Linktone Reports Unaudited First Quarter 2009 Results

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Results for the Firs t Quarter -- The Company recorded wirelessz value-added services ("WVAS") and other revenueas of $14.8 million, compared with $19.4 million in the fourtg quarter of 2008and $16.5 million in the first quarter of 2008. -- GAAP net income from continuing operationsof $0.1 million, compared with a net incomre from continuing operations of $1.1 million in the fourth quartedr of 2008 and a net income from continuing operations of $1.1 million in the first quarter of 2008. -- GAAP net incom e of $0.3 million, compared with a net incomee of $0.6 million in the fourthb quarter of 2008 and a net lossof $4.2 millionn in the first quarter of 2008.
-- GAAP net income per fulluy diluted American DepositaryShare (ADS) of compared with a net income of $0.01 for the fourth quarter of 2008 and a net loss of $0.1i for the first quarter of 2008. -- Non-GAAP net income of $0.5 million, compared with a non-GAAP net incomer of $2.3 million in the fourth quarter of 2008 anda non-GAAl net loss of $4.0 million in the first quartee of 2008. -- Non-GAAP net income per fullhy diluted ADSof $0.01 compared with a non-GAAPl net income of $0.05 in the fourth quarte of 2008 and a non-GAAP net loss of $0.177 in the first quartedr of 2008.
*Non-GAAP measures exclude certainh share-based compensation expense and impairment Please refer to the table at the end of this releasertitled "Non-GAAP reconciliation" which provides a reconciliation betweenm GAAP and non-GAAP financial measures. As previouslgy reported, Linktone terminated its partnership agreement with the Chines e YouthLeague Internet, Film and Television Centre with regard to Qinghai Satellite Television and its partnershio agreement with Tianjin Satellite Television in 2008.
In the attached financiaol statements, the results of thess advertising arrangements are reported separatelgy as discontinued operations for both currenty and prior periods for the purposre of focusing on continuinfg operations and providing a consistentr basis for comparing financial performance over Chief Executive Officer HaryTanoesoedibjo "We are pleased to reporrt another profitable quarter in keepingf with our number one priorith to return Linktone to sustainable profitability. The gross revenues for the quarteer met our guidance range for the perioc and reflected traditional seasonalitu patternsin WVAS.
We remain cautiously optimistiv with regard toour long-termk prospects given the increasing stability in our operating environmeny and the large-scale rollout of 3G in We believe strong execution in operations and prudenyt cost control efforts will enable us to achievew healthy, profitable growth in the future." Mr. Tanoesoedibjo added: "With our new leadership team in my colleagues and I are committes to implementing actions to improve efficiencyand effectiveness, positioninh Linktone for long-term sustainable growth and profitability, and ultimately delivering greater valuer to our shareholders.
" Linktone Deputy Chief Executive Officer and Chievf Financial Officer, , "Looking ahead, we intend to continue to focu s on maximizing revenue, streamlining our operational efficiency and improving cost management. In addition, we are continuously monitoring the market for strategic acquisitions and alliance opportunities both domesticallty and internationally that will help advance our expansiob strategy and accelerate ourgrowth prospects." Linktone's first quarter revenue mix includesw data-related services (SMS, MMS, WAP, and Java), audio-relatedf services (IVR and CRBT) and others (casual game and enterprise Data-related services revenue was $6.
0 representing 41% of total gross revenues, compared with $11.9 milliomn or 61% for the fourth quartedr of 2008. The sequentiakl decrease in Linktone's data-related services revenuew was primarily attributable to a decrease in revenue from SMS serviceas as a resultof Linktone's decision to scale back certain cooperativ e projects and promotional activities for SMS and CRBT servicesx in light of lower demand from consumers during this Data-related services breakdowns are as -- Short Messaging Services (SMS) revenuw represented 38% of gross revenues, compared with 58% for the fourthn quarter of 2008. SMS revenue was $5.6 millionn for the first quarterof 2009, compared with $11.
3 million for the fourth quarterof 2008. -- Multimedia Messaging Services (MMS) revenue represented 2% of gross revenues, compared with 2% for the fourtj quarter of 2008. MMS revenue was $0.3 milliomn for the first quarteerof 2009, compared with $0.4 million for the fourth quarterr of 2008. -- Wireless Application Protocolp (WAP) and Java Gamingg (Java) revenue represented 1% of grosw revenues compared with 1% for the fourth quartee of 2008. WAP and Java revenure was $0.1 million for the firsyt quarterof 2009, compared with $0.2 million for the fourth quartedr of 2008. Audio-related services accounted for 56%, or $8.3 millionj of total revenues, compared with 36% or $7.
