Reports record year for revenue and net profits
HONG KONG, March 31, 2015 /PRNewswire/ — Tian Ge Interactive Holdings Limited (Tian Ge, 1980.HK, TGRVY.US), the largest "many-to-many" live social communities platform in China, today announced the unaudited consolidated results for the fourth quarter and audited consolidated results for the year ended December 31, 2014.
Highlights of the Full Year of 2014
- Total revenues up 26.3% to RMB692.2 million from RMB548.3 million in the corresponding period of 2013.Excluding the VAT effect revenue increased by 30.4% year-over-year ("YoY"), as our revenues are recorded as net off 6% VAT tax after June 1, 2014.
- Revenue from live social video platform increased by 19.4% to RMB630.7 million from 528.4 million in the corresponding period of 2013, primarily due to an increase in paying users. Excluding the VAT effect, the YoY increase was should have reached 23.4%.
- Revenue from games and others increased 210.2% to RMB 61.5 million from RMB19.8 million in the corresponding period of 2013, as the Group launched new live social and mobile games.
- Gross profit increased by 22.2% to RMB586.9 million from RMB480.1 million in the corresponding period of 2013.
- Adjusted EBITDA increased 26.8% to RMB319.4 million from RMB251.9 million and adjusted EBITDA margin increased to 46.1% from 45.9% in the corresponding period of 2013.
- Adjusted net profit increased by 29.6% to RMB267.2 million from RMB206.3 million and adjusted net margin increased to 38.6% from 37.6% in the corresponding period of 2013.
- Adjusted diluted earnings per share increased to RMB 0.23 per share from RMB 0.22 in the corresponding period of 2013. Adjusted basic earnings per share decreased to RMB 0.29 from RMB 0.32 in the corresponding period of 2013. 2014 earnings per share were impacted by the increase in outstanding shares after the IPO.
Highlights of the Fourth Quarter of 2014
- Total revenues up 17.5% to RMB174.8 million from RMB148.8 million in the corresponding period of 2013. Excluding the VAT effect revenue increased by 24.5% YoY, as our revenues are recorded as net off 6% VAT tax after June 1, 2014.
- Revenue from live social video platform increased to RMB152.7 million from 136.2 million in the corresponding period of 2013, primarily due to the increase in mobile paying users. Excluding the VAT effect, the YoY increase should have reached 18.9%.
- Revenue from Games and Others increased by 74.7% to RMB 22.1 million from RMB12.6 million in the corresponding period of 2013, driven the launch of new mobile games.
- Gross profit increased by 11.1% to RMB143.5 million from RMB129.2 million in the corresponding period of 2013.
- Adjusted EBITDA increased 16.0% to RMB80.0 million from RMB69.0 million and adjusted EBITDA margin slightly increased to 45.7% from 46.3%.
- Adjusted net profit increased by 13.7% to RMB63.9 million from RMB56.2 million and adjusted net margin decreased slightly to 36.5% from 37.7%.
- Adjusted diluted earnings per share decreased to RMB 0.05 per share from RMB 0.06 in the corresponding period of 2013. Adjusted basic earnings per share decreased to RMB 0.05 from RMB 0.09. 2014 earnings per share were impacted by the increase in outstanding shares after the IPO.
Mr. Mike Fu, Chairman and CEO of Tian Ge, commented, "Year 2014 was a record year for Tian Ge marked by our financial and operating performance, and by our successful listing on the Hong Kong Stock Exchange. We made significant progress in expanding and developing our business, focusing on initiatives to grow our user base and our mobile engagement across our live social video communities."
"Our fourth quarter and full year financial performance was driven by strong growth in the number of active and paying users as well as the number of mobile paying users on our live social community platform, and by our investment in mobile gaming. The successful performance in the fourth quarter gives us confidence in maintaining healthy income, profit and cash flow growth in the future."
Operating Highlights for the Fourth Quarter of 2014
- Monthly Active Users ("MAU") were 15.8 million in the fourth quarter 2014, an increase of 9.9% from 14.4 million in the previous quarter.
- The percentage of mobile MAU users increased reached 13.9%, from 10.0% in the previous quarter, and 6.7% in the same period year ago.
- Monthly Paying Users increased 18.8% to 398,000 from 335,000 in the previous quarter. The ratio of paying users to monthly active users during the fourth quarter of 2014 improved to 2.5% from 2.3% in the previous quarter.
