Category: Media / Web

Sky-mobi Limited Announces Unaudited Financial Results for the Second Quarter 2014

HANGZHOU, China, Aug. 18, 2014 -- Sky-mobi Limited ("Sky-mobi" or the "Company") (MOBI), a leading mobile application platform in China, today announced its unaudited financial results for the second quarter ended June 30, 2014.

Second Quarter 2014 Highlights

  • Total revenues increased 32.4% quarter-over-quarter to RMB170.2 million (US$27.4 million) from RMB128.6 million.
  • Revenues from smartphone business increased 51.3% quarter-over-quarter to RMB132.5 million (US$21.4 million), or 77.8% of total revenues, from RMB87.5 million, or 68.1% of total revenues.
  • Net profit increased 1268.7% quarter-over-quarter to RMB63.4 million (US$10.4 million) from RMB4.6 million.
  • Non-IFRS net profit1 increased 644.2% quarter-over-quarter to RMB66.1 million (US$10.9 million) from RMB8.9 million.
  • Basic and diluted earnings per common share ("EPS") were RMB0.26 (US$0.04) and RMB0.26 (US$0.04), respectively, which represents the equivalent of RMB2.12 (US$0.34) and RMB2.11 (US$0.34) per ADS2, respectively.
  • Non-IFRS basic and diluted earnings per common share were RMB0.28 (US$0.04) and RMB0.27 (US$0.04), respectively, which represents the equivalent of RMB2.21 (US$0.36) RMB2.20 (US$0.35) per ADS, respectively.

Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi, stated, "We are excited with our robust second quarter financial and operational results, primarily due to the strong growth momentum of our smartphone business and further expansion into mobile game distribution. Driven by deep collaboration with telecom operators, we have expanded our offline presence to over 40,000 telecom stores nationwide. In addition, we continue to diversify our mobile content offering and selection of light casual games available on the Maopao platform. During the second quarter of 2014, we successfully extended our third-party game distribution channels to more than 100 partners, including Tencent, Baidu/91, Xiaomi and Qihoo 360. As affordable smartphones continue to be the fastest growing smartphone segment both in China and globally, we believe our strategic partnerships with handset manufacturers and telecom operators as well as third-party mobile game distribution channels will further entrench Sky-mobi in the ever accelerating mobile universe with a unique offline platform and the most innovative and diversified light casual games distribution platform."

Mr. Song continued, "As we continue to expand our international footprint, we have selected several games developed in China to be localized and distributed in Singapore, Malaysia, Thailand and Vietnam. By entering into direct partnerships with major local telecom operators to facilitate game distribution and monetization, we are able to create win-win situations for both the telecom operators and Sky-mobi. We are confident that our well-designed strategic initiatives and the growing demand from grassroots smartphone users in these markets will enable us to continue to drive long-term value for our shareholders."

John Bi, Chief Financial Officer of Sky-mobi, commented, "We are very proud to report the strong growth in our smartphone business and a sequential increase in total revenues that exceeded the high end of our prior guidance. By adding 450,000 new users per day on average, our smartphone business reached a historical high of RMB132.5 million in revenues, representing 77.8% of total revenues. The biggest contributor in revenue growth during the period was single player mobile games, which reached RMB93.1 million and an ARPU of RMB 8.8, accounting for 70.3% of our total smartphone revenues. In addition, we continued to strengthen our cost controls and effectively manage operational expenses, as reflected in the significant improvement in operating margin. Beginning this quarter, we will present revenue breakdown by mobile gaming types, to better reflect our focus on mobile gaming as well as provide more key operational metrics for improved transparency of our business model. Going forward, we aim to continue to grow our business intelligently and profitably and provide our shareholders long term value."

Second Quarter 2014 Financial Results

Total Revenues

Total revenues increased 32.4% quarter-over-quarter to RMB170.2 million (US$27.4 million), from RMB128.6 million in first quarter 2014 and an increase of 35.9% from RMB125.2 million in the prior year period.

