mobi Limited ("Sky-mobi" or the "Company") (Nasdaq:MOBI), a leading mobile application store and mobile social network community operator in China, announced today its unaudited financial results for the fiscal first quarter ended June 30, 2012 ("first quarter 2013").
First Quarter 2013 HighlightsTotal revenues decreased 7.6% to RMB153.4 million (US$24.1 million) in first quarter 2013 compared to the fiscal first quarter ended June 30, 2011 ("first quarter 2012"). Revenues collected from third party channels (i.e., revenues not collected through mobile network operators) represented 21.8% of total revenues Loss from operations was RMB9.2 million (US$1.4 million) in first quarter 2013, compared to profit from operations of RMB8.1 million in first quarter 2012 Non-IFRS1 loss from operations was RMB0.9 million (US$0.1 million) in first quarter 2013, compared to Non-IFRS profit from operations of RMB20.5 million in first quarter 2012 Net loss was RMB5.1 million (US$0.8 million) in first quarter 2013, compared to net profit of RMB7.5 million in first quarter 2012 Non-IFRS net profit was RMB3.1 million (US$0.5 million) in first quarter 2013, down 84.3% from first quarter 2012 Basic and diluted loss per common share were RMB0.02 (US$0.00). Non-IFRS basic and diluted earnings per common share ("EPS") were RMB0.01 (US$0.00) Basic and diluted loss per ADS2 were RMB0.16 (US$0.02). Non-IFRS basic and diluted earnings per ADS were RMB0.10 (US$0.02) Revenues collected from carrier channels decreased 17.4% to RMB112.5 million (US$17.7 million) in first quarter 2013 from first quarter 2012. Sky-mobi's application store experienced 4.2 billion user visits with 764.0 million downloads in first quarter 2013 Revenues collected from third party channels increased 38.8% to RMB33.5 million (US$5.3 million) in first quarter 2013 from first quarter 2012. Sky-mobi had 15.9 million active members of the Maopao Community with 810.3 million member log-ins in first quarter 2013
1Non-IFRS figures exclude share-based compensation expenses.Please see "About Non-IFRS Financial Measures" in this release for more information.
2American Depositary Shares, which are traded on the NASDAQ, each represents eight common shares of the Company.
Commenting on the Company's results, Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi, remarked:"We made significant progress in the smart phone market while maintaining strong cash flow from the declining Chinese feature phone industry in the June quarter. Since the launch of our smart phone series of products at the Global Mobile Internet Conference in May, we have entered into partnership agreements with 50 handset manufacturers to pre-install our smart phone application store platform, application store assistant, browser, mobile game competition platform or game content.
"The quick pace of adoption by industry players since the recent launch of our platform is proof of the commercial competitiveness of our products as well as our monetization capabilities in China. We expect to continue our rapid development by adding more manufacturers to work with our smart phone products. Once these manufacturers begin shipments over the next few quarters, we are confident we will become one of the top smart phone players in China by the end of the year," Mr. Song continued.
"We remain the market leader in the feature phone segment, experiencing a year-on-year revenue decline of only 7.6% compared to the overall industry estimate of about 25%. This is the result of the increased revenue contribution from our game-based mobile community and improvement in Average Revenue per User (ARPU) as we launched new games for users. The feature phone market is expected to continue to decline for the rest of the year but we will continue to optimize our products so that our feature phone business continues to provide a strong source of cash flow to support our smart phone growth," Mr. Song concluded.
Commenting on the Company's results, Carl Yeung, Chief Financial Officer of Sky-mobi, said: "Our revenue for the quarter came in behind the low end of our most recent guidance by 1% but we maintain our most recent full year guidance. As we entered our new fiscal year, the use of carrier based payments has become a material portion of our community revenue and we began to defer a portion of our carrier based revenue similar to our revenue deferral policy for revenues collected from third parties. In addition, we did not book a small component of revenue from a partner that demonstrated an unproven collection track record in accordance with the IFRS accounting policy.
