HONG KONG, Nov. 18 GIGM-Q3-ERN
HONG KONG, Nov. 18 /PRNewswire-FirstCall/ --
Financial Highlights for the Third Quarter of 2008
-- Consolidated revenues increased 16 percent to US$45.7 million from
US$39.3 million in the same quarter in 2007 and decreased 7 percent
from the previous quarter.
-- GAAP consolidated income from operations decreased 42 percent year-
over-year to US$5.8 million from US$10.0 million in the same quarter in
2007 and decreased 50 percent quarter-over-quarter.
-- Non-GAAP consolidated income from operations increased 12 percent year-
over-year to US$10.7 million from US$9.6 million in the same quarter in
2007 and decreased 15 percent from the previous quarter.(Note 1)
-- GAAP consolidated net income grew 24 percent to US$12.0 million from
US$9.7 million in the same quarter in 2007 and increased by 7 percent
from the second quarter of 2008.
-- Non-GAAP consolidated net income increased 22 percent to US$10.7
million from US$8.8 million in the same quarter in 2007 and decreased
10 percent from the previous quarter.
-- GAAP basic and fully-diluted earnings per share were US$0.22 and
US$0.20, respectively, for the third quarter of 2008.
-- Non-GAAP basic and fully-diluted earnings per share were US$0.20 and
US$0.18, respectively, for the third quarter of 2008.
Note 1: Non-GAAP measures are disclosed below and reconciled to the
corresponding GAAP measures in the attachment entitled
"Reconciliations of Non-GAAP Results of Operations."
Operational Highlights
-- Disposal of last legacy ISP business - completing transition to the new
GigaMedia, an online entertainment leader.
-- Poker software delivers solid results in traditionally weakest
quarter; seasonal up-cycle in current quarter now driving increased
player activity.
-- Casino software revenues hit record levels driven by ongoing platform
integration with Everest Poker.
-- Asian online games platform prepares for exciting game launches in 4Q
2008 and 1H 2009.
Recent Developments
-- Everest Poker awarded Poker Operation of the Year for the second
consecutive year at the annual eGaming Review Awards ceremony in
London.
-- World Series of Poker: Everest Poker celebrates finals in first year of
sponsorship; extensive ESPN broadcasts of the tournament and finals to
air in Everest's European markets in Q4 and throughout 2009.
-- Everest Gaming platform adds over 40 exciting new cash-wager casino
games featuring Marvel's Incredible Hulk, Spider-Man, X-Men and others.
GigaMedia Limited (Nasdaq: GIGM) announced today solid third-quarter
results with consolidated net income climbing 24 percent year-over-year to
$12.0 million from the same period of 2007, and increasing 7 percent
sequentially over the second quarter of 2008, driven in part by disposal of
its final legacy ISP unit.
Third-quarter 2008 non-GAAP basic and diluted earnings per share were
$0.20 and $0.18, respectively, which exclude results from discontinued
operations, non-cash share-based compensation expenses, and certain other non-
cash write-offs.
During the third quarter, Everest Poker received one of the online gaming
industry's top honors, winning the Poker Operation of the Year award for the
second consecutive year at the annual eGaming Review Awards ceremony in
London. The award highlights the quality and remarkable growth of Everest
Poker, which continues building one of the industry's most trusted and
exciting brands.
"GigaMedia performed well in the third quarter despite the normal summer
slowdown and the negative affects of the Olympics on player activity," stated
GigaMedia President Thomas Hui. "We look forward to continued growth in our
core businesses driven by a strong lineup of new games and sponsorships."
"The financial turmoil has created many concerns, many fears," stated
GigaMedia CEO Arthur Wang. "Nevertheless, the fact is we continue to run a
high-growth business generating high levels of free cash flow and look to an
even better 2009 supported by a strong balance sheet and cash position with no
net debt."
Consolidated Financial Results
Presentation of results from continuing operations. On September 3, 2008,
the company sold its legacy cable and corporate Internet service provider
("ISP") business. In accordance with reporting guidelines and to allow for
meaningful comparisons, the company has recast the current and past quarterly
financial results presented herein to reflect this disposal, unless otherwise
noted.
In addition to GigaMedia's third-quarter GAAP results, management has
presented herein non-GAAP financial measures that exclude certain expenses,
gains and losses that (a) are not expected to result in future cash payments,
and/or (b) that may not be indicative of GigaMedia's core operating results.
