GigaMedia's (GIGM) CEO Collin Hwang on Q2 2014 Results - Earnings Call Transcript

Jul.30.14 | About: GigaMedia Limited (GIGM)

GigaMedia Limited (NASDAQ:GIGM)

Q2 2014 Earnings Conference Call

July 22, 2014 08:00 PM ET

Executives

Bradley Miller – Director-Investor Relations

Collin Hwang – Chief Executive Officer & Director

Dirk Chen – Chief Financial Officer & Director

Analysts

Richard Greulich – REG Capital LLC

Greg Weaver – Invicta Capital Management, LLC

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q2 2014 GigaMedia Limited Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today, July 30, 2014.

I would now like to hand the conference over to your speaker for today, Mr. Brad Miller. Thank you. Please go ahead.

Bradley Miller

Thank you. This is Brad Miller, Investor Relations Director of GigaMedia Limited. Welcome to our conference call to discuss GigaMedia’s second quarter 2014 financial results. With me today is Collin Hwang, our CEO; and Dirk Chen, our CFO.

Before we begin, I would like to remind you that a number of forward-looking statements will be made during this conference call. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of GigaMedia and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties. GigaMedia’s actual results could differ materially from these statements. Information about factors that could cause, and in some cases have caused, such differences can be found in GigaMedia’s Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission in April 2014.

This presentation is being made on July 30, 2014, in Taiwan. The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. If any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date, GigaMedia will not be reviewing or updating the material that is contained therein.

After today’s prepared remarks, we will respond to questions that we’ve taken by e-mail and we'll also be taking live questions.

With that, I would like to turn the call over now to our CEO, Collin Hwang.

Collin Hwang

Hello, everyone, and thank you for joining us. Last quarter I was unable to participate in our call. At a time we were in discussion related to a new strategic partnership and schedules conflict. I apologize for my absence, but as a result of those discussions as noted in our announcement today, during the second quarter, we entered into a strategic tied up with some leading Taiwanese online game company Gamania.

Gamania is an online game power house that has developed a market titles in Greater China for all the 14 eves [ph]. They are one of Taiwan's largest online game companies and have extensive technology, development, and production capabilities. Gamania has operations in Taiwan and China. Historically, they have mainly focused on the MMO market.

In Taiwan, Gamania operates the MMO Lineage, one of the Taiwan's most popular online games. Gamania is also one of the top two operators of payment channels in Taiwan's lucrative payment service provider market. In 2013, Gamania reported full-year revenue of approximately US$275 million. We are very pleased to build an alliance with such a talented and accomplished team.

Going forward, we plan to explore further business cooperation and investment opportunities that present attracting strategic value to both companies and hold strong growth potential. Our objective here is to create and grow business and shareholders' value by leveraging combined skills and resources.

This is a big step forward in our efforts to vertically integrate, to stretch our development, distribution and operations of games and services, and to scale up. We are focused on transforming our games business by establishing strong holds in the upstream game development and publication and downstream licensing and distribution.

We are moving to end dependence on publishing and build strong comparative advantage. We are excited to explore synergies with Gamania and help to create here a strong cornerstone for growth.

Let me end this by making it very clear that while the tie up with Gamania is a potential game changer for us, there can be no assurance there will be any further development. Meanwhile, we continue to make good progress in growing both our games and our cloud business. Both business delivered top line growth in the second quarter. Growth was more, but it was driven by only one mobile game and one cloud initiative.

We represent only the start of number of growth initiative playing for this year. We entered the second half of 2014 well positioned to grow revenues in online games. In June, we licensed KingsRoad, a browser-based MMO style after the smash-hit Diablo. We recently secured license to operate our second mobile game and then our finalizing licensing of additional games.

We also have formed new partnership with two leading global operators of social casino games and we will be featuring a broad offering of their casino games and our two new social casino game preference. Adding [to lease], in cloud computing, we abandoned] our virtual desktop software with HP and plan (inaudible) with another permanent hardware provider soon, and we are seeing good results in growing new IaaS services building out cloud infrastructure for clients.

