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iDreamSky Reports Fourth Quarter and Fiscal Year 2014 Unaudited Financial Results

SHENZHEN, China, March 23, 2015 (GLOBE NEWSWIRE) -- iDreamSky Technology Limited ("iDreamSky" or the "Company") (Nasdaq:DSKY), China's leading independent mobile game publishing platform, today reported unaudited financial results for the fourth quarter of 2014 and fiscal year ended December 31, 2014. The Company will host a conference call to discuss the results at 8:00 a.m. EDT (or 8:00 p.m. Beijing/Hong Kong Time) on March 23, 2015.

Quarterly Highlights

  • Total revenues were RMB328.4 million (US$52.9 million1), up 190.6% from the same quarter last year, and up 11.5% sequentially.
  • Gross profit was RMB126.8 million (US$20.4 million), up 208.3% from the same quarter last year, and up 2.9% sequentially.
  • Net income was RMB29.1 million (US$4.7 million), up 76.5% from the same quarter last year, and down 22.3% sequentially.
  • Non-GAAP adjusted net income2 was RMB50.3 million (US$8.1 million), up 202.3% from the same quarter last year, and down 11.5% sequentially.
  • Average revenue per paying user ("ARPPU") was RMB15.9 (US$2.6), up 120.8% from the same quarter last year, and up 20.5% sequentially.
  • Average monthly active users ("MAUs") were 110.6 million, up 21.5% from the same quarter last year, and down 9.3% sequentially.
  • Average monthly paying users ("MPUs") were 6.9 million, up 35.3% from the same quarter last year, and down 6.8% sequentially.

1 The United States dollar (US$) amounts disclosed in this press release are presented solely for the convenience of the reader. The conversion of Renminbi (RMB) into U.S. dollars is based on the noon buying rate of RMB6.2046 to US$1.00 as published by the Federal Reserve Bank of New York on December 31, 2014. The Company makes no representation that the Renminbi or U.S. dollar amounts referred to in this release could have been, or could be, converted at such rate or at all. The percentages stated are calculated based on the RMB amounts.

2 Non-GAAP adjusted net income is net income adjusted by excluding share-based compensation expenses and share of loss from equity investments. Non-GAAP measures and related reconciliations to GAAP measures are described in the accompanying sections titled "About Non-GAAP Financial Measures" and "Unaudited Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Measures" at the end of this press release.

Annual Highlights

  • Total revenues were RMB984.2 million (US$158.6 million), up 299.1% from RMB246.6 million in 2013.
  • Gross profit was RMB403.2 million (US$65.0 million), up 344.7% from RMB90.7 million in 2013.
  • Non-GAAP adjusted net income in 2014 was RMB172.8 million (US$27.8 million), up 498.7% from RMB28.9 million in 2013.
  • ARPPU was RMB13.3 (US$2.1), up 98.5% from RMB6.7 in 2013.
  • Total number of registered users was 774.1 million in 2014, up 94.1% from 398.8 million in 2013.
  • Total number of downloads and activations was 375.3 million in 2014, up 38.3% from 271.3 million in 2013.

Mr. Michael Chen, Chief Executive Officer of iDreamSky, commented, "This past quarter, we continued to make tremendous progress strengthening our foundation for long-term growth, particularly in regards to our game portfolio and monetization strategy. We continued to achieve significant revenue growth in the fourth quarter, and launched more than ten new games, further enhancing and diversifying our game portfolio. Heading into 2015, we are already seeing some initial success in the development and launch of mobile games based on popular TV shows in China. We believe that this will provide many future opportunities to integrate mobile games with other forms of entertainment, such as talent shows, variety shows and other pop culture content. We have also acquired the exclusive distribution rights of several international hit games in the Greater China region, further expanding our game pipeline. In addition, we continued to make progress on the international expansion front. By December 2014, we have launched two games in the Hong Kong, Macau and Taiwan markets."

Mr. Michael Chen continued, "Furthermore, last quarter our game operations team strengthened our communication with users. Based on live user feedback, as well as increased expertise in game operations and big data analysis, we were able to better satisfy user needs and preferences, enabling us to enhance user experience and increase user stickiness on our platform, which contributed to more effective monetization."

Mr. Jun Zou, Chief Financial Officer of iDreamSky, added, "We are proud of the progress we made in 2014, where we grew our total revenues by nearly 300% from last year to RMB984.2 million and non-GAAP net income by nearly 500% from last year to RMB172.8 million, and successfully completed our IPO on NASDAQ. During the fourth quarter, our total revenue and non-GAAP net income achieved solid year-over-year growth of more than 190% and 200%, respectively. The growth was driven by a strong and diversified game portfolio, our ability to target and attract new users, and improving monetization capability. We are confident that the same drivers will help us maintain our leading market position and continued growth in 2015."

