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Sky-mobi Limited Announces Preliminary Financial Results for the Fiscal Fourth Quarter and Fiscal Year Ended March 31, 2011

/ Source: GlobeNewswire

HANGZHOU, China, May 8, 2011 (GLOBE NEWSWIRE) -- Sky-mobi Limited ("Sky-mobi" or the "Company") (Nasdaq:MOBI), a leading mobile application store and mobile social network community operator in China, announced today its preliminary unaudited financial results for the fiscal fourth quarter ("fourth quarter 2011") and fiscal year ended March 31, 2011 ("fiscal year 2011"). The preliminary unaudited financial data and operating data presented below are subject to change and the changes may be material.

Preliminary Fourth Quarter 2011 Highlights

  • Total revenues increased 20.8% to RMB177.5 million (US$27.1 million) in fourth quarter 2011, compared to the fiscal fourth quarter ended March 31, 2010 ("fourth quarter 2010"). Maopao Community revenues through K Currency, i.e., revenues not collected through mobile network operators represented 12.1% of total revenues, compared to 1.6% in fourth quarter 2010
  • Profit from operations was RMB14.4 million (US$2.2 million) in fourth quarter 2011, down 35.2% from fourth quarter 2010
  • Non-IFRS profit from operations was RMB27.5 million (US$4.2 million) in fourth quarter 2011, up 13.9% from fourth quarter 2010
  • Net profit was RMB4.4 million (US$0.7 million) in fourth quarter 2011, compared to net loss of RMB109.9 million in fourth quarter 2010
  • Non-IFRS net profit was RMB17.5 million (US$2.7 million) in fourth quarter 2011, up 48.4% from fourth quarter 2010
  • Basic and diluted earnings per common share were RMB0.02 (US$0.00) and RMB0.02 (US$0.00), respectively. Non-IFRS basic and diluted earnings per common share were RMB0.07 (US$0.01) and RMB0.07 (US$0.01), respectively
  • Application store revenue increased 5.7% to RMB149.4 million (US$22.8 million) in fourth quarter 2011 from fourth quarter 2010. Sky-mobi's application store experienced 5.0 billion user visits with 847.7 million downloads in fourth quarter 2011
  • Maopao Community revenue through K Currency increased 798.3% to RMB21.4 million (US$3.3 million) in fourth quarter 2011 from fourth quarter 2010. Sky-mobi had 11.0 million active members of the Maopao Community with 884.1 million member log-ins in fourth quarter 2011

Preliminary Fiscal Year 2011 Highlights

  • Total revenues increased 24.1% year-on-year to RMB675.3 million (US$103.1 million) in fiscal year 2011. Maopao Community revenues through K Currency, i.e., revenues not collected through mobile network operators represented 8.9% of total revenues in fiscal year 2011 compared to 0.1% for the fiscal year ended March 31, 2010
  • Profit from operations decreased 83.0% year-on-year to RMB21.1 million (US$3.2 million) in fiscal year 2011
  • Non-IFRS profit from operations decreased 41.2% year-on-year to RMB75.0 million (US$11.5 million) in fiscal year 2011
  • Net profit was RMB135.6 million (US$20.7 million) in fiscal year 2011 compared to net loss of RMB229.8 million in the fiscal year ended March 31, 2010
  • Non-IFRS net profit decreased 52.5% year-on-year to RMB54.9 million (US$8.4 million) in fiscal year 2011
  • Basic and diluted earnings per common share were RMB0.74 (US$0.11) and RMB0.06 (US$0.01), respectively. Non-IFRS basic and diluted earnings per common share were RMB0.30 (US$0.05) and RMB0.25 (US$0.04), respectively, in fiscal year 2011
  • Application store revenue increased 16.1% to RMB598.8 million (US$91.4 million). Sky-mobi's application store experienced 14.1 billion user visits with 3.2 billion downloads in fiscal year 2011
  • Maopao Community revenue through K Currency increased 1,578.3% to RMB60.0 million (US$9.2 million). Sky-mobi had 30.1 million active members of the Maopao Community with 2.7 billion member log-ins in fiscal year 2011

Non-IFRS figures exclude share-based compensation expenses and other non-operating one-time items. Please see "About Non-IFRS Financial Measures" in this release for more information.

