EX-99.1 2 v418962_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

Sky-mobi Limited Announces Second Quarter 2015 Unaudited Financial Results

 

Conference Call to be Held on August 24, 2015 at 8:00 AM U.S. Eastern Time

 

HANGZHOU, China, August 24, 2015 – Sky-mobi Limited (“Sky-mobi” or the “Company”) (NASDAQ: “MOBI”), a leading mobile application platform and game publisher in China, today announced its unaudited financial results for the second quarter ended June 30, 2015.

 

Second Quarter 2015 Highlights

 

·Total revenue was RMB164.1 million (US$26.5 million) in the second quarter of 2015, compared to RMB170.2 million in the prior year period.

 

·Revenue from smartphone business increased by 17.0% to RMB154.9 million (US$25.0 million), or 94.4% of total revenue, from RMB132.5 million, or 77.8% of total revenue in the prior year period.

 

Mr. Michael Tao Song, chairman and chief executive officer of Sky-mobi, stated, “During the second quarter of 2015, we increased the number of games published on both iOS and Android platforms with nearly 37.3 million monthly active users (“MAUs”), despite the various measures tightening payment system security implemented by the big three mobile carriers in China since mid-May, which has adversely affected our operations in the second quarter of 2015. In order to address these challenges, we will continue to strengthen and expand our mobile game publishing capabilities by publishing up to ten more high-quality overseas smartphone games in the China market by the end of this year. We believe these efforts will help us stabilize our business and allow us to reestablish solid growth in the coming quarters.”

 

Mr. Fischer Xiaodong Chen, chief financial officer of the Company, commented, “Our revenue from smartphone business continued to grow during the second quarter of 2015, as indicated by the 17% year-over-year increase to RMB154.9 million, accounting for over 94% of our total revenue. Unfortunately, due to the tightening measures implemented by the big three mobile carriers in China, including but not limited to the suspension of certain of their billing and payment channels, our mobile subscribers experienced increased difficulty in purchasing our mobile content, negatively impacting our total revenue. In an effort to mitigate this negative impact, we have initiated a series of cost-cutting measures, including streamlining our operations and employee base and divesting certain businesses that do not offer strong future growth potential such as Hangzhou Mopin Technology Co., Ltd. (“Mopin”), one of our subsidiaries. Looking ahead, we will continue to focus on introducing high-quality smartphone games, platform expansion, as well as operational discipline.”

 

 
 

 

Second Quarter 2015 Financial Results

 

Total Revenue

 

Total revenue was RMB164.1 million (US$26.5 million), compared to RMB233.0 million in the previous quarter and RMB170.2 million in the prior year period. The decrease was mainly due to the various measures and policies tightening payment system security implemented by the big three mobile carriers in China since mid-May, which have discouraged and disabled mobile subscribers from purchasing certain mobile content from mobile application providers, including Sky-mobi .

 

Revenue from smartphone business was RMB154.9 million (US$25.0 million), or 94.4% of total revenue, compared to RMB219.3 million in the previous quarter, or 94.1% of total revenue, and RMB132.5 million in the prior year period, or 77.8% of total revenue. The quarter-over-quarter decrease was due to the policies implemented by mobile carriers mentioned above. The year-over-year increase was mainly attributable to the Company’s increasing efforts in publishing single-player games both over the Maopao platform and through third-party distribution channels.

 

Revenue can be further broken down into three categories: “revenue from single-player games”, “revenue from multiplayer games” and “other revenue”. Revenue from single-player games was RMB133.7 million (US$21.6 million), compared to RMB194.9 million in the previous quarter and RMB110.7 million in the prior year period. ARPU for single-player games was RMB10.2, compared to RMB10.3 in the previous quarter. Revenue from multiplayer games was RMB14.7 million (US$2.4 million), compared to RMB22.8 million in the previous quarter and RMB34.3 million in the prior year period. ARPU for multiplayer games was RMB156.9, compared to RMB169.6 in the previous quarter. Other revenue was RMB15.7 million (US$2.5 million), compared to RMB15.3 million in the previous quarter and RMB25.2 million in the prior year period.

 

Cost of Revenue and Gross Profit

 

Total cost of revenue was RMB130.6 million (US$21.1 million), compared to RMB185.3 million in the previous quarter and RMB127.1 million in the prior year period.

 

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

 

Total non-IFRS cost of revenue was RMB130.4 million (US$21.0 million), compared to RMB184.9 million in the previous quarter and RMB127.0 million in the prior year period. Non-IFRS cost of revenue was composed of non-IFRS cost associated with payments to industry participants and non-IFRS direct cost as further discussed below.

 

 

1 “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, Maopao Desktop and Zimon.

2 “ARPU” stands for average revenue per paying user.

