Sky-Mobi (NASDAQ:MOBI)

Fourth Quarter 2013 Financial Results

• Total revenues decreased 10.1% to RMB161.0 million (US$25.9 million) compared to RMB179.0 million in the fiscal fourth quarter ended March 31, 2012 ("fourth quarter 2012"). Revenues collected from third party channels (i.e., revenues not collected through mobile network operators) represented 21.4% of total revenues
   
• Basic and diluted earnings per common share ("EPS") were RMB0.12 (US$0.02), which represents the equivalent of RMB0.95 (US$0.15) per ADS²
   
• Non-IFRS basic and diluted EPS were RMB0.13 (US$0.02), which represents the equivalent of RMB1.06 (US$0.17) per ADS

Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi, stated, "We were pleased that our fiscal fourth quarter 2013 revenues exceeded the high end of our prior guidance by approximately 28.8% and achieved 9.6% sequential growth. Even though we revised up our full fiscal year guidance last quarter we still managed to beat the high end of the guidance by 6.4%. These results are a testament to our proactive strategy to address the declining feature phone market by focusing on expanding our Maopao Community, which delivered over 13% year-over-year growth through game monetization.

"Our focus remains on the tremendous opportunities associated with China's fast growing smartphone market, especially the dramatic increase in the adoption of low-end smartphones. This strategy resulted in accelerated growth in the number of smartphone users which more than doubled quarter-over-quarter to over 20 million users. This strength continues to demonstrate the success of our multi-pronged approach for growing our smartphone business. More specifically, our partnerships with over 160 smartphone handset partners continues to provide immediate access to new users through direct pre-installations on smartphones. Also, our established offline presence through physical stores for application installation in partnership with Suning, one of China's largest consumer electronics and appliance retailers, as well as provincial carrier stores has become an increasingly important growth avenue which has resulted in over 140,000 daily smartphone user additions. Looking ahead, as China's smartphone market is increasingly driven by the adoption of low-end smartphones, we remain focused on the monetization opportunities available in this segment and are confident in our strategy to service these users, staying in front of China's evolving marketplace."

Carl Yeung, Chief Financial Officer of Sky-mobi, commented, "We were encouraged by our better-than-expected top line performance and the substantial improvement in operating profit and margins we experienced in the past quarter. In addition, through strategic analysis and disciplined investments, we continue to actively roll out our innovative growth initiatives that led to our improved quarter. As a result, we managed to maintain positive cashflow with our cash and deposits position growing to RMB608 million as of March 31, 2013. Given our recent success in navigating the macro shift to smartphones in China, we remain cautiously optimistic as we continue to adjust our model to better target these new emerging opportunities and improve shareholder value over the long term."

"In addition, beginning this quarter we have started to disclose additional operating metrics for our smartphone operation. We believe this additional disclosure will help investors to better understand our progress in expanding our reach and audience footprint in the increasingly important smartphone business. Combined with our ongoing share repurchase program, we believe that these efforts demonstrate our commitment to generating shareholder value as well as confidence in achieving long-term growth."

Business Outlook

For the fiscal first quarter 2014 ending June 30, 2013, Sky-mobi expects total revenues to be in the range of RMB 100 million to RMB 115 million.

Third Quarter 2013 Highlights

• Total revenues decreased 12.2% to RMB146.9 million (US$23.6 million) in third quarter 2013 compared to the fiscal third quarter ended December 31, 2011 ("third quarter 2012").

• Net profit was RMB3.8 million (US$0.6 million) in third quarter 2013, down 39.8% from third quarter 2012
   
• Basic and diluted earnings per common share ("EPS") were RMB0.01 (US$0.00). Non-IFRS basic and diluted EPS were RMB0.03 (US$0.01)
   
• Basic and diluted earnings per ADS² were RMB0.11 (US$0.02). Non-IFRS basic and diluted earnings per ADS were RMB0.25 (US$0.04) 

Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi, stated, "We were pleased that our fiscal third quarter 2013 revenues exceeded the high end of our prior guidance by approximately 13% and achieved 5.1% sequential growth. Even though the feature phone market continued to decline as anticipated, we were encouraged to see the rate of decline stabilizing as well as strong progress in our efforts to improve the contribution of revenue from our Maopao Community.