Key Operating Data

For the Three Months Ended
December 31, 2013 September 30, 2014 December 31, 2014
(in millions, except RMB and dollar amounts and percentages)
Downloads and activations(1) 79.0 116.9 108.3
Average MAUs(2) 91.0 122.0 110.6
Average DAUs(3) 25.4 27.4 26.2
Average MPUs(4) 5.1 7.4 6.9
ARPPU(5) RMB7.2 RMB13.2 RMB15.9 (US$2.6)
Paying ratio(6) 5.7% 6.1% 6.2%
For the Year Ended
December 31, 2013 December 31, 2014
(in millions, except RMB and dollar amounts)
Downloads and activations 271.3 375.3
Registered users(7) 398.8 774.1
ARPPU RMB6.7 RMB13.3 (US$2.1)

(1) "Downloads and activations" refer to a completed download and installation of one of Company's mobile games that successfully connects to the Company's SDK network through log-in or registration by a user.

(2) "MAUs" refer to the number of unique accounts that interacted with the Company's SDK network in a particular month. Average MAUs for a particular period is the average of the MAUs in each month during that period. An individual who has more than one unique account that interacted with the Company's SDK network is counted as more than one active user.

(3) "Daily active users," or "DAUs," refer to the number of unique accounts that interacted with the Company's SDK network in a particular day. Average DAUs for a particular period is the average of the DAUs in each day during that period. An individual who has more than one unique account that interacted with the Company's SDK network is counted as more than one active user.

(4) "MPUs" refer to the number of unique accounts through which a payment is made in the Company's mobile games in a particular month. Average MPUs for a particular period is the average of the MPUs in each month during that period. An individual who has more than one unique account through which a payment is made is counted as more than one paying user.

(5) "ARPPU" refers to the average amount of the revenue that we generate from each of the Company's paying users.

(6) "Paying ratio" for a given quarter equals to average MPUs divided by average MAUs for that quarter.

(7) "Registered users" refer to users of mobile devices who have at least played one game published by the Company.

Operating Review

Users

  • Average MAUs in the fourth quarter of 2014 were 110.6 million, up 21.5% from 91.0 million in the fourth quarter of 2013 and down 9.3% from 122.0 million from the third quarter of 2014.
  • Average DAUs in the fourth quarter of 2014 were 26.2 million, up 3.1% from 25.4 million in the fourth quarter of 2013 and down 4.4% from 27.4 million in the third quarter of 2014.
  • Total number of registered users was 774.1 million in 2014, up 94.1% from 398.8 million in 2013.
  • Total number of downloads and activations was 375.3 million in 2014, up 38.3% from 271.3 million in 2013.

The year-over-year increase in average MAUs and average DAUs for the fourth quarter of 2014, as well as the year-over-year increases in annual registered users and annual downloads and activations, were primarily due to the continued popularity of existing games as the Company (i) offered new and improved functionalities, gameplay options, and game editions to maintain user interest, (ii) increased cross-promotion activities to enhance user engagement and (iii) ran promotional events to reward user loyalty, all of which contributed to higher user retention on the Company's game platform. In addition, the Company operated 57 games as of December 31, 2014, compared to 46 as of December 31, 2013. The continuous roll-out of new content strengthens the Company's ability to acquire new users.

Furthermore, the Company introduced and enhanced its platform services, including leaderboards and user tournaments that enable in-game interaction, competition and social networking among users, which help make the Company's mobile game publishing platform more engaging to users. Powered by its strong data analysis engine and capitalizing on an increasingly large amount of historical user data, the Company was able to present more accurate targeted game recommendations to existing users based on their interests and profiles, achieving more downloads and activations on its game platform.

The sequential decrease in average MAUs and average DAUs in the fourth quarter of 2014 was due to seasonality, as users typically have less time to play games in the second and fourth quarters of each year, which have less public holidays and school breaks. In addition, the Company's casual games, which are played by more students than mid- and hardcore games are, are affected by seasonality to a greater extent.

In the fourth quarter of 2014, the Company maintained the leading position as the largest independent mobile game publishing platform in China, with a market share of 27.8% by number of active users, according to Analysys International, an independent market research firm.

Monetization

  • Average MPUs in the fourth quarter of 2014 were 6.9 million, up 35.3% from 5.1 million in the fourth quarter of 2013 and down 6.8% from 7.4 million in the third quarter of 2014.
  • Paying ratio in the fourth quarter of 2014 was 6.2%, up from 5.7% in the fourth quarter of 2013 and 6.1% in the third quarter of 2014.
  • ARPPU in the fourth quarter of 2014 was RMB15.9 (US$2.6), up 120.8% from RMB7.2 in the fourth quarter of 2013 and up 20.5% from RMB13.2 in the third quarter of 2014. ARPPU in 2014 was RMB13.3 (US$2.1), up 98.5% from RMB6.7 in 2013.

