Taomee Reports Unaudited First Quarter 2013 Financial Results

24 May 2013 10 h 43 min Comments Off

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Taomee

(May 23, 2013) 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 first quarter ended March 31, 2013.

First Quarter of 2013 Financial Highlights

Total net revenues were US$9.6 million in the first quarter of 2013, as compared with US$10.4 million in the first quarter of 2012.
Net income attributable to the holders of ordinary shares was US$1.0 million in the first quarter of 2013, as compared with US$1.6 million in the first quarter of 2012.
Basic and diluted earnings per ADS[1] were US$0.03 and US$0.03, respectively in the first quarter of 2013 as compared with US$0.04 and US$0.04, respectively, in the first quarter of 2012.
Non-GAAP net income attributable to holders of ordinary shares was US$1.6 million in the first quarter of 2013, as compared with US$2.2 million in the first quarter of 2012.
Non-GAAP basic and diluted earnings per ADS were US$0.04 and US$0.04, respectively, in the first quarter of 2013, as compared with US$0.06 and US$0.06, respectively, in the first quarter of 2012.

[1]Each American Depositary Share (“ADS”) represents twenty ordinary shares
Mr. Benson Wang, co-founder and chief executive officer of Taomee, stated, “This quarter demonstrated solid progress in executing our multi-pronged growth strategies to continue expanding our user base age range as well as to improve the monetization capabilities of our robust cross-media platform. Strong growth in our core games, Seer, Gong Fu Pai and Flower Fairy, helped us significantly exceed our own guidance and consensus estimates by 16% and 17%, respectively.

“Going forward, we plan to continue our balanced focus on increasing profitability and user growth over the coming quarters. As the summertime approaches we expect our new games like Avatar Star and Heroes Alliance, to continue to attract new users as well as to further strengthen our brand equity that can drive offline sales. This trend is exemplified by our self-produced TV show, Taomee Dream School, which was recently rated as one of the top three animation programs in China, according to our partnered TV stations’ rating. This success has strengthened our overall brand equity and trust with children and families throughout China and we hope this will continue to drive our online and offline business expansion over the coming years,” concluded Mr. Wang.

Operational Results for First Quarter of 2013

Active paying accounts for the Company’s virtual worlds under operation in mainland China increased by 25% sequentially to 1.5 million in the first quarter of 2013 from 1.2 million in the fourth quarter of 2012 due to strong seasonality effect, but decreased from 1.9 million in the first quarter of 2012, as the company did not commercially launch any new online games in recent quarters.
Average revenue per user (“ARPU”) for the Company’s virtual worlds under operation in mainland China was approximately RMB 33, an increase of 11% and 6.5% from the fourth quarter of 2012 and the first quarter of 2012, respectively.
The number of downloads for the mobile applications operated by the Company increased by over 23% to approximately 3.7 million in the first quarter of 2013 from 3.0 million in the first quarter of 2012, and increased by 35% from 2.7 million in the fourth quarter of 2012. As of March 31, 2013, the total cumulative downloads for Taomee’s mobile applications reached approximately 19.0 million.

Unaudited Financial Results for First Quarter of 2013

Total Net Revenues
Total net revenues were US$9.6 million in the first quarter of 2013, as compared with US$10.4 million in the first quarter of 2012.
Net online business revenues were US$8.2 million in the first quarter of 2013, as compared with US$9.3 million in the first quarter of 2012.
Net offline business revenues increased 28.5% to US$1.4 million in the first quarter of 2013, as compared with US$1.1 million in the first quarter of 2012. The increase was driven by the increase in interactive toy sales.

Total Cost of Services
Total cost of services was US$2.3 million in the first quarter of 2013, as compared with US$2.1 million in the first quarter of 2012, primarily due to the increase in costs of service in both online and offline business.
Online business related costs were US$1.8 million in the first quarter of 2013, as compared with US$1.7 million in the first quarter of 2012. The increase was primarily due to amortization costs associated with the Company’s upfront game licensing fees which were partially offset by the decrease in bandwidth and hosting costs.
Offline business related costs were US$0.5 million in the first quarter of 2013, as compared with US$0.4 million in the first quarter of 2012. The slight increase was mainly due to an increase in costs related to interactive toys business.