The company's non-GAAP financial measures exclude results from discontinued
operations representing income of approximately $8.0 million, non-cash share-
based compensation expenses of $856 thousand, and write-offs in this quarter
with a total net income impact of approximately $5.9 million related to the
company's Asian online games business. (See, "About the Numbers in This
Release -- Non-GAAP figures" for more details.)
GIGAMEDIA 3Q08 CONSOLIDATED FINANCIAL RESULTS
(unaudited,
all figures
in US$
thousands,
except per 3Q08 3Q07 Change 3Q08 2Q08Change
share amounts)(%)(%)
Revenues (A) 45,69139,327 1645,69148,904 -7
Gross
Profit(A)37,16332,060 1637,16339,878 -7
Operating
Income (A)5,83610,022-42 5,83611,656-50
Income from
Continuing
Operations
(A) 3,991 9,701-59 3,99110,953-64
Net Income12,036 9,695 2412,03611,200 7
Net Income
Per Share,
Diluted0.20 0.16 24 0.20 0.19 8
Non-GAAP
Operating
Income
(A)(B) 10,723 9,597 1210,72312,635-15
Non-GAAP
Net Income
(A)(B) 10,713 8,775 2210,71311,865-10
Non-GAAP
Net Income
Per Share,
Diluted
(A)(B) 0.18 0.15 22 0.18 0.20 -9
EBITDA
(A)(C) 14,42411,246 2814,42413,037 11
Cash, Cash
Equivalents
and
Marketable
Securities-
Current 103,74171,982 44 103,74181,655 27
(A) Excludes results from discontinued operations.
(B) Non-GAAP operating income, non-GAAP net income and non-GAAP net income
per share exclude results from discontinued operations, non-cash
share-based compensation expenses, and certain other non-cash items.
(See, "Use of Non-GAAP Measures," for more details.)
(C) 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 increased 16 percent to $45.7
million from $39.3 million in the same period of 2007, and decreased 7 percent
from $48.9 million in the second quarter of 2008. Year-over-year results
reflected continued organic growth in the company's core businesses, led by an
18 percent increase in Gigamedia's gaming software business. Quarter-over-
quarter revenue variation reflected the impact of a seasonal downturn in the
gaming software business, and the negative effect of the Olympic Games in
China on player activity across Asia in the Asian online games business.
Consolidated gross profit for the third quarter increased 16 percent to
$37.2 million from $32.1 million in 2007 and decreased 7 percent quarter-over-
quarter from $39.9 million. The year-over-year improvement was driven by solid
contributions from the gaming software and the Asian online games businesses,
whose gross profit grew 15 and 18 percent, respectively. The quarter-over-
quarter decrease in gross profit was due to quarterly sequential gross profit
decreases in the company's core businesses in line with the quarterly
sequential revenue trends. Third-quarter consolidated gross profit margin was
steady both year-over-year and quarter-over-quarter at 81.3 percent.
Consolidated income from operations for the third quarter decreased 42
percent year-over-year to $5.8 million from $10.0 million in the third quarter
of 2007 and decreased 50 percent quarter-over-quarter from $11.7 million in
the second quarter of 2008. Consolidated income from operations for the third
quarter of 2008 included certain aforementioned non-cash items, which impacted
operating income. This distorted period comparisons.
Non-GAAP consolidated operating income for the third quarter of 2008
excluded the following non-cash items recorded during the third quarter of
2008: (1) share-based compensation expenses of $898 thousand; (2) a write-off
of approximately $2.6 million recorded in the Asian online games business
related to loan receivables and accrued interest from Flagship Studios, the
developer of Hellgate: London; and (3) impairments totaling approximately $1.3
million recorded in the Asian online games business related to capitalized
costs for certain online games. (See, section I of the attachment to this
release entitled "Reconciliations of Non-GAAP Results of Operations" for more
details.)
Non-GAAP consolidated operating income was $10.7 million in the third
quarter of 2008, up 12 percent year-over-year and down 15 percent quarter-
over-quarter. The year-over-year increase in non-GAAP consolidated operating
income was primarily attributable to strong operating income growth in
GigaMedia's online games business in China and strong cost control of general
and administrative expenses in the gaming software business. The quarter-over-
quarter decrease in non-GAAP consolidated operating income reflected an
expected decrease in operating income from the gaming software business due to
the effects of seasonality. Third-quarter 2008 non-GAAP consolidated operating
margin was 23.5 percent.
Consolidated non-operating income (loss) during the third quarter of 2008
was a loss of $2.8 million, down from non-operating income of approximately
$1.5 million a year ago and $175 thousand recorded in the previous quarter.