The year-over-year increases in average MPUs, paying ratio and ARPPU for the quarter, as well as the increase in ARPPU from 2013 to 2014, were primarily due to the Company's increasingly effective monetization strategies as well as its expanded portfolio of mid- and hardcore games, which typically command higher ARPPU. The Company increased user spending by identifying and implementing new monetization points suitable for mobile users in China, optimizing its virtual goods merchandising strategy through data analysis, and maintaining user engagement through various platform services. The popularity of both the Company's existing and new games was also a major factor for the enhanced monetization.

The sequential increases in paying ratio and ARPPU for the quarter were due to (i) the same factors contributing to the year-over-year increases in these two metrics as discussed above and (ii) a stronger contribution by mid- and hardcore games, which typically have higher ARPPU, to the Company's total revenues and overall ARPPU, because seasonality had a greater impact on the performance of the Company's casual games. The sequential decrease in average MPUs in the fourth quarter of 2014 was due to seasonality.

Game Portfolio

As of December 31, 2014, the Company had a diversified portfolio of 30 casual games and 27 mid- and hardcore games, compared with 27 casual games and 25 mid- and hardcore games as of September 30, 2014. During the fourth quarter of 2014, the Company further diversified its game portfolio by introducing games of different genres.

In the first quarter of 2015, the Company acquired exclusive distribution rights for the Greater China markets to Monument Valley, a highly acclaimed mobile puzzle game. Since its launch in April 2014, Monument Valley hit number 1 on Apple's App Store's paid apps list in 66 countries, and was recognized as one of the Top Ten Video Games of the Year by Time Magazine in 2014.The Company plans to launch Monument Valley in the first half of 2015. Other games in the pipeline for the first half of 2015 include Marvel Run Jump Smash of Disney, Shadow Blade of Dead Mage, and Cookie Run of Devsisters. In addition to mobile games, the Company acquired rights to develop and publish two mobile games based on Chinese TV shows, capitalizing on their popularity. As demonstrated by these latest acquisitions, the Company continues to be the partner of choice for international game developers seeking to launch their games in China and brings compelling value to developers of mobile games and producers of entertainment content.

Distribution and Payment Channels

In the fourth quarter of 2014, the Company deepened its partnerships with its major distribution and payment channels. For example, the Company worked with major app stores and mobile browsers in China to launch a series of promotional and marketing activities to reward user loyalty and attract new users, contributing to increased user stickiness and more in-game spending on the Company's game platform. In addition, the Company was able to negotiate more favorable payment processing fee rates with certain of its payment channel partners, such as Alipay.

Financial Review

For the Three Months Ended For the Year Ended
December
31, 2013
September
30, 2014
December
31, 2014
December
31, 2014
December
31, 2013
December
31, 2014
December
31, 2014
RMB RMB RMB US$ RMB RMB US$
(in thousands)
(unaudited)
Financial Summary:
Total revenues 113,038 294,458 328,441 52,935 246,568 984,153 158,617
Gross profit 41,127 123,226 126,774 20,432 90,670 403,199 64,984
Operating income 21,033 41,117 30,103 4,852 33,842 6,943 1,119
Net income/(loss) 16,492 37,447 29,106 4,691 27,845 (16,701) (2,692)
Non-GAAP adjusted net income 16,632 56,788 50,271 8,103 28,858 172,775 27,846
Net (loss)/income attributable to Company's ordinary shareholders (218,646) (79,103) 29,169 4,701 (278,127) (1,071,765) (172,737)

Fourth Quarter 2014 Results

Revenues

Total revenues for the fourth quarter of 2014 were RMB328.4 million (US$52.9 million), representing an increase of 190.6% from RMB113.0 million for the fourth quarter of 2013 and an increase of 11.5% from RMB294.5 million for the third quarter of 2014.

The year-over-year and sequential increases in the fourth quarter total revenues were primarily due to the significant increases in game revenues as a result of the continued popularity of the Company's existing games, its enhanced game portfolio and effective monetization strategies.

In October 2014, the Company launched Fruit Ninja for Tencent on both Android and iOS platforms, which rapidly gained wide popularity and generated impressive gross billings. However, the game's performance was negatively affected when more than ten other games were launched on Weixin in the fourth quarter of 2014. The Company's revenue for the fourth quarter of 2014 was also negatively impacted as a result of a delay in the launch of Cookie Run due to that the Company received the source code of the game later than scheduled and the testing period by the distribution platform was extended. In addition, the monetization of some of the Company's casual games launched on a large distribution platform was less than expected, as the final gross billings generated from these games were lower than expected due to third-party telecom carrier billing code issues. The Company has started to gradually replace those third-party billing codes with its own billing codes. This will give the Company better control over prediction and recording of the actual gross billings generated in these games

Cost of Revenues

Cost of revenues for the fourth quarter was RMB201.7 million (US$32.5 million), representing an increase of 180.4% from RMB71.9 million for the fourth quarter of 2013 and an increase of 17.8% from RMB171.2 million for the third quarter of 2014. Cost of revenues as a percentage of total revenues for the fourth quarter of 2014 was 61.4%, compared with 63.6% for the fourth quarter of 2013 and 58.2% for the third quarter of 2014.

