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Sungy Mobile Reports Third Quarter 2014 Unaudited Financial Results

GUANGZHOU, China, Nov. 24, 2014 (GLOBE NEWSWIRE) -- Sungy Mobile Limited (Nasdaq:GOMO) ("Sungy Mobile" or the "Company"), a leading provider of mobile internet products and services globally with a focus on applications and mobile platform development, today announced its unaudited financial results for the third quarter ended September 30, 2014.

Third Quarter 2014 Highlights

  • Total revenues increased to RMB97.3 million (US$15.9 million) from RMB90.7 million in the prior year period.
  • Revenues from mobile application products and services increased to RMB48.8 million (US$7.9 million) from RMB41.6 million in the prior year period.
  • As of September 30, 2014, accumulated number of users1 of GO series products increased by 48.9% year over year to 484 million from 325 million as of September 30, 2013.
  • Total average monthly active users (MAU) of GO series products increased by 11.5% year over year to 97 million in the third quarter 2014 from 87 million in the prior year period.

Mr. Yuqiang Deng, Chief Executive Officer of Sungy Mobile, stated, "We continue to execute on our strategic initiatives and make advances towards our long-term goals. Total revenues increased year-over-year to RMB97.3 million, largely driven by our popular GO series products, which continue to experience strong global demand. Since our shifting of focus to further improve product functionality and user interface, as we announced in the second quarter of 2014, we have already witnessed solid progress in this effort, as evidenced by the 11.5% year-over-year growth to over 97 million MAU and over 484 million accumulated users as of September 30, 2014. With concrete action plans and focused execution, we are confident about the growth prospects across Sungy Mobile's mobile platform going forward."

Mr. Deng continued, "We will continue to invest judiciously into the R&D of our GO series platform, which will enable us to strengthen our operational capabilities and further solidify our foundation for monetization. Moreover, as we strategically allocated resources and leveraged our expanded executive team, we are confident in our overall competence in expanding our user base globally, positioning Sungy Mobile for long-term success and delivering value to our shareholders."

Third Quarter 2014 Financial Results

REVENUES

Total revenues for the third quarter of 2014 increased by 7.3% to RMB97.3 million (US$15.9million) from the prior year period. This increase was primarily driven by the increasing popularity of the Company's GO series products. Total revenues, excluding the impact of the GetJar acquisition, for the third quarter of 2014 increased by 2.4% to RMB92.9 million (US$15.1 million) from the prior year period.

Revenues from mobile application products and services increased by 17.2% to RMB48.8 million (US$7.9million) in the third quarter of 2014 from RMB41.6 million in the prior year period. This increase was primarily driven by a 51.4% year-over-year increase in revenues from third-party advertising networks2 to RMB16.5 million (US$2.7 million), and a 23.7% year-over-year increase in revenues from direct advertising services to RMB18.3 million (US$3.0 million).

Revenues from mobile reading services was RMB20.9 million (US$3.4 million) in the third quarter of 2014, compared with RMB29.2 million in the prior year period, primarily due to fewer purchases of the Company's online literary content.

Revenues from mobile portal marketing service increased by 28.5% to RMB16.6 million (US$2.7 million) in the third quarter of 2014 from RMB12.9 million in the prior year period, primarily driven by the increased advertising campaign during the 2014 FIFA World Cup events.

Revenues from others, which are primarily revenues from mobile games, increased by 59.7% year over year to RMB11.1 million (US$1.8 million) in the third quarter of 2014 from RMB6.9 million in the prior year period.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues was RMB37.7 million (US$6.1 million) in the third quarter of 2014, as compared to RMB25.0 million in the prior year period. This increase was primarily attributable to increased distribution fees, the costs related to content acquisition, as well as the amortization of intangible assets associated with the GetJar acquisition.

Gross profit was RMB59.6 million (US$9.7 million) in the third quarter of 2014, compared with RMB65.7 million in the prior year period. Gross margin was 61.2% in the third quarter of 2014, as compared with 72.4% in the prior year period. Gross profit, excluding the impact of the GetJar acquisition, was RMB59.9 million (US$9.8 million) in the third quarter of 2014, as compared to RMB65.7 million in the prior year period. Gross margin, excluding the GetJar acquisition, was 64.5% in the third quarter of 2014, as compared to 72.4% in the prior year period. The decrease in gross margin was mainly due to the higher content acquisition and distribution costs associated with the Company's mobile reading services.

