Highlights - 1) Some highlights for the first quarter include overall revenue for the quarter came in at $24.1 million U.S., down about 7.6% year-over-year. 2) Application store downloads were 764 million. 3) Mobile community carrier independent revenue throughout the third party channel, including concurrency, represents 21.8% of total revenue. 4) Mobile community added 22.8 million registered users with total registered users reaching 193.4 million. 5) Non-IFRS net profit totaled $0.5 million U.S. 6) Sky-mobi will be able to preserve the majority of our revenue by improving payment efficiency and increasing monetization of our feature phone business. 7)Given our strong start with Android, we are confident that we will become one of the top mobile phone players in China by year-end. 8) At the same time, we are also being conservative with our guidance by basing it only on the assumption that revenue will be only generated from the feature phone business in fiscal year 2013. 9) Any revenue from Android provides potential upside to our business model. As we gain further insight as to how China’s mobile phone market is evolving, we’ll update this guidance accordingly. 10) Again, we maintain our previous revenue guidance for fiscal year ending March 31, 2013 in the range of RMB 545 million to RMB 560 million. 11) Sky-mobi had 4.2 billion user visits and 764 million downloads of applications and content from the Maopao application store in the first quarter, down 28% and 2.9% respectively compared to the same quarter last year.
12) Revenues collected from third party channels was RMB 33.5 million or $5.3 million U.S., up 38.8% year-over-year and contributed 21.8% of total revenues. 13) Sky-mobi’s Maopao community had 15.9 million active members and 810 million member log-ins in the first quarter of 2013 compared to 14.7 million active members and 1.4 billion member log-ins in the same quarter last year. 14) Revenues from the community increased due to the growth in the number of active members as well as increasing spending for active members resulting from our two most popular mobile social games, Fantasy of the Three Kingdoms and Fairy Magic World. We expect that revenues collected from third party channels will contribute an increasing percentage of total revenues in the quarters ahead. 15) The low end of the market is the mass market. Based on our estimates, the low end of this market is expected to account for 65 to 70% of all smartphone shipments in China in 2012 and ’13. 16) In terms of smartphones, we have made excellent progress in penetrating this emerging market since launching our new Android platform at a global mobile Internet conference in Beijing in May. 17) We have already entered into agreements with 50 handset manufacturers to pre-install our app store PC shield browser mobile game competition platform. 18) This quick pace of adoption by industry players is proof of commercial competitiveness of our product and the monetization capability in China. 20) We expect to continue our rapid progress by adding more manufacturers once they begin shipments over the next few quarters. We are confident we will become one of the top smartphone players in China by the end of this year. At Sky-mobi, our target customer group has always been the grassroots mass user market. This mass user group typically does not have ready access to PC, Wi-Fi or 3G to download apps. Our plan is to build upon what we have done successfully from the feature phone market, which is to work with design houses and handset manufacturers via revenue sharing agreements to pre-install our app store and other features onto the handsets prior to shipment. That way, no matter where our customers purchase their smartphones, our app store or platform is already loaded on them. Buyback of 10 million !
To monetize this traffic, we have established in-house two game studios to publish mobile social games and by also offering content provided partners and Android social game platforms based on original Open Sky technology that allows them to quickly monetize the content. So our smartphone strategy is simple – capture traffic with our pre-installed and offline locations, then monetize this traffic using social-based games. Turning to our first quarter performance, while our feature phone business outperformed the overall market during the quarter, our revenue did come in behind the low end of our most recent guidance by 1%. We do maintain our most recent full-year guidance.
Our strong balance sheet with a cash position of approximately $94 million U.S. combined with a stable cash flow from our feature phone business provides a strong financial basis for us to continue investing in the smartphone business. With a very strong start in the smartphone segment and confidence of being a leader by the end of this year, we believe our stock price is undervalued and it is the right time to utilize the cash on hand to buy back shares and enhance shareholder value. Turning over to outlook, we do maintain our view that the overall feature phone market is expected to decline by about 30% in 2012; however, we believe Sky-mobi will be able to preserve the majority of our revenue by improving payment efficiency and increasing monetization of our feature phone business. Given our strong start with Android, we are confident that we will become one of the top mobile phone players in China by year-end. As Michael mentioned, we launched six new social mobile games during the quarter which generated a solid increase in revenues for social games. Our popular MMO games, Fantasy of the Three Kingdoms and Fairy Magic World, also drove traffic and generated a nice increase in revenue per user under the Maopao community this quarter. Our ACO – average concurrent online members – for the Maopao community in the quarter continued to grow to 140,000, up 13.1% from a year ago of 123,880. During the quarter, we shifted internal resources away from our feature phone business to focus on our Android platform. We began outsourcing a portion of our feature phone music platform to a partner and reduced a number of new game titles available in feature phone application store. Going forward, we will devote only the minimum of resources necessary to maintain our feature phone business. Our new relationship with China Mobile is going well, particularly in the area of mobile gaming as we directly operate this platform on behalf of China Mobile, which means we have much higher payment efficiency. Going forward, we will continue to optimize the feature phone products and operations so that this business continues to provide a strong source of cash flow to support our growth in the smartphone market.