The decrease in cost of revenues as a percentage of total revenues from the same period last year was primarily due to the decrease in channel costs as a percentage of total revenues, resulting from optimized payment and more efficient distribution solutions. The increase in cost of revenues as a percentage of total revenues from the prior quarter was primarily due to (i) higher content provider costs for the Company's mid- and hardcore games, which had an increased contribution to the Company's total revenues during the quarter and whose revenue are accounted for on a gross basis, (ii) higher accumulated amortization expenses associated with games launched in previous quarters, and (iii) the payment of technical service fees in connection with certain outsourced research and development and art design activities.

Gross Profit

As a result, the Company's gross profit in the fourth quarter of 2014 was RMB126.8 million (US$20.4 million), representing an increase of 208.3% from RMB41.1 million for the fourth quarter of 2013 and an increase of 2.9% from RMB123.2 million for the third quarter of 2014.

Operating Income and Non-GAAP Adjusted Operating Income

Operating income in the fourth quarter of 2014 was RMB30.1 million (US$4.9 million), an increase of 43.1% from RMB21.0 million for the fourth quarter of 2013 and a decrease of 26.8% from RMB41.1 million for the third quarter of 2014. Non-GAAP adjusted operating income for the fourth quarter of 2014, which is operating income excluding share-based compensation expenses, was RMB49.3 million (US$7.9 million), representing an increase of 133.3% from RMB21.1 million for the fourth quarter of 2013 and a decrease of 16.2% from RMB58.8 million for the third quarter of 2014.

  • Research and development expenses. Research and development expenses in the fourth quarter of 2014 were RMB24.4 million (US$3.9 million), which accounted for 7.4% of total revenues, compared with 4.3 % in the fourth quarter of 2013 and 7.2% in the third quarter of 2014. Both the year-over-year and sequential increases were primarily due to increased employee costs, and in particular share-based compensation expenses.

In the fourth quarter of 2014, the Company made some breakthrough in the development of mobile games based on popular non-game entertainment content. For example, the Company's self-developed Running Men, an endless running game based on a popular TV variety show in China, had more than one million active users and grossed more than RMB1.0 million during the first two days of its launch.

  • Sales and marketing expenses. Sales and marketing expenses in the fourth quarter of 2014 were RMB38.0 million (US$6.1 million), which accounted for 11.6% of total revenues, compared with 8.3% for the fourth quarter of 2013 and 12.5% for the third quarter of 2014. The year-over-year increase was primarily due to increased spending on promotional activities in connection with the introduction of new games in the fourth quarter of 2014. The slight sequential decrease was due to the improved effectiveness of the Company's target marketing and promotional activities.
  • General and administrative expenses. General and administrative expenses in the fourth quarter of 2014 were RMB35.8 million (US$5.8 million), which accounted for 10.9% of total revenues, compared with 5.2% for the fourth quarter of 2013 and 10.2% for the third quarter of 2014. The year-over-year increase was due to payment of professional fees associated with becoming a public company and share-based compensation expenses. The slight sequential increase was primarily due to the payment of additional professional fees associated with public company compliance.

Net Income and Non-GAAP Adjusted Net Income

The Company's net income in the fourth quarter of 2014 was RMB29.1 million (US$4.7 million), representing an increase of 76.5% from net income of RMB16.5 million for the fourth quarter of 2013, and a decrease of 22.3% from RMB37.4 million for the third quarter of 2014.

Non-GAAP adjusted net income in the fourth quarter of 2014, which is net income excluding share-based compensation expenses of RMB19.2 million (US$3.1 million) and share of loss from equity investments of RMB2.0 million (US$0.3 million), was RMB50.3 million (US$8.1 million), representing an increase of 202.3% from RMB16.6 million for the fourth quarter of 2013 and a decrease of 11.5% from RMB56.8 million for the third quarter of 2014.

Net Income/(loss) Attributable to the Company's Ordinary Shareholders

Net income attributable to the Company's ordinary shareholders for the fourth quarter of 2014 was RMB29.2 million (US$4.7 million). This compares to a net loss attributable to the Company's ordinary shareholders of RMB218.6 million for the fourth quarter of 2013 and a net loss attributable to the Company's ordinary shareholders of RMB79.1 million for the third quarter of 2014.

Basic and diluted net income per ADS for the fourth quarter of 2014 were RMB0.68 (US$0.11) and RMB0.64 (US$0.10), respectively. This compares to basic and diluted net loss per ADS of RMB21.31 and RMB21.31, respectively, for the fourth quarter of 2013, and basic and diluted net loss per ADS of RMB2.64 and RMB2.64, respectively, for the third quarter of 2014.