"Our non-IFRS gross margin and operating margin were lower due to a smaller top line compared to historical quarters while the relative number of employees was higher due to our investment in developing products for low cost smart phones. Our financial strategy is to continue to generate strong cash flow from feature phones to support our growth and penetration into the smart phone market while maintaining a reasonable cost base to complete the transition from feature phones to smart phones without seeking additional capital.
"With 60 percent of all staff now dedicated to smart phones, recent rapid client wins, a strong financial base and a prudent financial strategy, we are one of the best positioned dedicated mobile internet companies in China today," concluded Mr. Yeung.
Financial Results for First Quarter 2013
Sky-mobi analyzes revenue from two perspectives: by business unit and by source. Revenues by business unit are broken down into: "Application store revenues," "Maopao Community revenues" and "Other revenues."
Revenues by source are broken down into three categories: "Revenues collected from carrier channels," "Revenues collected from third party channels," and "Other revenues." "Other revenues" comprises commissions charged from mobile service providers, mobile network operators' selling applications to users through the Maopao Platform and Sky-mobi's overseas revenues collected via its overseas mobile service providers. Since "Other Revenues" are only minimal portion of Sky-mobi's total revenues, the discussions and analysis will exclude "other revenues" from perspective of "revenues by source."For the three months ended June 30, 2011 2012 2012 In thousands (RMB) (RMB) (US$) Revenues by source: Revenues collected from carrier channels 136,167 112,509 17,709 Revenues collected from third party channels 24,141 33,504 5,274 Other revenues 5,723 7,342 1,156 Total revenues 166,031 153,355 24,139 For the three months ended June 30, 2011 2012 2012 In thousands (RMB) (RMB) (US$) Revenues by business unit: Application store revenues 133,638 103,677 16,319 Maopao Community revenues 26,670 42,336 6,664 Other revenues 5,723 7,342 1,156 Total revenues 166,031 153,355 24,139
The discussion and analysis below focus on revenues by source, as the Company believes this metric is more useful to investors in analyzing and understanding its business model.
Total revenues for first quarter 2013 decreased 7.6% to RMB153.4 million (US$24.1 million) from RMB166.0 million in first quarter 2012.
Revenues collected from carrier channels of RMB112.5 million (US$17.7 million) in first quarter 2013, representing 73.4% of total revenues, decreased 17.4% from first quarter 2012. Sky-mobi had 4.2 billion user visits and 764.0 million downloads of applications and content from the Maopao application store in first quarter 2013, a decrease of 28.0% and 2.9%, respectively, compared to 5.8 billion user visits and 787.2 million downloads in first quarter 2012. The decrease in application store user activity and downloads was primarily due to the shrinking market share of feature phones as a percentage of overall mobile device shipments in China.
Revenues collected from third party channels were RMB33.5 million (US$ 5.3 million), up 38.8% from first quarter 2012 and contributing 21.8% of total revenues in first quarter 2013. Sky-mobi's Maopao Community had 15.9 million active members and 810.3 million member log-ins in first quarter 2013, representing an increase of 8.2% and a decrease of 40.4%, respectively, compared to 14.7 million active members and 1.4 billion member log-ins in first quarter 2012. Revenues from the Maopao Community increased due to growth in the number of active members as well as increased spending per active member resulting from the Company's two most popular mobile social games, "Fantasy of Three Kingdoms" and "Fairy Magic World."The Company expects that revenues collected from third party channels will contribute an increasing percentage of total revenues in future quarters as Sky-mobi focuses on growing its active mobile community member base and on diversifying revenue collection methods away from traditional carrier-based payment channels.
Cost of Revenues and Gross Profit
Total cost of revenues for first quarter 2013 decreased 2.1% to RMB116.3 million (US$18.3 million) compared to RMB118.8 million in first quarter 2012.
