KongZhong Corporation Announces Unaudited First Quarter 2005 Financial Results

Name	Symbol	Market	Type
Formidable Fortress ETF	AMEX:KONG	AMEX	Exchange Traded Fund

	Price Change	% Change	Price	High Price	Low Price	Open Price	Traded	Last Trade
	-0.1165	-0.44%	26.5429	26.55	26.36	26.36	4,905	21:15:02

Formidable Fortress ETF (AMEX:KONG)
Historical Stock Chart

From Jun 2019 to Jun 2024

Click Here for more Formidable Fortress ETF Charts.

KongZhong Corporation Announces Unaudited First Quarter 2005 Financial Results The Company Reports Record Revenue of $17 Million BEIJING, May 23 /Xinhua-PRNewswire/ -- KongZhong Corporation (NASDAQ: KONG), a leading provider of advanced second generation (2.5G) wireless value added services in China, today announced its first quarter 2005 financial results. Financial Highlights: -- Revenue for the quarter grew 138% year-over-year and 3% sequentially to a record $17 million. -- 2.5G revenue grew 161% year-over-year but declined 7% sequentially to $13.68 million. -- 2G revenue grew 71% year-over-year and 89% sequentially to $3.25 million. -- Net income for the quarter increased 87% year-over-year but declined 11% sequentially to $5.88 million. Diluted earnings per ADS was $0.17, up from $0.11 in 1Q04 but down from $0.19 in 4Q04. -- The operating expenses include $0.86 million in legal expenses related to the issues raised in the class-action litigation commenced in August 2004. If the company had not incurred these legal expenses, the diluted earnings per ADS would have been $0.02 greater for the quarter. Commenting on the results, the Company's Chairman and CEO, Yunfan Zhou, said, 'We are pleased to announce that we have met our guidance by growing our first quarter revenue by 3% sequentially and 138% year-over-year, despite a challenging regulatory and market environment. In the first quarter, China Mobile changed its MMS revenue recognition policy and this caused our MMS revenue to decline from last quarter. Thanks to our diversified growth strategy and broad product portfolio, we were able to offset the decline in MMS revenue and continue to maintain our leadership position in the 2.5G market in China. We believe we are in an excellent position to capture the market growth opportunity in 2.5G and 3G services in the future.' Business Highlights: -- The Company believes it remained the leader in China in terms of revenue from 2.5G services, including WAP, MMS, and Java. -- The Company grew its mobile game revenue from 2.5G services by 5% sequentially to approximately $1.63 million in 1Q05. -- The Company offer color ring back tone (CRBT) services through 32 provincial operators of China Mobile, China Unicom, China Netcom, and China Telecom. -- The Company signed agreements with: -- IN-FUSIO to license its Die Hard and Midtown Madness mobile games; -- Gameloft to license its famous Asphalt mobile game; -- Famous actor and comedian Ge You to exclusively use his voice for Color Ring Back Tone and Ring Tone products in China. -- The Company acquired rights to enjoy all the economic interest in Beijing Wireless Interactive Technology Co. Ltd., or Beijing Wireless Interactive, a wireless value-added services provider, for RMB 13.84 million (approximately $1.68 million) by having KongZhong Corporation and its subsidiaries, enter into a series of contractual arrangements with Beijing Wireless Interactive and its shareholders. These arrangements will allow the Company to account for Beijing Wireless Interactive as its wholly owned subsidiary. -- The Company entered into a definitive agreement on May 12, 2005 pursuant to which its operating companies, Beijing AirInbox Information Technologies Co., Ltd. and Beijing Wireless Interactive will acquire Tianjin Mammoth Technology Company, a well known mobile game developer in China. Financial Results: (Note: Unless otherwise stated, all financial statement amounts used in this press release are based on US GAAP and denominated in US dollars.) Revenues Revenues for the quarter totaled a record $17 million, up 138% from the same period of the previous year and up 3% from 4Q04. Revenues from 2.5G wireless value-added services accounted for 80% of total revenues and revenues from 2G wireless value-added services represented the remaining 20%. (See table below for a detailed breakdown.) Revenues from 2.5G services, which include services delivered using wireless access protocol (WAP), multimedia messaging service (MMS), and Java technology, grew 161% from 1Q04 but declined 7% from 4Q04 to $13.68 million in 1Q05. The sequential decline in 2.5G revenues resulted from a 54% decrease in MMS revenue from 4Q04. WAP revenues in 1Q05 were $10.24 million, up 195% from 1Q04 and 32% from 4Q04. MMS revenues in 1Q05 were $3.09 million, up 84% from 1Q04 but down 54% from 4Q04. As disclosed in the forth quarter 2004 earnings release, the sequential decline in MMS revenues was mainly caused by the new MMS revenue recognition policy introduced by China Mobile in January. Java revenues in 1Q05 were $0.36 million, up 285% from 1Q04 and 32% from 4Q04. Revenue from 2G services, which include short messaging service (SMS), interactive voice response (IVR), and color ring back tone (CRBT), grew 71% from 1Q04 and 89% from 4Q04 to $3.25 million in 1Q05. Growth in IVR accounted for the largest increase in 2G revenues, followed by growth in SMS and CRBT. SMS revenues in 1Q05 were $2.03 million, up 11% from 1Q04 and 64% from 4Q04. IVR revenues in 1Q05 were $1.14 million, up 2298% from 1Q04 and 153% from 4Q04. 