"For the smartphone market, we have made some truly exciting progress in the past eight months since the launch of our smartphone product platform. During this time, we have accumulated over 10 million smartphone users who are utilizing our smartphone application store, browser, games, game center and PC assistant on a regular basis. Over the coming quarters we anticipate this strong growth to continue as we see greater adoption of low-cost smartphones begin to take hold. Moreover, we have cemented strategic partnerships with over 160 smartphone handset partners. These partners are preinstalling our products, which we expect will further expand our user base and content offerings. We also anticipate additional growth through the offline store front from strategic partnership wins with Suning as well as forming other similar strategic partnerships covering important distribution points for low cost smartphones. Given our recent success, we are increasingly confident that we are implementing the correct strategy for successfully targeting the Chinese smartphone market."

Carl Yeung, Chief Financial Officer of Sky-mobi, commented, "We were encouraged by exceeding our revenue guidance, along with our operating profit, net income and cash flow all being positive. Despite the year over year decline in revenues, we believe that the 5.1% sequential revenue growth, the improvement in non-IRFS gross margin and a turnaround in non-IFRS profitability from a net loss last quarter are trending in the right direction. These sequential improvements are clearly a testament to our ability to adapt quickly to the changing mobile Internet market with effective operating strategies. Moreover, we are very excited that our revenue composition continues to improve with a new high of 30% of revenues coming from higher ARPU associated with our Maopao community, giving us a strong foundation for future expansion in revenue and margin over the long run. Overall, this quarter's results demonstrate management's commitment to maintaining a healthy financial profile while evolving with new initiatives to stay in front of China's dynamic mobile marketplace."

Business Outlook

For the fiscal fourth quarter 2013 ending March 31, 2013, Sky-mobi expects total revenues to be in the range of RMB115 million to RMB125 million.

Revenues for the fiscal year ending March 31, 2013 are expected to be in the range of RMB555 million to RMB565 million, revised upward from previous outlook of RMB540 million to RMB 560 million.

Second Quarter 2013 Highlights

• Total revenues decreased 19.3% to RMB139.8 million (US$22.3 million) in second quarter 2013 compared to the fiscal second quarter ended September 30, 2011 ("second quarter 2012"). Revenues collected from third party channels (i.e., revenues not collected through mobile network operators) represented 26.3% of total revenues
• Net loss was RMB11.7 million (US$1.9 million) in second quarter 2013, compared to a net profit of RMB7.1 million in second quarter 2012
• Basic and diluted loss per common share were RMB0.04 (US$0.01). Non-IFRS basic and diluted loss per common share ("EPS") were RMB0.01 (US$0.00)
• Basic and diluted loss per ADS² were RMB0.36 (US$0.06). Non-IFRS basic and diluted loss per ADS were RMB0.11 (US$0.02)

Commenting on the Company's results, Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi, stated, "We are pleased that the quarter's results came within guidance due to more effective monetization of user traffic despite unfavorable industry trends. The feature phone market which traditionally constitutes our main source of revenues, continues to be succeeded by smart phones at an accelerating pace. While we cannot reverse this macro trend, we will continue our efforts to maximize revenue and cash-flow generation from the feature phone market. At the same time, we have made rapid progress in the smart phone market in terms of user adoption and customer wins. As of the date of this release, three million smart phone users have begun using our products during the five-month period since launch. Our strategy to pre-install for manufacturers of smart phones has made excellent progress with currently 78 partners. Our offline strategy, such as installing our platform for free into end users' phones at the point of sale in physical locations such as in mobile phone retail stores and computer marts, has also shown good progress and we expect to close several significant partnerships shortly. These partnerships will provide Sky-mobi with strategic physical store locations to cost effectively deploy our services to the large population of Chinese smart phone users in order to access applications," concluded Mr. Song.

Commenting on the Company's results, Carl Yeung, Chief Financial Officer of Sky-mobi, said, "Despite the unfavorable macro decline in the feature phone market, our strategy to increase our focus on third-party, non-carrier payments and direct traffic towards community game spending, where the average revenue per user (ARPU) is higher, has been successful and driven higher monetization of user traffic. Continuing last quarter's trend, we have made further efforts to shift internal resources towards the smart-phone market, although we did not generate material revenue from smart phones during the quarter. As of the end of September, 80% of our employees were pursuing smart-phone opportunities, up from 60% in the June quarter. As the general market for smart-phone products and services remains at an early stage of development in China, our financial strategy is to invest responsibility in smart phones. Our aim is to remain cash flow neutral to positive by using cash proceeds generated from our feature phone business to support the growth and development of smart phones," concluded Mr. Yeung.