Revenues from the smartphone business increased 51.3% quarter-over-quarter to RMB132.5 million (US$21.4 million), from RMB87.5 million in first quarter 2014, and represented 77.8% of the Company's total revenues in second quarter 2014. The sequential increase was mainly attributable to our the Company's strong growth in publishing single-player games and multiplayer games on the Maopao smartphone platform as well as through third-party distribution channels.

Smartphone revenues can be further broken down into three categories: "revenues from single-player games", "revenues from multiplayer games" and "advertising revenues". Revenues from single-player games increased 63.3% quarter-over-quarter to RMB93.1 million (US$15.0 million), from RMB57.0 million in first quarter 2014. Average revenue per paying user ("ARPU") for single-player games was RMB8.8. Revenues from multiplayer games increased 27.2% quarter-over-quarter to RMB26.1 million (US$4.2 million), from RMB20.5 million in first quarter 2014. ARPU for multiplayer games was RMB161.4. Advertising revenues increased 32.1% quarter-over-quarter to RMB13.2 million (US$2.1 million), from RMB10.0 million in first quarter 2014.

Cost of Revenues and Gross Profit

Total cost of revenues was RMB127.1 million (US$20.5 million), an increase of 32.4% from RMB96.0 million in first quarter 2014 and an increase of 39.8% from RMB91.0 million in the prior year period.

The discussion and analysis below focuses on non-IFRS cost of revenues, which the Company believes more accurately reflects the Company's operating performance than the IFRS cost of revenues.

Total non-IFRS cost of revenues was RMB127.0 million (US$20.5 million), an increase of 32.7% from RMB95.8 million in first quarter 2014 and an increase of 39.7% from RMB90.9 million in the prior year period.

Non-IFRS cost associated with payments to industry participants was RMB120.2 million (US$19.4 million), an increase of 34.8% from RMB89.2 million in first quarter 2014 and an increase of 44.3% from RMB83.3 million in the prior year period. The increase was primarily due to the increased channel cost, which was largely in line with the increase in revenues, and the increased content provider costs due to the higher revenue sharing with smartphone content providers.

Non-IFRS direct cost was RMB6.8 million (US$1.1 million), an increase of 3.8% from RMB6.6 million in first quarter 2014 and a decrease of 10.6% from RMB7.6 million in the prior year period. Non-IFRS direct cost included salaries and benefits, depreciation, office expenses and utilities directly related to the operation of Maopao application stores for smartphones and feature phones. The year-over-year decrease in Non-IFRS direct cost was attributed to the Company's initiatives to focus on the smartphone market.

Non-IFRS gross profit increased 31.6% quarter-over-quarter to RMB43.2 million (US$7.0 million), compared to non-IFRS gross profit of RMB32.8 million in first quarter 2014 and RMB34.3 million the prior year period. Non-IFRS gross margin was 25.4%, compared to 25.5% in first quarter 2014 and 27.4% in the prior year period. This year-over-year decrease was principally due to the general decline of the Company's feature phone business.

Operating Expenses and Profit (Loss) from Operations

Total operating expenses, primarily consisting of employee salaries and benefits, training expenses, travel, entertainment and office related expenses, were RMB35.3 million (US$5.7 million), an increase of 10.9% from RMB31.8 in first quarter 2014 and a decrease of 7.3% from RMB38.1 million in the prior year period.

Total non-IFRS operating expenses were RMB32.6 million (US$5.3 million), an increase of 17.4% from RMB27.8 million in first quarter 2014 and an increase of 5.3% from RMB31.0 million in the prior year period. The increase was mainly due to the increased marketing and promotion expense to promote our platform and products.

Profit from operations increased significantly to RMB7.8 million (US$1.3 million), from RMB0.8 million in first quarter 2014 and a loss from operations of RMB3.8 million in the prior year period.

Non-IFRS profit from operations increased 110.7% to RMB10.5 million (US$1.7 million), from RMB5.0 million in first quarter 2014 and non-IFRS profit from operations of RMB3.3 million in the prior year period.