OPERATING INCOME (LOSS) AND EXPENSES

Total operating expenses for the third quarter of 2014 were RMB75.2 million (US$12.3 million), compared with RMB35.1 million in the prior year period.

  • Research and development expenses increased to RMB26.9 million (US$4.4 million) from RMB11.1 million in the prior year period. This increase was primarily due to the headcount expansion in research and development department and the increased staff-related costs as a result of the GetJar acquisition.
  • Selling and marketing expenses were RMB19.6 million (US$3.2 million) in the third quarter of 2014, compared with RMB11.9 million in the prior year period. This increase was primarily due to the Company's efforts to expand the awareness of its GO series products and the related brands globally.
  • General and administrative expenses were RMB28.7 million (US$4.7 million) in the third quarter of 2014, compared with RMB12.1 million in the prior year period. This increase was primarily attributable to increased share-based compensation costs and professional fees.

Operating loss in the third quarter of 2014 was RMB15.6 million (US$2.5 million), compared with operating income of RMB30.6 million in the prior year period. Operating loss, excluding the impact of the GetJar acquisition, was RMB7.3 million (US$1.2 million), as compared with operating income of RMB30.6 million in the prior year period. The operating margin, excluding the impact of the GetJar acquisition, was -7.8%, as compared with 33.8% in the prior year period. The decrease in the operating margin, excluding the impact of the GetJar acquisition, was primarily due to the increased share-based compensation costs and R&D expenses.

NET INCOME

Net income was RMB4.4 million (US$0.7 million) in the third quarter of 2014, as compared with RMB27.5 million in the prior year period. Net income, excluding the impact of the GetJar acquisition, was RMB12.7 million (US$2.1 million), as compared with RMB27.5 million in the prior year period. Net margin, excluding the impact of the GetJar acquisition, was 13.7% in the third quarter of 2014, compared with 30.3% in the prior year period.

Adjusted EBIT3 was RMB8.2 million (US$1.3 million) in the third quarter of 2014, as compared with RMB35.0 million in the prior year period. Adjusted EBIT margin4 was 8.4% in the third quarter of 2014, compared with 38.6% in the prior year period.

Adjusted net income5 was RMB19.7 million (US$3.2 million) in the third quarter, as compared with RMB31.7 million in the prior year period. Adjusted net margin6 was 20.3% in the third quarter, as compared with 35.0% in the prior year period.

NET INCOME PER ADS

Diluted earnings per ADS7 in the third quarter of 2014 were RMB0.13 (US$0.02), as compared with RMB0.55 in the prior year period.

Adjusted diluted earnings per ADS8 in the third quarter of 2014 were RMB0.59 (US$0.10), as compared with RMB0.73 in the prior year period.

CASH AND CASH EQUIVALENTS AND TIME DEPOSITS BALANCE

As of September 30, 2014, the Company had cash and cash equivalents of RMB273.8 million (US$44.6 million) and time deposits of RMB424.0 million (US$69.1 million).

SHARES OUTSTANDING

As of September 30, 2014, the Company had a total of 200.9 million ordinary shares outstanding, or the equivalent of 33.5 million ADSs outstanding, comprised of 65,858,046 Class A ordinary shares and 135,045,672 Class B ordinary shares9.

Business Outlook

For the fourth quarter of 2014, the Company expects its total revenues to be between RMB75 million and RMB80 million. These forecasts reflect the Company's current and preliminary view on the market and operational conditions, which are subject to change.

Conference Call Information

The Company will hold a conference call on Monday, November 24, 2014 at 8:00 pm Eastern Time or Tuesday, November 25, 2014 9:00 am Beijing Time to discuss the financial results. Listeners may access the call by dialing the following numbers:

United States (Toll Free): 1-888-346-8982
International: 1-412-902-4272
China (Toll Free): 4001-201203
China: 86-105-357-3132
Hong Kong (Toll Free): 800-905945
Hong Kong: 852-301-84992

To join the conference, please inform the operator you are joining the "Sungy Mobile conference call."

