GigaMedia Announces Third-Quarter 2014 Financial Results

TAIPEI, October 23, 2014 /PRNewswire/ —

Highlights

  • Continued success monetizing the mobile game Three Kingdoms Partner, with revenues up 17 percent quarter-over-quarter.
  • New mobile game revenue stream continues to expand: mobile games accounted for approximately 33 percent of total game revenues in the third quarter, up from 29 percent in the prior quarter.
  • Consolidated 3Q revenues held steady at $2.5 million: revenues from core mobile and MMO game products grew quarter-over-quarter; revenues from legacy PC games contributions decreased during the period.
  • GigaMedia launching six new games products in 4Q: four new mobile games, one MMO, and one social games platform.
  • Consolidated 4Q revenues expected to increase 20-30 percent to approximately $3.0 million to $3.5 million, boosted by new game products and a small increase in cloud revenues.
  • Revenue mix in 2015 to improve on 1) self-developed social games products and 2) other original IP products that include two mobile games and one MMO.
  • Total revenues expected to grow in 2015 on expansion to top Asian games markets and new products.
  • Solid financial position: cash and cash equivalents, restricted cash, marketable securities-current, and the market value of GigaMedia’s holdings of a listed game company as of September 30, 2014 totaled approximately $80.4 million, or approximately $1.45 per share. This total excludes cash proceeds of approximately $2.6 million that resulted from sales of marketable securities-current in late September and that due to a processing time lag were included in GigaMedia’s third-quarter balance sheets under “other receivables.”

GigaMedia Limited (NASDAQ: GIGM) today announced its unaudited financial results for the third quarter of 2014.

“In Q3, revenues were flat reflecting portfolio and business model weaknesses in our online games business,” stated GigaMedia Limited Chief Executive Officer Collin Hwang. “We have addressed these issues and expect results to improve quickly going forward.”

“Our team has done a tremendous job executing new strategic growth initiatives,” stated CEO Collin Hwang. “We have built a strong pipeline and also taken initial steps to create a more powerful business model.”

“We now expect to launch five titles in the fourth quarter, including four mobile games and one MMO,” stated CEO Collin Hwang. “And we anticipate another strong launch schedule in Q1 2015.”

“In addition to building our pipeline, we have taken first steps to vertically integrate – to strengthen the company’s development, distribution, and operations of games and services,” stated CEO Collin Hwang. “As a result, for the first time, our games business is positioned to benefit from operating self-developed products and licensing out GigaMedia’s original IP.”

“A new business model is emerging that will enable us to deliver increased revenues from expanding to larger markets and higher quality revenues from self-developed products and from licensing out,” stated CEO Collin Hwang. “In 4Q, we are starting operations of our new self-developed social games platform in Greater China, and in 1Q15 we plan to start licensing out another new social games platform plus two new original IP mobile games and one MMO to operators in some of Asia’s largest markets.”

“Complementing this, in cloud computing, we continue moving toward becoming a full-service provider, adding new products and services,” stated CEO Collin Hwang. “In 4Q, our cloud business forecasts revenue growth on higher sales of IaaS services and SaaS solutions.”

“In sum: retooling and improvements continue, momentum is growing,” stated CEO Collin Hwang. “We believe we have reached a turning point and are confident in delivering growth and improved financial performance going forward as we execute our strategic growth plans.”

Unaudited Consolidated Financial Results

GigaMedia Limited is a diversified provider of online games and cloud computing services. Unaudited consolidated results of GigaMedia are summarized in the table below.