Net Profit

Net profit increased 1268.7% quarter-over-quarter to RMB63.4 million (US$10.4 million) from RMB4.6 million in first quarter 2014. Basic and diluted EPS was RMB0.26 (US$0.04) and RMB0.26 (US$0.04), respectively, which represents the equivalent of RMB2.12 (US$0.34) and RMB2.11 (US$0.34) per ADS, respectively.

Non-IFRS net profit increased 644.2% quarter-over-quarter to RMB66.1 million (US$10.9 million) from RMB8.9 million. Non-IFRS basic and diluted earnings per common share were RMB0.28 (US$0.04) and RMB0.27 (US$0.04), respectively, which represents the equivalent of RMB2.21 (US$0.36) RMB2.20 (US$0.35) per ADS, respectively.

The weighted average number of ADSs used to calculate basic and diluted earnings per ADS for second quarter 2014 was 29,631,757 and 29,788,088, respectively.

Common Shares

Sky-mobi had approximately 239.6 million common shares outstanding as of June 30, 2014, or the equivalent of approximately 30.0 million ADSs outstanding.

Other Operating Data

  For the three months ended
In '000 March 31, 2014 Jun 30, 2014
Maopao Platform3    
Average DNU4 414 450
Average MAU5 25,000 30,000
     
Game Distribution    
     
Paying ratio6 10.2% 11.9%
     
Single-player games    
Average MPU7 2,514 3,513
Average ARPU (RMB)8 7.6 8.8
     
Multiplayer games    
Average MPU 41 54
Average ARPU (RMB) 158.2 161.4

Business Outlook

For the third quarter ending September 30, 2014, Sky-mobi expects its total revenues to be in the range of RMB 200 million to RMB 210 million.

The above represents Sky-mobi's current projections, which are subject to change.

Conference Call and Webcast

The Company will hold a conference call on Monday, August 18, 2014 at 8:00 am Eastern Time, or 8:00 pm Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:

United States: +1-845-675-0438
International Toll Free: +1-855-500-8701
China Domestic: 400-1200654
Hong Kong: +852-3051-2745
Conference ID: # 82904001

The replay will be accessible through August 25, 2014 by dialing the following numbers:

United States Toll Free: +1-855-452-5696
International: +61-2-9003-4211
Conference ID: # 82904001

A live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.sky-mobi.com

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 (loss) 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/minus other gains or losses, impairment loss on investments in associates, share of results of associates and gain on disposal of an associate, less 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.

Exchange Rate

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 RMB6.2036 to US$1.00, the exchange rate at June 30, 2014 as set forth in the H.10 statistical release of the Federal Reserve Board.

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 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. 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 is a leading mobile application platform in China. The Company works with handset companies to pre-install its Maopao App Store and other Maopao applications on handsets and with content providers to provide users with applications and content titles. Users of Maopao App Store can browse, download and enjoy a range of applications and content, such as single-player games, mobile music and books on various mobile handsets with different hardware and operating system configurations. The Company's mobile social network community in China, the Maopao Community, offers mobile social games as well as applications and content with social networking functions to its registered users. The Company is based in Hangzhou, China. For more information, please visit: www.sky-mobi.com.

1 An explanation of the Company's non-IFRS financial measures is included in the section entitled "Use of Non-GAAP Financial Measures" below, and the related reconciliations to IFRS financial measures are presented in the accompanying "Unaudited reconciliations of non-IFRS financial measures to comparable IFRS financial measures".

2 American Depositary Shares ("ADSs") are traded on the NASDAQ Global Market, each of which represents eight common shares of the Company.

3 "Maopao Platform" refers to Sky-mobi's Maopao-branded smartphone products and services, including but not limited to Maopao App Store, Maopao Game Center, Maopao Community, Maopao Browser, Maopao Assistant, and Maopao Desktop.

4 "DNU" stands for daily new users. When calculating the number of users, Sky-mobi considers an individual that uses Maopao products or services on one handset and with one SIM card as one user. By this calculation method, an individual who uses Maopao on one handset with two different SIM cards, or on two different handsets with one SIM card would be counted as two individual users.