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

Exchange Rate

This press release contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars, in this press release, were made at a rate of RMB6.1380 to US$1.00, the noon buying rate in effect on September 30, 2014 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York. Such translations should not be construed as representations that RMB amounts could be converted into U.S. dollars at that rate or any other rate, or to be the amounts that would have been reported under accounting principles generally accepted in the United States of America ("U.S. GAAP").

About Sungy Mobile Limited

Sungy Mobile Limited is a leading provider of mobile internet products and services globally with a focus on applications and mobile platform development. Sungy Mobile's platform product, GO Launcher EX, manages apps, widgets and functions on Android smartphones and serves as users' first entry point to their phones; it is the mobile access point from which many Android users are able to find new and innovative ways to customize their experience, download apps and interact with their mobile devices every day.

Safe Harbor Statements

This press release contains forward-looking statements. These statements, including management quotes and business outlook, constitute forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These forward-looking statements include, but are not limited to, statements about: Sungy Mobile's growth strategies; Sungy Mobile's ability to retain and increase its user base and expand its product and service offerings; Sungy Mobile's ability to monetize its platform; Sungy Mobile's future business development, financial condition and results of operations; competition from companies in a number of industries including internet companies that provide mobile internet portal services and operate mobile reading services; expected changes in Sungy Mobile's revenues and certain cost or expense items; and general economic and business condition globally and in China. Further information regarding these and other risks is included in Sungy Mobile's filings with the U.S. Securities and Exchange Commission. Sungy Mobile does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

Use of Non-GAAP Financial Measures

To supplement Sungy Mobile's consolidated financial information presented in accordance with U.S. GAAP, Sungy Mobile uses adjusted EBIT, adjusted EBIT margin, adjusted net income, adjusted net margin and adjusted diluted earnings per ADS, which are non-GAAP financial measures.

Adjusted earnings before interest and tax, or adjusted EBIT, is net income or loss excluding interest income, income tax expense or benefit, share-based compensation costs and change in fair value of warrants. Adjusted EBIT margin is adjusted EBIT as a percentage of total revenues. Adjusted net income is net income excluding share-based compensation costs. Adjusted net margin is adjusted net income as a percentage of total revenues. Adjusted diluted earnings per ADS is adjusted net income attributable to ordinary shareholders divided by weighted average number of diluted ADS.

The Company believes that separate analysis and exclusion of interest income, income tax expense or benefit, share-based compensation costs and change in fair value of warrants adds clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measure for planning, forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measure is useful supplemental information for investors and analysts to assess its operating performance without the effect of interest income, income tax expense or benefit, share-based compensation costs and change in fair value of warrants, which have been and will continue to be significant recurring factors in its business. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Sungy Mobile Limited Unaudited Reconciliations of GAAP and Non-GAAP Results" at the end of this release.

1 When calculating the accumulated number of users of all GO series products, the Company counts each individual user only once regardless of the number of GO series products such individual user may be using.

2 Revenues from third-party advertising networks include GetJar revenues.

3 Adjusted earnings before interest and tax, or Adjusted EBIT, is a non-GAAP financial measure, which is defined as net income or loss excluding interest income, income tax expense or benefit, share-based compensation costs and change in fair value of warrants.

4 Adjusted EBIT margin is a non-GAAP financial measure, which is defined as adjusted EBIT as a percentage of total revenues.

5 Adjusted net income is a non-GAAP financial measure, which is defined as net income excluding share-based compensation costs.

6 Adjusted net margin in a non-GAAP financial measure, which is defined as adjusted net income as a percentage of total revenues.

7 ADS is American Depositary Share. Each ADS represents six Class A ordinary shares of the Company. Diluted earnings per ADS is net income attributable to ordinary shareholders divided by weighted average number of diluted ADS.

8 Adjusted diluted earnings per ADS is a non-GAAP financial measure, which is defined as adjusted net income attributable to ordinary shareholders divided by weighted average number of diluted ADS.

9 Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof.