"We are pleased with our fiscal fourth quarter 2011 performance. Our application store had a record 5 billion user visits and 847.7 million downloads and our Maopao Community grew to a record 11 million active members and 884.1 million member log-ins," stated Mr. Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi. "We entered into important partnerships during the fiscal fourth quarter 2011. We signed a strategic partnership with Tencent in January and a mobile advertising contract with Sohu in March. More recently, in conjunction with the launch of OPENSKY, we announced SINA Mobile, SNS Game (the promoter of the Chinese version of a hit game, Zombie Farm) and other major Internet and videogame companies became the first international players to join the Maopao Community. We look forward to more exciting partnerships as Maopao becomes the platform of choice to access the hundreds of millions of mobile users in China. In addition, OPENSKY will offer our users an unprecedented experience in enjoying applications with other users, increasing our user stickiness and monetization."

"In addition to our better than expected revenue performance, we also achieved stronger profitability on a non-IFRS basis, driven by a slowdown in our operating expense growth and an improvement in our gross margin in fourth quarter 2011 compared to the previous quarter as well as compared to the fourth quarter 2010. Our fiscal fourth quarter 2011 non-IFRS gross margin increased 440 basis points sequentially and 150 basis points year-over-year, stated Mr. Carl Yeung, Chief Financial Officer of Sky-mobi. "As we look forward to fiscal 2012, we plan to continue to increase user activities and monetize our large user base through more diverse application and content offerings and making further improvements to the Maopao Community. We expect robust growth from the new games we plan to launch on the Maopao Community and an increase in monetization following the launch of our OPENSKY platform with our initial key partners."

Preliminary Financial Results for Fourth Quarter 2011

Total Revenues

Total revenues for fourth quarter 2011 increased 20.8% to RMB177.5 million (US$27.1 million) compared to RMB147.0 million for fourth quarter 2010.

Application store revenues of RMB149.4 million (US$22.8 million) in fourth quarter 2011 representing 84.2% of total revenues, increased 5.7% from fourth quarter 2010. Sky-mobi had 5.0 billion user visits and 847.7 million downloads of applications and content from the Maopao application store in fourth quarter 2011, an increase of 192.1% and 47.0%, respectively, compared to 1.7 billion user visits and 576.8 million downloads in fourth quarter 2010. The fast growth in application store user activity was offset by lower store activity monetization as a result of policies introduced by mobile network operators requiring multiple confirmations on SMS-based purchases of mobile applications and content, including triple-confirmation introduced in September 2010. The negative impact of the changes in carrier policy continued into fourth quarter 2011, although such impact was reduced compared to the quarter ended December 31, 2010.

Maopao Community revenues through K Currency were RMB21.4 million (US$3.3 million), up 798.3% from fourth quarter 2010 and contributing 12.1% of total revenue in fourth quarter 2011. Sky-mobi's Maopao Community had 11.0 million active members and 884.1 million member log-ins in fourth quarter 2011, an increase of 100.0% and 132.3%, respectively, compared to 5.5 million active members and 380.6 million member log-ins in fourth quarter 2010. Revenues from the Maopao Community increased due to fast growth in the number of active members as well as increased spending per active member resulting from the success of "Fantasy of Three Kingdoms," a mobile social game. However, the Company believes that the growth of Maopao Community revenues through K Currency in fourth quarter 2011 compared to the previous quarter was partially offset by the fact that many of our registered members traveled on extended trips during the Chinese New Year Holiday and had difficulties purchasing prepaid cards. The Company expects that Maopao Community revenues through K Currency will contribute an increasing percentage of total revenues in the quarters ahead as Sky-mobi continues to focus on growing its active mobile community member base and on diversifying revenue collection away from carrier-based payment channels.

Cost of Revenues and Gross Profit

Total cost of revenues for fourth quarter 2011 increased 19.2% to RMB116.5 million (US$17.8 million) compared to RMB97.7 million in fourth quarter 2010. Our gross profit for fourth quarter 2011 increased 23.8% to RMB61.0 million (US$9.3 million) from RMB49.2 million in fourth quarter 2010.

Total non-IFRS cost of revenues for fourth quarter 2011 increased 18.1% to RMB115.2 million (US$17.6 million) compared to RMB97.6 million in fourth quarter 2010.

Costs associated with payments to industry participants increased 14.1% to RMB105.8 million (US$16.2 million) in fourth quarter 2011 compared to RMB92.7 million in fourth quarter 2010. The increase was slower than growth in revenues primarily because of lower payments to service providers and mobile network operators due to lower application store activity monetization as well as more contribution from Maopao Community revenue through K Currency as a result of increased use of third-party payment agents, partially offset by increased payment to content providers that provide mobile social games on Maopao Community.

Direct costs including salaries and benefits, depreciation, office expenses and utilities directly related to the operation of Maopao application store, on a non-IFRS basis, increased 92.2% to RMB9.5 million (US$1.4 million) in fourth quarter 2011 compared to RMB4.9 million in fourth quarter 2010. This increase was largely due to the significant increase in headcount and depreciation related to the higher number of servers deployed since fourth quarter of 2010 to support the growth of the Maopao Community.