5 "MAU" stands for monthly active users. It refers to the number of users that visit Maopao Platform in a particular month. Average MAUs for a particular period is the average of the MAU during that period.

6 "Paying ratio" equals to average MPU divided by average MAU for a particular period.

7 "MPU" stands for monthly paying user. It represents the number of users that have purchased in-app virtual items or other contents in a particular month, adjusted to eliminate double-counting of the same user. Average MPU for a particular period is the average of the MPU during that period.

8 "ARPU" stands for average revenue per paying user.

FINANCIAL TABLES FOLLOW

Sky-mobi Limited
Unaudited Consolidated Statements of Profit or Loss and Other Comprehensive Income (IFRS)
               
  For the three months ended For the six months ended
  June 30, March 31, June 30, June 30, June 30, June 30, June 30,
  2013 2014 2014 2014 2013 2014 2014
In thousands (RMB) (RMB) (RMB) (US$) (RMB) (RMB) (US$)
(Except for share and per share data)              
               
Revenues 125,217 128,564 170,220 27,439 286,222 298,784 48,163
Cost of revenues (90,970) (96,006) (127,140) (20,495) (191,588) (223,146) (35,970)
Gross profit 34,247 32,558 43,080 6,944 94,634 75,638 12,193
               
Research and development expenses (11,788) (9,119) (9,035) (1,456) (17,837) (18,154) (2,926)
Sales and marketing expenses (10,764) (9,994) (10,192) (1,643) (19,948) (20,186) (3,254)
General and administrative expenses (15,464) (14,492) (17,064) (2,751) (32,731) (31,556) (5,087)
Other income and expense (39) 1,799 1,017 164 1,784 2,816 454
Total operating expenses (38,055) (31,806) (35,274) (5,686) (68,732) (67,080) (10,813)
(Loss) profit from operations (3,808) 752 7,806 1,258 25,902 8,558 1,380
               
Other gains and losses 2,845 5,910 5,319 857 6,541 11,229 1,810
Impairment loss on investments in associates -- -- (765) (123) (1,367) (765) (123)
Share of results of associates 1,456 (962) (288) (46) 1,950 (1,250) (201)
Gain on disposal of an associate -- -- 56,351 9,084 -- 56,351 9,084
Profit before tax 493 5,700 68,423 11,030 33,026 74,123 11,950
Income tax expenses (824) (1,071) (5,067) (817) (3,166) (6,138) (989)
(Loss) profit for the period (331) 4,629 63,356 10,213 29,860 67,985 10,961
               
Total comprehensive (loss) profit for the period (331) 4,629 63,356 10,213 29,860 67,985 10,961
               
Loss (profit) and total comprehensive (loss) income attributable to:              
- Owners of the Company (454) 4,765 63,667 10,263 29,778 68,432 11,033
- Non-controlling interests 123 (136) (311) (50) 82 (447) (72)
  (331) 4,629 63,356 10,213 29,860 67,985 10,961
               
Earnings per common share              
Basic (0.00) 0.02 0.26 0.04 0.12 0.29 0.05
Diluted (0.00) 0.02 0.26 0.04 0.12 0.28 0.05
               
Weight average number of ADS              
Basic 30,275,080 29,392,071 29,631,757   31,457,954 29,512,576  
Diluted 30,275,080 29,656,888 29,788,088   31,457,954 29,721,468  
               
Weight average number of shares              
Basic 242,200,638 235,136,572 237,054,058   251,663,630 236,100,612  
Diluted 242,200,638 237,255,104 238,304,704   251,663,630 237,771,740  
 
Unaudited Reconciliations of non-IFRS financial measures
to comparable IFRS financial measures
               
  For the three months ended For the six months ended
  June 30, March 31, June 30, June 30, June 30, June 30, June 30,
  2013 2014 2014 2014 2013 2014 2014
In thousands (RMB) (RMB) (RMB) (US$) (RMB) (RMB) (US$)
(Except for share and per share data)              
               
