KongZhong beats by $0.01 on adjusted basis; reports strong rev growth; guides above consensus (KONG 2Q05 earnings results)

KongZhong (ticker: KONG) reported Q2 2005 earnings results that beat consensus diluted EPS estimates by $0.01 on an adjusted basis. Key stats from the quarter:

Q2 Results:
(all percentage changes and comparisons are year on year, unless stated otherwise)

• Revenue rose 53.4% to $18.4 million vs consensus estimate of $17.0 million.
• Revenue rose 8.0% sequentially.
• 2.5G revenue rose 40.7% to $13.5 million, but fell 1.0% sequentially.
• 2G revenue rose 104.0% to $4.8 million, and rose 48.0% sequentially.
• Gross margin was 63.3% vs 70.8%.
• Operating expenses rose 74.8% to $5.6 million.
• Product development expenses rose 92.9% to $2.1 million.
• Sales and marketing expenses rose 39.7% to $1.2 million.
• G&A expenses rose 72.4% to $1.9 million.
• Operating income rose 14.6% to $6.1 million.
• Operating margin was 33.1% vs 44.2%.
• Net income rose 24.5% to $6.6 million.
• Net margin was 36.0% vs 44.3%.
• Diluted EPS of $0.19 vs $0.19.
• Adjusted diluted EPS of $0.20 above consensus estimate of $0.19.
• Note: Adjusted EPS excludes $326,000 legal expense.

Revenue Breakdown
(all percentage changes and comparisons are year on year, unless stated otherwise)

• WAP revenue rose 98.4% to $9.8 million, but fell 4.6% sequentially.
• MMS revenue fell 26.1% to $3.3 million, but rose 6.7% sequentially.
• Mobile game revenue rose 10.0% sequentially to $1.79 million.
• Java revenue rose 106.4% to $455,000, and rose 27.2% sequentially.
• SMS revenue rose 48.0% to $3.2 million, and rose 55.0% sequentially.
• IVR revenue rose 555.0% to $1.4 million, and rose 20.0% sequentially.
• CRBT rose 293.3% sequentially to $295,000.

Balance Sheet

• Cash and equivalents of $101.3 million as of June 30, 2005.

Q3 Guidance

• Revenue of $19.0 - $19.5 million vs consensus estimate of $18.5 million.

KONG chart.

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