GIGAMEDIA 3Q14 UNAUDITED CONSOLIDATED FINANCIAL RESULTS

(unaudited, all figures
in US$
thousands,
except per share
amounts)

3Q14

2Q14

Change

(%)

3Q14

3Q13

Change

(%)

Revenues

2,472

2,471

0

2,472

3,810

-35

Gross Profit

205

819

-75

205

2,030

-90

Loss from Operations

3,631

2,945

NM

3,631

4,552

NM

Net Loss Attributable
to
GigaMedia

4,839

2,677

NM

4,839

3,112

NM

Net Loss Per Share

Attributable to
GigaMedia, Diluted

0.09

0.05

NM

0.09

0.06

NM

EBITDA (A)

(4,589)

(2,448)

NM

(4,589)

(2,582)

NM

Cash, Cash Equivalents,

Restricted Cash, and
Marketable Securities-

Current

65,947

71,934

-8

65,947

74,281

-11

NM – Not Meaningful

(A)

EBITDA (earnings before interest, taxes, depreciation, and amortization) is provided as a supplement to results provided in accordance with U.S. generally accepted accounting principles (“GAAP”). (See, “Use of Non-GAAP Measures,” for more details.)

Consolidated revenues for the third quarter of 2014 were $2.5 million, flat compared to $2.5 million in the second quarter of 2014 and down from $3.8 million in the third quarter of 2013. Quarter-over-quarter, both online games revenues and cloud services revenues were flat. In online games, contributions from the mobile game Three Kingdoms Partner and the MMO game Tales Runner grew quarter-over-quarter but were offset by decreased contributions from legacy PC game products. Year-over-year results reflected the loss of the MMO A.V.A., as well as lower contributions from legacy PC game products and Tales Runner.

In online games, average monthly revenue per active paying account was $36.39 during the third quarter of 2014 compared to $35.36 in the previous quarter. Peak concurrent users were approximately 11,000 in the third quarter compared to approximately 10,000 in the second quarter of 2014.

Consolidated gross profit for the third quarter of 2014, excluding new game development expenses of $925 thousand, was approximately $1.1 million; including the aforementioned expenses, the company’s consolidated gross profit was $205 thousand. This compared to $819 thousand in the second quarter of 2014 and to $2.0 million in the third quarter of 2013. Third-quarter 2014 consolidated gross profit margin excluding the aforementioned new game development expenses, was 45.7 percent; including the aforementioned expenses, the company’s consolidated gross profit margin was 8.3 percent. This compared to 33.1 percent in the second quarter of 2014 and 53.3 percent in the third quarter of 2013.

During the third quarter of 2014, GigaMedia’s cost of revenues included expenses of approximately $925 thousand related to the out-sourced development of an MMO game and two mobile games. The games are scheduled for completion in the first quarter of 2015. GigaMedia will have global rights to the games.

Consolidated operating expenses for the third quarter of 2014 were $3.8 million. This compared to $3.8 million in the second quarter of 2014, and to $6.6 million in the third quarter of 2013.

Consolidated product development and engineering expenses were $198 thousand in the third quarter of 2014 compared to $228 thousand in the previous quarter and $510 thousand in the third quarter of 2013.

Consolidated selling and marketing expenses were $1.8 million in the third quarter of 2014 compared to $1.7 million in the previous quarter and $1.3 million in the third quarter of 2013.

Consolidated general and administrative expenses were $1.9 million in the third quarter of 2014 versus $1.9 million in the previous quarter and $1.7 million in the third quarter of 2013. Corporate operating expenses were approximately $990 thousand in the third quarter of 2014, in line with $900 thousand in the second quarter of 2014.

Consolidated loss from operations for the third quarter of 2014, excluding new game development expenses of $925 thousand, was $2.7 million; including the aforementioned expenses, the company’s consolidated loss from operations was $3.6 million. This compared to $2.9 million in the second quarter of 2014 and to $4.6 million in the third quarter of 2013. The quarter-over-quarter and year-over-year variations were in line with management expectations as GigaMedia continues to invest in, transition and grow its businesses.

Consolidated non-operating expenses/income during the third quarter of 2014 was a loss of $1.2 million compared to income of $157 thousand in the second quarter of 2014 and income of $1.3 million recorded in the third quarter of 2013. During the third quarter of 2014, GigaMedia disposed of a portion of its marketable securities-current, resulting in a gain of $2.5 million. This gain was more than offset by an unrealized investment loss of $3.9 million related to a decrease in market value of GigaMedia’s holdings of a listed games company, resulting in a negative net impact on consolidated non-operating income in the third quarter of 2014 of approximately $1.4 million.

