Exhibit 1.1
KongZhong Corporation Reports Third Quarter
2015 Unaudited Financial Results
BEIJING, China - November 24, 2015-KongZhong
Corporation (NASDAQ: KZ), a leading online games publisher and developer in the PRC, today announced its unaudited financial results
for the third quarter of 2015.
Third Quarter 2015 Financial Highlights
l
Total revenues for the third quarter of 2015 were US$ 38.58mn.
l
Total gross profit was US$ 16.90mn.
l
Net income was US$ 3.90mn, with diluted net income per American
Depositary Shares ("ADS") of US$ 0.08.
l
Non-GAAP net income was US$ 4.54mn, with Non-GAAP diluted net income per ADS of US$ 0.10(Non-GAAP Financial Measures are
described and reconciled to the corresponding GAAP measures in the section titled “Non-GAAP Financial Measures”).
l
As of September 30, 2015, the Company had US$ 137.97mn in cash and cash equivalents, term deposits, held-to-maturity securities,
available-for-sale securities and restricted cash or US$ 2.95 per ADS in cash and cash equivalents, term deposits, held-to-maturity
securities, available-for-sale securities and restricted cash, net of a US$ 49.96mn bank loan. The mark to fair value of the Company’s
investments in Ourgame and Forgame were priced at HK$ 3.94 and HK$ 14.20 per ordinary share, respectively (or US$ 30.47mn and US$
22.09mn, respectively) as of September 30, 2015, compared to the mark to fair value of the Company's investments in Ourgame and
Forgame which were priced at HK$ 6.49 and HK$ 22.25 per ordinary share, respectively (or US$ 50.18 mn and US$ 34.61 mn, respectively)
as of June 30, 2015.
Business Highlights
l
Moving forward, the Company intends to concentrate it's efforts in Internet Games and Mobile games around it's War Saga
game platform, China's leading military genre online game platform.
l
As part of War Saga, we expect to release World of Warships to Open Beta Test on November 27, 2015, which is currently one
of the most anticipated new PC games in China per mainstream media rankings.
l
The Company released Heart of Thorns, the first expansion pack for Guild Wars 2 to the mainland China market on November
20, 2015.
l
The Company recently licensed it's self-developed martial arts MOBA PC game, Master of Meteor Blades, to Tencent Games,
with beta testing to begin in the near future.
l
The Company continues to internally test Blitzkrieg 3 and other PC and mobile military genre games for potential release
in 2016.
l
The Company's co-developed mobile game with a Korean studio partner, Castle of Heroes, a Western Fantasy themed 3D Action
RPG, is expected to begin open beta testing during the fourth quarter of 2015.
| | |
Three Months Ended | |
| | |
September 30, | | |
June 30, | | |
September 30, | |
| | |
2014 | | |
2015 | | |
2015 | |
| | |
US$ in thousands | | |
US$ in thousands | | |
US$ in thousands | |
| | |
| | |
| | |
| |
| Revenues | |
| 59,637 | | |
| 47,547 | | |
| 38,579 | |
| Internet Games | |
| 32,146 | | |
| 24,461 | | |
| 23,745 | |
| Mobile Games | |
| 11,285 | | |
| 9,429 | | |
| 2,679 | |
| WVAS | |
| 16,206 | | |
| 13,657 | | |
| 12,155 | |
| | |
| | | |
| | | |
| | |
| Cost of Revenues before impairment loss on intangible assets | |
| 35,809 | | |
| 27,623 | | |
| 21,676 | |
| Internet Games | |
| 17,353 | | |
| 12,640 | | |
| 11,038 | |
| Mobile Games | |
| 5,846 | | |
| 4,946 | | |
| 1,607 | |
| WVAS | |
| 12,610 | | |
| 10,037 | | |
| 9,031 | |
| Impairment loss on intangible assets | |
| - | | |
| 35,210 | | |
| - | |
| | |
| | | |
| | | |
| | |
Gross
Profit (Loss) | |
| 23,828 | | |
| (15,286 | ) | |
| 16,903 | |
| | |
| | | |
| | | |
| | |
Gross
Margin | |
| 40 | % | |
| (32 | %) | |
| 44 | % |
| | |
| | | |
| | | |
| | |
| Non-GAAP Gross Profit | |
| 23,828 | | |
| 19,924 | | |
| 16,903 | |
| Internet Games | |
| 14,793 | | |
| 11,821 | | |
| 12,707 | |
| Mobile Games | |
| 5,439 | | |
| 4,483 | | |
| 1,072 | |
| WVAS | |
| 3,596 | | |
| 3,620 | | |
| 3,124 | |
| | |
| | | |
| | | |
| | |
| Non-GAAP Gross Margin | |
| 40 | % | |
| 42 | % | |
| 44 | % |
| Internet Games | |
| 46 | % | |
| 48 | % | |
| 54 | % |
| Mobile Games | |
| 48 | % | |
| 48 | % | |
| 40 | % |
| WVAS | |
| 22 | % | |
| 27 | % | |
| 26 | % |
Revenues
Total revenues for the third quarter of 2015
were US$ 38.58mn, an 18.9% decline from the second quarter of 2015 and a 35.3% decline from the same period last year.