Second quarter results do not include contribution for any of these initiatives. It is very early in our turnaround. In online games, we are strengthening our pipeline and moving beyond game publishing to become a stronger, more integrated game company. And in cloud computing, we are moving to add new IaaS and client services and more as we build our total solution provider.

We are only beginning to see returns from our investments as a restructuring of these businesses. Much remains to be done, but we are confident that our business is on track and expect growth to continue going forward, as we expect – as we execute our strategic growth plans. Thank you.

Bradley Miller

Thank you, Collin. This is Brad, I have a few more details to add on our financials and operations. First, on the Gamania investment, this investment will be accounted for using the cost method, our shares of Gamania will appear under the line item remarkable securities current on our balance sheet.

Since Gamania is publicly listed its shares already for sale at anytime. On our last call, we discussed plans to do a share buyback following the investment our plans have changed. Let me briefly explain that. Regarding share buybacks, our policy is as follows. We must have ample funds to take care of the operational and liquidity needs of our business. Unquestionable financial strength takes precedence overall outs [ph] at Giga. In terms of capital use, we believe, one, the best use of capital is to build the business organically, where we have competitive advantages and good returns. And two, the second best is great acquisitions.

Two, when we have ample funds and our shares are selling at a significant discount as fair value, we believe share buybacks can be a great deal for shareholders and intend to implement them. We began the process of implementing a share buyback a few months ago, however, shortly after that investment opportunity Gamania developed. Following that investment, our financial position has of course changed.

We do not currently have what we view as ample funds and as a result we have for now stop the process of share buyback. Next some color on results on our mobile games and social casino games growth initiatives. In online games, growth in Q2 was driven by one mobile game Three Kingdoms Partner, which offset declines and contributions from our legacy PC games business and our MMO Tales Runner.

Three Kingdoms Partner represents early positive results of our mobile games initiative. Our short-term approach has been to license games from third parties. This allows us to quickly build our pipeline while carefully managing our costs. Costs related to licensing of mobile games include upfront licensing fees, that run anywhere from hundreds of thousands of dollars to millions of dollars.

We can share with you that the titles we have licensed have been on the low end of that scale. Looking ahead, we plan to offer two additional license mobile games this year and several more beyond that, again, carefully managing our costs.

As Collin, we're also moving to end dependence on publishing games of other companies and began developing operating our own games, where we own the IP. This will reduce the level of licensing and royalty cost we incur and improve our financial performance.

Turning now to launch of our play-for-fun social casino games platforms, we will also improve our financial performance. Let me share a few details now on why we're excited about these initiatives. First, market trends. Social casino games generate large revenue streams and are not fad. Slots, another games of chance have proven to have enduring appeal even when they're simply played for fun. These are what they call evergreen offerings. According to market research the total global market last year was over $2 billion in gross revenues and it's grown 10 times in the past four years. The key drivers of this strong growth have been the popularity of social networks and mobile devices.

Mobile is a major growth opportunity and is now bigger than the web Facebook revenues. And I should add a note that Asia is the world's biggest mobile market for games.

The products, we are entering market in late 3Q with two new platforms. The platforms will have a very broad offering of great games from our partners, currently two world leading developers and operators of casino games. These games are highly polished and attractive and many of them have a real-money Vegas look and feel.

Innovation, we will also introduce some innovative features differentiating our platforms from others. Players on our platform will be able to customize the casino they play in and we will incorporate the number of social features that make playing together fun.

For the economics, social casino games generate ARPU that are much higher than almost double those of social games. Our social casino platforms will be open to developers going forward and we will operate on a revenue sharing basis with game developers. We can't share specifics on the revenue sharing, but since this is our platform the share percentage is very much in our favor.

Last is the China opportunity. Following launch in Taiwan near the end of Q3, we plan to launch in China where we believe there is a big opportunity. We believe a platform of play for fun games that have a look and feel of Vegas and Macau casinos will appeal to a large pool of players in China, including many who may want to play in our platform between the trips they make to play for real money in physical casinos in Macau and Vegas.