1Q04 2Q04 3Q04 4Q04 1Q05 2.5G: 73 % 80 % 85 % 90 % 80 % WAP 48 % 41 % 48 % 47 % 60 % MMS 24 % 37 % 35 % 41 % 18 % Java 1 % 2 % 2 % 2 % 2 % 2G: 27 % 20 % 15 % 10 % 20 % SMS 26 % 18 % 12 % 7 % 12 % IVR 1 % 2 % 3 % 3 % 7 % CRBT and others 0 % 0 % 0 % 0 % 1 % Total 100 % 100 % 100 % 100 % 100 % By service category, the Company derived 52% of its revenues from interactive entertainment, 23% from media services, and 25% from community- related services. 1Q04 2Q04 3Q04 4Q04 1Q05 Interactive Entertainment 56 % 47 % 47 % 50 % 52 % Media 25 % 37 % 36 % 36 % 23 % Community 19 % 16 % 17 % 14 % 25 % Total 100 % 100 % 100 % 100 % 100 % Expenses Cost of revenues in 1Q05 totaled $6.25 million, an increase of 179% from 1Q04 and 11% from 4Q04. The year-over-year increase was driven by higher business turnover and was primarily due to increased payments to mobile operators, handset manufacturers, and content partners. Gross margin for the quarter was 63%, compared to 69% in the same period of last year and 66% in 4Q04. The sequential decline was primarily due to an increase of transmission payments to operators resulting from the higher volume of messages sent and an increase of payment to the handset manufactures. Total operating expenses in 1Q05 were $5.34 million, an increase of 202% from the same period in 2004 and 17% from 4Q04. The sequential increase was largely due to the $0.86 million in legal expenses related to the issues raised in the class-action litigation. Total operating expenses represented 31% of revenues, compared to 25% and 28% of revenues in 1Q04 and 4Q04, respectively. The $0.86 million in legal expenses related to the issues raised in the class-action litigation represented 5% of revenues in 1Q05. Product development expenses increased by 4% from 4Q04 and represented 8.6% of revenues. Sales and marketing expenses declined 29% from 4Q04 and represented 5.9% of revenues. General and administrative expenses increased by 14% from 4Q04 and represented 7.1% of revenues. Sales tax increased by 24% from 4Q04 and represented 4% of revenues. Amortization of deferred stock compensation was flat from 4Q04 and represented 0.8% of revenues. Our headcount increased 11% from 541 at the end of 4Q04 to 601 as of March 31, 2005. Earnings Net income totaled $5.88 million in the first quarter, an increase of 87% from $3.14 million in the same period of last year but a decline of 11% from $6.60 million in 4Q04. The decline was largely due to the $0.86 million in legal expenses related to the issues raised in the class-action litigation. As a result of the increases in operating expenses, the Company's net margin contracted from 44% in 1Q04 and 40% in 4Q04 to 35% in 1Q05. Diluted earnings per ADS was $0.17, up from $0.11 in 1Q04 but down from $0.19 in 4Q04. If the Company had not incurred the $0.86 million in legal expenses related to the issues raised in the class-action litigation, the net margin would have been flat from the previous quarter and the diluted earnings per ADS would have been $0.02 greater in 1Q05. Balance Sheet and Cash Flow At the end of the quarter, the Company had $96.22 million in cash and cash equivalent funds and $112 million in total assets. Cash flow from operating activities totaled $6.78 million in the first quarter, compared to $2.24 million in 1Q04 and $8.99 million in the forth quarter of 2004. The net increase in cash and cash equivalents was $5.50 million. Appointment of the Senior Vice President of Finance Mr. JP Gan, Senior Vice President of Finance, joined the Company on May 16, 2005. Mr. Gan reports to Nick Yang, the Company's Co-founder and President, who continues to oversee the financial department's day-to-day operations as the Company's acting Chief Financial Officer. 2Q05 Business Outlook The Company expects revenues for 2Q05 to be between $17 million and$17.5 million. The Company anticipates its WAP revenue in the second quarter 2005 will decline from the first quarter as a result of changes to China Mobile's WAP revenue recognition policy that were introduced in the second quarter. The Company, however, expects that the diversified growth in its other services will offset the decline in WAP revenue in the second quarter 2005. Webcast of Conference Call The Company's management team will conduct a conference call at 11:00 pm Beijing time (11:00 am Eastern time and 8:00 am Pacific time) on May 23. A webcast of this conference call will be accessible on the Company's web site at http://ir.kongzhong.com/. KongZhong Corporation Condensed Consolidated Statements of Income (US$ thousands, except percentages, per share data, and share count) (unaudited) For