First Quarter 2013 Highlights

• Total revenues decreased 7.6% to RMB153.4 million (US$24.1 million) in first quarter 2013 compared to the fiscal first quarter ended June 30, 2011 ("first quarter 2012"). Revenues collected from third party channels (i.e., revenues not collected through mobile network operators) represented 21.8% of total revenues
   
• Loss from operations was RMB9.2 million (US$1.4 million) in first quarter 2013, compared to profit from operations of RMB8.1 million in first quarter 2012
   
• Non-IFRS¹ loss from operations was RMB0.9 million (US$0.1 million) in first quarter 2013, compared to Non-IFRS profit from operations of RMB20.5 million in first quarter 2012
   
• Net loss was RMB5.1 million (US$0.8 million) in first quarter 2013, compared to net profit of RMB7.5 million in first quarter 2012
   
• Non-IFRS net profit was RMB3.1 million (US$0.5 million) in first quarter 2013, down 84.3% from first quarter 2012
   
• Basic and diluted loss per common share were RMB0.02 (US$0.00). Non-IFRS basic and diluted earnings per common share ("EPS") were RMB0.01 (US$0.00)
   
• Basic and diluted loss per ADS² were RMB0.16 (US$0.02). Non-IFRS basic and diluted earnings per ADS were RMB0.10 (US$0.02)
   
• Revenues collected from carrier channels decreased 17.4% to RMB112.5 million (US$17.7 million) in first quarter 2013 from first quarter 2012. Sky-mobi's application store experienced 4.2 billion user visits with 764.0 million downloads in first quarter 2013
   
• Revenues collected from third party channels increased 38.8% to RMB33.5 million (US$5.3 million) in first quarter 2013 from first quarter 2012. Sky-mobi had 15.9 million active members of the Maopao Community with 810.3 million member log-ins in first quarter 2013

¹Non-IFRS figures exclude share-based compensation expenses. Please see "About Non-IFRS Financial Measures" in this release for more information.

²American Depositary Shares, which are traded on the NASDAQ, each represents eight common shares of the Company.

Commenting on the Company's results, Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi, remarked: "We made significant progress in the smart phone market while maintaining strong cash flow from the declining Chinese feature phone industry in the June quarter. Since the launch of our smart phone series of products at the Global Mobile Internet Conference in May, we have entered into partnership agreements with 50 handset manufacturers to pre-install our smart phone application store platform, application store assistant, browser, mobile game competition platform or game content.

"The quick pace of adoption by industry players since the recent launch of our platform is proof of the commercial competitiveness of our products as well as our monetization capabilities in China. We expect to continue our rapid development by adding more manufacturers to work with our smart phone products. Once these manufacturers begin shipments over the next few quarters, we are confident we will become one of the top smart phone players in China by the end of the year," Mr. Song continued.

"We remain the market leader in the feature phone segment, experiencing a year-on-year revenue decline of only 7.6% compared to the overall industry estimate of about 25%. This is the result of the increased revenue contribution from our game-based mobile community and improvement in Average Revenue per User (ARPU) as we launched new games for users. The feature phone market is expected to continue to decline for the rest of the year but we will continue to optimize our products so that our feature phone business continues to provide a strong source of cash flow to support our smart phone growth," Mr. Song concluded.

Commenting on the Company's results, Carl Yeung, Chief Financial Officer of Sky-mobi, said: "Our revenue for the quarter came in behind the low end of our most recent guidance by 1% but we maintain our most recent full year guidance. As we entered our new fiscal year, the use of carrier based payments has become a material portion of our community revenue and we began to defer a portion of our carrier based revenue similar to our revenue deferral policy for revenues collected from third parties. In addition, we did not book a small component of revenue from a partner that demonstrated an unproven collection track record in accordance with the IFRS accounting policy.

"Our non-IFRS gross margin and operating margin were lower due to a smaller top line compared to historical quarters while the relative number of employees was higher due to our investment in developing products for low cost smart phones. Our financial strategy is to continue to generate strong cash flow from feature phones to support our growth and penetration into the smart phone market while maintaining a reasonable cost base to complete the transition from feature phones to smart phones without seeking additional capital.

"With 60 percent of all staff now dedicated to smart phones, recent rapid client wins, a strong financial base and a prudent financial strategy, we are one of the best positioned dedicated mobile internet companies in China today," concluded Mr. Yeung.

Business Outlook

For the fiscal second quarter 2013 ending September 30, 2012, Sky-mobi expects total revenues to be in the range of RMB135 million to RMB145 million.

Revenues for the fiscal year ending March 31, 2013 are expected to be in the range of RMB545 million to RMB560 million.