IFRS cost of revenues (90,970) (96,006) (127,140) (20,495) (191,588) (223,146) (35,970)
Less: share-based compensation expenses 43 243 98 16 255 341 55
Non-IFRS cost of revenues (90,927) (95,763) (127,042) (20,479) (191,333) (222,805) (35,915)
               
IFRS gross profit 34,247 32,558 43,080 6,944 94,634 75,638 12,193
Add: share-based compensation expenses 43 243 98 16 255 341 55
Non-IFRS gross profit 34,290 32,801 43,178 6,960 94,889 75,979 12,248
               
Total IFRS operating expenses (38,055) (31,806) (35,274) (5,686) (68,732) (67,080) (10,813)
Less: share-based compensation expenses 7,048 4,008 2,635 425 10,529 6,643 1,071
Total non-IFRS operating expenses (31,007) (27,798) (32,639) (5,261) (58,203) (60,437) (9,742)
               
IFRS (loss) profit from operations (3,808) 752 7,806 1,258 25,902 8,558 1,380
Add: share-based compensation expenses 7,091 4,251 2,733 441 10,784 6,984 1,126
Non-IFRS profit from operations 3,283 5,003 10,539 1,699 36,686 15,542 2,506
               
IFRS net (loss) profit for the period (331) 4,629 63,356 10,213 29,860 67,985 10,961
Add: share-based compensation expenses 7,091 4,251 2,733 441 10,784 6,984 1,126
Non-IFRS net profit for the period 6,760 8,880 66,089 10,654 40,644 74,969 12,087
               
Non-IFRS earnings per common share              
Basic 0.02 0.04 0.28 0.04 0.16 0.31 0.05
Diluted 0.02 0.04 0.27 0.04 0.16 0.31 0.05
               
Weight average number of shares              
Basic 242,200,638 235,136,572 237,054,058   251,663,630 236,100,612  
Diluted 242,200,638 237,255,104 238,304,333   251,663,630 237,771,558  
 
Sky-mobi Limited
Unaudited Consolidated Statements of Financial Position (IFRS)
       
  As of As of
  March 31, June 30, June 30,
  2014 2014
In thousands (RMB) (RMB) (US$)
       
ASSETS      
Current assets      
Cash and cash equivalents 79,057 39,203 6,319
Term deposits 295,804 415,369 66,956
Short-term investment 52,569 -- --
Investment at fair value through profit or loss 166,073 185,682 29,931
Trade and other receivables 95,499 144,241 23,251
Amounts due from related parties 160 2,662 429
Total current assets 689,162 787,157 126,886
       
Non-current assets      
Property and equipment 7,605 8,709 1,404
Investments in associates 41,339 43,797 7,060
Investments in funds 6,150 34,177 5,510
Available-for-sale investments 100 -- 1,488
Non-current assets held for sale 35,274 -- --
Prepayment for investment 675 2,050 330
Other non-current assets 3,380 3,029 488
Deferred tax assets 1,968 1,968 317
Total non-current assets 96,491 93,730 15,109
       
Total assets 785,653 880,887 141,995
       
EQUITY AND LIABILITIES      
Current liabilities      
Trade and other payables 153,474 172,776 27,851
Income tax liabilities 10,699 10,162 1,638
Amounts due to related parties 11,201 18,146 2,925
Deferred revenue 6,350 13,058 2,105
Total current liabilities 181,724 214,142 34,519
       
Total liabilities 181,724 214,142 34,519
       
Equity      
Share capital 86 87 14
Share premium 637,451 636,285 102,567
Reserves 155,326 157,417 25,375
Treasury stock (1) (1) (0)
Deficit (192,644) (131,098) (21,133)
Equity attributable to owners of the Company 600,218 662,690 106,823
Non-controlling interests 3,711 4,055 653
Total equity 603,929 666,745 107,476
       
Total equity and liabilities 785,653 880,887 141,995
Contact:
Investor Relations Contact:
Sky-mobi Limited
Mr. John Bi, Chief Financial Officer
Phone: + (86) 571-8777 0978 (Hangzhou, China)
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
ICR, Inc.
Ms. Chenjiazi Zhong
Phone: + (1) (646) -915-1615 (US)
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.