Sky-mobi's CEO Discusses F1Q2013 Results - Earnings Call Transcript

Sky-mobi Limited (MOBI)

Q1 2013 Earnings Call

August 13, 2012 8:00 am ET


Michael Song – Chairman, Chief Executive Officer

Carl Yeung – Chief Financial Officer

Elaine Ketchmere – CCG Investor Relations


Andy Yeung – Oppenheimer

Bin Liu – Citigroup



Good morning, my name is Demetris and I will be your conference operator today. At this time, I would like to welcome everyone to the Sky-mobi First Quarter Fiscal Year 2013 Earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. [Operator instructions]

Thank you. Ms. Ketchmere, you may begin your conference.

Elaine Ketchmere

Thank you, Operator. Good morning and good evening everyone, and welcome to Sky-mobi’s Fiscal First Quarter 2013 Earnings conference call. With us today are Sky-mobi’s Chairman and Chief Executive Officer, Mr. Michael Song, and Chief Financial Officer, Mr. Carl Yeung.

Before I turn the call over to Mr. Song, may I remind our listeners that in this call, management’s prepared remarks contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the Company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today and therefore we refer you to a more detailed discussion of the risks and uncertainties in the Company’s filings with the Securities and Exchange Commission.

In addition, any projections as to the Company’s future performance represent management’s estimates as of today, August 13, 2012. Sky-mobi assumes no obligation to update these projections in the future as market conditions change.

To supplement its financial results presented in accordance with IFRS, management will make reference to certain non-IFRS financial measures which the Company believes provide meaningful additional information to understand Sky-mobi’s operating performance. A table reconciling non-IFRS financial measures to the nearest IFRS equivalent can be found in the earnings press release issued yesterday.

For those of you unable to listen to the entire call, a recording will be available via webcast at the Investor Relations section of Sky-mobi’s website at

And now it’s my pleasure to turn the call over to Sky-mobi’s CEO, Mr. Michael Song.

Michael Song

Thank you, Elaine. Welcome everyone and thank you for joining us today to review our fiscal first quarter 2013 results. We made significant progress in the smartphone market while maintaining strong revenue and cash flow from our feature phone business. We remained the market leader in China’s feature phone market, experiencing a revenue decline of only 7.6% compared to the overall industry estimate of about 25%. This was due to increased revenue contributed from our game-based mobile community and improved ARPU following the launch of several new games.

Some highlights for the first quarter include overall revenue for the quarter came in at $24.1 million U.S., down about 7.6% year-over-year. Application store downloads were 764 million. Mobile community carrier independent revenue throughout the third party channel, including concurrency, represents 21.8% of total revenue. Mobile community added 22.8 million registered users with total registered users reaching 193.4 million. Non-IFRS net profit totaled $0.5 million U.S.

Now I want to talk about our feature phone business. As anticipated, our feature phone business saw a year-over-year decline in revenue as Chinese consumers continue to migrate towards smartphones. This decline was lower than the overall market decline due to our strategy of streamlining costs, increasing monetization and ARPU, and improving payment efficiency. During this quarter, we saw year-over-year declines in user visits to and downloads from our app store primarily due to the shrinking feature phone market in China. The number of downloads was also influenced by our efforts to streamline and lower operating costs.

During the quarter, we shifted internal resources away from our feature phone business to focus on our Android platform. We began outsourcing a portion of our feature phone music platform to a partner and reduced a number of new game titles available in feature phone application store. Going forward, we will devote only the minimum of resources necessary to maintain our feature phone business.

Our mobile community also saw a decline in the number of active members due to the overall market decline to feature phones. Despite this, total revenue from the mobile community rose almost 60% due to the strong performance of our mobile social games. As we mentioned in our last call, we are repositioning the mobile community towards revenue-generating mobile social games and away from the free social functions. We launched a total of six new mobile social games this quarter, one of which had its revenue triple over three short months and is quickly approaching 10% of our social game revenue. We have another five mobile social games in the pipeline for the remainder of this calendar year.

Our new relationship with China Mobile is going well, particularly in the area of mobile gaming as we directly operate this platform on behalf of China Mobile, which means we have much higher payment efficiency. Going forward, we will continue to optimize the feature phone products and operations so that this business continues to provide a strong source of cash flow to support our growth in the smartphone market.

Now I want to talk about our smartphone strategy. In terms of smartphones, we have made excellent progress in penetrating this emerging market since launching our new Android platform at a global mobile Internet conference in Beijing in May. We have already entered into agreements with 50 handset manufacturers to pre-install our app store PC shield browser mobile game competition platform. This quick pace of adoption by industry players is proof of commercial competitiveness of our product and the monetization capability in China. We expect to continue our rapid progress by adding more manufacturers once they begin shipments over the next few quarters. We are confident we will become one of the top smartphone players in China by the end of this year.

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