That's our 2Q review and business update for today. Thank you.

Before we proceed to Q&A, a quick reminder for everyone as a standard protocol, we please ask that you limit yourself to one question at a time so that everyone has an opportunity to participate. Operator, let's begin the Q&A.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) And the first question comes from the line of Steven Rocko [ph], who is a private investor. Please ask your question.

Unidentified Analyst

How are you doing, guys? How are you, Collin?

Collin Hwang

How are you, Steven?

Unidentified Analyst

Well…

Bradley Miller

Hey, Steven. Hey, Steven, we're hearing.

Unidentified Analyst

I just wanted to ask you, number one, what was our cash burn for the last quarter? How much money did we burn cash-wise?

Bradley Miller

Well, the cash burn has varied over the past few quarters between $2 million to $3 million and Dirk has a few comments on this.

Dirk Chen

Hi, Steve. This is Dirk. How are you?

Unidentified Analyst

Okay.

Dirk Chen

Okay. To answer your question, it's in the regular operating cash burn in (inaudible) it's equal to forecasts [ph], and that depends on the timing of the number of initiatives. But, however,…

Unidentified Analyst

So, what was it last quarter? What was it for the quarter just ended?

Dirk Chen

You mean the second quarter, yes.

Unidentified Analyst

Yes, second quarter.

Dirk Chen

Second quarter, on the operating cash outflow is about $2 million.

Unidentified Analyst

Okay, fine. And then I just want to ask you one thing. This is for Collin. Will you say that starting with the fourth quarter, that's when our – let's say, hopefully, revenue from the social casino games will start kicking in or do you think it's possible that it can be towards the end of the third quarter?

Collin Hwang

We'll be launching the platform towards the end of third quarter. And we believe the revenue –we'll start generating revenue from the beginning of fourth quarter, that's what we believe, yes.

Unidentified Analyst

Okay. Thank you.

Collin Hwang

Thank you.

Operator

Thank you. (Operator Instructions) And the next question comes from the line of Richard Greulich of REG Capital Advisors. Please ask your question.

Richard Greulich – REG Capital LLC

Hello. I know this will sound somewhat hostile and I don't mean it as that. I simply want to get as granular as I can in terms of the acquisition. What are the specific advantages to be gained by strategic investment in Gamania?

Bradley Miller

Richard, it doesn't sound hostile at all. Thank you for your question.

Richard Greulich – REG Capital LLC

Thank you.

Bradley Miller

We see a number of advantages and strengths and potential synergies with Gamania. I'll let Collin share a little bit of information with you about Gamania.

Collin Hwang

Yes, it’s always a memberships, they have about 5 million active members on their platform called beanfun. We'll be able to tap into that platform for our game release or platform release. So that's what we start to begin with. And secondly they also have a data centre which will be very helpful for our cloud business as well. And on top of that they also have one of the largest payment systems, third-party payment system in Asia.

And we can also utilize their payment system for not only Taiwan but entire Asia. I think that's the major advantage, it's that why we aligned us with Gamania. But other than that there's other advantage as well, such as we can co-develop some of the games or share some of the experiences more than the top three – more than the three reasons here.

Richard Greulich – REG Capital LLC

And if I could just follow on, I know in U.S. investing, that's not considered to be a way you do it, like investing in the company by no initiatives [ph]. So, were you able to obtain this by the investment?

Collin Hwang

We don't have agreement – we didn't form agreement yet, we are still under negotiation. However, because their beanfun, their membership is already open to the public, it's not like they're exclusive for them yet.

Richard Greulich – REG Capital LLC

Okay. Thank you.

Collin Hwang

And at the moment we also have one boat feet, I think on their boat. So I think that's also indicated that we do have the influence and as well as slight control over that. So a lot of things are still under negotiation. There's no agreement signed yet.

Richard Greulich – REG Capital LLC

What was the price that was paid versus the public traded price?

Collin Hwang

We purchased that in line with the market price.