GigaMedia's third-quarter non-operating loss included losses totaling
approximately $2.9 million related to a write-off of an investment by T2CN in
CJIT2, a joint venture with the Korean game company CJ Internet.
Consolidated net income for the quarter increased 24 percent to $12.0
million from $9.7 million in 2007, and increased by 7 percent from the
previous quarter. Third-quarter 2008 net income included approximately $8.0
million related to the results from discontinued operations, as well as the
aforementioned non-cash items, all of which were excluded in the non-GAAP
results. (See, section II of the attachment to this release entitled
"Reconciliations of Non-GAAP Results of Operations" for more details.)
Non-GAAP consolidated net income in the third quarter was $10.7 million,
representing an increase of 22 percent over the same period last year and a 10
percent decrease from the second quarter of 2008. Non-GAAP basic earnings per
share was $0.20, a 20 percent increase from 2007 and a decrease of 10 percent
quarter-over-quarter. Non-GAAP fully-diluted earnings per share was $0.18, a
22 percent increase from the same period last year and down 9 percent compared
with the second quarter.
Consolidated EBITDA for the third quarter of 2008 grew 28 percent to $14.4
million versus the same period last year, and 11 percent from the second
quarter of 2008. Operating cash flow for the third quarter of 2008 was $13.0
million. Capital expenditures totaled $4.0 million for the period.
GigaMedia strengthened its balance sheet during the third quarter. Cash,
cash equivalents and marketable securities-current were $103.7 million, up
from $81.7 million in the second quarter of 2008. Total loans decreased to
$29.5 million at the end of the third quarter of 2008. The improvement in cash
position was mainly attributable to proceeds received from the disposal of the
ISP business.
Business Unit Results
GigaMedia Limited conducts its online entertainment business in two
business segments. The gaming software segment develops and licenses online
poker and casino gaming software solutions and application services, primarily
targeting emerging continental European markets. The Asian online games
segment operates a suite of play-for-fun online games, mainly targeting online
gamers in Greater China.
Gaming Software Business
(unaudited,
in US$ 3Q08 3Q07 Change3Q08 2Q08Change
thousands) (%) (%)
Revenues 34,51429,300 1834,514 36,889 -6
Gross Profit 28,97725,170 1528,977 31,066 -7
Operating
Income 9,306 9,533 -2 9,306 10,380-10
Net Income
Before
Minority
Interests 9,379 9,488 -1 9,379 10,245 -8
Net Income 9,626 9,1305 9,626 10,304 -7
EBITDA 10,412 9,483 1010,412 10,878 -4
The gaming software business delivered solid results despite operating in
the seasonally slowest period for online gaming activity. Driving this was
strong execution of a plan to leverage the Everest Gaming platform through
broadening and integrating its business to create synergies and greater
efficiencies. Everest continued to improve integration between its leading
poker offering and casino to better monetize its player base. Everest also
added a new VIP program to enhance the overall customer experience. Over the
coming months, a complementary new vertical, sportsbetting, will be added.
Finally, broadcasts of the World Series of Poker, which feature Everest Poker
as the official "felt sponsor," begin in Everest's European markets in the
fourth quarter, all of which position the business to sustain strong long-term
growth.
Third-quarter revenues in the gaming software business increased 18
percent year-over-year to $34.5 million from $29.3 million and decreased 6
percent quarter-over-quarter from $36.9 million.
GigaMedia's revenues from the gaming software business derived from
providing poker and casino software and services to its master licensee were
$16.4 million during the third quarter of 2008. This represented an increase
of 26 percent from $13.0 million in 2007 and a 4 percent decrease from the
second quarter of 2008, which totaled $17.0 million. Such revenues are
eliminated in consolidation.
Year-over-year revenue growth was driven by solid performance in the poker
software business and outstanding results in the casino software businesses.
Quarter-over-quarter results were affected by seasonality.
Revenues in the poker software vertical were $23.5 million, up 7 percent
from the same year-ago period and down 14 percent from the previous quarter.
Poker software represented 68 percent of the business unit's total third-
quarter 2008 revenues. Approximately 176,000 active depositing real-money
customers played on the poker platform during the third quarter, down 8
percent from the previous quarter. During the quarter, approximately 38,000
new depositing real-money poker players were added, down 17 percent quarter-
over-quarter.
Revenues in the casino software vertical were a record $11.0 million
during the third quarter. This represented a 51 percent increase from the same
period in 2007 and an increase of 15 percent from the previous quarter.
Enhancements to GigaMedia's platform software enabling strong cross-marketing
to Everest Poker players in the third quarter contributed to the strong
revenue growth.