Gross Profit and Gross Margin
Gross profit was US$7.3 million in the first quarter of 2013, as compared with US$8.3 million in the first quarter of 2012.
Gross margin was 76.3% in the first quarter of 2013, as compared with 79.6% in the first quarter of 2012, reflecting increased growth in offline sales as a percentage of total net revenues.
Gross margin for the online business was 78.6% in the first quarter of 2013, as compared with 81.4% in the first quarter of 2012.
Gross margin for the offline business was 62.7% in the first quarter of 2013, as compared with 63.9% in the first quarter of 2012.

Total Operating Expenses
Total operating expenses decreased by 3.8% to US$7.3 million in the first quarter of 2013, as compared with US$7.5 million in the first quarter of 2012.
Product development expenses were US$3.3 million in the first quarter of 2013, which remained stable as compared with the first quarter of 2012.
Sales and marketing expenses decreased 21.7% to US$1.7 million in the first quarter of 2013, as compared with US$2.2 million in the first quarter of 2012. The decrease was primarily due to lower advertising expenses for both online virtual worlds and mobile products.
General and administrative expenses were US$3.0 million in the first quarter of 2013, as compared with US$2.7 million in the first quarter of 2012.The increase was mainly due to higher payroll expenses including share based compensation expenses.

Share of Profit/ Loss in Equity Method Investment
Share of profit in equity methods investments was US$0.3 million in the first quarter of 2013, as compared with US$0.2 million in the first quarter of 2012.
Profit from Operations
Profit from operations was US$66,847 in the first quarter of 2013, as compared with US$0.8 million in the first quarter of 2012.
Net Income
Net income attributable to holders of ordinary shares was US$1.0 million, compared with US$1.6 million in the first quarter of 2012.
Basic and diluted earnings per ADS were US$0.03 and US$0.03, respectively, in the first quarter of 2013, as compared with US$0.04 and US$0.04, respectively, in the first quarter of 2012.
Non-GAAP net income attributable to holders of ordinary shares was US$1.6 million in the first quarter of 2013, as compared with US$2.2 million in the first quarter of 2012.
Non-GAAP basic and diluted earnings per ADS were US$0.04 and US$0.04, respectively, in the first quarter of 2013, as compared with US$0.06 and US$0.06, respectively, in the first quarter of 2012.

Cash and Cash Equivalents
As of March 31, 2013, the Company had US$113.1 million of cash and cash equivalents, compared with US$118.6million as of December 31, 2012.
Share Repurchase Program
During the first quarter of 2013, Taomee had repurchased 217,934 ADSs. As of March 31, 2013 the Company had repurchased a total of 803,486 ADSs under the Company’s share repurchase program at an average price of approximately US$3.95 per ADS.

Business Highlights
On February 1st, 2013, Taomee began broadcasting its self-produced TV show Taomee Dream School, and Seer animation Season 2 on leading cartoon channels across China.
On March 14th, 2013, Taomee started closed beta testing for Avatar Star, a cartoon style action game.
On March 15th, 2013, Taomee began broadcasting Mole’s World Season 3 on leading cartoon channels throughout mainland China and Hong Kong.
On April 2nd, 2013, Taomee started the second round of closed beta testing for Speedy Hunter, a 3-D racing game.
On May 10th,, 2013, Taomee started closed beta testing for Heroes Alliance, a new action game and major brand extension of Seer franchise.
On May 14th, 2013, Taomee partnered with Shanghai Youhug Media Co., Ltd to co-market a new family entertainment TV program called “Bao Bei”, or “Baby” in English.

Outlook for Second Quarter of 2013
Net revenues for the second quarter of 2013 are expected to be in the range of US$9.0 million to US$9.5 million. This forecast reflects the Company’s current and preliminary view, which is subject to change.

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 is set forth at the end of this release.

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