Internet Games Revenues
Internet Game (“Net Game”) revenues were US$ 23.74mn
in the third quarter of 2015, a decrease of 2.9% from the second quarter of 2015. Although World of Tanks demonstrated continued
stable performance, user activity and purchases in Guild Wars 2 and World of Warplanes continued to moderate during the period.
For the third quarter of 2015, mainland China
online game operations achieved average monthly active users (“MAUs”) of 1.8 mn and aggregated monthly paying accounts
(“APAs”) of 307k with monthly average revenue per user (“ARPU”) of RMB 160.
| | |
Three Months Ended | |
| | |
September 30, 2014 | | |
June 30, 2015 | | |
September 30, 2015 | |
| MAU | |
| 2207 | k | |
| 1, 832k | | |
| 1, 813k | |
| APA | |
| 343 | k | |
| 327 | k | |
| 307 | k |
| ARPU | |
| 193 | | |
| 152 | | |
| 160 | |
Internet game revenues made up 61.5% of total
revenues in the third quarter of 2015.
Mobile Games Revenues
Total mobile game revenues were US$ 2.68mn,
a 71.6% decrease from the second quarter of 2015 and a 76.3% decrease from the same period last year. The sharp reduction
in mobile game revenues was due to the shorter life cycle and high churn of recently launched smartphone games and the Company's
recent pivot to concentrate mobile game development and licensing towards primarily military genre mobile games to bolster the
War Saga brand. We expect this transition to influence mobile game revenues for the foreseeable future.
Total mobile game revenues made up 7.0% of
total revenues in the third quarter of 2015.
WVAS Revenues
WVAS revenues
were US$ 12.16mn, an 11.0% decrease from the second quarter
of 2015 and a 25.0% decrease from the same period of last year.
WVAS made up 31.5% of total revenues in the
third quarter of 2015.
Gross Profit
Total gross profit for the third quarter of
2015 was US$ 16.90mn, a
15.2% decrease from Non-GAAP gross profit in the second quarter of 2015 and a 29.1% decrease from the same period last year.
Total gross margin was 43.8% in the third
quarter of 2015 compared to Non-GAAP gross margins of 41.9% in the second quarter of 2015.
Internet Game Gross Profit
Internet game gross profit was US$ 12.71mn,
a 7.5% increase from Non-GAAP gross profits in the second quarter
of 2015 and a 14.1% decrease from the same period last year. Internet game gross margin
was 53.5%
compared to 48.3% in the second quarter of 2015, if excluding the effect of impairment on intangible assets related to the
underperformance of Guild Wars 2.
Mobile Game Gross Profit
Mobile games gross profit was US$ 1.07mn, a 76.1% decrease from
the second quarter of 2015 and an 80.3% decrease from the same period last year. Mobile games gross margin was 40.0% compared to
47.5% in the second quarter of 2015.