Third-quarter gross profit grew 15 percent to $29.0 million from $25.2
million in 2007 and decreased 7 percent from $31.1 million in the second
quarter, with the period variations attributable to strong revenue growth and
the traditional negative impact of seasonality, respectively. Gross profit
margin decreased slightly year-over-year to 84.0 percent from 85.9 percent in
2007 and was steady quarter-over-quarter. The year-period decrease was due
primarily to increases in platform expenses including customer service and
bandwidth in line with the increase in operational scale.
Total third-quarter selling and marketing expenses were $14.3 million, up
25 percent from $11.4 million in 2007 and down 4 percent quarter-over-quarter
from $14.9 million. The year-over-year increase was attributable to increases
in payments to marketing affiliates as a result of continued revenue growth,
as well as increases in sales and marketing headcount. The quarter-over-
quarter variation was largely due to a reduction in discretionary mass media
promotional expenses in the third quarter of 2008 in line with the traditional
downturn in online gaming activity during the period.
Operating income decreased 2 percent to $9.3 million from $9.5 million in
2007 and decreased 10 percent quarter-over-quarter from $10.4 million.
Operating margins declined year-over-year to 27.0 percent from 32.5 percent in
2007 and from 28.1 percent in the second quarter of 2008, mainly due to
increases in product development and engineering expenses during the periods.
The year-on-year sequential decline in operating margin also reflected the
aforementioned lower gross margin during the period.
Net income rose 5 percent to $9.6 million from $9.1 million in 2007 and
decreased 7 percent sequentially from $10.3 million in the second quarter.
EBITDA increased 10 percent year-over-year and decreased 4 percent from the
second quarter of 2008 to $10.4 million from $10.9 million. Capital
expenditures totaled approximately $3.2 million for the third quarter.
Asian Online Games Business
(unaudited,
in US$ 3Q08 3Q07Change 3Q08 2Q08 Change
thousands) (%)(%)
Revenues 11,17710,028 11 11,177 12,015 -7
Gross Profit8,185 6,920 18 8,185 8,811 -7
Operating
Income (A)-2,357 2,341 NA -2,357 3,160 NA
Net Income
Before
Minority
Interests (A) -5,142 3,818 NA -5,142 3,370 NA
Net Income (A) -4,287 2,592 NA -4,287 2,702 NA
EBITDA (A) -3,371 3,246 NA -3,371 3,485 NA
(A) Includes certain non-cash items, which have significantly affected
period results and comparisons. (See, "Use of Non-GAAP Measures," for more
details.)
Management continues executing its plan to grow the Asian online games
business by leveraging the platform's inherent scalability and massive reach.
Central to this strategy has been a sharp focus on strategic alliances with
world-class entertainment providers and product expansion to drive growth.
While third-quarter results were held back by certain non-cash charges, an
exciting pipeline of top-tier content for 2009 position the business to
deliver strong long-term growth.
Third-quarter revenues in the Asian online games business increased 11
percent to $11.2 million from $10.0 million a year ago and decreased 7 percent
from $12.0 million in the previous quarter. Solid organic growth in T2CN in
China drove the year-over-year improvement. The quarter-over-quarter revenue
variation reflected decreased revenues in FunTown and T2CN, which were
negatively impacted by decreased player activity during television broadcasts
of the 2008 Olympic Games and licensed game contributions.
Third-quarter revenues from FunTown were steady year-over-year at $6.2
million and decreased 6 percent from $6.6 million in the previous quarter.
Quarter-over-quarter, revenues were down on lower revenues from the licensed
game Tales Runner and decreased virtual item sales in the third quarter
following strong promotions in the second quarter. Average monthly active
paying accounts were approximately 109,000 during the third quarter, down 6
percent from the second quarter, and average monthly revenue per active paying
account was $19.11 during the period, steady quarter-over-quarter. Peak
concurrent users were approximately 46,000, a 4 percent increase from the
second quarter.
Total revenues for T2CN in the period were $4.9 million, representing a 27
percent increase from $3.9 million in 2007 and a 9 percent decrease from $5.4
million in the second quarter. Strong revenue growth in the year period was
attributable to increased revenue from FreeStyle. Appreciation of the renminbi
against the U.S. dollar also contributed to the increase. Revenues were down
quarter-over-quarter on lower revenues from FreeStyle, which resulted from
decreased online player activity during the Olympic Games. T2CN's average
monthly active paying accounts were approximately 398,000 during the third
quarter, down 11 percent from the second quarter, and average monthly revenue
per active paying account was $4.06 during the period, up 2 percent quarter-
over-quarter. Peak concurrent users of FreeStyle were approximately 118,000, a
decrease of 15 percent from the second quarter.