These are Sky-mobi's current projections, which are subject to change. You are cautioned that operating results in first quarter 2013 are not necessarily indicative of operating results for any future periods.

HANGZHOU, China, Aug. 12, 2012 (GLOBE NEWSWIRE) -- Sky-mobi Limited ("Sky-mobi" or the "Company") (Nasdaq:MOBI), a leading mobile application store and mobile social network community operator in China, today announced that its board of directors has approved a share repurchase program.

The board has authorized the Company to repurchase up to US$10 million of its own American Depositary Shares ("ADSs") during the period from August 13, 2012 to August 12, 2013. The repurchases will be made from time to time on the open market at prevailing market prices, in negotiated transactions off the market, in block trades or otherwise. The timing and extent of any purchases will depend upon market conditions, the trading price of ADSs and other factors, and subject to the restrictions relating to volume, price and timing under applicable law, including Rule 10b-18 under the Securities Exchange Act of 1934. The Company expects to implement this share repurchase program in a manner consistent with market condition and the interest of the shareholders. The Company's board of directors will review the share repurchase program periodically, and may authorize adjustment of its terms and size accordingly.

"A variety of factors have impacted the valuation of US listed Chinese stocks in recent months, and resulted in Sky-mobi's stock trading at what we believe to be a significantly undervalued level," said Mr. Michael Song, Sky-mobi's Chairman and Chief Executive Officer. "We have made significant progress in the smart phone segment and are confident about establishing a leading market position in the segment through the year. Our strong balance sheet and cash flow from the feature phone business provides strong financial base to execute our smart phone strategy. At the same time, we feel it is important to use a portion of our cash to enhance shareholder value."

Fourth Quarter 2012 Results

• Total revenues increased 0.9% to RMB179.0 million (US$28.4 million) in fourth quarter 2012 compared to the fiscal fourth quarter ended March 31, 2011 ("fourth quarter 2011"). Revenues collected from third party channels (i.e., revenues not collected through mobile network operators) represented 17.1% of total revenues
   
• Profit from operations was RMB9.0 million (US$1.4 million) in fourth quarter 2012, down 37.4% from fourth quarter 2011
   
• Non-IFRS¹ profit from operations was RMB17.0 million (US$2.7 million) in fourth quarter 2012, down 38.1% from fourth quarter 2011
   
• Net profit was RMB12.0 million (US$1.9 million) in fourth quarter 2012, up 170.9% compared to fourth quarter 2011
   
• Non-IFRS net profit was RMB20.0 million (US$3.2 million) in fourth quarter 2012, up 14.2% from fourth quarter 2011
   
• Basic and diluted earnings per common share ("EPS") were RMB0.05 (US$0.01). Non-IFRS basic and diluted EPS were RMB0.08 (US$0.01)
   
• Basic and diluted earnings per ADS² were RMB0.37 (US$0.06). Non-IFRS basic and diluted earnings per ADS were RMB0.61 (US$0.10)

Commenting on the Company's results, Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi, remarked: "We are pleased to have completed the quarter and full fiscal year with revenues ahead of our most recent guidance. The Chinese feature phone industry in the March quarter experienced minor growth from the December quarter mainly due to the Chinese New Year Holidays. The strong performance in revenue was the direct result of our continued focus on intensifying our monetization efforts in order to stabilize revenues as the domestic market transitions from feature phones to low cost smart phones."

"We formally announced at the Global Mobile Internet Conference last week the launch of our smart phone series of products we have been working on for the last six months, including the Android application store and PC suite, Android social gaming platform, and Android payment solution for developers. We are excited to see these products reach commercial readiness at this critical time, as local Chinese manufacturers begin to launch their sub RMB1,000 Android devices in volume," Mr. Song continued.

"With a portfolio of commercially competitive products for Android that have real monetization capabilities compared to the competition, we look forward to garnering solid support from our current network of Chinese handset manufacturers and developers. Our solid cash flow from feature phone operations and highly competitive, new products for low cost smart phones make us one of the best positioned mobile internet companies in China," Mr. Song concluded.

Commenting on the Company's results, Carl Yeung, Chief Financial Officer of Sky-mobi, said: "In addition to the pickup in feature phone sales during the March quarter, we began direct operation of China Mobile's reading and gaming base, which more than offset the systematic deterioration in the service provider billing industry. We expect the service provider billing sector to continue to deteriorate as operators place tighter controls on the use of mobile billing codes. However, our increased use of third-party payment providers and ability to regulate more revenue traffic directly to the carriers should largely offset this decline."