WVAS Gross Profit
WVAS gross profit was US$3.12mn, a 13.7% decrease
from the second quarter of 2015 and a 13.1% decrease from the same period last year. WVAS gross margin was
25.7% compared to 26.5% in the second quarter of 2015.
Operating Expenses
Total operating expenses in the third quarter
of 2015 were US$ 13.17mn compared to US$ 17.41 mn in the second quarter of 2015.
Product development expenses in the third
quarter of 2015 were US$ 5.77mn compared to US$ 6.12 mn in the
second quarter of 2015.
Sales and marketing expenses in
the third quarter of 2015 were US$ 5.20mn compared to US$ 8.11mn in the second quarter of 2015.
Sales and marketing expenses decreased as we did not release any major new Internet or mobile games in the third quarter.
General and administrative expenses in the
third quarter of 2015 were US$ 2.20mn compared to US$3.18mn in the second quarter of 2015.
The Company’s total headcount in the
third quarter of 2015 was 913 staff compared to 1,022 staff at the end of the second quarter of 2015 as the Company has begun optimize
our cost structure for the lower amount of business in mobile games and WVAS.
Earnings
US GAAP net income and diluted income per
ADS were US$ 3.90mn and US$ 0.08, respectively. Non-GAAP net income and diluted income per ADS were US$ 4.54mn and US$ 0.10, respectively.
Total ADS on a diluted basis outstanding during
the third quarter of 2015 were 47.21mn, compared to
47.10mn outstanding during the second quarter of 2015.
For the purpose of earnings
per share calculation | |
Number during three
months ended June 30, 2015 (Non-GAAP) | | |
Number during three
months ended September 30, 2015 | |
| ADS (in mns) | |
| 46.65 | | |
| 46.78 | |
| Add: Dilution impact from options and nonvested shares | |
| 0.33 | | |
| 0.30 | |
| Warrants issued to business partners | |
| 0.12 | | |
| 0.13 | |
| ADS on diluted basis (Note) | |
| 47.10 | | |
| 47.21 | |
Note: There is no diluted effect for the US GAAP loss per ADS.
There is a diluted effect on Non-GAAP
earnings per share as it was net income on
Non-GAAP measures.
Balance Sheet
As of September 30, 2015, the Company had
US$ 137.97 mn in cash and cash equivalents, term deposits, held-to-maturity securities, available-for-sale securities and restricted
cash or US$ 2.95 per ADS in cash and cash equivalents, term deposits, held-to-maturity securities, available-for-sale securities
and restricted cash, net of a US$ 49.96mn bank loan. The mark to fair value of the Company’s investments in Ourgame and Forgame
were priced at HK$ 3.94 and HK$ 14.20 per ordinary share, respectively (or US$ 30.47mn and US$ 22.09mn, respectively) as of September
30, 2015, compared to the mark to fair value of the Company's investments in Ourgame and Forgame which were priced at HK$ 6.49
and HK$ 22.25 per ordinary share, respectively (or US$ 50.18 mn and US$ 34.61 mn, respectively) as of June 30, 2015.
Business Outlook (for the fourth quarter
ending December 31, 2015)
The Company expects total revenues for the
fourth quarter of 2015 to be within the range of US$ 41 mn to US$ 42 mn. The Company expects total gross profit to be within the
range of US$ 19 mn to US$ 20 mn. We expect net income to be within the range of US$ 3mn to US$ 4 mn and Non-GAAP net income is
expected to be within the range of US$ 4 mn to US$ 5 mn.
4Q15 guidance reflects partial quarterly contribution
from the open beta of World of Warships and the expansion pack for Guild Wars 2, offset by increased marketing for those game releases
as well as an expected small rebound in mobile games due to new mobile games releases off a lowered based in 3Q15 and continued
moderation in our WVAS business sequentially.
Recent Developments
On June 29, 2015, the Company announced that its board of directors
(the “Board”) had received a preliminary non-binding proposal letter from Leilei Wang, chairman and chief executive
officer of the Company, and IDG-Accel China Growth Fund II L.P. to acquire all of the outstanding ordinary shares of the Company
not owned by them or their affiliates for US$ 8.56 in cash per
American depositary share (the “ADS”, each representing forty ordinary shares) (the “Going Private Proposal”).