Third-quarter gross profit grew 18 percent to $8.2 million from $6.9
million in 2007 and decreased by 7 percent sequentially from $8.8 million as a
result of the quarterly sequential revenue decrease. Gross profit margin
increased year-over-year to 73.2 percent from 69.0 percent in 2007, largely
attributable to better utilization of bandwidth costs at T2CN. Gross profit
margin was steady quarter-over-quarter.
Total selling and marketing expenses in the third quarter grew 12 percent
to $3.3 million from $2.9 million in 2007 and 40 percent from $2.3 million in
the previous quarter. The year-over-year and quarter-over-quarter increases
were primarily due to sequential increases in mass media
promotional/advertising expenses, including various marketing initiatives
surrounding FunTown's new MahJong 3.0 and game patches for T2CN's FreeStyle.
Operating income decreased to a loss of $2.4 million from positive
operating income of $2.3 million in the third quarter of 2007 and from $3.2
million in the previous quarter largely due to the impact of several non-cash
items recorded during the third quarter of 2008. These items included (1) a
write-off of approximately $2.6 million related to loan receivables and
accrued interest from Flagship Studios, developer of Hellgate: London; and (2)
write-downs of approximately $1.3 million on capitalized license costs for
cancellation of game projects. Excluding such non-cash items, operating income
in the third quarter of 2008 was $1.6 million and operating margin was 14.6
percent.
Net income decreased to a loss of $4.3 million from net income of $2.6
million in 2007 and from net income of $2.7 million in the second quarter.
Year-over-year and quarter-over-quarter results reflected the aforementioned
factors impacting operating income, as well as write-offs on certain
investments recorded in T2CN, including investments in CJIT2, a joint venture
with CJ Internet, and others, the impact of which to net income was
approximately $2.1 million after minority interest adjustments. Excluding
these charges recorded during the third quarter of 2008, net income was $1.6
million.
EBITDA decreased to a loss of $3.4 million from EBITDA of $3.2 million in
the third quarter of 2007 and decreased from EBITDA of $3.5 million in the
second quarter. Capital expenditures totaled approximately $800 thousand for
the third quarter.
Business Outlook
The following forward-looking statements reflect GigaMedia's expectations
as of November 18, 2008. Given potential changes in economic conditions and
consumer spending, the evolving nature of gaming software, online games, and
various other risk factors, including those discussed in the company's 2007
Annual Report or 20-F filing with the U.S. Securities and Exchange Commission
referenced below, actual results may differ materially.
Gaming software business. In the fourth quarter, GigaMedia expects growth
in its gaming software business driven by a traditional upturn in online
gaming during the fall and winter seasons, limited in part by increased
competition in European markets and challenging macro-economic conditions
globally.
Asian online games business. The company expects revenues to hold steady
in the fourth quarter of 2008 and accelerate strongly in 2009, driven by major
new game launches including Holic, NBA STREET Online, and Warhammer.
Use of Non-GAAP Measures
To supplement GigaMedia's consolidated financial statements presented in
accordance with GAAP, the company uses the following measures defined as non-
GAAP by the SEC: EBITDA, and US GAAP operating income, net income and basic
and fully-diluted earnings per share data adjusted to exclude the impact of
discontinued operations, share-based compensation, as well as certain non-cash
items, including write-offs related to game licensing, gains and losses on the
sale of businesses and discontinued operations, and write-offs related to
investments. GigaMedia may consider whether other significant items that arise
in the future should also be excluded in calculating the non-GAAP financial
measures it uses. The presentation of these non-GAAP financial measures is not
intended to be considered in isolation or as a substitute for the financial
information prepared and presented in accordance with GAAP. For more
information on these non-GAAP financial measures, please see the tables
captioned "Reconciliations of Non-GAAP Results of Operations" set forth at the
end of this release.
The company's management uses non-GAAP financial measures to gain an
understanding of the company's comparative operating performance (when
comparing such results with previous periods or forecasts) and future
prospects. The company's non-GAAP financial measures exclude the
aforementioned items from GigaMedia's internal financial statements for
purposes of its internal budgets. Non-GAAP financial measures are used by the
company's management in their financial and operational decision-making,
because management believes they reflect the company's ongoing business in a
manner that allows meaningful period-to-period comparisons. The company's
management believes that these non-GAAP financial measures provide useful
information to investors in the following ways: (1) in understanding and
evaluating the company's current operating performance and future prospects in
the same manner as management does, if they so choose, and (2) in comparing in
a consistent manner the company's current financial results with the company's
past financial results. GigaMedia further believes these non-GAAP financial
measures provide useful and meaningful supplemental information to both
management and investors regarding GigaMedia's performance by excluding
certain expenses, expenditures, gains and losses (i) that are not expected to
result in future cash payments or (ii) that may not be indicative of the
company's core operating results and business outlook.
