SHANGHAI, Nov. 28, 2011 /PRNewswire-Asia/ -- Taomee
Holdings Limited (NYSE: TAOM) ("Taomee" or the "Company"), one of
the leading children's entertainment and media companies in
China, today reported its
unaudited financial results for the third quarter ended
September 30, 2011.
Third Quarter 2011 Financial
Highlights
- Total net revenues reached an historical high of US$12.7 million, an increase of 7.8% from
US$11.8 million in the second quarter
2011 and 23.7% from US$10.3 million
in the third quarter 2010, exceeding the Company's guidance.
- Gross margin decreased to 81.2% from 85.1% in the second
quarter 2011 and 84.9% in the third quarter 2010.
- Net income attributable to the holders of ordinary shares was
US$ 4.4 million, compared with US
$4.3 million in the second quarter of
2011 and US $6.4 million in the third
quarter of 2010.
- Basic and diluted earnings per ADS were US$0.12 and US$0.12, respectively, compared with US$0.14 and US$
0.13, respectively, in the second quarter 2011 and
US$0.22 and US$0.21, respectively, in the third quarter
2010.
- Non-GAAP net income attributable to holders of ordinary shares
was US$5.0 million, compared with
US$4.7 million in the second quarter
2011 and US$6.5 million in the third
quarter of 2010.
- Non-GAAP basic and diluted earnings per ADS were US$0.14 and US$0.13, respectively, compared with US$0.15 and US$0.14, respectively, in the second quarter 2011
and US$0.22 and US$0.22, respectively, in the third quarter
2010.
"During the third quarter of 2011, we are pleased to report that
we delivered a new record level of revenue and reached an all-time
high of 37.1 million active users," said Mr. Benson Wang, Co-founder, Director and Chief
Executive Officer of Taomee. "We also successfully launched two
film releases based on our core franchises, Seer and Mole's World.
Both movies were ranked among the top 10 for domestically produced
animated films."
"Our new high in active users was partly driven by our strategy
to gain market share and increase user stickiness by temporarily
decelerating monetization activities within our online games. The
third quarter results give us tremendous confidence in our strategy
and we plan to continue to prioritize market share expansion as we
foster user growth, and user stickiness. The success of the films
and triple digit growth in licensing also demonstrates our ability
to monetize our brands across our platform, while reducing our
dependence on online revenues. Meanwhile, we also recently
strengthened our competitive position and intensified our share
gain efforts in the fourth quarter with the launch of Mole's World
on the iOS platform on October 28th.
The entertainment application has been a top ranked download in
China since its launch. Looking
forward, we are extremely excited by the opportunities that lie
ahead as we continue to build Taomee into one of the largest, most
profitable children's entertainment companies in China."
Operational Results for Third Quarter
2011
For the third quarter 2011, the number of active accounts for
the Company's games under operation in mainland China increased 55% to approximately 37.1
million from 24.0 million in the second quarter of 2011. Active
paying accounts for the Company's games under operation in mainland
China decreased to 2.1 million
from 2.2 million in the second quarter 2011 and from 3.1 million in
the third quarter 2010. The increase in active accounts was
primarily due to a series of successful marketing initiatives that
attracted new users as the Company attempts to increase market
share. The decline in active paying accounts was primarily because
the Company decided to temporarily decelerate monetization
opportunities in an effort to enhance user stickiness.
Unaudited Financial Results for Third
Quarter 2011
Total Net Revenues
Total net revenues were US$12.7
million, compared with US$11.8
million in the second quarter 2011 and US$10.3 million in the third quarter 2010.
Net online business revenues were US$10.4
million, compared with US$10.7
million in the second quarter 2011 and US$9.7 million in the third quarter 2010. The
quarter-over-quarter decrease was primarily due to the active
implementation of the Company's strategy to increase market share
and user stickiness by temporarily reducing the monetization of
online products to attract a new generation of users. The
year-over-year increase was primarily due to the revenue
contributed from new products.
Net offline business revenues were US$2.3
million, compared with US$1.1
million in the second quarter 2011 and US$0.6 million in the third quarter 2010. The
sequential and year-over-year increases were mainly due to a rise
in offline merchandise, book licensing and film and television
series.
Total Cost of
Services
Total cost of services was US$2.4
million, compared with US$1.8
million in the second quarter 2011 and US$1.5 million in the third quarter 2010.
Online business related costs were US$1.5
million, compared with US$1.5
million in the second quarter 2011 and US$1.4 million in the third quarter 2010. The
quarter-over-quarter and the year-over-year increases were
primarily due to additional employees and higher share-based
compensation.