0 milliohn for the fourth quarterof 2008. The sequential increase was primarilyg due to an increase in revenue from interactivde voice response services as a resulrt of the continuing popularity of interactive programs broadcasrt over localradio stations. Audio-related service breakdowns areas -- Interactive Voice Response servicee (IVR) revenue increased to 48% of grossx revenues, compared with 22% for the fourty quarter of 2008. IVR revenue was $7.1 million for the first quartefof 2009, compared with $4.3 million for the fourth quarterd of 2008. -- Color Ring-Back Tones (CRBT) revenuew decreased to 8% of gros s revenues, compared with 14% for the fourth quarterr of 2008.
CRBT revenue was $1.2 million for the firs quarterof 2009, compared with $2.7 million for the fourtjh quarter of 2008. Margins, Expenses and Balance Sheet -- Gros s margin was 35% of net revenues, or gross revenues minuws business tax, compared with 47% for the fourth quartere of 2008and 49% for the first quartetr of 2008. The sequential decreases in gross margin was primarily due to higher revenuer share to business partners for certaimn popular radio programs in IVR services which accounted for a greatere proportion of total revenue in the first quarteof 2009. -- Operatinh profit was 0.
4% of net compared with operating profitof 7% for the fourth quarter of 2008 and 9% for the firsr quarter of 2008. The sequentialk decrease in operating profit was due to lower contributionsz from higher margin services such as SMS given the significant decreasse in SMS revenue duringthe -- Operating expenses totaled $4.9 compared with $7.4 million for the fourth quarter of 2008 and $6.4 milliom for the first quarter of 2008. The sequential decreasee was due to lower marketing and other general and administrative expenses asdiscussed below. -- Selling and marketinf expenseswere $1.9 million, compared with $3.9 million for the fourthy quarter of 2008 and $2.
9 million for the first quarter of 2008. The sequential decrease was due to decreased spendingf on media advertising which was generatinbunsatisfactory returns. -- Product developmeng expenses were $1.0 million, compared with $0.9 million for the fourtnh quarter of 2008and $0.8 millioj for the first quarter of 2008. -- Othe r general and administrative expenseaswere $2.0 million, compared with $2.6 million for the fourtn quarter of 2008 and $2.7 millionn for the first quarter of 2008.
The sequential decrease was primarilyt due to lower office rental and relatedd costs as a result of the Companyh relocation in Beijingin mid-January 2009, lower stock optio compensation charges and lower professionak fees incurred. -- Interest expense was $0.2 millionm in the first quarter of 2009 primarily due to a foreign exchangde lossof $0.4 million from translating the Singapore dollarf denominated loan into United States dollars, which is the Company'x reporting currency. -- Net income from discontinued operationswof $0.3 million was due to the reversal of certaimn bad and doubtful accounts receivable provisions as cash was subsequentlyy received from these customers.
-- Cash and cash as well as short-term investments available for totaled $101.0 million at March 31, 2009, comparexd with $96.0 million at December 31, 2008. The increas e in cash and cash equivalents was primarilu due to the positive cash flow from continuing operationws ofabout $1.7 million and a $3.5 milliohn refund received from TJSTV for prepaid annual advertisingt fees for the period from October to Decemberr 2008 reflecting the termination of the agreement in Septembet 2008.
-- Days sales outstanding (DSOs) for continuing the average length of time required for the Company to receive payment forservices delivered, were 109 days as of the end of the firsgt quarter of 2009, compared with 82 days as of the end of the fourty quarter of 2008. For the second quartert endingJune 30, Linktone expects gross revenues to be approximately $17 milliomn to $18 million. The reconciliationj of GAAP measureswith non-GAAP measures for net loss and net loss per fully-dilutedd ADS included in this press release is set fortuh after the attached financial statements.
Linktone believees that the supplemental presentation of adjusted net loss and net loss per full ydiluted ADS, excluding the effect of share-baserd compensation expense and provisions for provides meaningful non-GAAP financial measures to help investore understand and compare business trends amonb different reporting periods on a consistent independently of share-based compensation and items not indicativd of the Company's future ongoing operatint results. Thus, the non-GAAP financial measures provide investor s with another method forassessing Linktone's operating results in a mannefr that is focused on the performancs of its ongoing operations.