 

 
 

 

Non-IFRS cost associated with payments to industry participants was RMB124.9 million (US$20.2 million), compared to RMB178.8 million in the previous quarter and RMB120.2 million in the prior year period. The decrease was primarily due to decreased channel cost, which was in line with decrease in total revenue.

 

Non-IFRS direct cost was RMB5.5 million (US$0.9 million), compared to RMB6.1 million in the previous quarter and RMB6.8 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 the Maopao platform. The decrease in non-IFRS direct cost was due to decreased employee-related expenses as a result of the Company’s headcount restructuring in an effort to achieve greater efficiency.

 

Non-IFRS gross profit was RMB33.7 million (US$5.4 million), compared to RMB48.1 million in the previous quarter and RMB43.2 million in the prior year period. Non-IFRS gross margin was 20.6%, compared with 20.6% in the previous quarter and 25.4% in the prior year period. The year-over-year decrease in non-IFRS gross margin was primarily due to the higher revenue contribution of the Company’s smartphone business. The Company’s smartphone business in general has a lower profit margin compared to its feature phone business as the Company generally offers more attractive revenue sharing arrangements to its smartphone content providers and handset companies.

 

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 RMB48.7 million (US$7.9 million), compared to RMB40.6 million in the previous quarter and RMB35.3 million in the prior year period.

 

Total non-IFRS operating expenses were RMB45.5 million (US$7.3 million), compared to RMB35.2 million in the previous quarter and RMB32.6 million in the prior year period. The increase in total non-IFRS operating expenses was mainly due to the increased marketing and promotion expenses to promote the Company’s Maopao platform and products, as well as severance costs incurred as a result of the Company’s strategy to streamline its employee base.

 

Loss from operations was RMB15.2 million (US$2.5 million), compared to profit from operations of RMB7.2 million in the previous quarter and RMB7.8 million in the prior year period.

 

Non-IFRS loss from operations was RMB11.7 million (US$1.9 million), compared to profit from operations of RMB12.9 million in the previous quarter and RMB10.5 million in the prior year period.

 

Net Profit/Loss

 

Net loss was RMB6.1 million (US$1.0 million), compared to net profit of RMB14.2 million in the previous quarter and RMB63.4 million in the prior year period. Basic and diluted loss per common share were RMB0.02 (US$0.00) and RMB0.02 (US$0.00), respectively, which represents the equivalent of RMB0.18 (US$0.03) and RMB0.18 (US$0.03) per ADS, respectively.

 

 
 

 

Non-IFRS net loss was RMB2.7 million (US$0.4 million), compared to net profit of RMB20.0 million in the previous quarter and net profit of RMB66.1 million in the prior year period. Non-IFRS basic and diluted loss per common share were RMB0.01 (US$0.00) and RMB0.01 (US$0.00), respectively, which represents the equivalent of RMB0.06 (US$0.01) and RMB0.06 (US$0.01) per ADS, respectively.

 

The weighted average number of ADSs used to calculate basic and diluted loss per ADS for the second quarter of 2015 was 27,994,562 and 27,994,562, respectively.

 

Common Shares

 

Sky-mobi had approximately 224.8 million common shares outstanding as of June 30, 2015, or the equivalent of approximately 28.1 million ADSs outstanding.

 

Other Operating Data

 

   For the three months ended 
   March 31, 2015   June 30, 2015 
         
Maopao Platform          
Average MAU3 (in thousands)   37,742    37,268 
           
Single-player games          
Average ARPU (RMB)   10.3    10.2 
           
Multiplayer games          
Average ARPU (RMB)   169.6    156.9 

 

Business Divestiture

 

In August 2015, the Company entered into certain equity transfer agreements, pursuant to which it agreed to transfer all of its 79.88% equity interest in Mopin to a shareholder of XPlane Ltd., as well as an entity held by the Mopin management. The consideration of the transfer was determined primarily on the basis of the fair value of Mopin as of July 31, 2015. The transaction is expected to be completed in the third quarter of 2015 and is part of the Company’s cost-cutting measures to divest businesses that do not offer strong future growth potential.

 

Business Outlook

 

Since the second quarter of 2015, the three mobile carriers in China (China Mobile, China Unicom and China Telecom) have implemented various measures tightening payment system security, including suspending certain of their billing and payment channels and introducing additional mandatory payment verification steps to the payment process. These measures have discouraged and disabled mobile subscribers from purchasing certain mobile content from mobile application providers, including Sky-mobi, resulting in lost revenue of these mobile application providers. The Company expects its total revenue for the third quarter of 2015 to be significantly lower than that of the second quarter, as these measures will continue to adversely affect the overall mobile gaming industry in China.

 

 

3 “MAU” stands for monthly active users. It refers to the number of users that visit Maopao Platform in a particular month, adjusted to eliminate double-counting of the same user. Average MAUs for a particular period is the average of the MAU during that period.