Offline business related costs were US$0.9 million in the third quarter 2011,
compared with US$0.2 million in the
second quarter 2011 and US$0.2
million in the third quarter 2010. The sequential and
year-over-year increases were mainly due to costs associated with
movie production, additional employees and share-based
compensation.
Gross Profit and Gross Margin
Gross profit was US$10.3 million,
compared with US$10.0 million in the
second quarter 2011 and US$8.7
million in the third quarter 2010.
Gross margin was 81.2%, compared with 85.1% in the second
quarter 2011 and 84.9% in the third quarter 2010.
Gross margin for the online business was 85.3%, compared with
86.0% in the second quarter of 2011, and 85.6% in the third quarter
of 2010.
Gross margin for the offline business was 63.0%, compared with
76.7% in the second quarter of 2011 and 72.7% in the third quarter
2010. This is the first quarter the company began to book revenue
and cost of goods sold from film and animation, the lower margin of
the film and animation business has decreased the average gross
margin of the offline business.
Total Operating Expenses
Total operating expenses were US$6.2
million, compared with US$5.6
million in the second quarter 2011 and US$3.3 million in the third quarter 2010.
- Product development expenses were US$2.9
million, compared with US$2.2
million in the second quarter 2011 and US$1.4 million in the third quarter 2010. The
sequential and year-over-year increases were primarily due to
additional employees, costs required by new social welfare
regulations, and an increase in share-based compensation
- Sales and marketing expenses were US$1.9
million, compared with US$1.7
million in the second quarter 2011 and US$0.5 million in the third quarter 2010. The
sequential and year-over-year increases were largely due to an
increase in film promotion expenses, animation costs and higher
advertising expenses.
- General and administrative expenses were US$2.3 million, compared with US$1.9 million in the second quarter 2011 and
US$1.4 million in the third quarter
2010. The sequential and year-over-year increase were largely
related to higher share based-compensation and professional service
fees related to being a public company.
Share of Profit in Equity Investment
Share of profit in equity investment was US$0.2 million, compared with US$0.3 million in the second quarter 2011 and
US$0.2 million in the third quarter
2010.
Profit from Operations
Profit from operations was US$4.1
million, compared with US$4.4
million in the second quarter 2011 and US$5.5 million in the third quarter 2010.
Income Tax Benefit/(Expense).
We had income tax expense of US$0.3
million in the third quarter of 2011, compared to an income
tax expense of US$0.5 million in the
second quarter of 2011 and income tax benefit of US$0.8 million in the third quarter of 2010, due
to the changes in the corporate income tax rate eligibility of
Shanghai Shengran and Shanghai Taomee in 2011.
Net Income
Net income attributable to holders of ordinary shares was
US$4.4 million, compared with
US$4.3 million in the second quarter
2011 and US$6.4 million in the third
quarter 2010.
Basic and diluted earnings per American Depositary Share (ADS)
were US$0.12 and US$0.12 each, compared with US$0.14 and US$0.13, respectively, in the second quarter
2011, and US$0.22 and US$0.21, respectively in the third quarter 2010.
Non-GAAP net income attributable to shareholders was
US$5.0 million, compared with
US$4.7 million in the second quarter
2011 and US$6.5 million in the third
quarter 2010.
Non-GAAP basic and diluted earnings per American Depositary
Share (ADS) were US$0.14 and
US$0.13 each, compared with
US$0.15 and US$0.14 each, in the second quarter 2011, and
US$0.22 and US$0.22, respectively, in the third quarter
2010.
Cash and Cash Equivalents
As of September 30, 2011, the
Company had US$120.9 million of cash
and cash equivalents, compared with US$119.5
million as of June 30,
2011.
Recent Business Highlights
On July
28th, 2011, Taomee
released its first fully animated movie, Seer: The Search for
the Sacred Phoenix based on the Seer franchise.
On August
11th, 2011, Taomee
released its second fully animated movie, Legend of the
Moles-The Frozen Horror based on the Mole's World
franchise.
On September
6th, 2011, Taomee's
Chairman of the Board, Mr. Jason Liqing
Zeng purchased 216,000 shares of the Company's common stock
in open market transactions.