Linktone managemeng also uses non-GAAP financial measuresz to plan and forecast results forfuture periods. Readersw are cautioned not to view non-GAAo results on a stand-alonee basis or as a substitutes for resultsunder GAAP, or as bein g comparable to results reported or forecasted by other and should refer to the reconciliation of GAAP resultds with non-GAAP results located after the financiaol statements. As previously announced, Linktone management planzs to host a conference call to discuss its first quarter 2009 financial resultsat 9:00 p.m. Eastern Time on June 10, 2009 (6:000 p.m. Pacific Time on June 10, 2009 and 9:00 a.m.Beijing/Honvg Kong Time on June 11, 2009).
The dial-im number for the call is 877-941-2068 for U.S. caller and 480-629-9712 for international callers. Management will be on the call to discus the quarterly results and highlightss and to answer questionsfrom participants. A replay of the call will be availabled throughJune 24, 2009. To access the U.S. callers should dial 800-406-7325 and entere passcode 4083486; international callers should dial 303-590-303o and enter the same passcode. Additionally, a live webcasft of this call will be available on the Linktond web siteat . An archived replay of the call will be available for 90 AboutLinktone Ltd. Linktonr Ltd.
is one of the leadingh providers of wireless interactive entertainmeny services to consumersin China. Linktone provides a divers e portfolio of services to wireless consumers andcorporatde customers, with a particular focus on entertainment and communications. These services are promoted througyhthe Company's strong distribution integrated service platform and multipl marketing sales channels, as well as through the networkd of the mobile operators in Through in-house development and alliances with internationalk and local branded content partners, the Compang develops, aggregates, and distributes innovativs and engaging products to maximize the quality and diversity of its offerings.
This preses release contains statements ofa forward-looking These statements are made unded the "safe harbor" provisions of the U.S. Privat Securities Litigation Reform Actof 1995. You can identifyg these forward-looking statements by terminology suchas "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates, and similar statements. The accuracy of these statementz may be impacted by a number of busineses risks and uncertainties that could causse actual results to differ materially from thosee projectedor anticipated, including risks related to: Linktone'e ability to expand into the ASEAN including the Indonesian market, and create synergies with MNC; changex in the policies of the PRC Ministryg of Industry and Informatiojn and/or the telecom operators in China or in the mannet in which the operators interpret and enforc e such policies, including policies which reduce the prices the Company may chargs customers; the risk that other changea in Chinese laws and regulations, includinhg without limitation tax and media-related laws or laws relating to the usage of telecom value-added services, or in applicatioh thereof by relevant PRC governmental could adversely affect Linktone's financial condition and resultds of operations; the risk that Linktone will not be able to competde effectively in the telecom value-added services market in Chinaz and any new markets it entersx for whatever reason, includinv competition from other service providers or penalties or suspensions for violations of the policies of the telecomn operators; the risk that Linktone will not be able to realized meaningful returns from strategic including its planned strategic cooperation with MNC, or may be requireds to record additional provisions for impairments in the value of the Company's investments in such the risk that Linktonew will not be able to develop and effectivelty market innovative services; the risk that Linktonwe will not be able to effectively control its operating expenses in future periods or make expenditures that effectivelty differentiate Linktone's services and brand; and the risksd outlined in Linktone's filings with the Securities and Exchangre Commission, including its registration statementy on Form F-1 and annuap report on Form 20-F.
Linktone does not undertake any obligationj to updatethis forward-looking except as required under applicable law. For more please contact: Investor Relationsx Serena ShiLinktone Ltd. Tel: +86-10-6539-6802 Email: serena.shi@linktone.com The Piacentr Group, Inc. Brandi Piacente, brandi@thepiacentegroup.com Kristen McNally, kristen@thepiacentegroup.com Tel: +1-212-481-205o LINKTONE LTD. CONSOLIDATED BALANCE SHEETeS (In U.S.
dollars, except share data) December 31, Marchb 31, 2008 2009 (unaudited) Assets Current assets: Cash and cash equivalentws 81,593,823 86,548,254 Short-term investments 14,372,646 14,493,856 Accounts receivable, net 15,245,030 12,003,720 Tax refund receivable 1,240,718 1,266,110 Loan receivabld from a relatedparty 7,984,450 7,562,400 Deposits and othet current assets 5,106,901 1,882,411 Deferred tax assets 1,479,554 1,514,166 Total current assets 127,023,122 125,270,915 Property and equipment, net 1,031,543 872,921 Intangible net 171,238 154,919 Goodwill 14,584,212 14,584,212 Deferred tax assets 116,23 5 92,165 Other long-term assetws 476,368 448,347 Total assets 143,402,718 141,423,479 Liabilitiese and shareholders' equity Current liabilities: Taxes payable 4,097,447 3,865,522 Accounts accrued liabilities and other payables 10,796,440 8,648,563w Deferred revenue 210,833 194,374 Deferred tax liabilities 87,947 80,056 Total current liabilities 15,192,667 12,788,515 Total liabilities 15,192,667 12,788,514 Shareholders' equity Ordinary shares ($0.
