2007'02.01.Thu
Tom Online Inc. Reports 1Q 2006 Revenues up 37.7% YoY
PR
May 10, 2006
Non-GAAP Net Income up 41% YoY as Company Consolidates Wireless Internet Leadership
BEIJING, May 10 /Xinhua-PRNewswire/ -- TOM Online Inc.
(Nasdaq: TOMO; Hong Kong GEM: 8282) ("TOM Online"
or "the Company"), a leading wireless Internet
company in China, announced today its financial results for
the first quarter ended March 31, 2006 ("1Q06").
FINANCIAL HIGHLIGHTS
-- Total revenues were US$ 48.58 million
("mn"), an increase of 37.7% from
the same period last year and up 1.0% from last
quarter. This was at
the high-end of the Company's 1Q06 guidance range of
US$ 47.7 mn to US$
48.5 mn.
-- Wireless Internet revenues were US$ 45.49 mn,
representing a 36.0%
increase over the same period last year and a 2.0%
increase over the
previous quarter. Wireless Internet revenues made
up 93.6% of the
Company's total quarterly revenues.
-- Online advertising revenues were US$ 2.70 mn,
representing a 70.5%
increase over the same period last year, but a
decline of 15.5% quarter
on quarter ("QoQ") due to seasonality.
-- Net Income was US$ 12.14 mn, an increase of 32.5%
from the same period
last year but down 4.6% from the last quarter due to
recognition of
share-based compensation ("SBC") expenses
and seasonal impacts.
-- Non-GAAP Net Income, which excludes SBC expenses of
US$ 0.78 mn, was
US$ 12.91 mn, representing an increase of 41.0% year
on year ("YoY").
-- Fully diluted earnings per American Depository Share
("ADS") were US$
22.6 cents per ADS or US$ 0.28 cents per common
share.
-- Non-GAAP fully diluted earnings per ADS were US$
24.1 cents per ADS or
US$ 0.30 cents per common share, after adjusting for
SBC expenses.
-- Balance of cash, short-term bank deposits and
marketable securities was
approximately US$ 139.03 mn at the end of the first
quarter 2006.
Wang Lei Lei, TOM Online Chief Executive Officer and an
Executive Director, said: "I am very pleased to
announce another quarter of solid financial results for TOM
Online. While competition in the online and wireless
Internet space is becoming more intense, the overall
operating environment has stabilised at the same time. As
a fast adopter of new technologies and innovative
distribution channels, TOM Online continues to lead in the
development of China's online and wireless Internet
markets. The Company's solid financial figures are the
results of its concrete cooperation relationships with
telecoms operators and other partners, and made possible by
our team of committed staff."
BUSINESS RESULTS:
The Company's unaudited consolidated revenues for the
three months ended March 31, 2006 were US$ 48.58 mn, an
increase of 37.7% over the same period in 2005 and an
increase of 1.0% QoQ. This was at the high-end of the
Company's 1Q06 guidance range of US$ 47.7 mn to US$ 48.5
mn.
Gross profit was US$ 19.96 mn, representing an increase
of 43.7% over the same period last year but a 6.6% decline
QoQ as gross margins declined in the first quarter to 41.1%
from 44.4% in the fourth quarter of 2005. However, gross
margins increased from the first quarter of 2005, which
were 39.4%.
Total operating expenses were US$ 9.32 mn in 1Q06,
roughly flat from 4Q05, but an increase of 59.7% over the
same period last year. In 1Q06, for the first time as per
SFAS 123(R), the Company recognized US$ 0.78 mn in SBC
expenses and exclude this expense in its calculations for
adjusted EBITDA ("Earnings before Interest, Taxes,
Depreciation and Amortization") and non-GAAP net
profit.
Operating income was US$ 10.65 mn up 32.1% from the
same period last year but down 12.3% from the previous
quarter, due to the first time expensing of SBC. Excluding
SBC expenses, operating income would have been US$11.43 mn.
Operating margins were 21.9% in the first quarter of 2006,
compared to 25.2% in the previous quarter.
Net interest income was US$ 0.49 mn. In addition, as
TOM Online's functional currency is RMB, the Company
recorded a non-operating gain of US$ 0.92 mn due to the
appreciation of the RMB relative to its net non-RMB
monetary liabilities at the period end.