On October
28th, 2011, Taomee
released its first game for Apple iOS, Mole's
World. The game follows the adventures of several moles made
popular through Taomee's online virtual communities
On November
22nd, 2011, Taomee's
Board of Directors approved a share repurchase plan, effective upon
the approval. Under the plan, Taomee is authorized, but not
obligated, to repurchase up to US$10
million worth of outstanding American Depositary Shares
("ADSs") representing the ordinary shares of Taomee over the next
12 months, depending on market conditions, share price and other
factors, subject to the relevant rules and regulations under the
U.S. securities laws.
Outlook for Fourth Quarter 2011
The Company expects revenues in the fourth quarter to decline
due to seasonality of the school year and because the Company does
not have any offline film releases. Net revenues for the 4Q are
expected to exceed US$8.0
million.
- Virtually all of Taomee's users attend elementary and middle
school. Children are in school for most of the fourth quarter
compared with only about one month in the third quarter because of
the summer holiday. Although many students will still visit our
virtual worlds during the fourth quarter, users are less likely to
spend. Furthermore, Taomee intentionally reduced monetization
activities in the third and fourth quarter to increase market share
and stimulate user stickiness. Seasonal fluctuations will continue
to be a part of Taomee's business, so management encourages
investors to look at the business on a longer term, year-to-year
basis.
- In this quarter, Taomee released two fully-animated movies
including "Seer: The Search for the Sacred Phoenix" and "Legend of
the Moles-The Frozen Horror". Both movies were ranked among the top
10 for domestically-produced animated film. We do not expect to
generate significant revenue from movie in the fourth quarter and
we have no new movies scheduled for release until the summer of
2012.
Despite a seasonal decline in revenues, the Company is proving
that it is becoming increasingly capable of monetizing its brands
through licensing and film, and as such, it will require lower
levels of online game monetization to produce attractive returns on
its franchises.
Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with
generally accepted accounting principles in the United States, or GAAP, this press release
presents non-GAAP net income attributable to the Company's
shareholders and non-GAAP earnings per ADS by excluding share-based
compensation charge from net income attributable to the Company's
shareholders and from the calculation of earnings per ADS. The
Company believes these non-GAAP financial measures are important to
help investors understand the Company's operating and financial
performance, compare business trends among different reporting
periods on a consistent basis and assess the Company's core
operating results. The use of the above non-GAAP financial measures
has certain limitations. Share-based compensation charge has been
and will continue to be incurred and is not reflected in the
presentation of the non-GAAP financial measures; it should be
considered in the overall evaluation of our results. None of the
non-GAAP measures is a measure of net income attributable to the
Company's shareholders, operating profit, operating performance or
liquidity presented in accordance with GAAP. We compensate for
these limitations by providing the relevant disclosure of our
share-based compensation charge in our reconciliations to the most
directly comparable GAAP financial measures, which should be
considered when evaluating our performance. These non-GAAP
financial measures should be considered in addition to financial
measures prepared in accordance with GAAP, but should not be
considered a substitute for, or superior to, financial measures
prepared in accordance with GAAP. Reconciliation of each of these
non-GAAP financial measures to the most directly comparable GAAP
financial measure are set forth at the end of this release.
Conference Call
The Company will host a conference call and live webcast at
7:30 p.m. Eastern Standard Time
(New York) on Monday, November 28, 2011 (which is 8:30 a.m. in China on Tuesday,
November 29, 2011).
The dial-in details
for the live conference call are:
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U.S. toll-free
number
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+1-866-519-4004
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International
dial-in number
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+65-6723-9381
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China
Mainland toll-free number
Hong Kong
dial-in number
|
+86-800-819-0121
+852-2475-0994
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Passcode
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Taomee
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|
A live webcast and archive of the conference call will be
available on the Investor Relations section of Taomee's website at
http://www.taomee.com/en_taomee.html.
A telephone replay of the call will be available after the
conclusion of the conference call at 11:30
a.m. Eastern Standard Time on Nov 29,
2011 through 11:30 p.m. Eastern
Standard Time, December 6,
2011. The dial-in details for the telephone replay are:
Conference ID
number: 28319110
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International dial-in
number
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+612-8235-5000
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China
dial-in number
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+400-692-0026
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About Taomee Holdings Limited
Taomee Holdings Limited is one of the leading children's
entertainment and media companies in China with a mission to create exceptional
entertainment experiences for children that are fun, safe and
trusted by parents. Taomee has created online virtual worlds with
enduring and iconic characters, images and story lines that have
resonated and attracted a loyal following among children in
China. As of June 2010, Taomee was ranked as the largest
online entertainment community for children in China measured by market share and active
accounts, according to a report from iResearch. Taomee has expanded
into offline business by licensing its franchises to other media
formats including books, films and television and makers of
consumer products targeting children.