Non-GAAP basic and diluted adjusted net income per ADS for the fourth quarter of 2014 were RMB1.16 (US$0.19) and RMB1.12 (US$0.18), respectively. This compares to non-GAAP basic and diluted adjusted net loss per ADS of RMB21.31 and RMB21.31, respectively, for the fourth quarter of 2013, and non-GAAP basic and diluted adjusted net loss per ADS of RMB2.00 and RMB2.00, respectively, for the third quarter of 2014.

2014 Full Year Results

Revenues

Total revenues in 2014 were RMB984.2 million (US$158.6 million), an increase of 299.1% from RMB246.6 million in 2013.

The increase was primarily driven by the Company's enhanced game portfolio, which contributed to the expansion of the Company's user base, and its effective monetization strategies.

Cost of Revenues

Cost of revenues in 2014 were RMB581.0 million (US$93.6 million), an increase of 272.7% from RMB155.9 million in 2013. Cost of revenues as a percentage of total revenues for 2014 was 59.0%, compared to 63.2% in 2013.

The decrease in cost of revenues as a percentage of total revenues from 2013 to 2014 was primarily due to (i) economies of scale of the Company's operations and (ii) the payment of value-added tax (which is accounted for through offsetting revenues) rather than business tax (which is accounted for as part of cost of revenues) in 2014 due to changes in applicable PRC tax laws.

Gross Profit

As a result, the Company gross profit in 2014 was RMB403.2 million (US$65.0 million), representing an increase of 344.7% from RMB90.7 million in 2013.

Operating Income/Non-GAAP Adjusted Operating Income

Operating income in 2014 was RMB6.9 million (US$1.1 million), representing a decrease of 79.5% from RMB33.8 million in 2013. Non-GAAP adjusted operating income excluding share-based compensation expenses in 2014 was RMB192.7 million (US$31.1 million), representing an increase of 463.9% from RMB34.2 million in 2013.

  • Research and development expenses. Research and development expenses in 2014 were RMB63.7 million (US$10.3 million), which as a percentage of total revenues accounted for 6.5%, compared with 5.8% in 2013.
  • Sales and marketing expenses. Sales and marketing expenses in 2014 were RMB104.6 million (US$16.9 million), which as a percentage of total revenues accounted for 10.6%, compared with 11.3% in 2013.
  • General and administrative expenses. General and administrative expenses in 2014 were RMB236.8 million (US38.2 million), which as a percentage of total revenues accounted for 24.1%, compared with 6.0% in 2013.

Net Income/(Loss) and Non-GAAPAdjusted Net Income

Net loss in 2014 was RMB16.7 million (US$2.7 million), compared to net income of RMB27.8 million in 2013.

Non-GAAP adjusted net income in 2014, which is net income excluding share-based compensation expenses of RMB185.8 million (US$29.9 million) and share of loss from equity investments of RMB3.7 million (US$0.6 million), was RMB172.8 million (US$27.8 million), compared to non-GAAP adjusted net income of RMB28.9 million in 2013, representing an increase of 498.7%.

Net Loss Attributable to the Company's Ordinary Shareholders

Net loss attributable to the Company's ordinary shareholders in 2014 was RMB1,071.8 million (US$172.7 million), including accretion to convertible redeemable preferred shares redemption value of RMB1,054.9 million (US$170.0 million). This compares to net loss attributable to the Company's ordinary shareholders in 2013 of RMB278.1 million.

Basic and diluted net loss per ADS for 2014 were RMB45.36 (US$7.32) and RMB45.36 (US$7.32), respectively. This compares to basic and diluted net loss per ADS for 2013 of RMB27.88 and RMB27.88, respectively.

Non-GAAP basic and diluted adjusted net loss per ADS for 2014 were RMB37.32 (US$6.01) and RMB37.32 (US$6.01), respectively. This compares to non-GAAP basic and diluted adjusted net loss per ADS for 2013 of RMB27.76 and RMB27.76, respectively.

Cash and Cash Equivalents

Cash and cash equivalents were RMB929.8 million (US$149.9 million) as of December 31, 2014, up from RMB179.7 million as of December 31, 2013.

Outlook

For the first quarter of 2015, the Company expects revenue of RMB340.0 million (US$54.8 million), an increase of 95.3% year-over-year. This forecast is based on the Company's current view on its recent operational results, estimated performance of its games and general market conditions, which may fluctuate and are subject to change.

Conference Call Information

The Company will announce and discuss its results for the fourth quarter of 2014 via conference call at 8:00 a.m. U.S. Eastern Daylight Time, corresponding to 8:00 p.m. Beijing/Hong Kong Time, on March 23, 2015. Dial-in details for the earnings conference call are as follows:

International: +1-412-902-4272
U.S. Toll Free: +1-888-346-8982
Hong Kong: 800-905945
China: 4001-201203

Please dial in 15 minutes before the call is scheduled to begin.