the For the For the Three Three Three Months Months Months Ended Mar. Ended Dec. Ended Mar. 31, 2004 31, 2004 31, 2005 Revenues $7,148 $16,494 $17,001 Cost of revenues 2,239 5,648 6,247 Gross profit 4,909 10,846 10,754 Operating expense Product development 716 1,412 1,463 Sales & marketing 294 1,413 997 General & administrative 676 1,606 1,885 Legal expenses related to -- -- 856 the issues raised in the class-action litigation commenced in August 2004 Amortization of deferred 81 135 135 stock compensation Subtotal 1,767 4,566 5,336 Operating income 3,142 6,280 5,418 Non-operating expense (income) Interest expense (1) (333) (496) Others 1 14 3 Subtotal 0 (319) (493) Income before tax 3,142 6,599 5,911 Income tax expense -- 27 Net income 3,142 6,599 5,884 Basic earnings per ADS $0.27 $0.19 $0.17 Diluted earnings per ADS $0.11 $0.19 $0.17 Margin Analysis: Gross margin 68.7 % 65.8 % 63.3 % Operating margin 44.0 % 38.1 % 31.9 % Net margin 44.0 % 40.0 % 34.6 % Additional Data: 2.5G revenue $5,245 $14,773 $13,684 2G revenue 1,903 1,719 3,246 ADS outstanding (million) 11.73 34.25 34.28 ADS used in diluted EPS 27.46 35.51 35.41 calculation (million) KongZhong Corporation Condensed Consolidated Statements of Cash Flows (US$ thousands) (unaudited) For the For the 3-Months Ended 3-Months Ended Mar. 31, 2004 Mar. 31, 2005 Cash Flows From Operating Activities Net Income $3,142 $5,884 Adjustments Amortization of deferred stock 81 135 compensation Depreciation and amortization 114 349 Disposal of fixed assets 1 3 Changes in operating assets and (1,095) 407 liabilities Net Cash Provided by Operating 2,243 6,778 Activities Cash Flows From Investing Activities Purchase of property & equipment (371) (230) Acquisition of investments -- (985) Net Cash Used in Investing (371) (1,215) Activities Cash Flows From Financing Activities Issuance of New Equity -- 38 Increase (decrease) in minority 121 (97) interest Net Cash Provided by (used in) 121 (59) Financing Activities Translation Adjustments -- (2) Net increase in Cash and Cash 1,993 5,502 Equivalents Cash and Cash Equivalents, Beginning 3,743 90,714 of Period Cash and Cash Equivalents, End of 5,736 96,216 Period KongZhong Corporation Condensed Consolidated Balance Sheets (US$ thousands) (unaudited) Dec. 31, Mar. 31, 2004 2005 Cash and cash equivalents $90,714 $96,216 Accounts receivable 10,199 11,421 Other current assets 720 719 Total current assets 101,633 108,356 Rental deposits 256 376 Property and equipment (net) 2,484 2,371 Long-term investment -- 500 Goodwill and other intangible assets -- 471 Total assets $104,373 $112,074 Accounts payable 2,499 3,971 Other current liabilities 1,899 2,180 Amount due to related party 46 36 Total current liabilities 4,444 6,187 Minority interest 121 24 Total liabilities 4,565 6,211 Shareholders' equity 99,808 105,863 Total liabilities & shareholders' $104,373 $112,074 equity About KongZhong KongZhong Corporation is a leading provider of advanced second generation (2.5G) wireless interactive entertainment, media, and community services to consumers in China. The Company delivers a broad range of services, through multiple technology platforms, which users can access directly from their mobile phones by choosing an icon embedded in select models of handsets or from a mobile operator's portal or web site. Safe Harbor Statement This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements regarding trends in the wireless value-added services market and our future results of operations, financial condition and business prospects. Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends and our results may differ materially from those expressed or implied in these forward looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to, continued competitive pressure in China's wireless interactive services market and the effect of such pressure on prices; unpredictable changes in technology, consumer demand and usage preferences in this market; the state of and any change in our relationship with China's telecommunications operators; our dependence on the billing systems of mobile operators for our performance; changes in the regulatory policies of the Ministry of Information Industry and other relevant government authorities; and changes in political, economic, legal and social conditions in China, including the Chinese government's policies with respect to economic growth, foreign exchange, foreign investment and entry by foreign companies into China's telecommunications market. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release. For more information, please contact: Investor Contact: JP Gan Senior Vice President of Finance Tel: +86-10-8857-6000 Fax: +86-10-8857-5891 Email: Media Contact: Xiaohu Wang Manager Tel: +86-10-8857-6000 Fax: +86-10-8857-5900 Email: DATASOURCE: KongZhong Corporation CONTACT: Xiaohu Wang, Manager, +86-10-8857-6000, or fax +86-10-8857- 5900, Web site: http://www.kongzhong.com/

Market Data

News

Trading Tools

Markets

Discover

Hot Features

Follow Feed

Options Flow

Monitor

KONG Formidable Fortress ETF