- Monthly Average Revenue Per User ("ARPU") was RMB143 a decrease of 11.2% compared to RMB161 in the previous quarter. The decline in ARPU primarily reflects the impact of VAT, and to a lesser extent, the impact of new mobile paying users who are currently spending less than our existing PC based paying users.
- Number of Rooms was 28,000, a decrease of 6.7% from 30,000 in the previous quarter. The decrease was primarily due to consolidation of rooms and increase in average room sizes, reflecting changes to meet the needs of our growing mobile user base.
- Number of Hosts was 40,000, an increase of 2.6% from 39,000 in the previous quarter.
Live Social Community Business
During the period under review, the Group continued to deliver robust and stable profitability, return on equity and free cash flow yield growth, thanks to our core "many-to-many" live social business segment. Our live social video revenues increased 19.4% for the year ended December 31, 2014, contributed to our strong gross profit growth of 22.2% for the same corresponding period. The strong and consistent profit margins of our core business support continued investments in our newer mobile and online to offline (O2O) business.
We also see an increasing dominance and market share in the "many-to-many" market, with plans on further strengthening our market leadership position through industrial consolidation of smaller platforms in the market. Our live social platform’s accumulated registered users increased by over 30.9% from 205.1 million as of December 31, 2013 to 268.5 million as of December 31, 2014. Average monthly active users ("MAUs") increased 18.8% to 398,000 in the fourth quarter 2014 over the prior quarter.
Key catalyst of user growth in 2014 has been derived from our investment in mobile, including the launch of iOS and Android versions of our various live social video communities. We enabled mobile payments in late 2013, and continued to expand the number of mobile payment channels in 2014, resulting in MPU growth faster than our MAU growth in 2014. Approximately 13.9% of our MAUs in the fourth quarter of 2014 entered our platform via mobile devices, an increase from 10.0% in the prior quarter and 6.7% in the same quarter of 2013.
Games, Mobile & Other
We continue to leverage our R&D capabilities to innovate and develop new products that expand our business and extend our reach in entertainment and live social video. With the rising number of hardcore gamers within our new core user base, we have officially entered into the mobile games market through our first mobile game "Three Kingdoms" in late 2013. Recently, leveraging our existing hosts system and virtual economies, we have added a new live social embedded function into this game, to improve user experience, achieve higher monetization, increase user engagement, lower user acquisition risk and extend users’ life cycles. In addition, the Group has initiated the soft launch of "Power Pets", the 2nd RPG style mobile game licensed from third party developer, in third quarter of 2014.
In total, the Group plans to launch 3 to 4 mobile games per year, with approximately 6 to 8 self-developed and third-party developed mobile games in total through 2015, several of which could enable interactive live social functionality. In the long run, we consider to leverage our innovative live social embedded strategy to publish and help smaller game companies to remain competitive despite tough conditions against other market players in the industry.
In addition to games, we are also developing new mobile applications, extending into new verticals, and testing new emerging businesses that leverage our large audience and established capabilities in live social entertainment. Currently, the revenue contribution from these new businesses is minimal as compared to the total revenue of the Group. We plan to launch more new smaller mobile applications in 2015.
Online to Offline (O2O) Entertainment business
In 2014, we launched our first investment in online to offline (O2O) entertainment with 49% equity investment in Sun’s Catering & Entertainment Management (Hangzhou) Co., Ltd. as disclosed in our global offering prospectus (the "Prospectus") dated June 25, 2014. The joint venture does not contribute to our revenue growth, although the operations is supported by our R&D and operations. Currently, we have 3 pilot testing centers in Hangzhou and have begun to see solid results from the initial periods of short operation. Given the results, we are actively evaluating opportunities to expand with potential chain karaoke operator partners on a regional or national scale. By leveraging our live social video know-how, virtual monetization strategy, sophisticated host economy and technological capabilities, we believe our new O2O product offers users an unique and revolutionary O2O karaoke experience including real-time video interaction and gamification amongst users at physical karaoke venues and across the Group’s live social online platform.
Full Year Financial Review
Revenue increased by 26.3% YoY to RMB692.2 million for the year ended December 31, 2014 from RMB548.2 million the corresponding period in 2013. Excluding the VAT effect revenue increased by 30.4% YoY, as our revenues are recorded as net off 6% VAT tax after June 1, 2014.
