Linktone Ltd. Reports Unaudited Third Quarter 2012 Financial Results

     Linktone Ltd. Reports Unaudited Third Quarter 2012 Financial Results

PR Newswire

SINGAPORE, Nov. 12, 2012

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  Three months ended
items and %
                    September 30,   June 30,   September   %change  %change
                    2011            2012       30,         vs Sep'11 vs Jun'12
                                               2012
Gross Revenues      $16.6           $12.1      $12.1       -27%      0%
Gross Profit        6.6             4.4        4.4         -33%      0%
Operating Income /  0.7             (1.9)      (2.1)       -400%     11%
(Loss)
GAAP Net Income     4.6             8.1        12.1        163%      49%
GAAP Net Income     $         $      $     
per ADS (Diluted)    0.11                    0.29    164%      45%
                                    0.20
Non-GAAP Net        4.7             8.2        12.1        157%      48%
Income
Non-GAAP Net        $         $      $     
Income per ADS       0.11                    0.30    173%      50%
(Diluted)                           0.20

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        Gross     % of Gross
                         Revenues  Revenues          Revenues  Revenues
VAS Data-related         $5.2      43%               $4.8      40%
services
VAS Audio-related        2.7       22%               2.9       24%
services
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     June 30,                    September 30,
for %                   2012                        2012
                        Gross     % of Gross        Gross     % of Gross
                        Revenues  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      $5.2      43%               $4.8      40%
services

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       Gross     % of Gross
                          Revenues  Revenues         Revenues  Revenues
IVR                       $1.7      14%              $2.0      17%
RBT                       1.0       8%               $0.9      7%
Total Audio-related       $2.7      22%              $2.9      24%
services

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,        Three months ended
except for %
                    September30,  June30,  September30, %change  %change
                    2011           2012      2012          vs Sep'11 vs Jun'12
Gross profit        40%            36%       36%
margin
Operating profit    4%             (16%)     (17%)
/ (loss) margin
Operating           $6.0           $6.3      $6.6          10%       5%
expenses
Selling and
marketing           2.5            1.8       2.0           -20%      11%
expenses
Product
development         0.6            0.8       1.0           67%       25%
expenses
General and
administrative      2.9            3.7       3.6           24%       -3%
expenses
Operating profit    0.7            (1.9)     (2.1)         -400%     11%
/ (loss)
Income before tax   5.2            7.5       11.5          121%      53%
Income tax
expense /           0.1            (0.4)     (0.1)         -200%     -75%
(benefit)
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      14,980,545   16,170,155
payables
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)
                                                    December31, September30,
                                                    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 ($0.0001 par value;
500,000,000 shares authorized, 421,435,030 shares
issued and 410,422,650 shares outstanding as of     42,144       42,144
December 31, 2011 and 421,435,030 shares issued and
409,243,820 outstanding as at September 30, 2012,
respectively)
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         4,453,157    3,315,824
securities
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
                                    September30, June 30,     September30, September30, September30,
                                    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  (66,005)      -            -             10,425        -
recovery of bad debt
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
Dividendincomefromshort-term     -             -            364,027       -             364,027
investment
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     (426,128)     227,026      445,482       (471,062)     1,170,221
interest
Net income                          4,619,602     8,104,572    12,061,539    5,174,594     23,929,851
Othercomprehensiveincome/(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 incomeperordinary 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
                 September30, June 30,    September30, September30, September30,
                 2011          2012        2012          2011          2012
                 (unaudited)   (unaudited) (unaudited)   (unaudited)   (unaudited)
Basic income per
ADS:
 Total net     0.11          0.20        0.29          0.12          0.58
income
Diluted income
per ADS:
 Total net     0.11          0.20        0.29          0.12          0.58
income
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     37,179        50,037      25,475        96,739        125,549
expense
Provision for
impairment/(Gain 66,005        -           -             (10,425)      -
on recovery of
bad debt)
Non-GAAP net     4,722,786     8,154,609   12,087,014    5,260,908     24,055,400
income
Non-GAAP diluted 0.01          0.02        0.03          0.01          0.06
income per share
Non-GAAP diluted 0.11          0.20        0.30          0.12          0.59
income per ADS
Number of shares
used in diluted  421,435,030   409,244,813 409,545,439   421,426,519   409,332,320
per-share
calculation
Number of ADSs
used in diluted  42,143,503    40,924,481  40,954,544    42,142,652    40,933,232
per-share
calculation



SOURCE Linktone Ltd.
 
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