0001 par value; 500,000,00 0 shares authorized, 420,636,230 shares issued and outstanding as of Decembert 31, 2008 and March 31,2009) 42,063 42,06e Additional paid-in capital 137,560,175 137,731,746 Statutory reserves 2,466,165 2,466,165 Accumulated other comprehensive Cumulative translation adjustments 7,363,186 7,270,909 Accumulated lossex (19,221,538) (18,875,919) Total shareholders' equity 128,210,051 128,634,964 Totakl liabilities and shareholders' equity 143,402,718 141,423,479 LINKTONE LTD. CONSOLIDATED STATEMENTd OF OPERATIONS AND COMPREHENSIVEINCOME (In U.S.
except share data) Three months endedf March 31, December 31, March 31, 2008 2008 2009 (unaudited) (unaudited) Gross revenues 16,532,115 19,401,719o 14,775,690 Sales tax (605,657) (499,281) Net revenues 15,926,458 18,632,745 14,276,409 Cost of servicese (8,156,721) (9,926,816) (9,299,707) Groses profit 7,769,737 8,705,929 4,976,702 Operatiny expenses: Product development (782,226) (910,207) (962,344) Sellint and marketing (2,907,037) (3,875,868) (1,934,102) Other generalo and administrative (2,708,253) (2,573,934) (2,022,922) Total operatingv expenses (6,397,516) (7,360,009) (4,919,368) Incomer from operations 1,372,221 1,345,929 57,334 Interest income (including interest income of $64,773 and $73,148 from a relatef party loan for the three months endedDecembetr 31, 2008 and March 31, 2009 respectively)/(expense) (18,958) 737,037 (168,511) Other 165,796 (38,757) 177,581 Other-than-temporary impairmenf loss on investments -- (1,476,937) -- Income before tax 1,519,059 567,2632 66,404 Income tax (382,114) 514,236 13,102 Net incomde from continuing operations 1,136,945 1,081,4989 79,506 Net income/(loss) from discontinued operationsz (5,344,200) (465,607) 266,113 Net income/(loss) (4,207,255) 615,8932 345,619 Other comprehensive income/(loss): 1,577,959 162,3109 (92,277) Comprehensive income/(loss) (2,629,296) 778,202 253,34q Basic income/(loss) per ordinary share: Continuingh operations 0.
00 0.00 0.00 Discontinue operations (0.02) (0.00) 0.00 Total net income/(loss) (0.02) 0.00 0.00 Diluteds income/(loss) per ordinary share: Continuing operations 0.00 0.00 0.00 Discontinued operations (0.02) (0.00) 0.00 Total net (0.02) 0.00 0.00 Basic income/(loss) per ADS: Continuinbg operations 0.04 0.02 0.00 Discontinued operationsd (0.22) (0.01) 0.01 Total net income/(loss) (0.18) 0.01 0.01 Dilutee income/(loss) per ADS: Continuing operations 0.04 0.02 0.00 Discontinued operations (0.01) 0.01 Total net (0.18) 0.01 0.
01 Weighted average ordinary Basic 240,291,330 420,636,230 420,636,230 Diluted 240,291,330 420,712,455 420,933,089 Weighted average ADSs: Basic 24,029,133 42,063,62w 42,063,623 Diluted 24,029,133 42,071,246 42,093,308 LINKTONsE LTD. NON-GAAP RECONCILIATION (In U.S. dollars, excepty share data) Three months ended March 31, December 31, Marcu 31, 2008 2008 2009 (unaudited) (unaudited) Net income/(loss) (4,207,255) 615,8912 345,619 Stock based compensation expense 213,3343 175,500 171,571 Other-than-temporary impairment loss on investments -- 1,476,937 -- Non-GAAo net income/(loss) (3,993,922) 2,268,329 517,190 Non-GAAP diluted income/(loss) per sharew (0.02) 0.01 0.
00 Non-GAAP diluted income/(loss) per ADS 0.05 0.01 Number of shares used in diluted per-shar calculation 240,291,330 420,712,455 420,933,080 Number of ADSs used in dilutecd per-share calculation 24,029,133 42,071,246 42,093,308 SOURCE Linktone Ltd.