1Q06 EBITDA were US$ 12.92 mn, an increase of 29.4% YoY
but down 9.1% QoQ. EBITDA margins were 26.6% for the first
quarter down from 29.5% in the last quarter. Excluding SBC
expenses, 1Q adjusted EBITDA was US$ 13.70 mn.
Net Income was US$ 12.14 mn, an increase of 32.5% YoY
but a decline of 4.6% QoQ, due to lower gross margins and
SBC expenses.
Non-GAAP Net Income, which excludes SBC expenses of US$
0.78 mn, was US$ 12.91 mn, representing an increase of 41.0%
YoY.
US GAAP basic earnings per American Depository Share
were US$ 22.9 cents for the quarter. US GAAP basic
earnings per Hong Kong ordinary share were US$ 0.29 cents
for the quarter. Shares used in computing US GAAP basic
earnings per American Depository Share were 53.01 mn and
shares used in computing US GAAP basic earnings per Hong
Kong ordinary share were 4,241 mn.
Non-GAAP basic earnings per American Depository Share
were US$ 24.4 cents for the quarter. Non-GAAP basic
earnings per Hong Kong ordinary share were US$ 0.30 cents
for the quarter. Shares used in computing non-GAAP basic
earnings per American Depository Share were 53.01 mn and
shares used in computing non-GAAP basic earnings per Hong
Kong ordinary share were 4,241 mn.
US GAAP diluted earnings per American Depository Share
were US$ 22.6 cents for the quarter. US GAAP diluted
earnings per Hong Kong ordinary share were US$ 0.28 cents
for the quarter. Shares used in computing US GAAP diluted
earnings per American Depository Share were 53.64 mn and
shares used in computing US GAAP diluted earnings per Hong
Kong ordinary share were 4,291mn.
Non-GAAP diluted earnings per American Depository Share
were US$ 24.1 cents for the quarter. Non-GAAP diluted
earnings per Hong Kong ordinary share were US$ 0.30 cents
for the quarter. Shares used in computing non-GAAP diluted
earnings per American Depository Share were 53.64 mn and
shares used in computing non-GAAP diluted earnings per Hong
Kong ordinary share were 4,291 mn.
WIRELESS INTERNET SERVICES
Total wireless Internet service revenues were US$ 45.49
mn for the first quarter of 2006, an increase of 36.0% from
the same period last year and a 2.0% increase QoQ.
Wireless Internet revenues accounted for 93.6% of the
Company's total revenues in the first quarter compared to
92.7% in 4Q05.
During the quarter, the Company continued to develop
its leadership in the mainland Chinese wireless Internet
market, prepared for 3G and continued its initiatives to
develop new business opportunities in non-mobile content
areas.
Key activities in the quarter included:
1. During the quarter, the Company continued to develop
its alliances with
media partners in TV, radio and print, to more
effectively market its
wireless services, such as 2.5G services and IVR, as
well as broaden
the awareness of its brand with consumers. This
includes activities
related to the Company's exclusive wireless Internet
relationship with
CCTV-5 for this year's World Cup tournament. The
Company believes that
its scale and diversification in wireless
distribution channels is a
competitive advantage.
2. In 1Q06, the Company signed a strategic cooperation
agreement with
Titan Sports, the country's top-selling sports
newspaper, to provide
joint coverage on this year's FIFA World Cup in
addition to a range of
other long-term initiatives, including the launch of
a new sports
channel, http://titan.tom.com, and focus on
developing new wireless
applications and services around sports content. In
the second quarter,
the Company has re-started its offline road shows to
promote its
"Wanleba" Internet music brand as the
Company believes that mobile
music will continue to be an important driver of
growth for its
business in 2006.
SMS ("Short Messaging Service") revenues in
1Q06 were US$ 17.44 mn, down 2.0% QoQ but an increase of
38.5% from the same period last year. SMS revenues made up
38.3% of its total wireless Internet revenues for the
quarter. YoY growth in SMS was driven by a combination of
improved revenue confirmation rates and broader
distribution of products and services.
