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

Domestic net game revenues were $8.3 million, a 66% increase from 1Q and a 228% increase from 2Q 2010 due to the successful commercial launch of WoT or World of Tanks. Overseas, net game revenues were $2 million a 36% increase from 1Q and a 39% increase from 2Q 2010 due mainly to the contribution from a self developed 3D MMORPG game Shengmozhixue or Demon Code Online in Taiwan. Total overseas revenues as a percentage of total Internet game revenues in 2Q were 20% compared to 23% in 1Q.

For the second quarter three month period, domestic Mainland Chinese online game operations achieved average concurrent users or ACUs of 157,000 and aggregate paying accounts or APAs of 445,000 with quarterly ARPU of RMB121. We have previously reported first quarter ACU figures, which assumed as of World of Tanks as operating for the entire three month period of 1Q at post launch levels versus only for the last 17 days of the first quarter of the March 15 or ACU figures of 145,000.

However, if we were to calculate 1Q actual ACU figures in the same manner we do 2Q, 2011 and 4Q 2010, whereby World of Tanks would have only recorded zero ACUs prior to the March 15 of commercial launch date. ACUs for 1Q would have been 66,000 compared to 157,000 in 2Q of 2011 and 81,000 in 4Q of 2010. Net game revenues made up 25% of total revenues in 2Q’11.

Internet game gross profit in 2Q was $5.7 million a 31% increase from 1Q and a 64% increase from the same period of last year. 2Q internet game gross margins were 55% compared to 67% in 1Q due to the higher revenue contribution from WoT or World of Tanks, which compared to a self developed internet games includes revenue share war gaming, our third-party game development partner for World of Tanks.

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