Total non-IFRS cost of revenues for first quarter 2013 decreased 2.3% to RMB115.3 million (US$18.2 million) compared to RMB118.0 million in first quarter 2012.For the three months ended June 30, 2011 2012 2012 In thousands (RMB) (RMB) (US$) Cost of revenues: Costs associated with payments to industry participants 107,795 103,286 16,258 Direct costs 11,024 13,010 2,048 Total cost of revenues: 118,819 116,296 18,306 Gross Margin 28.4% 24.2% Non-IFRS cost of revenues: Costs associated with payments to industry participants 107,795 103,286 16,258 Direct costs 10,182 12,020 1,892 Total non-IFRS cost of revenues: 117,977 115,306 18,150 Non-IFRS Gross Margin 28.9% 24.8%
Non-IFRS cost of revenues is defined as cost of revenues excluding share-based compensation expenses. The discussion and analysis below focus on non-IFRS cost of revenue, which the Company believes more accurately reflects the Company's operating performance than IFRS cost of revenues.
Costs associated with payments to industry participants decreased 4.2% to RMB103.3 million (US$16.3 million) in first quarter 2013 compared to RMB107.8 million in first quarter 2012, primarily due to the decreased channel costs in line with the decline in revenues collected from carrier channels, partially offset by increased revenue share percentage with mobile service providers and handset manufacturers and increased spending on better quality mobile content to realize improved customer retention of the Maopao Community. Approximately RMB6.2 million of accrued costs payable for content and handset software designs were reversed into cost of sales in first quarter 2012 while no such reversal occurred in first quarter 2013. Such accrued costs are not expected to recur in the current fiscal year.
Non-IFRS direct costs including salaries and benefits, depreciation, office expenses and utilities directly related to the operation of Maopao application store and Maopao Community increased 18.1% to RMB12.0 million (US$1.9 million) in first quarter 2013 compared to RMB10.2 million in first quarter 2012. The increase was primarily due to increased costs in connection with more efforts on developing overseas markets and other revenues.
Gross profit for first quarter 2013 decreased 21.5% to RMB37.1 million (US$5.8 million) compared to RMB47.2 million in first quarter 2012. Non-IFRS gross margin in first quarter 2013 was 24.8%, down from 28.9% in first quarter 2012, mainly due to the increased revenue share percentage with mobile service providers and handset manufacturers, higher costs of better quality mobile content and the reversal of the previously mentioned accrued costs in the year ago period.
Operating Expenses (representing research and development expenses, sales and marketing expenses, general and administrative expenses and other income)
Total operating expenses, primarily consisting of employee salaries and benefits, training expenses, travelling, entertainment and office related expenses, increased 18.2% in first quarter 2013 to RMB46.2million (US$7.3 million) from RMB39.1 million in first quarter 2012.
Total non-IFRS operating expenses were RMB39.0 million (US$6.1 million) in first quarter 2013, increased 41.5% from RMB27.5 million in first quarter 2012.For the three months ended June 30, 2011 2012 2012 In thousands (RMB) (RMB) (US$) Operating expenses: Research and development expenses 13,694 20,075 3,160 Sales and marketing expenses 7,814 8,930 1,406 General and administrative expenses 20,285 17,270 2,719 Other income (2,703) (60) (10) Total operating expenses 39,090 46,215 7,275 Non-IFRS operating expenses: Research and development expenses 11,363 17,758 2,795 Sales and marketing expenses 6,661 8,068 1,270 General and administrative expenses 12,209 13,202 2,079 Other income (2,703) (60) (10) Total non-IFRS operating expenses 27,530 38,968 6,134
Non-IFRS operating expenses are defined as operating expenses excluding share-based compensation expenses. The discussion and analysis below focus on non-IFRS operating expenses, which the Company believes is more useful to investors to understand the Company's operating activities than IFRS operating expenses.
The increase in operating expenses was primarily due to the increase in headcount, as described below, and the Company's focus on Android platform/Android product development to participate in the competitive smart phone market, and business development on Maopao Community, as well as efforts relating to internal controls over financial reporting.As of June 30, 2011 2012 % change Headcount Operations 151 117 -22.5% Research and development 225 299 32.9% Sales and marketing 101 84 -16.8% General and administrative 79 97 22.8% Total Headcount 556 597 7.4%
The Company's employee headcount increased 7.4% to 597 as of June 30, 2012 from 556 as of June 30, 2011. The increase in headcount was mainly due to our business strategies in connection with Android platform/Android product development and Maopao community expansion.
Net profit and EPS
Net loss in first quarter 2013 was RMB5.1 million (US$0.8 million), compared to net profit of RMB7.5 million in first quarter 2012.