MMS ("Multimedia Messaging Service") revenues
for 1Q06 were US$ 4.09 mn, down 7.0% QoQ, but up 113.3% YoY.
MMS revenues made up 9.0% of the Company's total wireless
Internet revenues in the quarter. However as discussed
before, the Company continues to believe that MMS is a
transitory product category and does not expect MMS to be a
key business driver to its overall business in coming
years.
WAP ("Wireless Application Protocol")
revenues for 1Q06 were US$ 7.83 mn, down 2.9% QoQ but up
5.0% YoY. WAP revenues made up 17.2% of the Company's
total wireless Internet revenues in the quarter. WAP
revenues declined slightly in 1Q06 from 4Q05 due in part to
seasonal factors, but also due to ongoing operator policy
issues surrounding inactive users, decline in CDMA WAP
usage and ongoing competition for more attractive WAP deck
positioning.
IVR ("Interactive Voice Response") revenues
in 1Q06 were US$ 12.25 mn, up 12.6% QoQ, and up 46.8% YoY.
IVR revenues made up 26.9% of TOM Online's total wireless
Internet revenues in the quarter. Music-related IVR
services related to the Company's TV channel alliances were
its main revenue driver in 1Q as well as IVR coming off a
lower than normal base in 4Q05 due to technical issues
discussed in 4Q05 results.
CRBT ("Colour Ringback Tones") revenues in
1Q06 were US$ 2.46 mn, up 6.8% QoQ, but down 8.1% YoY.
CRBT revenues made up 5.4% of its total wireless Internet
revenues in the quarter. CRBT business rebounded slightly
during 1Q06, but was still down YoY due to
activities/promotions the Company conducted in conjunction
with mobile operators to continue to spur usage as well as
activities by smaller players seeking to gain market share
by self-promoting their own songs.
Other wireless Internet revenues were US$ 1.43 mn, up
21.4% QoQ and 219.7% YoY as the Company only began to
consolidate Indiagames revenues in late February 2005.
However, the major sequential driver for other wireless
Internet revenues was mainland China mobile game revenues
at the TOM Online level.
ONLINE ADVERTISING
Online advertising revenues were US$ 2.70 mn in 1Q06,
down 15.5% QoQ but up 70.5% YoY. On an annual basis the
Company's online advertising business performed well due to
its efforts to better monetize core online channels such as
entertainment, music (including Wanleba) and sports. To
increase its brand recognition with users and advertisers
with regards to Wanleba, the Company will be staging
another year of mobile music college campus road shows from
April 19 to June 9 and from September to November, covering
roughly 30 universities in 16 cities.
Jay Chang, Chief Financial Officer and an Executive
Director of TOM Online, commented: "I'm pleased to say
that as a result of our operational excellence and focus on
building a broad network of distributional partnerships,
TOM Online was not only able to produce another quarter of
solid financial results but also further consolidate its
leadership in the wireless Internet space."
NEW BUSINESS OPPORTUNITIES
TOM-SKYPE JV
At the end of April 2006, the Company had over 12 mn
registered TOM-Skype users, up from over 9 mn registered
users we announced at the end of February 2006. The
Company continues to drive user growth through tom.com and
through its JV partner's eBay China site. The Company
continues to work with Skype to co-develop more local
features and services for the mainland China market as well
as premium services over the TOM-Skype platform. In
addition, the Company is exploring advertising
opportunities through the TOM-Skype clients, which it hopes
to begin monetizing over the next few quarters.
UMPAY alliance
In the first half of 2006, the Company has begun
testing for micro-payment services (<RMB 30 per
transaction) based on UMPay's mobile payment platform to
allow users to pay for online goods and services using IVR.
Moreover, the Company is in the early stages of developing
a pre-paid card top up business, based on UMPay's platform,
with testing to occur in the second quarter of 2006. The
Company continues to work exclusively with UMPay to develop
China's mobile payment market as a longer-term opportunity
for the Company.
BUSINESS OUTLOOK
Based on current information and expectations as of May
10th, 2006, the Company estimates total revenues for the
second quarter of 2006 would be between US$50.0 mn and
US$51.5 mn.