Effective January 1, 2006, GigaMedia adopted Statement of Financial
Accounting Standards No. 123(R) ("SFAS 123(R)") regarding the expensing of
share-based compensation. The company's management believes excluding share-
based compensation from its non-GAAP financial measures is useful for itself
and investors as such expense will not result in future cash payments and is
otherwise unrelated to the company's core operating results. Non-GAAP
financial measures that exclude stock-based compensation also enhance the
comparability of results against prior periods.
The company's management believes excluding the non-cash write-off of loan
receivables, game capitalized costs and investments is useful for itself and
for investors as such write-off does not impact cash earnings and is not
indicative of the company's core operating results and business outlook. The
company's management believes excluding the results of discontinued operations
from its non-GAAP financial measure of net income is useful for itself and for
investors because such gains and losses are not indicative of the company's
core operating results and are no longer associated with the company's
continuing operations.
The company believes that the presentation of non-GAAP operating income,
net income, and basic and fully-diluted earnings per share enables more
meaningful comparisons of performances across periods to be made by excluding
the effect of SFAS 123(R), and that EBITDA is a measure of performance used by
some investors, equity analysts and others to make informed investment
decisions.
The non-GAAP financial measures have limitations. They do not include all
items of income and expense that affect the company's operations.
Specifically, these non-GAAP financial measures are not prepared in accordance
with GAAP, may not be comparable to non-GAAP financial measures used by other
companies and, with respect to the non-GAAP financial measures that exclude
certain items under GAAP, do not reflect any benefit that such items may
confer to the company. A limitation of using non-GAAP operating income
excluding share-based compensation expenses and other non-cash items and
adjustments, net income excluding share-based compensation expenses and other
non-cash items and adjustments, and basic and fully-diluted earnings per share
excluding share-based compensation expenses and other non-cash items and
adjustments is that these non-GAAP measures exclude share-based compensation
expenses and may exclude other items that have been and will continue to be
for the foreseeable future a recurring expense in the company's business. A
limitation of using EBITDA is that it does not include all items that impact
the company's net income for the period. Management compensates for these
limitations by also considering the company's financial results as determined
in accordance with GAAP and by providing specific information regarding the
GAAP amounts excluded from each non-GAAP measure. Reconciliations of the
adjusted income statement data to GigaMedia's US GAAP income statement data
are provided on the attached unaudited financial statements.
About the Numbers in This Release
Quarterly figures
All quarterly figures 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.
Segmental results
GigaMedia's segmental financial results are based on the company's method
of internal reporting and are not necessarily in conformity with accounting
principles generally accepted in the U.S. Consolidated quarterly and/or annual
financial results of the company may differ from totals of the company's
segmental financial results for the same period due to (1) the impact of
certain of the company's headquarters costs and expenses, which are not
reflected in the business segment results, (2) the impact of certain non-
operating subsidiaries of GigaMedia on the company's consolidated financial
results, and (3) certain inter-company eliminations.
Results from continuing operations
On September 3, 2008, the company sold its legacy ISP business. In
accordance with reporting guidelines (SFAS No. 144: Accounting for the
Impairment or Disposal of Long-Lived Assets), the company has recast the
current and past quarterly financial results presented herein to reflect this
sale, unless otherwise noted. Results of the legacy cable and corporate ISP
business are reported separately as discontinued operations in the
consolidated financial statements.
Non-GAAP figures
GigaMedia's management has presented herein non-GAAP financial measures
that exclude certain expenses, gains and losses that (a) are not expected to
result in future cash payments, and/or (b) that may not be indicative of
GigaMedia's core operating results and business outlook. The company's non-
GAAP financial measures exclude results from discontinued operations and
certain non-cash items, including the following:
i. share-based compensation expenses;
ii. income from discontinued operations in the third quarter of
approximately $8.0 million;
iii. a write-off of approximately $2.6 million recorded in the Asian
online games business related to loan receivables and accrued
interest from Flagship Studios, the developer of Hellgate: London;
iv. impairments totaling approximately $1.3 million recorded in the Asian
online games business related to capitalized costs for certain online
games, the impact of which after minority interest adjustments was
approximately $1.1 million; and
v. a write-off of investments recorded in T2CN, namely, CJIT2 and
others, the impact of which was approximately $2.1 million to net
income after minority interest adjustments.