On July 8, 2015, the Company announced that the Board has formed
a special committee (the “Special Committee”) consisting of two independent directors, Hope Ni and Xiaolong Li, and
delegated to the Special Committee the exclusive power and authority of the Board to, among other things, evaluate and respond
to the Going Private Proposal. Ms. Ni is serving as the chair of the Special Committee.
On November 3, 2015, the Company announced that the Special
Committee has retained Duff & Phelps, LLC and Duff & Phelps Securities LLC as its financial advisors and Skadden, Arps,
Slate, Meagher &Flom as its legal counsel in connection with its review and evaluation of the Going Private Proposal.
The Board cautions the Company's shareholders and others considering
trading in the Company’s securities that no decisions have been made by the Special Committee or the Company with respect
to the Company's response to the Going Private Proposal. There can be no assurance that any definitive offer will be made, that
any agreement will be executed or that this or any other proposed transaction involving the Company, its securities and/or its
assets will be approved or consummated. The Company does not undertake any obligation to provide any updates with respect to this
or any other proposed transaction, except as required under applicable law.
Conference Call
KongZhong’s management will hold a conference
call and live webcast to discuss the results at 7:30 PM Eastern Standard Time (EST) on Monday, November 23, 2015 (8:30 AM Beijing/Hong
Kong time, Tuesday, November 24, 2015)
The Company welcomes all interested parties
to participate in the live conference call. An Operator will greet you and ask for the Conference ID shown as following.
Conference ID: 4698571
The dial-in details are as below:
- U.S. Toll Free Dial-in Number: +1 866 519
4004
- U.S. Dial-in Number: +1 845 675 0437
- Hong Kong Toll Free Dial-in Number: 800
906 601
- Hong Kong Dial-in Number: +852 3018 6771
- Mainland China Dial-in Number: 800 819 0121,
400 620 8038
- International Dial-in Number: +65 6713 5090
The live conference call via webcast and archive
replay will be available on the Investor Relations section of KongZhong's website athttp://ir.kongzhong.com. The archive replay
will be available on the website shortly after the call.
A dial-in replay of the conference call will
be available until December 1, 2015:
- U.S. Toll Free Dial-in Number: +1 855 452
5696
- U.S. Dial-in Number: +1 646 254 3697
- Hong Kong Toll Free Dial-in Number: 800
963 117
- Hong Kong Dial-in Number: +852 3051 2780
- Mainland China Toll Free Dial-in Number:
800 870 0206, 400 602 2065
- International Dial-in Number: +61 2 8199
0299
About KongZhong
KongZhong Corporation (NASDAQ: KZ), listed
on Nasdaq in 2004, is a leading online game developer and operator in China. KongZhong operates three main business units, namely
Internet Games, Mobile Games and WVAS. Under Internet Games, KongZhong operates the largest Chinese military gaming platform under
the "WAR SAGA" brand, which includes games such as World of Tanks, World of Warplanes and World of Warships. On May 15,
2014, KongZhong officially launched the most-anticipated 3D fantasy MMORPG Guild Wars 2 in China. KongZhong has the exclusive publishing
rights for World of Tanks, World of Warplanes and World of Warships, Guild Wars 2, Auto Club Revolution, Blitzkrieg 3 and other
titles in Mainland China.
KongZhong entered the smartphone game industry
in 2011 through an acquisition of smartphone game engine and has expanded its mobile game development team across 4 cities across
Mainland China. KongZhong offers popular mobile games in China and overseas with over 10 smartphone games across various genres
being under development, including RPG, RTS, military, fantasy and etc. For more information, please visit http://ir.kongzhong.com
..