Starting in the first quarter of 2006, the Company has
begun expensing costs related to employee stock
compensation due to the adoption of the Statement of
Financial Accounting Standard 123R, "Share-Based
Payment." Based on unvested shares as of the end of
March 31, 2006, and excluding any new shares that may be
granted, the Company estimates that the impact to the
second quarter of 2006 would be in the range of US$ 0.7 mn
to US$ 0.9 million.
Non-GAAP Measures
To supplement its consolidated financial statements
presented in accordance with the generally accepted
accounting principles in the United States, the Company
uses the non-US GAAP measures, which are adjusted from
results based on US GAAP. The use of non-US GAAP measures
is provided to enhance the reader's overall understanding
of our current financial performance and our future
prospects. Specifically, the Company believes that the
non-US GAAP results provide useful information to both
management and investors by excluding certain items that
are not expected to result in future cash payments or may
not be indicative of our core operating results. In
addition, because the Company has historically reported
certain non-US GAAP results, the Company believes the
inclusion of non-US GAAP measures provides consistency in
our financial reporting. Non-US GAAP measures should be
considered in addition to results prepared in accordance
with the US GAAP, but should not be considered a substitute
for or superior to our US GAAP results.
Forward Looking Statements
This announcement contains statements that may be
viewed as "forward-looking statements" within the
meaning of Section 27A of the United States Securities Act
of 1933, as amended, and Section 21E of the United States
Securities Exchange Act of 1934, as amended. Such
forward-looking statements are, by their nature, subject to
significant risks and uncertainties that may cause the
actual performance, financial condition or results of
operations of the Company to be materially different from
any future performance, financial condition or results of
operations implied by such forward-looking statements. Such
forward-looking statements include, without limitation,
statements that are not historical fact relating to the
financial performance and business operations of the
Company in mainland China and in other markets, the
continued growth of the telecommunications industry in
China and in other markets, the development of the
regulatory environment and the Company's latest product
offerings, and the Company's ability to successfully
execute its business strategies and plans.
Such forward-looking statements reflect the current
views of the Company with respect to future events and are
not a guarantee of future performance. Actual results may
differ materially from information contained in the
forward-looking statements as a result of a number of
factors, including, without limitation, any changes in our
relationships with telecommunication operators in China and
elsewhere, the effect of competition on the demand for the
price of our services, changes in customer demand and usage
preference for our products and services, changes in the
regulatory policies by relevant government authorities, any
changes in telecommunications and related technology and
applications based on such technology, and changes in
political, economic, legal and social conditions in China,
India and other countries where the Company conducts
business operations, including, without limitation, the
Chinese government's policies with respect to economic
growth, foreign exchange, foreign investment and entry by
foreign companies into China's telecommunications market.
Please also see "Item 3 - Key Information - Risk
Factors" section of the Company's 2005 annual report
on Form 20-F as filed with the United States Securities and
Exchange Commission.
Conference Call
TOM Online's management will hold an investor
conference call at 8.00 PM Hong Kong time (8.00 AM EDT) on
May 10, 2006 to present an overview of the Company's first
quarter financial performance and business operations
during the period.
The dial-in numbers for the calls are:
Australia: 1-800-750-079; China A (China Netcom
subscribers): 10800-852-0823; China B (China Telecom
subscribers): 10800-152-0823; Hong Kong: 2258-4002; India:
000-800-852-1133; Singapore: 800-852-3412; United Kingdom:
0800-096-7428; USA: 877-542-7993.
Password: TOM Online.
The conference calls will be accompanied by a slide
presentation at http://ir.tom.com. An audio replay of the
call can be accessed by dialing +852-2802-5151; password:
735220. The audio replay will be kept for seven days.
About TOM Online Inc.
TOM Online Inc. (Nasdaq: TOMO; HK GEM stock code: 8282)
is a leading wireless Internet company in China providing
value-added multimedia products and services. A premier
online brand in China targeting the young and trendy
demographic, the Company's primary business activities
include wireless Internet services and online advertising.
The Company offers an array of products such as SMS, MMS,
WAP, wireless interactive voice response services, content
channels, search and classified information, free and
fee-based advanced email and online games. As at March 31,
2006, TOM Online is the only portal in China that enjoyed a
top three ranking in every wireless Internet services
segment.