The company's non-GAAP financial measures reported herein include non-GAAP
consolidated operating income, non-GAAP consolidated net income, non-GAAP
basic and fully-diluted earnings per share, and consolidated EBITDA. The non-
GAAP measures are described above and reconciliations to the corresponding
GAAP measures are included at the end of this release.
Conference Call and Webcast
GigaMedia will hold a conference call at 9:00 p.m. Taipei/Hong Kong Time on
November 18, 2008, which is 8:00 a.m. Eastern Daylight Time on November 18,
2008 in the United States, to discuss the company's third-quarter performance.
Individual investors can listen to a webcast of the call at
http://ir.giga.net.tw , through CCBN's individual investor center at
http://www.fulldisclosure.com , or by visiting any of the investor sites in
CCBN's Individual Investor Network. Institutional investors can access the
call via CCBN's password-protected event management site, StreetEvents
( http://www.streetevents.com ). The webcast will be available for replay.
About GigaMedia
GigaMedia Limited (Singapore registration number: 199905474H) is a major
provider of online entertainment software and services. GigaMedia develops
and licenses software for online gaming. GigaMedia also operates online games
businesses including FunTown, a leading Asian casual games operator and the
world's largest online MahJong game site in terms of revenue, and T2CN, a
leading online sports game operator in China. More information on GigaMedia
can be obtained from http://www.gigamedia.com.tw .
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
integrate our poker offering and casino to better monetize our player base,
our ability to successfully launch sport betting services, our ability to
retain existing online gaming and online game players and attract new players,
our ability to license, develop or acquire additional online games that are
appealing to users, 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 June 2008 and its other filings with the
United States Securities and Exchange Commission.
-- Tables to Follow --
GIGAMEDIA LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
9/30/2008 6/30/2008 9/30/2007
unaudited unaudited unaudited
USD USD USD
Operating revenues
Gaming software and service revenues 34,514,493 36,889,478 29,299,559
Online game and service revenues 11,176,804 12,014,730 10,027,562
45,691,297 48,904,208 39,327,121
Operating costs
Cost of gaming software and service
revenues 5,537,104 5,823,047 4,129,266
Cost of online game and service
revenues (includes share-based
compensation expenses under SFAS
123(R) of $13,520, $13,266, and
$56,592, respectively) 2,991,517 3,202,907 3,137,992
8,528,621 9,025,954 7,267,258
Gross profit 37,162,676 39,878,254 32,059,863
Operating expenses
Product development and engineering
expenses (includes share-based
compensation expenses under SFAS
123(R) of $124,788, $124,788, and
$72,794, respectively) 4,041,331 3,553,619 1,264,112
Selling and marketing expenses
(includes share-based
compensation expenses under
SFAS 123(R) of $58,753, $58,595,
and $66,962, respectively)17,538,401 17,273,684 14,415,974
General and administrative expenses
(includes share-based
compensation
expenses under SFAS 123(R) of
$701,088, $782,459, and $365,209,
respectively) 5,671,824 7,348,691 6,259,982
Bad debt expenses 2,726,201 46,162 97,381
Impairment loss 1,349,348 0 0
31,327,105 28,222,156 22,037,449
Income from operations 5,835,571 11,656,098 10,022,414
Non-operating income (expense)
Interest income 157,850 306,144 440,724
Gain on sales of marketable securities 0 0 16,938
Interest expense (268,273) (252,200) (184,744)
Foreign exchange gain (loss) -- net 129,137 53,608(208,349)
Loss on disposal of property, plant
and equipment (5,184) (1,048)(45,105)
Proportionate share of loss under the
equity method 0 0(204,530)
Write-off of equity method investment (2,884,759) 0 0
Other 104,584 68,222 1,727,752
(2,766,645)174,726 1,542,686
Income from continuing operations
before income taxes and minority
interest 3,068,926 11,830,824 11,565,100