Richard Greulich – REG Capital LLC

Okay. Thank you very much.

Collin Hwang

Thank you.

Operator

Thank you. And the next question is a follow-up question from the line of Steven Rocko, who is a private investor. Please ask your question.

Unidentified Analyst

Mr. Collin, on the cloud computing front I know you announced something with HP, you said about something else with another major player. When you think some significant revenues on that front are going to start kicking in, is it a fourth quarter event, is it a first quarter of next year? How much longer is it going to take for a meaningful revenue on the cloud side to appear on our revenue line? Which quarter are you like aiming for that hopefully we could see like some significant difference on the cloud computing side as far as the revenue line is concerned?

Hello?

Bradley Miller

Steven, thanks. Just a couple of quick comments now and I'll turn it over to Collin. I think with the cloud, we're walking before we can sly here. We have a new Director for the business, and we are giving him little time before we put too much pressure on him to grow his business. We've come a long way in a short amount of time, and we're pleased to see that his plans are moving forward very quickly with developing new revenue streams. I'm not so sure how much guidance we can give on revenue, but I'll turn this over to Collin.

Collin Hwang

Yes, we are hoping to work with our partner to generate revenue start from the fourth quarter of this year. However, it really depends on especially government contracts – contracts we are bidding together with our partners. So at the moment there is not much I can say about that. But we are hoping that to come in from first quarter, if not it will be towards the first quarter next year.

Unidentified Analyst

Thank you.

Bradley Miller

Thank you.

Operator

Thank you. And the next question is a follow-up question from the line of Richard Greulich of REG Capital Advisors. Please ask your question.

Richard Greulich – REG Capital LLC

Thank you. So the contract you are bidding on, can you give an idea of the magnitude of that, is it a $0.5 million contract, is it a $1 million contract or?

Collin Hwang

There are few government contracts we're working with; one is Ministry of Economics, and also with the local governments as well. So this is ranging from say $0.5 million to about $2 million. Actually this smaller contract we try to build our reference and reputation from the beginning.

We do consider in going to larger contract, but at the moment with typical government contracts locally in Taiwan, you need to – you have to build market reputation as well as some of the eligibility as well. So it probably takes some time for us to reach to bid for a multibillion contract.

Richard Greulich – REG Capital LLC

Okay. And if I can endorse my – your pleasure, I have two actually more questions real quick. And the company is unprofitable, are there any corporate cost reductions that can be obtained at this point in time?

Collin Hwang

We tried our best really in the past 12 months. We do look at every single line item especially myself and the CFO in terms of cost reduction. I think we are really streamlined now at a moment and a lot of money there goes into research and development and also marketing to improve our future growth.

So, I think, we are not sitting here our existing size or – at the moment, we are now really investing into a lot of game businesses. So like any typical startups, we were quite competitive and time in a moment, so I hope you understand that, and I hope this answer your question.

Richard Greulich – REG Capital LLC

Thank you. And the last question would be, you could have bought your stock back at significant discount from even the cash. Could you compare the financial returns from doing that with purchasing the Gamania stock?

Collin Hwang

All right, okay.

Richard Greulich – REG Capital LLC

That’s the tough one.

Collin Hwang

That’s a tough one, that’s a tough one. I think at a moment, we do have some cash in hand, and I believe those cash should be used in a good M&A project. And when I think good M&A projects, we do have very clear defined area for that such as either we invest into content related, which will help us to gain more games or softwares, and the other side is will be member, so we either apply members or traffic on the other side. So we believe we should use our cash in those two areas and still share buyback.

Richard Greulich – REG Capital LLC

But you understand where I'm coming from, is the shareholder is you could repurchase the shares at a discount from what the actual cash value of the company is, and if you are not going to do that, you are going to have to as management prove that you are making a much better decision than that? Do you see them saying?

Collin Hwang

Yes, they were just saying. I think at the moment we do need to grow and we need those cash flow for growth, that’s what I believe. I think the cash is well used in terms of – for the book. I think for shareholders in order to create value, I think, with this company we are trying to do a turnaround here, and we do need cash and time and talent to do that.

