Marbridge Daily

KongZhong Q1 2010 Profit Up 26% YoY

KongZhong PR, 5/19/10

Chinese mobile Internet company KongZhong (Nasdaq: KONG) has announced its unaudited financial results for the first quarter ended March 31, 2010, with total revenues up 37% YoY to USD 40.64 mln, above KongZhong's revised Q1 2010 revenue guidance of USD 37.5 mln.

Net income for the quarter was USD 3.17 mln, up 25.8% YoY.

Wireless value-added service (WVAS) revenues in Q1 2010 were USD 25.9 mln, a 3% increase from Q4 2009 and a 9% increase from the same period last year. Although the bulk of KongZhong's WVAS services, both 2G and 2.5G, were negatively impacted by various new mobile operator policies implemented during the course of Q1 2010, its IVR services saw a strong seasonal increase due to the Chinese New Year holiday period. As a result, 2G revenues represented 91% of total WVAS revenues compared to 81% in Q4 2009, while 2.5G services made up 9% of total WVAS revenues.

Total mobile game revenues in Q1 2010 were USD 9.48 mln, a 92% increase from the same period last year and a 29% increase from Q4 2009.

Revenues from downloadable mobile games were USD 8.95 mln representing a 112% increase from the same period last year and an increase of 37% from Q4 2009. The strong performance in KongZhong's downloadable mobile game revenues was due to KongZhong's proactive focus on developing monthly mobile game subscription packages with China Mobile (NYSE: CHL; 0941.HK), which KongZhong believes provides both a source of growth potential, but more importantly a more stable source of revenues due to the recurring nature of monthly subscriptions for a package of mobile games compared to the previously more prevalent per transaction downloadable mobile game model.

Revenues from mobile MMORPGs were USD 0.53 mln, a decrease of 27% from the same period last year and a decrease of 36% from Q4 2009. In a continuation of trends from the previous quarter, namely the initial poor performance of "Feng Shen," KongZhong's newer online mobile game, not compensating for the decline in revenues for Tian Jie Online (Reincarnation), its older online mobile game, KongZhong's online mobile game revenues continued to decline. However, towards the end of Q1 2010, a new expansion pack for Feng Shen was launched which KongZhong expects to stabilize its online mobile game revenues in the future. In addition, KongZhong intends to refresh its online mobile game content portfolio in 2010 by launching "Fantasy Tianjie," a turn-based 2D mobile MMO sometime in Q3 2010 and the second generation version of Tian Jie, currently called Tian Jie 2, sometime in early 2011.

Revenues from "Tian Jie" accounted for about 96% of KongZhong's online mobile game revenues while revenues from "Feng Shen" accounted for the remaining 4%, compared to 11% in Q4 2009.

Revenues from downloadable mobile games made up 94% of total mobile game revenues compared to 89% in Q4 2009. Revenues from online mobile games made up roughly 6% of total mobile game revenues compared to 11% in Q4 2009.

Wireless Internet service ("WIS") revenues were USD 1.02 mln in Q1 2010, representing an increase of 4% from the same period last year but decrease of 41% from Q4 2009. The decline in sequential WIS revenues was mainly due to the suspension of the WAP billing platform across KongZhong's mobile operator partners. In Q1 2010, 40% of WIS revenues were from wireless advertising with the remaining 60% of revenues from premium services on the Kong.net mobile Internet site and revenues coming from KongZhong's Internet literature site, Zhulang.com.

From January 14th 2010, revenues from KongZhong's newly acquired Online Game business unit, or Dacheng Networks (under "Online Games"), recorded USD 4.24 mln in revenues, all primarily from Dacheng's main online game, Loong. Of this, roughly 93% were related to mainland Chinese operations of Loong and the other roughly 7% from overseas license fees and the net revenue share from overseas online game operation partners.

For the full quarter, Loong's mainland China operations achieved ACU of 77,000 and aggregate paying accounts of 185,000 with quarterly ARPU of RMB 172.

KongZhong expects total revenues for Q2 2010 to be within the range of USD 34.5 mln to USD 35.5 mln, with business unit revenues at the mid-point expected to roughly consist of WVAS revenues of USD 16.5 mln, mobile game revenues of USD 13.0 mln, WIS revenues of USD 1.0 mln and Online Game revenues of USD 4.5 mln.

To view Kongzhong's full earnings report, please click here.

Keywords: Tian Jie 2 mobile payment WAP regulation Fantasy Tianjie Dacheng Loong guidance Internet profit revenue wireless WVAS Reincarnation ACU IVR Kong.net Kongzhong KONG Q1 2010 mobile Internet Feng Shen Zhulang SP mobile gaming online gaming fiscal report