Non-IFRS net profit in first quarter 2013 decreased 84.3% to RMB3.1 million (US$0.5 million) from RMB19.9 million in first quarter 2012.
Basic and diluted loss per share in first quarter 2013 were RMB0.02 (US$0.00) and basic and diluted loss per ADS were RMB0.16 (US$0.02).
Non-IFRS basic and diluted EPS in first quarter 2013 were RMB0.01 (US$0.00), and non-IFRS basic and diluted earnings per ADS were RMB0.10 (US$0.02).
The weighted average number of ADSs used to calculate basic and diluted earnings per ADS for first quarter 2013 were 32,273,852.
Each ADS represents eight common shares.
Sky-mobi had 258,191,000 common shares outstanding as of June 30, 2012 and 258,174,600 common shares outstanding as of March 31, 2012.
Other Operating Data
The following table sets forth total user downloads of our single-user applications and content titles for the period indicated:For the three months ended June 30, In millions 2011 2012 % change Application Store User visits 5,773.3 4,156.9 -28.0% Single-user applications and content downloads Single-player games 285.4 263.1 -7.8% Multimedia applications and content titles 110.1 118.9 8.0% Other single-user applications 391.7 382.0 -2.5% Total Single-user applications and content downloads 787.2 764.0 -2.9%
The following table sets forth the number of registered, active members and member log-ins in our Maopao Community as of the date indicated:As of June 30, In millions 2011 2012 % change Number of registered members 94.1 193.4 105.5% For the three months ended June 30, In millions 2011 2012 % change Maopao Community Number of active members 14.7 15.9 8.2% Number of member log-ins 1,360.6 810.3 -40.4%
For the fiscal second quarter 2013 ending September 30, 2012, Sky-mobi expects total revenues to be in the range of RMB135 million to RMB145 million.
Revenues for the fiscal year ending March 31, 2013 are expected to be in the range of RMB545 million to RMB560 million.
These are Sky-mobi's current projections, which are subject to change. You are cautioned that operating results in first quarter 2013 are not necessarily indicative of operating results for any future periods.
The board has approved a program that authorizes the Company to repurchase up to US$10 million of its own American Depositary Shares ("ADSs") during the period from August 13, 2012 to August 12, 2013.
Conference Call and Webcast
Sky-mobi's management team will host a conference callon August 13, 2012 at 8:00 AM ET, (or 5:00 AM U.S. Pacific Time and 8:00 PM, August 13, 2012 Beijing/Hong Kong time).A live audio webcast of the conference call will be available on Sky-mobi's website at http://ir.sky-mobi.com/events.cfm. To listen to the conference call, please use the dial in numbers below:USA Toll Number: 1-877-275-8968 International: +1-706-643-1666 Passcode: 15972587
A replay of the call will be available for two weeks following the call and can be accessed on the Company website or by dialing the numbers below:USA Toll Number: 1-855-859-2056 International: +1-404-537-3406 Passcode: 15972587
About Non-IFRS Financial Measures
To supplement its consolidated financial statements prepared in accordance with International Financial Reporting Standards, or IFRS, Sky-mobi uses several non-IFRS financial measures defined below.The Company believes management and investors benefit from non-IFRS financial measures in assessing the Company's performance and prospects. Specifically, the Company believes that non-IFRS financial measures provide meaningful supplemental information regarding its performance by excluding certain items that may not be indicative of the Company's operating performance.
The presentation of this additional information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with IFRS. A limitation of using non-IFRS cost of revenues, gross profit, operating expenses, profit from operations, net profit and net profit per share is that these non-IFRS measures exclude share-based compensation expenses that have been and will continue to be for the foreseeable future a significant recurring expense. Management provides specific information regarding the IFRS amounts excluded from each non-IFRS measure. For more information on these non-IFRS financial measures, please see the tables containing reconciliations of non-IFRS financial measures to comparable IFRS measures in this release.
Definitions of Non-IFRS Measures
Non-IFRS cost of revenues is defined as cost of revenues excluding share-based compensation expenses.
