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KongZhong's CEO Discusses Q2 2011 Results - Earnings Call Transcript

Total gross profit was $17 million compared to $16.5 million in 1Q, while gross margins remain stable at 41%. Total OpEx was $12.3 million, an increase of – from 1Q levels of $11.4 million as we increased sales and marketing activities for the long-term loan to tax for the full period of 2Q.

Net profit in the quarter was $4.39 million compared to a net loss in 1Q of $0.46 million, but this included a charge related to the change in the fair value of the Dacheng contingent consideration of $3.73 million. Basic net profit for ADS was $0.11 based on $40.9 million ADS which included the full quarter – first two quarters impact of new shares issued to the shareholder’s of Dacheng at the end of March.

Non-GAAP net income was $6.2 million in line with the company’s guidance range of $6 million to $7 million, while non-GAAP diluted net income per ADS was $0.14.

At the end of 2Q, the company had $134.2 million in cash and cash equivalents or $3.3 per basic ADS in cash compared to 11 of a $118.3 million at the end of 1Q. However, cash and cash equivalents exclude to $21.6 million third party loan and it’s including the value of the RMB third-party loan which was made totally for the purpose of treasury management.

Total cash and third-party loans amounted to $155.8 million at the end of 2Q or equivalent to $3.8 per ADS.

Now, I would like turn to each business unit’s financial performance in the Internet games, mobile games, and WVAS. Internet game revenues in the second quarter were $10.35 million a 59% increase from 1Q and 158% increase compared to 2Q 2.10. Net game revenues were driven by the strong performance of World of Tanks which was launched commercially on March 15, 2011.

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