So I wanted to spend money on that side than do a share purchase. And also, for your information, I think we do as a Singaporean company, we do have restriction in terms of the amounts we could buyback. And the amounts will relatively minimum, so I believe the impact is really coming for us. We would like to do share buyback, but it’s just the restriction who make us – it will be too small to create big impact there.

Richard Greulich – REG Capital LLC

Thank you very much for your time and good luck. Thank you.

Collin Hwang

Thank you.

Operator

Thank you. And the next question comes from the line of Greg Weaver of Invicta Please ask your question.

Greg Weaver – Invicta Capital Management, LLC

Yes, hi. Could you tell us a little bit about Wenhe [ph] Investment Limited?

Collin Hwang

Sorry, Greg. You just want some of the details on the acquisition of the shares?

Greg Weaver – Invicta Capital Management, LLC

Yes, I want to know what's this Wenhe Investment Limited is and why the transaction was done at an arm's length basis?

Bradley Miller

Right. It was the – the shares were indirectly purchased through this vehicle Wanhe. There is no GigaMedia ownership of Wanhe. After the acquisition of the shares, Collin has been appointed Director of Wanhe.

Greg Weaver – Invicta Capital Management, LLC

And how does this Wanhe, have anything to do with the shares or how are they controlling it?

Bradley Miller

I – just to correct what I said there Greg, I was mistaken, we own Wanhe, we have acquired Wanhe and through that acquisition we acquired the shares.

Greg Weaver – Invicta Capital Management, LLC

Okay. What was the background of this company that such that you bought it and you had to do this two-step process as opposed to purchasing the shares just, (inaudible) by the whole investment company?

Bradley Miller

Well, Greg, we bought a large amount of shares that would not be available through buying it on the market. So we structured it this way large block sale indirectly purchased through this entity.

Greg Weaver – Invicta Capital Management, LLC

It only after the fact Collin was appointed, I mean, it seems like there is some relationship here given that you quoted as an arm's-length basis transaction, not only that terminology is only used when there is some affiliation with somebody at the company?

Bradley Miller

Affiliation…

Collin Hwang

No, no, look, I was appointed after we take over Wanhe.

Greg Weaver – Invicta Capital Management, LLC

Not before that?

Collin Hwang

No.

Greg Weaver – Invicta Capital Management, LLC

Okay. And just one other question on Gamania, are they profitable as it stands today?

Bradley Miller

Yes, it’s a profitable company.

Dirk Chen

Yes, I give – this is Dirk Chen, CFO. I give you some – last year the financial results. I think in 2013, the Gamania revenue is about $275 million and they have operating result of about $5.7 million, and net income just about $1.9 million, that’s because we found in the financial report, they have some – one-time social payment in that year. So that’s why the earnings ratio is so – compared to the revenue is so small.

Greg Weaver – Invicta Capital Management, LLC

Okay. And any color on where you think the cash burn will go from this point for the next six months or so, it sounds like you got a lot of projects going on?

Collin Hwang

We are hoping that we can – no longer cash burns from the beginning of 2015. That's why we're working on the development.

Greg Weaver – Invicta Capital Management, LLC

Okay. Thank you.

Collin Hwang

But for your information we're also putting a lot of money for our future growth, that's also the reason why we do spend quite a bit of money in terms of R&D to upgrade our (inaudible) system, as well as, just for your information we are creating a bit data type backbone, so that we can get information from not only our game business, but also casino business as well as mobile platform business. So in the future, we'll be able to cross-selling between these three divisions. Thank you.

Operator

Thank you. And the next question is a follow-up question from the line of Steven Rocko, who is a private investor. Please ask your question.

Unidentified Analyst

So I just want to talk to you on the (inaudible) fuller the Gamania purchase as opposed to the stock buyback, number one. Number two is, I understand the company can't buyback any stock, but it would. I know you bought a million shares a couple of years ago. It will be nice if once in a while a director or somebody could buy stock. That would show the Street a little confidence as far as that's concerned.