Gross profit increased by 22.2% to RMB586.9 million for the year ended December 31, 2014 from RMB480.1 million in the corresponding period of 2013, despite a decline in gross margin to 84.8% from 87.6%. The decline in gross margin was primarily due to the growing mix of revenues from games which operate at lower gross margins related to commissions to third party game developers. Excluding games and other revenue and the commission charges related to the launch and operation of our mobile games, gross margins would have increased over the comparable period.
Selling & Marketing Expenses
Selling and marketing expenses increased by 27.4% to RMB212.4 million for the year ended December 31, 2014 from RMB 166.7 million the corresponding period of 2013. The increase in selling and marketing expenses was primarily due to the increase of promotion and advertising expenses related to our existing live social video platforms, including to promote our expansion into mobile and the launch of new mobile games.
Administrative expenses increased by 155.2% YoY to RMB136.0 million for the year ended December 31, 2014 from RMB 53.3 million in the corresponding period of 2013, primarily due to an increase in share-based compensation expenses of RMB41.5 million and listing expenses related to our IPO of RMB40.1 million.
Research & Development Expenses
Research and development expenses increased by 24.5% YoY to RMB86.0 million for the year ended December 31, 2014 from RMB69.1 million in the corresponding period of 2013, primarily due to the increase in R&D headcount and employee cost.
Impact of Convertible Redeemable Preferred Shares
As disclosed and discussed in our Prospectus and in accordance with IFRS reporting standards, we incurred a fair value loss of convertible redeemable preferred shares of RMB283.6 million and RMB283.3 million for the year ended December 31, 2014 and 2013, respectively. The loss and changes in fair value are the result of the continued increase in the equity value of the Company. Upon completion of the IPO on July 9, 2014, these convertible redeemable preferred shares were automatically converted into ordinary shares on a one-to-one basis. There will be no fair value gain or loss associated with these shares to be recognized in periods afterwards.
Adjusted EBITDA increased by 26.8% to RMB319.4 million from RMB 251.9 million in the corresponding period of 2013. Adjusted EBITDA represents operating profit, adjusted to exclude share-based compensation expenses, listing expenses, depreciation and amortization.
Adjusted Net Income and Earnings Per Share
Adjusted net profit increased by 29.6% to RMB267.2 million from RMB206.3 million in the corresponding period of 2013 and adjusted net margin increased to 38.6% from 37.6%. Adjusted diluted earnings per share increased to RMB 0.23 per share from RMB 0.22 in the corresponding period of 2013.
Adjusted net income eliminates the effect of non-cash share-based compensation expenses, non-cash fair value change of convertible redeemable preferred shares and redeemable ordinary shares, non-cash gains on repurchase of preferred shares, dividend appropriation to preferred shareholders and listing expenses. The term of adjusted net profit is not defined under IFRS.
As of December 31, 2014, the Company had no debt and RMB1,794.4 million of cash, cash equivalents, term deposits with initial terms over three months and RMB-denominated principal-protected structured deposits (recorded under current available-for-sale financial assets and financial assets at fair value through profit or loss).
For the year ended December 31, 2014, our capital expenditures were approximately RMB 98.7 million, which includes the purchase and decoration of our current office space estimated at RMB 39.7 million, purchases of IP licenses equivalent to approximately RMB45 million, and RMB14.0 million related to the purchase of hardware, servers and other equipment.
- On March 4, 2015, the Company issued and paid a special dividend of HK$0.06 per share to shareholders.
- The acquisition of 34.47% equity interest in Hangzhou Xi He Technology Co., Ltd ("Xi He"), a market leader in providing health management software to hospitals and physical check-up clinics in China, was completed in March 2015. Xi He is leading cloud-based health management system provider and has an established network of hospitals and physical examination centers, which services health oriented users and doctors nationwide.
- Effective March 9, 2015, the Group has been included by Hang Seng Indexes Company Limited as a constitute of the Hang Seng Composite Index series, including Hang Seng Composite Index, Hang Seng Composite Small Cap Index, Hang Seng Composite Industrial Index – Information Technology, Hang Seng Global Composite Index, as well as Hang Seng Broad Consumption Index.