Consolidated net loss for the third quarter of 2014, excluding the aforementioned new game development expenses and the unrealized loss in investment income, was approximately $5 thousand; including the aforementioned new game development expenses and the unrealized loss in investment income the company’s net loss was $4.8 million. This compared to $2.7 million in the previous quarter and to a loss of $3.1 million in the third quarter of 2013.

Consolidated EBITDA for the third quarter of 2014 was a loss of $4.6 million compared to a loss of $2.4 million in the previous quarter and to a loss of $2.6 million in the third quarter of 2013.

Financial Position

During the third quarter, GigaMedia continued to maintain a solid financial position with cash and cash equivalents, restricted cash, marketable securities-current, and the market value of GigaMedia’s holdings of a listed game company totaling approximately $80.4 million, or approximately $1.45 per share, as of September 30, 2014. This total excludes cash proceeds of approximately $2.6 million that resulted from sales of marketable securities-current in late September and that due to a processing time lag were included in GigaMedia’s third-quarter balance sheets under “other receivables.” The third quarter total of $80.4 million compared to $90.9 million at the end of the second quarter of 2014, with the difference reflecting mainly a) variation in the market value of GigaMedia’s investment in a listed game company of approximately $4 million, b) marketable securities-current disposals of approximately $4.2 million, and c) net cash outflow of approximately $1.8 million.

Cash flow from operations was an outflow of approximately $3.0 million, an increase from cash outflow in the second quarter of $2.0 million, with the variation reflecting increased game licensing and development fees in the third quarter totaling approximately $1.5 million. Short-term debt was $19.4 million at the end of the third quarter, of which approximately $16.5 million was incurred in the second quarter of 2014 at a rate of 1.35 percent to finance the aforementioned investment in a game company.

Business Outlook

The following forward-looking statements reflect GigaMedia’s expectations as of October 23, 2014. Given potential changes in economic conditions and consumer spending, the evolving nature of online games, and various other risk factors, including those discussed in the company’s 2013 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission as referenced below, actual results may differ materially.

In the fourth quarter, GigaMedia expects total revenues to increase to approximately $3.0 million to $3.5 million, boosted by new game products and a small increase in cloud revenues.

Management expects the following online game initiatives to begin making contributions in the fourth quarter and represent the main revenue streams in the period:

  1. New licensed mobile games — GigaMedia has scheduled four new mobile games for launch during the fourth quarter that it has licensed from Asian developers.
  2. New Web-based MMO game KingsRoad — GigaMedia expects to launch Rumble’s acclaimed next-generation browser action/role-playing game KingsRoad by December.
  3. New social game platforms — GigaMedia has completed development and testing of its first self-developed social games product, Fortune Casino, an open platform that creates a new distribution channel for gaming operators targeting Asia. The platform features a broad selection of play-for-fun social casino games. GigaMedia expects to launch the platform in Greater China by November. GigaMedia plans to begin offering operators a second self-developed solution, ClubOne, in January 2015. ClubOne is a complete, proprietary solution that will feature a broader variety of play-for-free social games from which operators may select. GigaMedia expects to begin white labeling the software to online gaming operators in early 2015.

Use of Non-GAAP Measures

To supplement GigaMedia’s consolidated financial statements presented in accordance with US GAAP, the company uses the following measure defined as non-GAAP by the SEC: EBITDA. Management believes that EBITDA (earnings before interest, taxes, depreciation, and amortization) is a useful supplemental measure of performance because it excludes certain non-cash items such as depreciation and amortization and that EBITDA is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. EBITDA is not a recognized earnings measure under GAAP and does not have a standardized meaning. Non-GAAP measures such as EBITDA should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, other financial measures prepared in accordance with GAAP. A limitation of using EBITDA is that it does not include all items that impact the company’s net income for the period. Reconciliations to the GAAP equivalents of the non-GAAP financial measures are provided on the attached unaudited financial statements.