And the way I see it is, you're making a lot of investments now with those, whether it's cloud, or whether it's social casino games, and I think within the next – whether it's next quarter or fourth quarter, I mean, we should hopefully start seeing the impact of, let's say, the money that we're spending on the revenue line. I mean, if we see it, then you're a hero. If we don’t see it, then we know you're in trouble. That's the way I look at things. Is that the way you see it?

Collin Hwang

Yes, and no. Let me put it this way. First, with the share buyback, even I do understand where you're coming from. And once we start talking to parties like Gamania, Gamania is not only party we were talking to since this year. So, once we do that all our directors or anyone involved is restricted to purchase any – to do any buyback, buy our shares, own shares.

So that's one of the reasons. I mean, if – that's one of the reasons why we cannot do buyback. But, however, if the standard – in all these cases, we stop talking to them then I'll work on that. But I don't think that's what you want to see really. I mean, because we're working with these big partners, there's a lot of…

Unidentified Analyst

Listen, I think you're trying to grow the revenues and I think you're doing the right thing, and hopefully you're going to be successful. I think we're getting to a point right now where you said, starting the fourth quarter, hopefully, the social casino games are going to take off, whether it's the fourth quarter or the first quarter, the cloud casino revenue hopefully is going to come in and hopefully it's going to happen. That's what I'm saying, it's – we're getting to a point where either what we're planning – what you're planning is going to work, what you're planning is not going to work. We're going to know within the next one or two quarters.

Collin Hwang

Yes, that's correct. But we – let me add on this, Steven. Believe or not, we – all our teams are working really hard on that to generate not only revenue, but also profit margin for the company and at beginning let me separate with our three divisions for our game business.

In terms of the casino game business, we do identify and engage quite a few local operators in China, which means when we are starting our platform, it's not from the scratch. We do have members that tap into large membership in different markets, not only China, but also in Southeast Asia as well.

So, we're hoping to see some revenue, that's why I'm saying in the fourth quarter, there will be revenue comes in for the casinos – on the casino side – casino game side. In terms of mobile platform, I said in the beginning, we're going to see members. So it's – I was explaining to another investor another day is that, it's a bit like Facebook [ph] at the beginning for mobile platform you will see lot of members. When members equals revenue really, we just need to at least time to monetize that. So on the mobile platform side what I do is that you will be seeing members first instead of revenue. So I hope that I can make that clear to the investors as well.

In terms of our existing license games, we are not only became a distributor like before, we are also contract – we do a lot of contract development with some of the studios and that will provide us, we'll have our own game. So then we can distribute those games, we can become a licensee to a licensor. In that sense, we can market our own games in different markets and we will still operate that in our home market in Taiwan.

So that – I think, I see that way, we should be able to not only maintain, but have low level revenue growth and new games comes in from the fourth quarter this year. So lot is happening, will be from the fourth quarter and revenue generating starts from fourth quarter, but really the main revenue will be coming from 2015. Thank you.

Unidentified Analyst

Hey, good luck. Thank you.

Operator

Thank you. (Operator Instructions)

Bradley Miller

Operator, if we have no further questions, we have a question that we received by e-mail about increase in restricted cash quarter-over-quarter. So, Dirk, has some color on this increase in restricted cash.

Dirk Chen

Okay. Thank you, Brad. In the last quarter, our restricted cash increased about $1.5 million [ph] in the first quarter. I think the reserved cash is just for business needs and also for better financial leverage purpose. We provide our (inaudible) for the bank for certain period. And the reason why we just not use this cash for business and instead of certain law, because the cash deposit, it actually has a higher yield than the borrowing rate. So you can see, if we can allow that cash is reserved for use but, however, it can be paid back the debt anytime. So that's why we transfer our reserved cash from the cash to – in the second quarter.

Bradley Miller

Thanks, Dirk.

Operator

Thank you. And the next question is a follow-up question from the line of Richard Greulich from REG Capital Advisors. Please ask your question.