 

 
 

 

The Company is assessing and will continue to assess the impact of these measures implemented by the three mobile carriers and their implication on its business. In addition, Sky-mobi is in the process of introducing more high-quality smartphone games on both iOS and Android platforms in the coming months, which it believes will partially offset the impact of these measures.

 

Conference Call and Webcast

 

The Company will hold a conference call on Monday, August 24, 2015 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 3018-6776
Conference ID: # 9738357

 

The replay will be accessible through September 1, 2015 by dialing the following numbers:

 

United States Toll Free: +1-855-452-5696
International: +61 2 90034211  
Conference ID: # 9738357

 

A live and archived webcast of the conference call will be available on the Company’s investor relation 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 revenue, gross profit, operating expenses, profit/loss from operations, net profit/loss and net profit/loss 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 revenue is defined as cost of revenue excluding share-based compensation expenses.

 

Non-IFRS gross profit is defined as revenue less non-IFRS cost of revenue. 

 

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 (loss) is defined as non-IFRS profit (loss) from operations plus/minus other gains or losses, impairment loss on investments in associates and share of results of associates, less income tax.

 

Non-IFRS basic and diluted earnings (loss) per common share/ADS are defined as non-IFRS net profit (loss) 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 RMB6.2000 to US$1.00, the exchange rate at June 30, 2015 as set forth in the H.10 statistical release of the Federal Reserve Board.

 

About Sky-mobi Limited

 

Sky-mobi Limited is a leading mobile application platform and game publisher 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 also publishes domestic and foreign game titles through its own Maopao App Store platform and third party platforms. 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.

 

 
 

 

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.

 

Investor Relations Contact:

 

Chenjiazi Zhong

ICR, Inc.

Phone: + (1) (646) -915-1615 (US)

Email: investor.relations@sky-mobi.com

 

Source: Sky-mobi

 

 
 

 

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, 
   2014   2015   2015   2015   2014   2015   2015 
In thousands  (RMB)   (RMB)   (RMB)   (US$)   (RMB)   (RMB)   (US$) 
(Except for share and per share data)                                   
                                    
Revenue   170,220    233,008    164,142    26,475    298,784    397,150    64,056 
Cost of revenue   (127,140)   (185,254)   (130,570)   (21,060)   (223,146)   (315,824)   (50,939)
Gross profit   43,080    47,754    33,572    5,415    75,638    81,326    13,117 
                                    
Research and development expenses   (9,035)   (12,451)   (12,513)   (2,018)   (18,154)   (24,964)   (4,026)
Sales and marketing expenses   (10,192)   (13,230)   (16,235)   (2,619)   (20,186)   (29,465)   (4,752)
General and administrative expenses   (17,064)   (16,103)   (21,582)   (3,481)   (31,556)   (37,685)   (6,078)
Other income and expense   1,017    1,225    1,602    258    2,816    2,827    456 
Total operating expenses   (35,274)   (40,559)   (48,728)   (7,860)   (67,080)   (89,287)   (14,400)
Profit (loss) from operations   7,806    7,195    (15,156)   (2,445)   8,558    (7,961)   (1,284)
                                    
Other gains and losses   5,319    6,523    4,666    753    11,229    11,188    1,805 
Impairment loss on investments in associates   (765)   (2,222)   (776)   (125)   (765)   (2,998)   (484)
Share of results of associates   (288)   4,690    5,416    874    (1,250)   10,106    1,630 
Gain on disposal of associates   56,351    -    497    80    56,351    497    80 
Profit (loss) before tax   68,423    16,186    (5,353)   (863)   74,123    10,832    1,747 
Income tax expenses   (5,067)   (1,941)   (740)   (119)   (6,138)   (2,681)   (432)
Profit (loss) for the period   63,356    14,245    (6,093)   (982)   67,985    8,151    1,315 
                                    
Total comprehensive profit (loss) for the period   63,356    14,245    (6,093)   (982)   67,985    8,151    1,315 
                                    
Profit and total comprehensive income (loss) attributable to:                                   
- Owners of the Company   63,667    14,669    (5,308)   (855)   68,432    9,360    1,510 
- Non-controlling interests   (311)   (424)   (785)   (127)   (447)   (1,209)   (195)
    63,356    14,245    (6,093)   (982)   67,985    8,151    1,315 
                                    
Earnings (loss) per common share                                   
Basic   0.26    0.06    (0.02)   (0.00)   0.29    0.04    0.01 
Diluted   0.26    0.06    (0.02)   (0.00)   0.28    0.04    0.01 
                                    
Weight average number of ADS                                   
Basic   29,631,757    27,807,989    27,994,562         29,512,576.44    27,901,791      
Diluted   29,788,088    27,874,209    27,994,562         29,721,467.55    27,973,071      
                                    