Safe
Harbor Statements
This press release contains “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements include, without limitation, statements regarding trends in the wireless value-added services,
wireless media, mobile games and online games industries and our future results of operations, financial condition and business
prospects. Although such statements are based on our own information and information from other sources we believe to be reliable,
you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends and our
results may differ materially from those expressed or implied in these forward looking statements for a variety of reasons. Potential
risks and uncertainties include, but are not limited to, continued competitive pressure in China’s wireless value-added services,
wireless media, mobile games and online games industries and the effect of such pressure on revenues; our ability to develop new
products that are commercially successful; unpredictable changes in technology, consumer demand and usage preferences in the markets
we operate; our ability to protect our intellectual property rights; the short operating history of certain of our business segments,
in particular the online games segment; the state of and any change in our relationship with China’s telecommunications operators;
our dependence on the billing systems of telecommunications operators for our performance; the outcome of our investment of operating
income generated from the WVAS segment into the development of our wireless Internet, mobile games and online games segments; changes
in the regulations or policies of the Ministry of Industry and
Information Technology and other government authorities relevant to our businesses; and changes in political, economic, legal and
social conditions in China, including the Chinese government’s policies with respect to economic growth, foreign exchange,
foreign investment and entry by foreign companies into China’s telecommunications and online games markets. For additional
discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities
and Exchange Commission. We assume no obligation to update any forward-looking statements, which apply only as of the date of this
press release.
KongZhong Contacts
Investor Contact
Jay Chang
Chief Financial Officer
Tel.: (+86-10) 8857 6000
E-mail: ir@kongzhong.com
Media Contact
Li Feng
Public Relations
Tel.: (+86-10) 88576000
E-mail:lifeng3@kongzhong.com
KongZhong Corporation
Condensed Consolidated Statements of Comprehensive Income
(Unaudited, US$ in thousands, except per share and share data)
| | |
Three Months Ended | |
| | |
September 30, | | |
June 30, | | |
September 30, | |
| | |
2014 | | |
2015 | | |
2015 | |
| | |
| | |
| | |
| |
| Revenues | |
| 59,637 | | |
| 47,547 | | |
| 38,579 | |
| | |
| | | |
| | | |
| | |
| Cost of revenues | |
| | | |
| | | |
| | |
| Cost of revenues before impairment loss on intangible assets | |
| 35,809 | | |
| 27,623 | | |
| 21,676 | |
| Impairment loss on intangible assets | |
| - | | |
| 35,210 | | |
| - | |
| Total cost of revenues | |
| 35,809 | | |
| 62,833 | | |
| 21,676 | |
| | |
| | | |
| | | |
| | |
| Gross profit (loss) | |
| 23,828 | | |
| (15,286 | ) | |
| 16,903 | |
| | |
| | | |
| | | |
| | |
| Operating expenses | |
| | | |
| | | |
| | |
| Product development | |
| 6,580 | | |
| 6,123 | | |
| 5,772 | |
| Sales and marketing | |
| 10,702 | | |
| 8,106 | | |
| 5,198 | |
| General and administrative | |
| 2,502 | | |
| 3,178 | | |
| 2,202 | |
| Impairment loss on intangible assets | |
| 1,323 | | |
| - | | |
| - | |
| Total operating expenses | |
| 21,107 | | |
| 17,407 | | |
| 13,172 | |
| | |
| | | |
| | | |
| | |