Income tax expense (179,965) (268,517) (281,775)
Minority interest loss (income) 1,101,720(609,243) (1,582,712)
Income from continuing operations 3,990,681 10,953,064 9,700,613
Income (loss) from discontinued
operations 8,045,707 246,549 (5,653)
Net Income 12,036,388 11,199,613 9,694,960
Earnings per share:
Basic:
Income from continuing operations 0.070.200.18
Income from discontinued operations0.150.010.00
0.220.210.18
Fully-diluted:
Income from continuing operations 0.070.180.16
Income from discontinued operations0.130.010.00
0.200.190.16
Weighted average shares outstanding:
Basic 54,221,277 54,049,298 53,087,556
Diluted60,020,643 60,327,221 59,926,553
GIGAMEDIA LIMITED
CONSOLIDATED BALANCE SHEETS
9/30/20086/30/20089/30/2007
unauditedunauditedunaudited
USD USD USD
Assets
Current assets
Cash and cash equivalents91,011,138 76,682,114 59,402,276
Marketable securities -- current 12,729,6474,972,892 12,579,342
Notes and accounts receivable -- net 15,088,072 18,174,762 19,174,838
Prepaid expenses 17,591,737 17,875,3686,677,798
Restricted cash 6,482,8573,983,7263,910,581
Other receivables 2,399,7252,988,9703,430,606
Other current assets287,3902,992,0732,179,959
Total current assets145,590,566 127,669,905 107,355,400
Marketable securities -- noncurrent 24,017,482 24,017,482 10,000,000
Investments 2,052,0025,110,9935,124,076
Property, plant & equipment -- net 12,019,301 15,452,942 11,760,400
Goodwill 87,612,567 89,227,014 86,358,425
Intangible assets -- net 27,729,409 29,168,135 24,921,992
Prepaid licensing and royalty fees 21,130,128 19,309,073 10,603,722
Other assets 6,044,9206,189,9801,768,562
Total assets326,196,375 316,145,524 257,892,577
Liabilities & shareholders' equity
Short-term borrowings29,520,529 32,294,135 24,524,332
Notes and accounts payable 946,4451,822,9571,857,950
Accrued compensation 5,302,8535,093,2765,124,108
Accrued expenses 13,320,7899,016,4409,199,039
Player account balances 32,922,049 33,956,994 23,053,459
Other current liabilities15,604,044 14,692,433 12,724,579
Total current liabilities97,616,709 96,876,235 76,483,467
Other liabilities 498,9391,371,4101,501,020
Total liabilities98,115,648 98,247,645 77,984,487
Minority interests8,256,0979,275,413 12,641,805
Shareholders' equity219,824,630 208,622,466 167,266,285
Total liabilities & shareholders'
equity 326,196,375 316,145,524 257,892,577
GIGAMEDIA LIMITED
Reconciliations of Non-GAAP Results of Operations
Three months ended
9/30/20086/30/2008 9/30/2007
unauditedunaudited unaudited
USD USD USD
I. Income from operations
GAAP result 5,835,571 11,656,098 10,022,414
Adjustments:
(a) share-based compensation 898,149 979,108 561,557
(b) bad debt expenses related
to the loans to Flagship 2,640,278 -- --
(c) write-off of capitalized
license costs1,349,348 -- --
(d) indemnification from
termination of game
licensing -- -- (987,037)
Non-GAAP result 10,723,346 12,635,2069,596,934
II. Net income
GAAP result 12,036,388 11,199,6139,694,960
Adjustments:
(a) share-based compensation 856,380 911,629 528,363
(b) bad debt expenses related
to the loans to Flagship2,640,278 -- --
(c) write-off of capitalized
license costs 1,123,281 -- --
(d) indemnification from
termination of game
licensing -- -- (920,635)
(e) write-off of certain
investments 2,102,159 -- --
(f) (gain) loss from
discontinued operations(8,045,707)(246,549) 5,653
(g) gain on cancellation of
preferred share call
options-- -- (533,057)
Non-GAAP result 10,712,779 11,864,6938,775,284
III. Basic earnings per share
GAAP result 0.22 0.21 0.18
Adjustments (0.02)0.01(0.01)
Non-GAAP result 0.20 0.22 0.17
IV. Diluted earnings per share
GAAP result 0.20 0.19 0.16
Adjustments (0.02)0.01(0.01)
Non-GAAP result 0.18 0.20 0.15
V. Reconciliation of Net Income to EBITDA
Net income12,036,388 11,199,6139,694,960
Depreciation 616,884 601,787 610,870
Amortization 1,294,334 986,009 842,158
Interest expense (income)143,960 53,989 (166,064)
Tax expense 332,725 196,068 264,330
EBITDA14,424,291 13,037,466 11,246,254
For further information contact:
Brad Miller, Investor Relations Director
Tel: +886-2-2656-8016
Email: brad.miller@gigamedia.com.tw
SOURCE GigaMedia Limited