Non-IFRS gross profit is defined as revenues less non-IFRS cost of revenues.
Non-IFRS operating expenses are defined as operating expenses excluding share-based compensation expenses.
Non-IFRS profit from operations is defined as Non-IFRS gross profit less non-IFRS operating expenses.
Non-IFRS net profit is defined as non-IFRS profit from operations plus/minusother gains or losses, less share of results of associates and income tax.
Non-IFRS basic and diluted earnings per common share/ADS are defined as non-IFRS net profit attributable to owners of the Company divided by weighted average outstanding shares/ADSs during the period.
This announcement contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.3530 to US$1.00, the exchange rate at June 30, 2012 as set forth in the H.10 statistical release of the Federal Reserve Board.
When calculating the number of Maopao users, Sky-mobi counts an individual who uses a particular handset with a particular SIM card to access Maopao as one user. Therefore, an individual who accesses Maopao through one handset with two SIM cards separately will be counted as two users, while an individual who accesses Maopao through two handsets using the same SIM card will also be counted as two users.
The number of downloads of application and content titles on Maopao refers to the number of requests made by mobile users for downloading a particular application or a content title, or for authorization to access to a specified feature of a particular application or a content title from Maopao. A user may make multiple download requests for an application depending on the complexity of the application and whether interruptions occurred during the downloading process.
The number of active members of the Maopao Community refers to the number of registered members who logged on to the Maopao Community at least twice during a month for the relevant quarter.
Safe Harbor Statement
This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by such terms as "may," "will," ''believes,'' ''expects,'' ''anticipates,'' ''intends,'' ''estimates,'' "plans," "continues" or other similar expressions, the negative of these terms, or other comparable terminology. Such statements, including the statements relating to the Company's business outlook, are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Potential risks and uncertainties include the effectiveness, profitability, and marketability of the Company's solutions; the Company's limited operating history; measures introduced by the PRC government and mobile network operators aimed at mobile applications-related services;the Company's ability to maintain relationships with handset companies, content providers and payment service providers; its dependence on mobile service providers and mobile network operators for the collection of a substantial majority of its revenues; billing and transmission failures, which are often beyond the Company's control; its ability to compete effectively; its ability to capture opportunities in the growing smart phone market; its ability to obtain and maintain applicable permits and approvals; general economic and business conditions; the volatility of the Company's operating results and financial condition; the Company's ability to attract or retain qualified senior management personnel and research and development staff; and other risks described in the Company's filings with the Securities and Exchange Commission, including its annual report on Form 20-F filed on June 29, 2012. These forward-looking statements are based on current expectations, assumptions, estimates and projections about the Company and its industry. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law.
About Sky-mobi Limited
Sky-mobi Limited operates the leading mobile application store in China, measured by revenues in 2010, according to a report commissioned by the Company and prepared by Analysys International in July 2011, an independent research and advisory firm. The Company works with handset companies to pre-install its Maopao mobile application store on handsets and with content providers to provide users with applications and content titles. Users of its Maopao store can browse, download, and enjoy a range of applications and content, such as single-player games, mobile music, and books. The Company's Maopao store enables mobile applications and content to be downloaded and run on various mobile handsets with different hardware and operating system configurations. The Company also operates a mobile social network community in China, the Maopao Community, where it offers mobile social games, as well as applications and content with social network functions to its registered members. The Company is based in Hangzhou, the People's Republic of China. For more information, please visit: www.sky-mobi.com.