A telephone replay of the call will be available after the conclusion of the conference call through 8:00 a.m. Eastern Daylight Time, March 30, 2015. The dial-in details for the replay are as follows:

International: +1-412-317-0088
U.S. Toll Free: +1-877-344-7529
Passcode: 10062069

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of iDreamSky's website at http://ir.idreamsky.com.

About iDreamSky

iDreamSky Technology Limited (Nasdaq:DSKY) is the largest independent mobile game publishing platform in China based on the number of active users in the fourth quarter of 2014, according to Analysys International, an independent market research firm. The Company believes that it has redefined the role of a game publisher by redesigning and optimizing third-party games and delivering them to users through its proprietary distribution channels as part of its broader publishing solution. Well-known international mobile game developers grant the Company access to the source codes of their games, allowing for greater control and efficiency in redesigning their games for the China market. The Company distributes these games through both its proprietary distribution channels and third-party channels, such as app stores and device pre-installations. The Company also operates games as a service, where the Company offers live game services and gains user insights through its multi-dimensional data analysis engine to drive ongoing game optimization and monetization. For more information, please visit http://ir.idreamsky.com.

Safe Harbor Statements

All statements other than statements of historical fact contained in this release, including statements regarding future results of the operations of the Company are forward-looking statements, which are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: the Company's ability to effectively acquire, retain and monetize users; the fact that a relatively small number of games continue to account for a substantial majority of the Company's revenue, and declines in popularity of these games could harm its financial results; the Company's ability to extend the life cycle of its existing popular games and to source and launch new popular games in a timely manner; the fact that revenues from new games may not be sufficient to offset declines in revenues in more mature games; market acceptance of new games and enhancements to existing games; the Company's relationship with developers of popular games and its ability to enter into favorable revenue sharing arrangements with the developers; the Company's relationship with China's major mobile game distribution and payment processing platforms; the continued growth of the Company's proprietary distribution channel and the effectiveness of cross-promotion on its platform; intense competition in the mobile game industry; the Company's relatively short operating history; the price of the Company's ADSs and changing market conditions for its ADSs; general economic conditions and their impact on consumer spending, especially leisure spending; acquisition-related risks, including unknown liabilities and integration risks; as well as those risks detailed from time to time under the caption "Risk Factors" and elsewhere in the Company's Securities and Exchange Commission filings and reports, including in the prospectus filed by the Company on August 7, 2014. In addition, the Company operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for the management to predict all risks, nor can the Company assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements that the Company may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this release are inherently uncertain and may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely upon forward-looking statements as predictions of future events. The Company does not undertake any obligation to update publicly or revise any forward-looking statements for any reason after the date of this release, nor to conform these statements to actual results, future events, or to changes in the Company's expectations.

About Non-GAAP Financial Measures

To supplement the Company's financial results presented in accordance with U.S. GAAP, the Company uses non-GAAP financial measures, which are adjusted from results based on U.S. GAAP to exclude (i) share-based compensation expenses and (ii) share of loss from equity investments, as applicable. Reconciliations of non-GAAP financial measures to U.S. GAAP financial measures are set forth in tables at the end of this earnings release, which provide more details on the non-GAAP financial measures.

Non-GAAP financial information is provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors' overall understanding of the historical and current financial performance of the Company's continuing operations and prospects for the future. The Company has included the "adjusted net income" information because it is a key measure the Company uses to evaluate its operating performance, generate future operating plans and make strategic decision for the allocation of capital. However, non-GAAP financial information should not be considered a substitute for or superior to U.S. GAAP results. In addition, calculations of this non-GAAP financial information may be different from calculations used by other companies, and therefore comparability may be limited.