CONSOLIDATED BALANCE SHEETS
Audited
Unaudited
December
March
31, 2005
31, 2006
(in
thousands of U.S.
dollars)
Assets
Current Assets:
Cash and cash equivalents 99,869
98,289
Short-term bank deposits 1,863
2,621
Accounts receivable, net 33,950
35,535
Restricted cash 300
300
Prepayments 6,053
5,677
Deposits and other receivables 2,503
3,028
Due from related parties 189
193
Inventories 53
62
Total current assets 144,780
145,705
Available-for-sale securities 38,519
38,122
Restricted securities 59,122
58,518
Investment under cost method 1,494
1,504
Long-term prepayments and deposits 132
134
Property and equipment, net 15,346
15,479
Deferred tax assets 521
524
Goodwill, net 184,678
192,231
Intangibles, net 1,415
1,841
Total assets 446,007
454,058
Liabilities and shareholders' equity
Current liabilities:
Accounts payable 5,031
5,605
Other payables and accruals 16,002
17,346
Income tax payable 569
328
Deferred revenues 69
82
Consideration payables 16,615
124
Due to related parties 19,430
19,628
Total current liabilities 57,716
43,113
Non-current liabilities:
Secured bank loan 56,099
55,753
Deferred tax liabilities 182
183
Total liabilities 113,997
99,049
Minority interests 2,900
3,360
116,897
102,409
Shareholders' equity:
Share capital
(ordinary share, US$0.001282 par value,
10,000,000,000 shares authorized,
4,224,532,105 and 4,247,131,716 shares
issued and outstanding as at December
31, 2005 and March 31, 2006 respectively) 5,416
5,445
Paid-in capital 312,643
317,738
Statutory reserves 11,396
11,396
Accumulated other comprehensive
(losses)/incomes
(3,187) 2,093
Retained earnings 2,842
14,977
Total shareholders' equity 329,110
351,649
Total liabilities, minority interests and
shareholders' equity 446,007
454,058
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months
ended March 31,
2005
2006
(in thousands
of U.S. dollars,
except
for of shares
and per
share data)
Revenues:
Wireless Internet services 33,440
45,493
Advertising 1,585
2,702
Commercial enterprise solutions and
Others 256
384
Total revenues 35,281
48,579
Cost of revenues:
Cost of services (includes
share-based compensation cost under
SFAS 123(R) of 0 and 24 in thousands
of U.S. dollars, respectively) (21,387)
(28,615)
Total cost of revenues (21,387)
(28,615)
Gross profit 13,894
19,964
Operating expenses:
Selling and marketing expenses
(includes share-based compensation
cost under SFAS 123(R) of 0 and 1
in thousands of U.S. dollars,
respectively) (1,177)
(1,451)
General and administrative
expenses (includes share-based
compensation cost under SFAS 123(R)
of 0 and 745 in thousands of U.S.