Safe Harbor Statements
This press release contains statements that may constitute
"forward-looking" statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and as defined in the
U.S. Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by words or phrases
such as "may," "will," "expect," "anticipate," "aim," "estimate,"
"intend," "plan," "believe," "potential," "continue," "is/are
likely to" or other similar expressions. Among other things, the
management's quotations and outlook information contain
forward-looking statements. These forward-looking statements
involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to
be materially different from those expressed or implied by the
forward-looking statements. Potential risks and uncertainties
include, but are not limited to: the Company's business strategies
and initiatives as well as business plans; future business
development, results of operations and financial condition;
expected changes in revenues and certain cost or expense items;
expectations with respect to increased revenue growth and the
Company's ability to sustain profitability; the Company's services
and products under development or planning; the Company's ability
to attract users and further enhance the Company's brand
recognition; and trends and competition in the children's
entertainment and media market and industry, including those for
online entertainment. Further information regarding these and other
risks is included in Taomee's filings with the U.S. Securities and
Exchange Commission, including its registration statement on its
final prospectus dated June 10, 2011.
All information provided in this press release is as of the date of
the press release, and the Company undertakes no obligation to
update any forward-looking statements to reflect subsequent
occurring events or circumstances, or changes in its expectations,
except as required under applicable law. Although the Company
believes that the expectations expressed in these forward looking
statements are reasonable, the Company cannot assure you that their
expectations will turn out to be correct, and investors are
cautioned that actual results may differ materially from the
anticipated results.
For further information, please
contact
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Taomee Holdings
Limited
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Email: ir@taomee.com
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Christensen
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In China
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Christian Arnell
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Phone:
+86-10-5826-4939
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E-mail: carnell@christensenir.com
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In U.S.
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Kimberly Minarovich
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Phone:
+1-917-533-3268
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E-mail: kminarovich@christensenir.com
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Taomee
Holdings Limited - Unaudited Consolidated Balance
Sheets
|
|
|
In
USD
|
|
In
USD
|
|
|
September 30
|
|
June 30
|
|
|
2011
|
|
2011
|
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash
equivalents
|
120,867,023
|
|
119,461,002
|
|
Accounts
receivable
|
1,616,153
|
|
161,053
|
|
Due from
related parties
|
9,069
|
|
-
|
|
Prepayments and
other current assets
|
1,506,567
|
|
1,278,101
|
|
Deferred tax
assets, current
|
2,917,853
|
|
2,865,237
|
|
Total current
assets
|
126,916,665
|
|
123,765,393
|
|
|
|
|
|
|
Investments in equity
investees
|
2,089,499
|
|
1,972,907
|
|
Property and
equipment, net
|
2,571,307
|
|
2,724,974
|
|
Acquired intangible
assets
|
1,367,435
|
|
149,545
|
|
Other assets
|
793,306
|
|
1,536,098
|
|
TOTAL ASSETS
|
133,738,212
|
|
130,148,917
|
|
|
|
|
|
|
LIABILITIES
AND EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
99,906
|
|
44,318
|
|
Income tax
payable
|
1,748,557
|
|
1,449,753
|
|
Advance from
customers
|
12,332,440
|
|
10,587,779
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|
Due to related
parties
|
83,359
|
|
89,432
|
|
Deferred
revenue
|
13,791,827
|
|
14,226,052
|
|
Dividends
payable
|
-
|
|
6,400,000
|
|
Deferred tax
liabilities, current
|
61,522
|
|
388,760
|
|
Accrued expenses
and other current liabilities
|
4,504,588
|
|
6,015,372
|
|
Total current
liabilities
|
32,622,199
|
|
39,201,466
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Ordinary shares