FINANCIAL TABLES FOLLOWSky-mobi Limited Unaudited Consolidated Statements of Comprehensive Income Data (IFRS) For the three months ended June 30, 2011 2012 2012 In thousands (RMB) (RMB) (US$) (Except for share and per share data) Revenues 166,031 153,355 24,139 Cost of revenues (118,819) (116,296) (18,306) Gross profit 47,212 37,059 5,833 Research and development expenses (13,694) (20,075) (3,160) Sales and marketing expenses (7,814) (8,930) (1,406) General and administrative expenses (20,285) (17,270) (2,719) Other income 2,703 60 10 Total operating expenses (39,090) (46,215) (7,275) Profit (loss) from operations 8,122 (9,156) (1,442) Other gains and losses 981 4,496 708 Share of results of associates (272) (281) (45) Profit (loss) before tax 8,831 (4,941) (779) Income tax expenses (1,333) (167) (27) Profit (loss) for the period 7,498 (5,108) (806) Total comprehensive profit (loss) for the period 7,498 (5,108) (806) Total comprehensive profit (loss) attributable to owners of the company 7,498 (5,099) (805) Non-controlling interests -- (9) (1) 7,498 (5,108) (806) Earnings (loss) per common share Basic 0.03 (0.02) (0.00) Diluted 0.03 (0.02) (0.00) Weight average number of ADS Basic 32,173,725 32,273,852 Diluted 32,541,092 32,273,852 Weight average number of shares Basic 257,389,800 258,190,818 Diluted 260,328,739 258,190,818 Unaudited Reconciliations of non-IFRS financial measures to comparable IFRS financial measures For the three months ended June 30, 2011 2012 2012 In thousands (RMB) (RMB) (US$) (Except for share and per share data) IFRS cost of revenues (118,819) (116,296) (18,306) Less: share-based compensation expenses 842 990 156 Non-IFRS cost of revenues (117,977) (115,306) (18,150) IFRS gross profit 47,212 37,059 5,833 Add: share-based compensation expenses 842 990 156 Non-IFRS gross profit 48,054 38,049 5,989 Total IFRS operating expenses (39,090) (46,215) (7,275) Less: share-based compensation expenses 11,560 7,247 1,141 Total non-IFRS operating expenses (27,530) (38,968) (6,134) IFRS profit (loss) from operations 8,122 (9,156) (1,442) Add: share-based compensation expenses 12,402 8,237 1,297 Non-IFRS Profit (loss) from operations 20,524 (919) (145) IFRS Profit (loss) for the period 7,498 (5,108) (806) Add: share-based compensation expenses 12,402 8,237 1,297 Non-IFRS net profit for the period 19,900 3,129 491 Non-IFRS earnings per common share Basic 0.08 0.01 0.00 Diluted 0.08 0.01 0.00 Weight average number of shares Basic 257,389,800 258,190,818 Diluted 260,328,739 258,190,818 Sky-mobi Limited Unaudited Consolidated Statements of Financial Position (IFRS) As of As of March 31, June 30, June 30, 2012 2012 In thousands (RMB) (RMB) (US$) ASSETS Current assets Cash and cash equivalents 137,538 233,184 36,705 Term deposits 438,393 368,249 57,965 Trade and other receivables 103,372 89,661 14,113 Amounts due from related parties 126 127 20 Total current assets 679,429 691,221 108,803 Non-current assets Property and equipment 32,856 28,496 4,485 Investments in associates 714 3,632 572 Available-for-sale investments 900 900 142 Prepayment for investment 1,100 1,500 236 Other non-current assets 1,542 2,235 352 Deferred tax assets 2,210 2,210 348 Total non-current assets 39,322 38,973 6,135 Total assets 718,751 730,194 114,938 EQUITY AND LIABILITIES Current liabilities Trade and other payables 121,932 127,696 20,100 Income tax liabilities 5,675 2,878 453 Amounts due to related parties 871 1,232 194 Deferred revenue 10,038 11,712 1,844 Total current liabilities 138,516 143,518 22,591 Total liabilities 138,516 143,518 22,591 Equity Share capital 92 92 14 Share premium 642,495 642,635 101,155 Reserves 153,526 163,651 25,760 Subscription receivable (1,284) -- -- Deficit (214,938) (220,037) (34,635) Equity attributable to owners of the Company 579,891 586,341 92,294 Non-controlling interests 344 335 53 Total equity 580,235 586,676 92,347 Total equity and liabilities 718,751 730,194 114,938 CONTACT: Sky-mobi Limited Mr. Carl Yeung, CFO Phone: + (86) 571-87770978 (Hangzhou) Email: firstname.lastname@example.org CCG Investor Relations Elaine Ketchmere, Partner and VP Phone: +(1) 310-954-1345 (Los Angeles) Email: email@example.com
Source: Sky-mobi Limited