IDREAMSKY TECHNOLOGY LIMITED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"), except for number of shares and earnings per share)
As of December 31 As of December 31
2013 2014 2014
RMB RMB US$
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 179,658 929,829 149,861
Accounts receivable 76,900 204,541 32,966
Amounts due from related parties 56 16,277 2,623
Prepayments and other current assets 7,078 193,424 31,174
Deferred tax assets 1,262 -- --
Total current assets 264,954 1,344,071 216,624
Non-current assets
Equity investments 1,330 26,801 4,320
Prepayment and other assets -- 42,833 6,904
Available-for-sale securities -- 19,852 3,200
Property and equipment, net 8,684 15,901 2,563
Intangible assets, net 2,040 97,505 15,715
Other non-current assets 1,630 3,423 553
Total non-current assets 13,684 206,315 33,255
Total assets 278,638 1,550,386 249,879
Liabilities and shareholders' equity
Current liabilities
Accounts payable 86,235 182,663 29,440
Deferred revenue -- 41,411 6,674
Accruals and other current liabilities 20,800 47,286 7,624
Short-term bank loans -- 20,000 3,223
Income tax payable 7,239 5,781 932
Amounts due to related parties 8,879 18,706 3,015
Total current liabilities 123,153 315,847 50,908
Non-current liabilities
Deferred income tax liability -- 27,005 4,352
Total non-current liabilities -- 27,005 4,352
Total liabilities 123,153 342,852 55,260
IDREAMSKY TECHNOLOGY LIMITED
CONSOLIDATED BALANCE SHEETS (Continued)
(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"), except for number of shares and earnings per share)
As of December 31, As of December 31,
2013 2014 2014
RMB RMB US$
(Unaudited) (Unaudited)
Mezzanine equity
Series A convertible preferred shares (US$0.0001 par value, 6,750,000 shares authorized, issued and outstanding as of December 31, 2013, and none outstanding December 31, 2014) 3,270 -- --
Series B convertible redeemable preferred shares (US$0.0001 par value, 25,000,000 shares authorized, issued and outstanding as of December 31, 2013, and none outstanding December 31, 2014) 159,757 -- --
Series A-1 convertible preferred shares(US$0.0001 par value, 19,717,880 shares authorized, issued and outstanding as of December 31, 2013, and none outstanding December 31, 2014) 51,452 -- --
Series B-1 convertible redeemable preferred shares (US$0.0001 par value, 11,111,100 shares authorized, issued and outstanding as of December 31, 2013, and none outstanding December 31, 2014) 71,962 -- --
Series C convertible redeemable preferred shares (US$0.0001 par value, 27,948,320 shares authorized, issued and outstanding as of December 31, 2013, and none outstanding December 31, 2014) 184,223 -- --
Total mezzanine equity 470,664 -- --
IDREAMSKY TECHNOLOGY LIMITED
CONSOLIDATED BALANCE SHEETS (Continued)
(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"), except for number of shares and earnings per share)
As of December 31 As of December 31
2013 2014 2014
RMB RMB US$
(Unaudited) (Unaudited)
Shareholders' equity
Common shares (US$0.0001 par value); 26 107 17
Additional paid-in capital -- 2,460,677 396,589
Statutory reserves 2,701 5,237 844
Accumulated deficits (322,619) (1,248,020) (201,144)
Accumulated other comprehensive income/(loss) 4,661 (10,693) (1,723)
Total iDreamSky Technology Limited shareholders' deficit equity (315,231) 1,207,308 194,583
Non-controlling interest 52 226 36
Total shareholders' equity (315,179) 1,207,534 194,619
Total liabilities, mezzanine equity and shareholders' equity 278,638 1,550,386 249,879
IDREAMSKY TECHNOLOGY LIMITED
Condensed Consolidated Statements of Comprehensive Income
(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"), except for number of shares and earnings per share)
For the Three Months Ended For the Twelve Months Ended
December
31
September
30
December
31
December
31
December
31
December
31
December
31
2013 2014 2014 2014 2013 2014 2014
RMB RMB RMB US$ RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues:
Game revenue 111,772 293,463 328,303 52,913 244,806 982,845 158,406
Advertising revenue -- 497 12 2 -- 603 97
Other revenue 1,266 498 126 20 1,762 705 114
Total revenues 113,038 294,458 328,441 52,935 246,568 984,153 158,617
Cost of revenues (71,911) (171,232) (201,667) (32,503) (155,898) (580,954) (93,633)
Gross profit 41,127 123,226 126,774 20,432 90,670 403,199 64,984
Operating expenses:
Research and development expenses (4,911) (21,252) (24,445) (3,940) (14,214) (63,678) (10,263)
Sales and marketing expenses (9,343) (36,951) (37,969) (6,119) (27,940) (104,645) (16,866)
General and administrative expenses (5,863) (30,019) (35,834) (5,775) (14,780) (236,788) (38,163)
Total operating expenses (20,117) (88,222) (98,248) (15,834) (56,934) (405,111) (65,292)
