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KongZhong Corporation CEO Discusses Q1 2011 Results - Earnings Call Transcript

Total gross profit was $16.5 million, compared to $16 million in 4Q, while gross margins declined to 41% compared to 44% in 4Q. Total operating expenses, we have $11.4 million, a decrease from $19.8 million in 4Q and $14 million in 1Q of 2010.

Net loss in 1Q was $0.46 million; however, this included a charge related to a change in the fair value of the Dacheng contingent consideration of roughly $3.7 million. Excluding this, net income in 1Q was $3.2 million, a 3% increase compared to $3.17 million in 1Q of the same period last year.

Basic net loss per ADS was $0.01 based on 37.6 million ADS. Non-GAAP net income was $6.9 million, in line with the company’s guidance range of $6 million to $7 million, while non-GAAP diluted net income per ADS was $0.17.

As of 1Q, the company had $118.3 million cash and cash equivalents or $3.1 per basic ADS in cash and cash equivalents. This included a $9.3 million payment for the early extinguishment of convertible note issued to – a partial extinguishment of the convertible note issued to Nokia Growth Partners, a $14.6 million payment for the cash portion related to the final payment for Dacheng and a $21.2 million investment in RENMINIBI denominated short-term loan to a third party. It’s including the value of this RENMINIBI third-party loan which was made totally for the purpose of treasury management.

Total cash and third-party loans amounted to $140 million exiting the first quarter of 2011.

Now, I would like turn to each business unit’s financial performance in the mobile games, Internet games, and WVAS. Total mobile game revenues in 1Q were $12.3 million, a 29% increase from the same period last year but a 4% decrease from 4Q.

Revenues from downloadable mobile games were $11.69, representing a 31% increase from the same period last year, but a decrease of 5% from 4Q.

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