| Government subsidy | |
| 198 | | |
| 326 | | |
| 265 | |
| | |
| | | |
| | | |
| | |
| Income (loss) from operations | |
| 2,919 | | |
| (32,367 | ) | |
| 3,996 | |
| | |
| | | |
| | | |
| | |
| Interest income | |
| 2,835 | | |
| 1,298 | | |
| 1,158 | |
| Interest expense | |
| - | | |
| (192 | ) | |
| (281 | ) |
| Imputed interest on long-term liabilities | |
| (150 | ) | |
| - | | |
| - | |
| Impairment loss on cost method investment | |
| (2,000 | ) | |
| - | | |
| - | |
| Investment income from sales of available-for-sale securities | |
| - | | |
| 1,164 | | |
| - | |
| Exchange gain (loss) | |
| 8 | | |
| (32 | ) | |
| (557 | ) |
| Income (loss) before income tax expense, loss on equity method investment, net of income tax | |
| 3,612 | | |
| (30,129 | ) | |
| 4,316 | |
| Income tax expense | |
| (109 | ) | |
| (174 | ) | |
| (142 | ) |
| Loss on equity method investment, net of Income tax | |
| - | | |
| (121 | ) | |
| (273 | ) |
| Net income (loss) | |
| 3,503 | | |
| (30,424 | ) | |
| 3,901 | |
| | |
| | | |
| | | |
| | |
| Earnings per ADS, basic | |
| 0.08 | | |
| (0.65 | ) | |
| 0.08 | |
| Earnings per ADS, diluted | |
| 0.08 | | |
| (0.65 | ) | |
| 0.08 | |
| Weighted average ADS outstanding (million) | |
| 45.56 | | |
| 46.65 | | |
| 46.78 | |
| Weighted average ADS used in diluted EPS calculation (million) | |
| 46.64 | | |
| 46.65 | | |
| 47.21 | |
| Net income (loss) | |
| 3,503 | | |
| (30,424 | ) | |
| 3,901 | |
| Other comprehensive income | |
| 2,079 | | |
| 32,402 | | |
| (40,333 | ) |
| Total comprehensive income | |
| 5,582 | | |
| 1,978 | | |
| (36,432 | ) |
KongZhong Corporation
Condensed Consolidated Balance Sheets
(Unaudited, US$ in thousands)
| | |
As of September 30, | | |
As of June 30, | | |
As of September 30, | |
| | |
2014 | | |
2015 | | |
2015 | |
| Assets | |
| | | |
| | | |
| | |
| Current assets | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
| 114,654 | | |
| 61,618 | | |
| 33,139 | |
| Term deposits | |
| 2,781 | | |
| 26,094 | | |
| 26,047 | |
| Available-for-sale securities | |
| 30,447 | | |
| 84,792 | | |
| 52,563 | |
| Held-to-maturity securities | |
| 48,297 | | |
| 15,023 | | |
| 17,083 | |
| Accounts receivable (net) | |
| 24,805 | | |
| 30,898 | | |
| 24,235 | |
| Restricted cash | |
| - | | |
| 62,510 | | |
| 18,230 | |
| Other current assets | |
| 10,195 | | |
| 43,950 | | |
| 71,209 | |
| Total current assets | |
| 231,179 | | |
| 324,885 | | |
| 242,506 | |
| | |
| | | |
| | | |
| | |
| Non-current assets | |
| | | |
| | | |
| | |
| Rental deposits | |
| 1,321 | | |
| 1,447 | | |
| 1,385 | |
| Intangible assets (net) | |
| 60,507 | | |
| 14,263 | | |
| 13,392 | |
| Property and equipment (net) | |
| 6,402 | | |
| 6,018 | | |
| 5,078 | |
| Long-term investments | |
| - | | |
| 2,042 | | |
| 3,844 | |
| Goodwill | |
| 89,524 | | |
| 90,099 | | |
| 86,553 | |
| Restricted cash | |
| 36,571 | | |
| - | | |
| 40,872 | |
| Total non-current assets | |
| 194,325 | | |
| 113,869 | | |
| 151,124 | |
| Total assets | |
| 425,504 | | |
| 438,754 | | |
| 393,630 | |
| | |
| | | |
| | | |
| | |
| Liabilities and Shareholders' Equity | |
| | | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | | |
| | |
Accounts payable
(including accounts payable of the consolidated variable interest entities ("VIE") without recourse to KongZhong Corporation of $31,140, $29,153 and $23,579 as of September 30, 2014, June 30, 2015 and September 30, 2015, respectively) | |
| 31,581 | | |
| 29,202 | | |
| 23,590 | |
Short-term bank loan
(including short-term bank loan of the consolidated VIE without recourse to KongZhong Corporation of $nil, $nil and $nil as of September 30, 2014, June 30, 2015 and September 30, 2015, respectively) | |