About the Numbers in This Release

Quarterly results

All quarterly results referred to in the text, tables and attachments to this release are unaudited. The financial statements from which the financial results reported in this press release are derived have been prepared in accordance with U.S. GAAP, unless otherwise noted as “non-GAAP,” and are presented in U.S. dollars.

Conference Call and Webcast

Management will hold an investor conference call and webcast on October 23, 2014 at 8:00 p.m. Eastern Standard Time, which is 8:00 a.m. Taipei Time on October 24, 2014, to discuss GigaMedia’s third-quarter 2014 performance.

Dial-in numbers:

U.S.: +1-845-507-1610
International: +61-283-733-610
Passcode: 20981940

A replay will be available from 11:00 p.m. Eastern Standard Time on October 23, 2014 for seven days.

U.S.: +1-646-254-3697
International: +612-8199-0299
Passcode: 20981940

A link to the live and archived webcast will be available at www.gigamedia.com.

Conference Call Format

The call will consist of brief prepared remarks, followed by live Q&A and management responses to questions submitted via email. Questions may be sent in advance to IR@gigamedia.com.tw.

About GigaMedia

Headquartered in Taipei, Taiwan, GigaMedia Limited (Singapore registration number: 199905474H) is a diversified provider of online games and cloud computing services. GigaMedia’s online games business is an innovative leader in Asia with growing game development, distribution and operation capabilities, as well as platform services for games; focus is on mobile games and social casino games. The company’s cloud computing business is focused on providing enterprises in Greater China with critical communications services and IT solutions that increase flexibility, efficiency and competitiveness. More information on GigaMedia can be obtained from www.gigamedia.com.

The statements included above and elsewhere in this press release that are not historical in nature are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding expected financial performance (as described without limitation in the “Business Outlook” section and in quotations from management in this press release) and GigaMedia’s strategic and operational plans. These statements are based on management’s current expectations and are subject to risks and uncertainties and changes in circumstances. There are important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, including but not limited to, our ability to license, develop or acquire additional online games that are appealing to users, our ability to retain existing online game players and attract new players, and our ability to launch online games in a timely manner and pursuant to our anticipated schedule. Further information on risks or other factors that could cause results to differ is detailed in GigaMedia’s Annual Report on Form 20-F filed in April 2014 and its other filings with the United States Securities and Exchange Commission.

For further information contact:
Brad Miller, Investor Relations Director
Country/City Code 8862 Tel: 2656-8016
Brad.Miller@GigaMedia.com

GIGAMEDIA LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended

9/30/2014

6/30/2014

9/30/2013

unaudited

unaudited

unaudited

USD

USD

USD

Operating revenues

Asian online game and service revenues

2,237,498

2,180,171

3,803,430

Other revenues

234,987

290,627

6,521

2,472,485

2,470,798

3,809,951

Operating costs

Cost of Asian online game and service revenues

1,972,295

1,291,889

1,709,214

Cost of other revenues

294,982

360,349

70,586

2,267,277

1,652,238

1,779,800

Gross profit

205,208

818,560

2,030,151

Operating expenses

Product development and engineering expenses

197,745

227,509

510,189

Selling and marketing expenses

1,759,991

1,677,455

1,253,071

General and administrative expenses

1,878,580

1,858,949

1,678,765

Impairment losses

0

0

3,139,999

3,836,316

3,763,913

6,582,024

Loss from operations

(3,631,108)

(2,945,353)

(4,551,873)

Non-operating income (expense)

Interest income

187,194

174,559

48,499

Gain on sales of marketable securities

2,447,065

162,051

539,840

Interest (expense) recoveries

(78,714)

(68,399)

72

Foreign exchange gain – net

20,058

115,438

339,274

(Loss) gain on equity method investments – net

(3,848,048)

(244,775)