Other gain , net 23 6,113 1,577 254 106 8,855 1,427
Operating income 21,033 41,117 30,103 4,852 33,842 6,943 1,119
Other (expenses)/income:
Interest income 33 121 1,157 186 81 1,785 288
Finance (costs)/income , net 170 (63) 6,413 1,034 266 5,107 823
Share of losses from associates (58) (1,661) (1,995) (322) (170) (3,726) (601)
Income before income tax 21,178 39,514 35,678 5,750 34,019 10,109 1,629
Income tax expense (4,686) (2,067) (6,572) (1,059) (6,174) (26,810) (4,321)
Net income/ (loss) 16,492 37,447 29,106 4,691 27,845 (16,701) (2,692)
Less: Net loss/(income) attributable to the non-controlling interest shareholders (66) (57) (63) (10) (287) 174 28
Net (loss)/income attributable to iDreamSky Technology Limited 16,558 37,504 29,169 4,701 28,132 (16,875) (2,720)
Accretion to convertible redeemable preferred shares redemption value (235,204) (116,607) -- -- (262,782) (1,054,890) (170,017)
Deemed dividend to Series A preferred shareholders -- -- -- -- (14,402) -- --
Deemed dividend to Li Meiping -- -- -- -- (29,075) -- --
Net (loss)/income attributable to ordinary shareholders (218,646) (79,103) 29,169 4,701 (278,127) (1,071,765) (172,737)
For the Three Months Ended For the Twelve Months Ended
December
31
September
30
December
31
December
31
December
31
December
31
December
31
2013 2014 2014 2014 2013 2014 2014
RMB RMB RMB US$ RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net (loss)/income 16,492 37,447 29,106 4,691 27,845 (16,701) (2,692)
Other comprehensive income: -- -- -- -- -- -- --
Foreign currency translation adjustments, net of tax 3,588 (2,615) (5,230) (843) 4,559 (15,354) (2,475)
Comprehensive (loss)/income 20,080 34,832 23,876 3,848 32,404 (32,055) (5,167)
Less: Comprehensive (loss)/income attributable to the non-controlling interest (66) (57) (63) (10) (287) 174 28
Comprehensive (loss)/income attributable to iDreamSky Technology Limited 20,146 34,889 23,939 3,858 32,691 (32,229) (5,195)
Net (loss)/income per share attributable to iDreamSky Technology Limited
-Basic(RMB) (5.33) (0.66) 0.17 0.03 (6.97) (11.34) (1.83)
-Diluted(RMB) (5.33) (0.66) 0.16 0.03 (6.97) (11.34) (1.83)
Net (loss)/income per ADS attributable to iDreamSky Technology Limited
-Basic (21.31) (2.64) 0.68 0.11 (27.88) (45.36) (7.32)
-Diluted (21.31) (2.64) 0.64 0.1 (27.88) (45.36) (7.32)
Share-based compensation expense included in:
- Cost of revenues 23 185 184 30 89 441 71
- Research and development expenses 43 4,926 5,073 818 174 10,943 1,764
- Sales and marketing expenses -- 127 126 20 -- 275 44
- General and administrative expenses 16 12,442 13,787 2,222 66 174,091 28,058
IDREAMSKY TECHNOLOGY LIMITED
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
(Amounts in thousands of Renminbi ("RMB"), except for number of shares and earnings per share)
For the three months ended For the Twelve Months Ended
December
31, 2013
September
30, 2014
December
31, 2014
December
31, 2014
December
31, 2013
December
31, 2014
December
31, 2014
RMB RMB RMB US$ RMB RMB US$
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
GAAP operating income/(loss) 21,033 41,117 30,103 4,852 33,842 6,943 1,119
Share-based compensation expense 82 17,680 19,170 3,090 329 185,750 29,937
Non-GAAP operating income 21,115 58,797 49,273 7,942 34,171 192,693 31,056
Net income/(loss) 16,492 37,447 29,106 4,691 27,845 (16,701) (2,692)
Share-based compensation expense 82 17,680 19,170 3,090 329 185,750 29,937
Share of loss from equity investments 58 1,661 1,995 322 170 3,726 601
Fair value change of preferred share warrant liability -- -- -- -- 514 -- --
Non-GAAP net income 16,632 56,788 50,271 8,103 28,858 172,775 27,846
GAAP loss per share attributable to common shareholders
-Basic (5.33) (0.66) 0.17 0.03 (6.97) (11.34) (1.83)
-Diluted (5.33) (0.66) 0.16 0.03 (6.97) (11.34) (1.83)
GAAP loss per ADSs attributable to common shareholders
-Basic (21.31) (2.64) 0.68 0.11 (27.88) (45.36) (7.32)
-Diluted (21.31) (2.64) 0.64 0.1 (27.88) (45.36) (7.32)
Non-GAAP loss per share attributable to common shareholders
-Basic (5.33) (0.50) 0.29 0.05 (6.94) (9.33) (1.50)
-Diluted (5.33) (0.50) 0.28 0.05 (6.94) (9.33) (1.50)
Non-GAAP loss per ADSs attributable to common shareholders
-Basic (21.31) (2.00) 1.16 0.19 (27.76) (37.32) (6.01)
-Diluted (21.31) (2.00) 1.12 0.18 (27.76) (37.32) (6.01)
Weighted average number of common shares used in per share calculation:
-Basic 41,032,120 120,471,629 173,912,753 173,912,753 39,925,000 94,548,430 94,548,430
-Diluted 41,032,120 120,471,629 180,720,850 180,720,850 39,925,000 94,548,430 94,548,430

CONTACT: iDreamSky Contact: For investor and media inquiries, please contact: iDreamSky Technology Limited Ms. Caroline Dong Phone: +86-755-8668-5111 (8010) E-mail: ir@idreamsky.com

Source:iDreamSky Technology Limited