($0.00002 par value; 875,000,000 shares authorized; 723,250,000
shares issued and outstanding as of June
30, 2011
and 733,754,480 shares
issued and outstanding as of September
30, 2011)
|
14,675
|
|
14,465
|
|
Additional paid-in
capital
|
70,046,832
|
|
65,020,949
|
|
Retained
earnings
|
28,932,143
|
|
24,522,932
|
|
Accumulated other
comprehensive income
|
2,122,363
|
|
1,389,105
|
|
Total equity
|
101,116,013
|
|
90,947,451
|
|
|
|
|
|
|
TOTAL
LIABILITIESAND EQUITY
|
133,738,212
|
|
130,148,917
|
|
|
|
|
|
|
|
Taomee
Holdings Limited - Unaudited Consolidated
Statements of Operations
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In
USD, except for share
data
For three months
ended
|
|
|
|
September
30,
|
|
June
30,
|
|
September
30,
|
|
|
|
2011
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|
2011
|
|
2010
|
|
Revenues:
|
|
|
|
|
|
|
|
Online business,
net
|
|
10,382,615
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|
10,692,370
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|
9,699,826
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Offline business,
net
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2,296,950
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|
1,068,729
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|
554,333
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Total net
revenues
|
|
12,679,565
|
|
11,761,099
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|
10,254,159
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|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
|
|
|
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|
Online
business
|
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(1,529,614)
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|
(1,502,720)
|
|
(1,396,540)
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|
Offline
business
|
|
(850,275)
|
|
(248,639)
|
|
(151,503)
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|
Total cost of
services
|
|
(2,379,889)
|
|
(1,751,359)
|
|
(1,548,043)
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
10,299,676
|
|
10,009,740
|
|
8,706,116
|
|
|
|
|
|
|
|
|
|
Operating
income
expenses:
|
|
|
|
|
|
|
|
Product
development
|
|
(2,929,040)
|
|
(2,212,485)
|
|
(1,389,707)
|
|
Sales and
marketing
|
|
(1,901,633)
|
|
(1,678,841)
|
|
(454,387)
|
|
General and
administrative
|
|
(2,278,333)
|
|
(1,896,278)
|
|
(1,407,638)
|
|
Other operating
income
|
|
907,625
|
|
158,926
|
|
-
|
|
Total operating
expenses
|
|
(6,201,381)
|
|
(5,628,678)
|
|
(3,251,732)
|
|
|
|
|
|
|
|
|
|
Profit from
operations
|
|
4,098,295
|
|
4,381,062
|
|
5,454,384
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
482,981
|
|
131,699
|
|
87,455
|
|
Other income (expenses),
net
|
|
(65,966)
|
|
(5,115)
|
|
(11,888)
|
|
Income before income taxes and
share of profit in equity investments
|
|
4,515,310
|
|
4,507,646
|
|
5,529,951
|
|
|
|
|
|
|
|
|
|
Income tax benefit
(expense)
|
|
(284,753)
|
|
(514,634)
|
|
754,688
|
|
|
|
|
|
|
|
|
|
Share of profit in equity
investments
|
|
178,657
|
|
342,979
|
|
218,346
|
|
|
|
|
|
|
|
|
|
Net income
|
|
4,409,214
|
|
4,335,991
|
|
6,502,985
|
|
|
|
|
|
|
|
|
|
Less: Deemed dividends on Series
A convertible redeemable preferred shares
|
|
-
|
|
(81,085)
|
|
(114,591)
|
|
|
|
|
|
|
|
|
|
Net income attributable to
holders of ordinary shares
|
|
4,409,214
|
|
4,254,906
|
|
6,388,394
|
|
|
|
|
|
|
|
|
|
Earnings per
ADS
|
|
|
|
|
|
|
|
-Basic
|
|
0.12
|
|
0.14
|
|
0.22
|
|
-Diluted
|
|
0.12
|
|
0.13
|
|
0.21
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares used in calculation
|
|
|
|
|
|
|
|
- Basic
|
|
728,341,047
|
|
514,972,527
|
|
450,000,000
|
|
- Diluted
|
|
764,675,988
|
|
537,289,764
|
|
469,606,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taomee
Holdings Limited - Reconciliation of Non-GAAP and
GAAP Results
|
|
|
|
In
USD, except for share
data
For three months
ended
|
|
|
|
September
30,
|
|
June
30,
|
|
September
30,
|
|
|
|
2011
|
|
2011
|
|
2010
|
|
Reconciliation from
Non-GAAP
measures to GAAP measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net
income attributable to holders of ordinary
shares
|
|
5,039,182
|
|
4,709,962
|
|
6,464,418
|
|
Share-based compensation
cost
|
|
(629,968)
|
|
(455,056)
|
|
(76,024)
|
|
GAAP net income
attributable to holders of ordinary
shares
|
|
4,409,214
|
|
4,254,906
|
|
6,388,394
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted earnings per
ADS
|
|
|
|
|
|
|
|
-Basic
|
|
0.14
|
|
0.15
|
|
0.22
|
|
-Diluted
|
|
0.13
|
|
0.14
|
|
0.22
|
|
|
|
|
|
|
|
|
|
|
SOURCE Taomee Holdings Limited