| - | | |
| 49,963 | | |
| 7,534 | |
Deferred revenue
(including deferred revenue of the consolidated VIE without recourse to KongZhong Corporation of $9,445, $3,233 and $2,831as of September 30, 2014, June 30, 2015 and September 30, 2015, respectively) | |
| 9,475 | | |
| 3,262 | | |
| 2,860 | |
Other current liabilities
(including other current liabilities of the consolidated VIE without recourse to KongZhong Corporation of $12,582, $11,466 and $8,636 as of September 30, 2014, June 30, 2015 and September 30, 2015, respectively) | |
| 18,494 | | |
| 19,300 | | |
| 16,673 | |
| Total current liabilities | |
| 59,550 | | |
| 101,727 | | |
| 50,657 | |
| | |
| | | |
| | | |
| | |
| Non-current Liabilities | |
| | | |
| | | |
| | |
Other long-term liabilities
(including other long-term liabilities of the consolidated VIE without recourse to KongZhong Corporation of $9,710, $nil and $nil as of September 30, 2014, June 30, 2015 and September 30, 2015, respectively) | |
| 9,710 | | |
| - | | |
| - | |
Long-term bank loan
(including long-term bank loan of the consolidated VIE without recourse to KongZhong Corporation of $nil, $nil and $nil as of September 30, 2014, June 30, 2015 and September 30, 2015, respectively) | |
| - | | |
| - | | |
| 42,429 | |
| Total non-current liabilities | |
| 9,710 | | |
| - | | |
| 42,429 | |
| | |
| | | |
| | | |
| | |
Shareholders’
equity | |
| 356,244 | | |
| 337,027 | | |
| 300,544 | |
| Total liabilities and shareholders’ equity | |
| 425,504 | | |
| 438,754 | | |
| 393,630 | |
KongZhong Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited, US$ in thousands)
| | |
Nine Months Ended | |
| | |
September 30, | | |
September 30, | |
| | |
2014 | | |
2015 | |
| Cash Flows From Operating Activities | |
| | | |
| | |
| Net income (loss) | |
| 13,519 | | |
| (22,326 | ) |
| Adjustments to reconcile net income to net cash provided by operating activities | |
| | | |
| | |
| Depreciation and amortization | |
| 15,415 | | |
| 8,752 | |
| Loss on disposal of property and equipment | |
| - | | |
| 50 | |
| Imputed interest on long-term liabilities | |
| 450 | | |
| 140 | |
| Impairment loss on cost method investment | |
| 2,000 | | |
| - | |
| Loss on equity method investment | |
| - | | |
| 419 | |
| Share-based compensation | |
| 1,318 | | |
| 702 | |
| Impairment loss on intangible assets | |
| 1,323 | | |
| 35,210 | |
| Changes in operating assets and liabilities | |
| (4,050 | ) | |
| (8,597 | ) |
| Net Cash Provided by Operating Activities | |
| 29,975 | | |
| 14,350 | |
| | |
| | | |
| | |
| Cash Flows From Investing Activities | |
| | | |
| | |
| Purchase of intangible assets | |
| (98 | ) | |
| - | |
| Purchase of term deposits | |
| (2,610 | ) | |
| (9,989 | ) |
| Proceeds from disposal of term deposits | |
| 4,237 | | |
| 815 | |
| Investments | |
| (16,380 | ) | |
| (7,577 | ) |
| Loans to equity method investee | |
| - | | |
| (28,860 | ) |
| Loans to third parties | |
| - | | |
| (25,003 | ) |
| Purchase of held-to-maturity securities | |
| (166,880 | ) | |
| (50,239 | ) |
| Purchase of available-for-sale securities | |
| - | | |
| (24,695 | ) |
| Proceeds from disposal of available-for-sale securities and dividend received | |
| - | | |
| 2,129 | |
| Proceeds from disposal of held-to-maturity securities | |
| 170,075 | | |
| 56,882 | |
| Purchase of property and equipment | |
| (3,076 | ) | |
| (1,837 | ) |
| Addition of restricted cash | |
| - | | |
| (8,145 | ) |
| Release of restricted cash | |
| - | | |
| 9,989 | |
| Loan repayment from third party | |
| - | | |
| 3,201 | |
| Net Cash Used in Investing Activities | |
| (14,732 | ) | |
| (83,329 | ) |
| | |
| | | |