Our gross profit for fourth quarter 2011 increased 23.8% to RMB61.0 million (US$9.3 million) compared to RMB49.2 million in fourth quarter 2010. Non-IFRS gross margin in fourth quarter 2011 was 35.1%, up from 33.6% in fourth quarter 2010, mainly due to lower costs associated with payments to industry participants as a percentage of revenue.

Operating Expenses (representing the total amount of research and development expenses, sales and marketing expenses, general and administration expenses)

Total operating expenses primarily consisting of employee salaries and benefits, training expenses, travelling, entertainment and office related expenses increased 72.1% in fourth quarter 2011 to RMB46.6 million (US$7.1 million) from RMB27.1 million in fourth quarter 2010.

Total non-IFRS operating expenses increased 37.6% in fourth quarter 2011 to RMB34.8 million (US$5.3 million) from RMB25.3 million in fourth quarter 2010.

The increase in operating expenses was primarily due to the increase in headcount, as described below,

The Company's employee headcount increased 61.3% to 534 as of March 31, 2011 from 331 as of March 31, 2010. The increase in headcount was necessary to support the growing operation and active promotion of the Maopao Community and carrier independent third-party payment channels.

Non-IFRS research and development expenses for the fourth quarter increased 34.6% to RMB11.3 million (US$1.7 million) compared to RMB8.4 million in fourth quarter 2010. The increase was primarily due to increase in salaries and bonus from increased headcount.

Non-IFRS sales and marketing expenses for the fourth quarter decreased 42.7% to RMB5.1 million (US$0.8 million) compared to RMB8.9 million in fourth quarter 2010. The decrease was due to a shift in compensation structure to long term stock based incentive for sales and marketing staff, lowering the cash salaries and bonus per staff and a reclassification of additional cost paid to content provider in fiscal third quarter 2011 to cost of revenues.

Non-IFRS general and administrative expenses for the fourth quarter increased 129.1% to RMB18.3 million (US$2.8 million) compared to RMB8.0 million in fourth quarter 2010. This was primarily due to increase in salaries and bonus from increased headcount.

Net profit and EPS

Net profit in fourth quarter 2011 was RMB4.4 million (US$0.7 million) compared to a loss of RMB109.9 million in fourth quarter 2010.

Non-IFRS net profit in fourth quarter 2011 increased 48.4% to RMB17.5 million (US$2.7 million) from RMB11.8 million in fourth quarter 2010.

Basic and diluted earnings per common share in fourth quarter 2011 were RMB0.02 (US$0.00) and RMB0.02 (US$0.00) respectively, and basic and diluted earnings per ADS were RMB0.16 (US$0.02) and RMB 0.16 (US$0.02) respectively.

Non-IFRS basic and diluted earnings per common share in fourth quarter 2011 were RMB0.07 (US$0.01) and RMB0.07 (US$0.01) respectively, and non-IFRS basic and diluted earnings per ADS were RMB0.56 (US$0.09) and RMB0.56 (US$0.09) respectively.

The weighted average number of ADSs used to calculate basic and diluted earnings per ADS for fourth quarter 2011 were 32,173,725 and 32, 255,178 respectively.

Each ADS represents eight common shares.

Other Operating Data

The following table sets forth total user downloads of our single-user applications and content titles for the period indicated:

The following table sets forth the number of registered, active members and member log-ins in our Maopao Community as of the date indicated:

Sky-mobi had 257,389,800 common shares outstanding as of March 31, 2011 and 257,389,800 common shares outstanding as of December 31, 2010.

Business Outlook

For the fiscal first quarter 2012 ending June 30, 2011, Sky-mobi expects total revenues to be in the range of RMB180 million to RMB190 million.

These are Sky-mobi's current projections, which are subject to change. You are cautioned that operating results in fourth quarter 2011 and fiscal year 2011 are not necessarily indicative of operating results for any future periods.

Other Announcements

Hu Xinyong, Vice President of Marketing has resigned from the Company. Mr. Hu was responsible for the marketing of our Maopao brand and decided to pursue his own interest to start a venture focused on the Android mobile technology platform. Sky-mobi is supportive of Mr. Hu's new venture and will maintain a close working relationship to explore new applications for the Android platform.

Conference Call and Webcast

Sky-mobi's management team will host a conference call 8:00 a.m. ET on Monday, May 9, 2011, to discuss results for its fiscal fourth quarter and full year ended March 31, 2011.

A live audio webcast of the conference call will be available on Sky-mobi's website at .