378,014

Other

22,550

18,402

19,184

(1,249,895)

157,276

1,324,883

Loss from continuing operations before income taxes

(4,881,003)

(2,788,077)

(3,226,990)

Income tax benefit (expense)

125

60,849

(1,403)

Loss from continuing operations

(4,880,878)

(2,727,228)

(3,228,393)

Income from discontinued operations, net of tax

0

0

116,272

Net loss

(4,880,878)

(2,727,228)

(3,112,121)

Less: Net loss attributable to noncontrolling interest

41,966

50,537

92

Net loss attributable to shareholders of GigaMedia

(4,838,912)

(2,676,691)

(3,112,029)

(Loss) earnings per share attributable to GigaMedia

Basic:

Loss from continuing operations

(0.09)

(0.05)

(0.06)

Loss from discontinued operations

0.00

0.00

0.00

(0.09)

(0.05)

(0.06)

Diluted:

Loss from continuing operations

(0.09)

(0.05)

(0.06)

Loss from discontinued operations

0.00

0.00

0.00

(0.09)

(0.05)

(0.06)

Weighted average shares outstanding:

Basic

55,261,661

53,901,371

50,719,976

Diluted

55,261,661

53,901,371

50,719,976

GIGAMEDIA LIMITED

CONSOLIDATED BALANCE SHEETS

9/30/2014

6/30/2014

9/30/2013

unaudited

unaudited

unaudited

USD

USD

USD

Assets

Current assets

Cash and cash equivalents

38,899,281

40,660,576

54,658,747

Marketable securities – current

18,041,022

22,348,693

19,622,706

Accounts receivable – net

1,327,883

1,352,875

2,480,216

Prepaid expenses

534,534

648,190

616,367

Restricted cash

9,006,571

8,924,513

0

Other receivables

2,739,712

273,032

645,557

Other current assets

166,917

143,465

922,309

Total current assets

70,715,920

74,351,344

78,945,902

Marketable securities – noncurrent

9,073,630

9,214,270

4,263,473

Investments

20,775,344

25,476,917

5,828,209

Property, plant & equipment – net

1,753,309

1,695,953

1,744,797

Goodwill

0

0

16,630,544

Intangible assets – net

592,482

884,979

14,569,242

Prepaid licensing and royalty fees

5,061,593

4,843,848

4,683,692

Other assets

309,549

329,422

431,908

Total assets

108,281,827

116,796,733

127,097,767

Liabilities and equity

Accounts payable

453,885

332,166

183,702

Accrued compensation

1,144,451

785,562

1,127,221

Accrued expenses

2,508,376

2,717,972

3,007,902

Short-term borrowings

19,395,135

19,755,567

0

Other current liabilities

5,954,043

6,099,614

6,950,036

Total current liabilities

29,455,890

29,690,881

11,268,861

Other liabilities

181,193

182,150

845,164

Total liabilities

29,637,083

29,873,031

12,114,025

GigaMedia’s shareholders’ equity

78,589,516

86,825,311

115,322,174

Noncontrolling interest

55,228

98,391

(338,432)

Total equity

78,644,744

86,923,702

114,983,742

Total liabilities and equity

108,281,827

116,796,733

127,097,767

GIGAMEDIA LIMITED

Reconciliations of Non-GAAP Results of Operations

Three months ended

9/30/2014

6/30/2014

9/30/2013

unaudited

unaudited

unaudited

USD

USD

USD

Reconciliation of Net Loss to EBITDA

Net loss attributable to GigaMedia

(4,838,912)

(2,676,691)

(3,112,029)

Depreciation

76,182

75,599

99,130

Amortization

282,115

319,683

477,940

Interest income

(187,194)

(174,362)

(48,718)

Interest expense (recoveries)

78,714

68,399

(72)

Income tax (benefit) expense

(125)

(60,849)

1,403

EBITDA

(4,589,220)

(2,448,221)

(2,582,346)

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/gigamedia-announces-third-quarter-2014-financial-results-119935998.html