| | |
| Cash Flows From Financing Activities | |
| | | |
| | |
| Proceeds from exercise of employee stock options | |
| 434 | | |
| 618 | |
| Deferred payments for acquisition of business | |
| (2,881 | ) | |
| - | |
| Deferred payments for intangible assets | |
| (20,829 | ) | |
| (10,396 | ) |
| Repurchase of ordinary shares | |
| (12 | ) | |
| - | |
| Proceeds from bank borrowing | |
| - | | |
| 7,534 | |
| Net Cash Used in Financing Activities | |
| (23,288 | ) | |
| (2,244 | ) |
| | |
| | | |
| | |
| Effect of foreign exchange rate changes | |
| (729 | ) | |
| (731 | ) |
| | |
| | | |
| | |
| Net decrease in Cash and Cash Equivalents | |
| (8,774 | ) | |
| (71,954 | ) |
| Cash and Cash Equivalents, Beginning of Period | |
| 123,428 | | |
| 105,093 | |
| Cash and Cash Equivalents, End of Period | |
| 114,654 | | |
| 33,139 | |
Non-GAAP Financial Measures
To supplement the unaudited condensed statements of comprehensive income presented in accordance with US GAAP, the Company uses non-GAAP financial measures (Non-GAAP Financial Measures) of gross profit, net income and net income per diluted ADS, which are adjusted from results based on GAAP to exclude certain infrequent or unusual or non-cash based expenses, gains and losses. The Non-GAAP Financial Measures are provided as additional information to help both management and investors compare business trends among different reporting periods on a consistent and more meaningful basis and enhance investors’ overall understanding of the Company’s current financial performance and prospects for the future.
The Non-GAAP Financial Measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. In addition, the Company’s calculation of the Non-GAAP Financial Measures may be different from the calculation used by other companies, and therefore comparability may be limited.
For the periods presented, the Company’s non-GAAP gross profit excludes, as applicable, impairment loss on intangible assets. In addition, the Company’s non-GAAP net income and non-GAAP net income per diluted ADS exclude, as applicable, the amortization of intangibles, share-based compensation expense, imputed interest on long-term liabilities, impairment loss on intangible assets, as well as impairment loss on cost method investment are adjusted for the dilution impact on ADS numbers from stock options, non-vested shares and warrants.
Reconciliation of the Company’s Non-GAAP financial measures to the GAAP financial measures is set forth below.
(US$ in thousands, except per share and share data)
| | |
Three Months Ended | |
| | |
September 30, | | |
June 30, | | |
September 30, | |
| | |
2014 | | |
2015 | | |
2015 | |
| | |
| | |
| | |
| |
| GAAP gross profit (loss) | |
| 23,828 | | |
| (15,286 | ) | |
| 16,903 | |
| Impairment loss on intangible assets | |
| - | | |
| 35,210 | | |
| - | |
| Non-GAAP gross profit | |
| 23,828 | | |
| 19,924 | | |
| 16,903 | |
| | |
| | | |
| | | |
| | |
| GAAP net income (loss) | |
| 3,503 | | |
| (30,424 | ) | |
| 3,901 | |
| Share-based compensation | |
| 217 | | |
| 234 | | |
| 234 | |
| Imputed interest on long-term liabilities | |
| 150 | | |
| - | | |
| - | |
| Amortization of intangibles | |
| 599 | | |
| 599 | | |
| 403 | |
| Impairment loss on cost method investment | |
| 2,000 | | |
| - | | |
| - | |
| Impairment loss on intangible assets | |
| 1,323 | | |
| 35,210 | | |
| - | |
| Non-GAAP net income | |
| 7,792 | | |
| 5,619 | | |
| 4,538 | |
| | |
| | | |
| | | |
| | |
| Weighted average ADS used in diluted EPS calculation (million) | |
| 46.64 | | |
| 47.10 | | |
| 47.21 | |
| | |
| | | |
| | | |
| | |
| Non-GAAP diluted net income per ADS | |
| 0.17 | | |
| 0.12 | | |
| 0.10 | |