To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1 (877) 275-8968. International callers should dial +1 (706) 643-1666. When prompted by the operator, mention conference pass code 63639619.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Monday, May 9, 2011, at 10:00 a.m. ET. To access the replay, please dial +1 (800) 642-1687, international callers dial +1 (706) 645-9291, and enter the pass code 63639619.


About Non-IFRS Financial Measures 

To supplement its consolidated financial statements presented in accordance with International Financial Reporting Standards, or IFRS, Sky-mobi uses several non-IFRS financial measures defined below. The Company believes both management and investors benefit from referring to non-IFRS financial measures in assessing the Company's performance and prospects for the future. 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 revenues, gross profit, operating expenses, profit from operation, net profit and net profit per share is that these non-IFRS measures exclude the share-based compensation expenses that have been and will continue to be for the foreseeable future a significant recurring expense in the business. Management compensates for these limitations by providing 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 captioned "Reconciliations of non-IFRS financial measures to comparable IFRS financial measures" contained elsewhere in this release.  

Definitions of Non-IFRS Measures

Non-IFRS cost of revenues is defined as cost of revenue excluding share-based compensation expenses.

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

Non-IFRS operating expenses is defined as operating expenses excluding share-based compensation expenses, and one-time items such as IPO marketing expenses.

Non-IFRS profit from operations is defined as Non-IFRS gross profit less non-IFRS operating expenses.

Non-IFRS net profit is defined as non-IFRS profit from operations plus/minus other income/(expenses), less income taxes. Such amount excludes non-cash expenses from changes of fair value of preferred shares and warrant, and one-time items. 

Non-IFRS basic and diluted earnings per common share/ADS are defined as non-IFRS net profit divided by weighted average outstanding shares/ADSs during the period/year.


Explanatory Notes

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 RMB6.5483 to US$1.00, the exchange rate at March 31, 2011 as set forth in the H.10 statistical release of the Federal Reserve Board.

When calculating number of users of Maopao application store, Sky-mobi counts an individual who uses a particular handset with a particular SIM card to access Maopao as one user. Therefore, an individual who accesses Maopao through one handset with two SIM cards separately will be counted as two users, while an individual who accesses Maopao through two handsets using the same SIM card will also be counted as two users.

The number of downloads of application and content titles on Maopao refers to the number of requests made by mobile users for downloading a particular application or a content title, or for authorization to access a specified feature of a particular application or a content title from Maopao. There may be multiple download requests made by a user for an application depending on the complexity of the application and whether interruptions occurred during the downloading process.

The number of active members of the Maopao Community refers to the number of registered members who logged on to the Maopao Community at least twice during a month for the relevant quarter.

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 ''believes,'' ''expects,'' ''anticipates,'' ''intends,'' ''estimates,'' the negative of these terms, or other comparable terminology. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Potential risks and uncertainties include the effectiveness, profitability, and marketability of the Company's solutions; the Company's limited operating history; measures introduced by the PRC government and mobile network operators aimed at the telecommunications industry and mobile applications-related services; the Company's ability to maintain cooperation relationships with handset companies, content providers and payment service providers; its dependence on mobile service providers, and ultimately mobile network operators, for the collection of a substantial majority of its revenues; billing and transmission failures, which are often beyond the Company's control; its ability to compete effectively; its ability to capture opportunities in the expected growth of the smart phone market; its ability to obtain and maintain all applicable permits and approvals; general economic and business conditions; the volatility of the Company's operating results and financial condition; the Company's ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the Company's filings with the Securities and Exchange Commission. These forward-looking statements are based on current expectations, assumptions, estimates and projections about the Company and the 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. 


About Sky-mobi Limited

Sky-mobi Limited operates the leading mobile application store in China as measured by revenues in 2009, according to Analysys International. The Company works with handset companies to pre-install its Maopao mobile application store on handsets and with content providers to provide users with applications and content titles. Users of its Maopao store can browse, download, and enjoy a range of applications and content, such as single-player games, mobile music, and books. The Company's Maopao store enables mobile applications and content to be downloaded and run on various mobile handsets with different hardware and operating system configurations. The Company also operates a mobile social network community in China, the Maopao Community, where it offers mobile social games, as well as applications and content with social network functions to its registered members. The Company is based in Hangzhou, the People's Republic of China. For more information, please visit: .

The Sky-mobi Limited logo is available at

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CONTACT: Sky-mobi Limited Mr. Carl Yeung, CFO Phone: + (86) 571-87770978 (Hangzhou) Email: ir@sky-mobi.com CCG Investor Relations Mr. Athan Dounis Phone: +1-646-213-1916 Email: athan.dounis@ccgir.com