SUNGY MOBILE LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$") except for number of ADSs and per ADS data)
Three Months Ended
September
30,
2013
September
30,
2014
September
30,
2014
RMB RMB US$
Revenues 90,699 97,294 15,851
Cost of revenues (25,026) (37,727) (6,147)
Gross profit 65,673 59,567 9,704
Research and development expenses (11,053) (26,876) (4,379)
Selling and marketing expenses (11,859) (19,607) (3,194)
General and administrative expenses (12,139) (28,715) (4,678)
Operating income (loss) 30,622 (15,631) (2,547)
Share of losses of an equity method investment -- (108) (18)
Investment income 169 8,568 1,396
Interest income 47 7,243 1,180
Income before income taxes 30,838 72 11
Income tax benefit (expense) (3,321) 4,294 700
Net income 27,517 4,366 711
Accretion of redeemable convertible preferred shares (14,209) -- --
Net income applicable to common stock 13,308 4,366 711
Net income 27,517 4,366 711
Other comprehensive income
Unrealized gains, less reclassification adjustment for gains realized in net income on available-for-sale investments -- (6,209) (1,012)
Foreign currency translation adjustment, net of nil income taxes 2,394 (111) (18)
Comprehensive income (loss) 29,911 (1,954) (319)
Earnings per ADS
- Basic 0.58 0.13 0.02
- Diluted 0.55 0.13 0.02
Weighted average number of ADS used in calculating earnings per ADS
- Basic 8,626,508 33,465,877 33,465,877
- Diluted 9,006,195 33,699,872 33,699,872
SUNGY MOBILE LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$"))
December 31,
2013
September 30,
2014
September 30,
2014
RMB RMB US$
ASSETS
Current assets:
Cash and cash equivalents 759,388 273,773 44,603
Time deposits -- 424,000 69,078
Short-term investments 12,500 33,500 5,458
Accounts receivable, net 84,345 95,602 15,575
Prepaid expenses and other current assets 14,546 27,615 4,500
Deferred income tax assets 16,421 10,645 1,734
Total current assets 887,200 865,135 140,948
Property and equipment, net 9,215 18,048 2,940
Intangible assets, net 2,071 26,479 4,314
Goodwill -- 16,200 2,639
Long-term investments -- 10,756 1,752
Other non-current assets 4,518 31,746 5,172
Total assets 903,004 968,364 157,765
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 9,355 12,167 1,982
Accrued expenses and other current liabilities 50,798 72,496 11,811
Income tax payable 7,861 8,733 1,423
Total current liabilities 68,014 93,396 15,216
Deferred income tax liabilities -- 1,050 171
Other non-current liabilities -- 3,765 613
Total liabilities 68,014 98,211 16,000
Shareholders' equity:
Class A ordinary shares 36 41 7
Class B ordinary shares 97 93 15
Treasury shares -- (41,158) (6,705)
Additional paid-in capital 1,111,259 1,155,983 188,332
Accumulated other comprehensive income 45,022 51,411 8,376
Accumulated deficit (321,424) (296,217) (48,260)
Total shareholders' equity 834,990 870,153 141,765
Total liabilities and shareholders' equity 903,004 968,364 157,765
SUNGY MOBILE LIMITED
Unaudited Reconciliations of GAAP and Non-GAAP Results
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$") except for number of ADSs and per ADS data)
Three Months Ended
September
30,
2013
September
30,
2014
September
30,
2014
RMB RMB US$
Net income 27,518 4,366 711
Deduct: interest income (47) (7,243) (1,180)
Add back: income tax expense (benefit) 3,321 (4,294) (700)
Add back: share-based compensation costs 4,201 15,342 2,500
Adjusted EBIT 34,993 8,171 1,331
Total revenues 90,699 97,294 15,851
Adjusted EBIT margin 38.6% 8.4%
Net income 27,518 4,366 711
Add back: share-based compensation costs 4,201 15,342 2,500
Adjusted net income 31,719 19,708 3,211
Total revenues 90,699 97,294 15,851
Adjusted net margin 35.0% 20.3%
Adjusted net income 31,719 19,708 3,211
Deduct: Accretion of redeemable convertible preferred shares (14,209) -- --
Deduct: Allocation of Adjusted net income to participating redeemable convertible preferred shares (10,964) -- --
Adjusted net income attributable to ordinary shareholders 6,546 19,708 3,211
Adjusted diluted earnings per ADS 0.73 0.59 0.10
Weighted average number of ADS used in calculating adjusted diluted earnings per ADS 9,006,195 33,699,872 33,699,872

CONTACT: Investor Relations Contact ICR, Inc. Chenjiazi Zhong Tel: +1-646-417-5388 Email: IR@sungymobile.comSource:Sungy Mobile Limited