Richard Greulich - REG Capital LLC

Thank you. So did you purchase the shares directly from Gamania then or on the open market?

Bradley Miller

Hi, this is Brad. Now, if you look at the SEC filings, this started back in our 20-F later known as under subsequent events in our 20-F filing in our Annual Report that we made a loan that was involved in this to a third-party. A third-party purchased the shares, so we filed a 6-K in June indicating that we have acquired shares indirectly.

So basically it's an indirectly purchased B shares, not on the open market. It will be very difficult to purchase 15 million shares on the open market.

Richard Greulich – REG Capital LLC

Thanks for the clarification. Clearly, I'm fairly new to this story, so I didn't understand that, I appreciate that. But I just had one other further question. It still seems to me that in a company that's losing money, there must be some $500,000, $700,000, $900,000 costs that can be eliminated. And I'm curious as to whether the management is looking at that.

Bradley Miller

Thanks. I think as you said, you maybe a little bit new to this story. There has been a very strong focus over the past two years on cost cutting. We've made a lot of progress in that. And in fact, the headquarters costs are at an all time low for the company. So we'll continue to look at cost cutting where we can but I think we're running out of areas to cut costs and focus is very much shifted to growth and investment now.

Richard Greulich - REG Capital LLC

I appreciate your time, thank you.

Operator

Thank you. (Operator Instructions)

Bradley Miller

While we're waiting we have a couple of more e-mail questions we've received from investors. First, what is the expected future break-down between self-developed and license games and mobile games versus those on other platforms?

Collin Hwang

It really been our division we are talking about now. Again for some of our new investors, for your information, we do have three divisions. One is casino game division, and second is traditional license game division, online game and mobile games, and the third is the mobile game platform division. If we talk about the casino game division we do self-develop most of the games ourselves. However, since early this year and we have changed our strategy that we rather build a platform with our own games, as well as the top content providers in the world that we welcome them to put their games on our platform so we can offer our customer the latest and the best games possible.

In order to earn those members we believe China is the most important for that division. So, we – in that sense, we do work with – as I mentioned that is two to three world top level game – casino game developer. And we have already put their games [Audio Gap]. We should be able to launch that before the end of the third quarter. So in that sense, there is a mix of self-developed and also – I wouldn't call it licensed game, I would say, we have access to their games from our platform.

In term of license game division as you can see that, most of the games are licensed from the third-party. However, this year we'll also change our strategy to that. We are contract – we contracted our – the development with two studios, since I think July this year. We should be able to see some – those two games, one, in later in the fourth quarter this year, and one, probably towards the second quarter next year.

And the third, in terms of mobile platform, we self-developed that mobile platform, so therefore there's – it's all self-developed, it's 100% self-developed. However, it's very similar to Google Market or AppStore. The difference is that, we make it into social platform that is what they're making off, and also it's very Chinese orientated as well. So therefore in that regards, that's 100% self-developed. Thank you.

Bradley Miller

Thanks, Collin. And one additional question, do you see Mainland China as the most important target geography for your games business?

Collin Hwang

Yes, once again this is different from different divisions. I think for our casino games, yes, they are the most important target geography for our casino game business. In terms of license game, no, at the moment, we mainly operate in Taiwan, Hong Kong, and Macau.

With our mobile platform, that's another story. Yes, China is still our – the first – the first important market for us for that division. But again, we made that mobile platform very international such as there's auto-translation, which allows users to talk in their language and they can, which also translated into foreign languages, which allow people to talk to each other internationally.

Therefore, I think the market – we're really aiming in the global market, but mainly Asia as a beginning, and I hope that answer the question. Thank you.

Bradley Miller

Thanks, Collin. Operator, any additional questions?

Operator

We have no further questions at this time. Please continue.

Bradley Miller

Operator, thanks. That's all we have for today. Thanks, everyone, for joining us. For further information about GigaMedia or if you have questions and would like to contact us, please visit our website at www.gigamedia.com. That concludes our call. Thanks again, everyone.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may all now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!