dollars, respectively) (4,054)
(7,230)
Product development expenses
(includes share-based compensation
cost under SFAS 123(R) of 0 and 8
in thousands of U.S. dollars,
respectively) (258)
(454)
Amortization of intangibles (346)
(181)
Total operating expenses (5,835)
(9,316)
Income from operations 8,059
10,648
Other income:
Net interest income 1,119
488
Exchange gain --
918
Income before tax 9,178
12,054
Income tax (expenses)/ credit (20)
60
Income after tax 9,158
12,114
Minority interests 3
21
Net income attributable to
shareholders 9,161
12,135
Earnings per ordinary share - basic
(cents): 0.24
0.29
Earnings per ordinary share -
diluted (cents): 0.22
0.28
Earnings per ADS - basic (cents): 18.8
22.9
Earnings per ADS - diluted (cents): 17.4
22.6
Weighted average number of shares
used in computing Earnings Per Share:
Ordinary shares, basic 3,896,200,000
4,240,608,912
Ordinary shares, diluted 4,200,355,503
4,291,046,914
American Depositary Shares, basic 48,702,500
53,007,611
American Depositary Shares, diluted 52,504,444
53,638,086
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY
Share
Paid-in Statutory
Number
Capital Capital Reserves
of Shares
(in thousands of
U.S. dollars except
for number
of shares)
Balance as of January 1, 2005 3,896,200,000
4,995 260,867 9,452
Unrealized loss on securities --
-- -- --
Net income --
-- -- --
Balance as of March 31, 2005 3,896,200,000
4,995 260,867 9,452
Balance as of January 1, 2006 4,224,532,105
5,416 312,643 11,396
Issuance of shares on exercise of
employee share options 22,599,611
29 4,317
Share based compensation
778
Unrealized loss on securities
Currency translation adjustments
Net income
Balance as of March 31, 2006 4,247,131,716
5,445 317,738 11,396
Accumulated
(Accumulated Total
other
holders' share-
comprehensive
deficit)/ holders
(losses)/incomes
Retained equity
earnings
(in thousands of
U.S. dollars except
for number
of shares)
Balance as of January 1, 2005 (670)
(40,220) 234,424
Unrealized loss on securities (2,314)
-- (2,314)
Net income --
9,161 9,161
Balance as of March 31, 2005 (2,984)
(31,059) 241,271
Balance as of January 1, 2006 (3,187)
2,842 329,110
Issuance of shares on exercise of
employee share options
4,346
Share based compensation
778
Unrealized loss on securities (907)
(907)
Currency translation adjustments 6,187
6,187
Net income
12,135 12,135
Balance as of March 31, 2006 2,093
14,977 351,649
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
March 31,
2005 2006
(in thousands of
U.S. dollars)
Cash flow from operating activities:
Net income
9,161 12,135
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of intangibles
346 181
Amortization of premium on debt securities
109 94
Allowance for doubtful accounts
241 159
Depreciation
1,578 2,092
Exchange gain
-- (918)
Loss on disposal of property and equipment
81 2
Share based compensation
-- 778
Minority interests
(3) (21)
Change in assets and liabilities, net of effects
from acquisitions:
Accounts receivable
(2,112) (1,480)
Prepayments
190 456
Deposits and other receivables
(267) (493)
Due from related parties
-- (4)
Inventories
31 (9)
Accounts payable
592 172
Other payables and accruals
1,274 1,196
Income tax payable
4 (246)
Deferred revenues
(25) 12
Due to related parties
487 199
Net cash provided by operating activities
11,687 14,305
Cash flow from investing activities:
Payments for purchase of property and equipment
(2,447) (1,740)
Cash paid for short-term bank deposits
-- (736)
Payments for acquisitions
(13,707) (17,952)
Net cash used in investing activities
(16,154) (20,428)
Cash flow from financing activities:
Issuance of ordinary shares from the exercise of
shares options,
4,346
net of expenses
--
Payments for IPO shares issuing expenses
(803) --
Partial repayment of bank loan
-- (347)
Net cash (used in) /provided by financing
activities
(803) 3,999
Net decrease in cash and cash equivalents
(5,270) (2,124)
Cash and cash equivalents, beginning of period
79,320 99,869
Foreign currency translation
544
Cash and cash equivalents, end of period
74,050 98,289
Supplemental disclosures of cash flow information
Cash (paid)/received during the period:
Cash paid for income taxes
(17) (186)
Interest received from bank deposit and securities
800 1,049
RECONCILIATION FROM US GAAP INCOME FROM OPERATION TO
NON-GAAP MEASURES
Three months
ended March 31,
2005
2006
(in thousands
of U.S. dollars)
Income from operations 8,059
10,648
Add back: Depreciation 1,578
2,092
Amortization 346
181
EBITDA 9,983
12,921
Add back: Share-based compensation cost --
778
Adjusted EBITDA 9,983
13,699
Three
months ended March 31,
2005
2006
(in
thousands of U.S. dollars)
Net income attributable to shareholders 9,161
12,135
Add back: Share-based compensation cost --
778
Non-GAAP Net income 9,161
12,913
For more information, please contact:
Rico Ngai
Tom Online Inc.
Tel: +86-10-6528-3399 x6940
Mobile: +86-139-118-95354
Skype: ricoinrio
SOURCE TOM Online Inc.
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