Conference Call Information
The Company will host a conference call at 9:00 p.m. ET on March 30, 2015 (9:00 a.m. Beijing Time on March 31, 2015) to review the Company’s financial results and answer questions. You may access the live interactive call via:
- 1-888-346-8982 (U.S. Toll Free)
- 1-412-902-4272 (International)
- 852-301-84992 (Hong Kong-Local Toll)
- 86-105-357-3132 (Beijing-Local Toll)
- 4001-201203 (China Toll Free)
- 800-905945 (Hong Kong Toll Free)
Please dial-in approximately 5 minutes in advance to facilitate a timely start.
A replay will be available until 9:00 p.m. ET on April 7, 2015 and may be accessed via:
- 1-877-344-7529 (US Toll Free)
- 1-412-317-0088 (International Toll)
- 855-669-9658 (Canada Toll Free)
- Replay access code: 10061981
A live and archived webcast of the call will be available on the Company’s website at http://www.tiange.com/enInvestor/Index.aspx
About Tian Ge
Tian Ge (1980.HK) is one of the largest live social online video community platforms in China. The Company was founded in Hangzhou, China in 2008 and went public on the main board of the stock exchange of Hong Kong in July 2014. It currently operate eight "many-to-many" live social video communities on both mobile and PC, including 9158 and Sina Show, the two largest communities; and one "one-to-many" community, Sina Showcase.
Our communities offer diverse selection of user-generated content in the live social online video community industry. Through our "many-to-many" ecosystem where multiple users can simultaneously stream to other viewers in the same real-time video room, Tian Ge enables users to interact, socialize, share interest, send virtual items & gifts, and encourages our users to showcase their talents or knowledge for open and public exposure. Recently, we expanded our ecosystem to the online-to-offline (O2O) karaoke, live social games and emerging healthcare mobile applications.
For more information, please visit www.tiange.com
To visit our communities:
For media inquiries, please feel free to contact:
LBS Communications Consulting Limited
Joanne Chan (852-9616 2676), Janice Liu (852-9859 0513), Ian Fok (852-9348 4484)
Tel: (852) 3679 3671 / (852) 3752 0428 / (852) 3752 0432
Fax : (852) 3753 2899
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Tel: +86 (571) 88108686 Ext. 8103
This press release contains forward-looking statements relating to the business outlook, forecast business plans and growth strategies of the Company. These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release. They are based on certain expectations, assumptions and premises, some of which are subjective or beyond the Company’s control. These forward-looking statements may prove to be incorrect and may not be realized in future. Underlying the forward-looking statements is a large number of risks and uncertainties. Further information regarding these risks and uncertainties is included in the Company’s other public disclosure documents available on the corporate website.
Condensed Consolidated Statements of Comprehensive Income
Year ended December 31,
Cost of revenue
Selling and marketing expenses
Research and development expenses
Other gains, net
Finance income, net
Fair value loss of convertible redeemable preferred shares
Share of loss of investment accounted for using the equity method
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive (loss) / income:
Items that may be reclassified to profit and loss
Currency translation differences
Total comprehensive loss for the year
Loss attributable to:
– Shareholders of the Company
– Non-controlling interests
Total comprehensive loss attributable to:
– Shareholders of the Company
– Non-controlling interests
Loss per share (expressed in RMB per share)
Condensed Consolidated Statements of Financial Position
As of December 31,
Property and equipment
Investment accounted for using the equity method
Deferred income tax assets
Available-for-sale financial assets
Prepayments and other receivables
Term deposits with initial term over 3 months
Prepayments and other receivables
Available-for-sale financial assets
Financial assets at fair value through profit or loss
Term deposits with initial term over 3 months
Cash and cash equivalents
Equity and liabilities
Equity attributable to Shareholders of the Company
Shares held for RSU Scheme
Total equity / (deficits)
Convertible redeemable preferred shares
Deferred income tax liabilities
Other non-current liabilities
Other payables and accruals
Income tax liabilities
Customer advance and deferred revenue
Total equity and liabilities
Net current assets
Total assets less current liabilities
Pursuant to the Circular on the Pilot Practice of Levying VAT in Place of Business Tax for the Telecommunication Industry (Caishui #43, 2014) jointly issued by the Ministry of Finance and the State Administration of Taxation, revenue from operation of live social video communities, interactive social video games was subject to VAT since June 1, 2014, and the applicable tax rate was 6%. After that, majority revenue of the Company is subject to the VAT instead of the business tax, which will have a downward impact on reported net revenues and our cost of revenues.
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