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KongZhong Corporation Reports Second Quarter 2016 Unaudited Financial ResultsBEIJING, Aug. 29, 2016 /PRNewswire/ -- KongZhong Corporation (NASDAQ: KZ), a leading online game publisher and developer in the PRC, today announced its unaudited financial results for the second quarter of 2016. Second Quarter 2016 Financial Highlights
Business Highlights
Revenues Total revenues for the second quarter of 2016 were US$ 46.35 mn, a 9.90% decrease from the first quarter of 2016 and a 2.52% decrease from the same period last year. Internet Games Revenues Internet Game ("Net Game") revenues were US$ 32.93 mn in the second quarter of 2016, an 11.04% decrease from the first quarter of 2016 but a 34.62% increase from the same period last year. For the second quarter of 2016, mainland China online game operations achieved average monthly active users ("MAUs") of 2.41 mn and aggregated monthly paying accounts ("APAs") of 389k with monthly average revenue per user ("ARPU") of RMB 181.
Internet game revenues made up 71.1% of total revenues in the second quarter of 2016. Mobile Games Revenues Total mobile game revenues were US$ 5.43 mn, a 20.69% increase from the first quarter of 2016 but a 42.41% decrease from the same period last year. The increase in mobile game revenues was due to the newly launched mobile games in the Chinese domestic market and overseas. Total mobile game revenues made up 11.7% of total revenues in the second quarter of 2016. WVAS Revenues WVAS revenues were US$ 7.99mn, a 19.54% decrease from the first quarter of 2016 and a 41.50% decrease from the same period of last year. WVAS made up 17.2% of total revenues in the second quarter of 2016. Gross Profit Total gross profit for the second quarter of 2016 was US$22.67 mn, but if excluding the effect of an US$0.23mn impairment loss on intangible assets, Non-GAAP gross profit was US$22.90 mn, a 3.64% increase from gross profit in the first quarter of 2016 and a 14.95% increase from Non-GAAP gross profit in the same period last year. Total Non-GAAP gross margin was 49.4% in the second quarter of 2016 compared to Non-GAAP gross margins of 43.0% in the first quarter of 2016. Internet Game Gross Profit Internet game gross profit was US$ 18.88 mn, other than the effect of impairment loss on intangible assets, internet game Non-GAAP gross profit was US$ 19.11 mn, a 0.49% decrease from gross profits in the first quarter of 2016 but a 61.63% increase from Non-GAAP gross profit in the same period last year. Internet game gross margin, other than the effect of impairment loss on intangible assets, was 58.0% compared to 51.9% in the first quarter of 2016. Mobile Game Gross Profit Mobile games gross profit was US$ 2.30 mn, a 460.24% increase from the first quarter of 2016 but a 48.76% decrease from the same period last year. 2Q16 gross profit returned to normal operating levels compared to 1Q16 due to recognition of prepaid license fees for offline mobile games in 1Q16. Mobile games gross margin was 42.3% compared to 9.1% in the first quarter of 2016. WVAS Gross Profit WVAS gross profit was US$1.50 mn, a 39.69% decrease from the first quarter of 2016 and a 58.56% decrease from the same period last year. WVAS gross margin was 18.8% compared to 25.0% in the first quarter of 2016. Operating Expenses Total operating expenses in the second quarter of 2016 were US$18.68 mn compared to US$17.48 mn in the first quarter of 2016. The operating expenses in the second quarter of 2016 included the impairment amount of US$1.72 mn related to prepaid license fees for games that will not be launched. Product development expenses in the second quarter of 2016 were US$ 5.61 mn compared to US$ 6.16 mn in the first quarter of 2016. Sales and marketing expenses in the second quarter of 2016 were US$ 9.12 mn compared to US$9.07 mn in the first quarter of 2016. General and administrative expenses in the second quarter of 2016 were US$2.23 mn compared to US$2.25 mn in the first quarter of 2016. The Company's total headcount in the second quarter of 2016 was 822 staff compared to 789 staff at the end of the first quarter of 2016. Earnings US GAAP net income and diluted income per ADS were US$ 3.39 mn and US$ 0.07, respectively. Non-GAAP net income and diluted income per ADS were US$ 8.21 mn and US$ 0.17, respectively. Total ADS on a diluted basis outstanding during the second quarter of 2016 were 47.32mn, compared to 47.50mn outstanding during the first quarter of 2016.
Balance Sheet As of June 30th 2016, the Company had US$ 158.82 mn in cash and cash equivalents, term deposits, held-to-maturity securities, available-for-sale securities and restricted cash or US$ 3.37 per ADS in cash and cash equivalents, term deposits, held-to-maturity securities, available-for-sale securities and restricted cash, net of a US$ 65.04 mn short-term bank loan. The mark to fair value of the Company's investments in Ourgame and Forgame were priced at HK$ 3.47 and HK$ 10.10 per ordinary share, respectively (or US$ 9.27mn and US$ 15.70mn, respectively) as of June 30th 2016, compared to the mark to fair value of the Company's investments in Ourgame and Forgame which were priced at HK$ 4.35 and HK$ 11.44 per ordinary share, respectively (or US$ 11.63mn and US$ 17.78mn, respectively) as of March 31st 2016. 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. On August 25, 2016, the Company announced the Board received a revised non-binding proposal letter, dated August 25, 2016, from Mr. Leilei Wang, chairman and chief executive officer of the Company, and IDG-Accel China Growth Fund II L.P., who, together with certain other parties, formed a buyer group (the "Buyer Group") to acquire all of the outstanding ordinary shares of the Company not owned by them or their affiliates (the "Transaction") for US$7.18 in cash per American depositary share ("ADS", each representing forty ordinary shares), or approximately US$0.1795 per ordinary share. The special committee of the Board (the "Special Committee"), formed to consider the original proposal by the Buyer Group, is evaluating this revised proposal with the assistance of its financial and legal advisors. The Special Committee cautions the Company's shareholders and others considering trading in the Company's securities that no decision has been made by the Special Committee or the Board with respect to the revised proposal. There can be no assurance that any definitive offer will be made, any agreement will be executed or that this or any other transaction will be approved or consummated. 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, August 29, 2016 (7:30 AM Beijing/Hong Kong time, Tuesday, August 30, 2016) 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: 67090787 The dial-in details are as below:
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 September 6, 2016(EST):
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. KongZhong has the exclusive publishing rights for World of Tanks, World of Warplanes, World of Warships, Guild Wars 2, 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.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/kongzhong-corporation-reports-second-quarter-2016-unaudited-financial-results-300319166.html SOURCE KongZhong Corporation |