Weight average number of shares                                   
Basic   237,054,058    222,463,910    223,956,494         236,100,612    223,214,326      
Diluted   238,304,704    222,993,672    223,956,494         237,771,740    223,784,569      

 

 
 

 

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, 
   2014   2015   2015   2015   2014   2015   2015 
In thousands  (RMB)   (RMB)   (RMB)   (US$)   (RMB)   (RMB)   (US$) 
(Except for share and per share data)                            
                             
IFRS cost of revenue   (127,140)   (185,254)   (130,570)   (21,060)   (223,146)   (315,824)   (50,939)
Less: share-based compensation expenses   98    336    169    27    341    505    81 
Non-IFRS cost of revenue   (127,042)   (184,918)   (130,401)   (21,033)   (222,805)   (315,319)   (50,858)
              　    　                
IFRS gross profit   43,080    47,754    33,572    5,415    75,638    81,326    13,117 
Add: share-based compensation expenses   98    336    169    27    341    505    81 
Non-IFRS gross profit   43,178    48,090    33,741    5,442    75,979    81,831    13,198 
    　         　    　                
Total IFRS operating expenses   (35,274)   (40,559)   (48,728)   (7,860)   (67,080)   (89,287)   (14,400)
Less: share-based compensation expenses   2,635    5,402    3,248    524    6,643    8,650    1,395 
Total non-IFRS operating expenses   (32,639)   (35,157)   (45,480)   (7,336)   (60,437)   (80,637)   (13,005)
    　         　    　    　    　    　 
IFRS  profit (loss) from operations   7,806    7,195    (15,156)   (2,445)   8,558    (7,961)   (1,283)
Add: share-based compensation expenses   2,733    5,738    3,417    551    6,984    9,155    1,477 
Non-IFRS profit (loss) from operations   10,539    12,933    (11,739)   (1,894)   15,542    1,194    194 
    　         　    　    　    　    　 
IFRS net profit (loss) for the period   63,356    14,245    (6,093)   (982)   67,985    8,151    1,315 
Add: share-based compensation expenses   2,733    5,738    3,417    551    6,984    9,155    1,477 
Non-IFRS net profit (loss) for the period   66,089    19,983    (2,676)   (431)   74,969    17,306    2,792 
Non-IFRS earnings (loss) per common share                                   
                                    
Non-IFRS earnings (loss) per common share                                   
Basic   0.28    0.09    (0.01)   (0.00)   0.31    0.08    0.01 
Diluted   0.27    0.09    (0.01)   (0.00)   0.31    0.08    0.01 
                                    
Weight average number of shares                                   
Basic   237,054,058    222,463,910    223,956,494         236,100,612    223,214,326      
Diluted   238,304,704    222,993,672    223,956,494         237,771,740    223,784,569      

 

 
 

 

Sky-mobi Limited

Unaudited Consolidated Statements of Financial Position (IFRS)

 

   As of   As of   As of 
   March 31,   June 30,   June 30, 
   2015   2015   2015 
In thousands  (RMB)   (RMB)   (US$) 
             
ASSETS               
Current assets               
Cash and cash equivalents   135,362    127,598    20,580 
Term deposits   369,427    366,505    59,114 
Investment at fair value through profit or loss   28,702    37,729    6,085 
Trade and other receivables   246,711    216,533    34,925 
Amounts due from related parties   7,879    7,444    1,201 
Total current assets   788,081    755,809    121,905 
                
Non-current assets               
Property and equipment   8,601    7,870    1,269 
Investments in associates   107,954    111,091    17,918 
Investments in funds   12,284    12,218    1,971 
Available-for-sale investments   50    50    8 
Other non-current assets   2,458    2,214    357 
Deferred tax assets   2,746    2,746    443 
Total non-current assets   134,093    136,189    21,966 
                
Total assets   922,174    891,998    143,871 
                
EQUITY AND LIABILITIES               
Current liabilities               
Trade and other payables   239,920    237,551    38,314 
Income tax liabilities   8,226    8,126    1,311 
Amounts due to related parties   44,707    19,646    3,169 
Deferred revenue   3,659    3,049    492 
Total current liabilities   296,512    268,372    43,286 
                
Total liabilities   296,512    268,372    43,286 
                
Equity               
Share capital   81    82    13 
Share premium   602,854    610,648    98,492 
Reserves   154,037    150,299    24,242 
Deficit   (134,984)   (140,293)   (22,628)
Equity attributable to owners of the Company   621,988    620,736    100,119 
Non-controlling interests   3,674    2,890    466 
Total equity   625,662    623,626    100,585 
                
Total equity and liabilities   922,174    891,998    143,871