"Our non-IFRS net profit of RMB20 million is higher than that of any of the previous eight quarters, due to higher margins from our direct cooperation with China Mobile and prudent cost management designed to maximize cash flow from our feature phone operations. The cash flow will provide for a solid base for further development of smart phone programs and operations."

"Despite the stronger than previously expected fourth quarter and full year fiscal 2012, we want to be conservative in our approach to guidance and look to over achieve when smart phone products begin to monetize," concluded Mr. Yeung.

Business Outlook

For the fiscal first quarter 2013 ending June 30, 2012, Sky-mobi expects total revenues to be between RMB155 million to RMB165 million.

For the fiscal year 2013 ending March 31, 2013, Sky-mobi expects total revenues to be between RMB545 million to RMB560 million.

These are Sky-mobi's current projections, which are subject to change. You are cautioned that operating results in fourth quarter 2012 and fiscal year 2012 are not necessarily indicative of operating results for any future periods.

HANGZHOU, China, March 5, 2012 (GLOBE NEWSWIRE) -- Sky-mobi Limited ("Sky-mobi" or the "Company") (Nasdaq:MOBI), a leading mobile application store and mobile social network community operator in China, today announced that its subsidiary, Hangzhou Mijia Technologies Co., Ltd., has entered into a partnership agreement with China Mobile's reading platform. Content from China Mobile's reading platform will be published and promoted on Sky-mobi's Maopao platform.

Under the terms of the agreement, China Mobile's mobile reading application software will be made available as a downloadable application via the Maopao's browser, application store and via technical plug-ins to Sky-mobi's Maopao Community. China Mobile's mobile reading platform will share revenue with Sky-mobi based on viewed content following the download of its reading application software. With the popularity of smartphones and the advent of the mobile Internet era, the mobile reading market has entered a stage of dramatic growth. China Mobile's mobile reading platform owns 280,000 electronic publications on its mobile-phone platform, which attracts visits by 70 million mobile-phone users a month.

Mr. Michael Song, Chairman and Chief Executive Officer of Sky-mobi, stated, "We are excited to expand our relationship with China Mobile by making its mobile reading application and content available to our user base. By adding one of China's most popular reading application software and extensive mobile reading database to our platform, we expect to further increase our market presence in the mobile application sector and the stickiness of our Maopao Community."

Mr. Hezhong Dai, General Manager of China Mobile's reading platform, stated, "We are excited to make our high-quality reading application available to millions of additional mobile users of China Mobile Group via Sky-mobi's Maopao platform."

HANGZHOU, China, March 1, 2012 (GLOBE NEWSWIRE) -- Sky-mobi Limited ("Sky-mobi" or the "Company") (Nasdaq:MOBI), a leading mobile application store and mobile social network community operator in China, today announced that its subsidiary, Hangzhou Mijia Technologies Co., Ltd., has entered into a partnership agreement with China Mobile Group Jiangsu Company Limited ("Jiangsu Mobile"), a wholly-owned subsidiary of China Mobile Group, to provide content and operational cooperation for China Mobile's gaming platform nationwide.

Under the terms of the one-year agreement, Sky-mobi will provide cooperative content, including single user games and applications, online multi-player games and other content, on China Mobile Group's gaming platform along with customer service and operation cooperation for the games and content for feature phones. Jiangsu Mobile is responsible for development and maintenance of the gaming platform, new game screening, launches and related gaming channel operations, including collections. Jiangsu Mobile will share revenue with Sky-mobi based on paid downloads and usage. Over the course of the agreement both parties will work together on marketing, promotions and user development.

Mr. Michael Song, Chairman and Chief Executive Officer of Sky-mobi, stated, "We are pleased to partner with China Mobile to provide content and operational cooperation for its mobile gaming platform. China Mobile Group is the leading mobile service provider in China and our cooperation will further enhance our industry presence and increase confidence amongst our subscribers. Through this arrangement, high quality games will be available to 80% of our Maopao users throughout China. We expect this partnership will provide both parties with operational and financial benefits going forward."

Third Quarter 2012 Results

• Total revenues increased 3.8% to RMB167.3 million (US$26.6 million) in third quarter 2012, compared to the fiscal third quarter ended December 31, 2010 ("third quarter 2011"). Revenues collected from third party channels, i.e., revenues not collected through mobile network operators, represented 17.6% of total revenues
• Basic and diluted earnings per common share ("EPS") were RMB0.02 (US$0.00). Non-IFRS basic and diluted earnings per common share were RMB0.07 (US$0.01)
• Basic and diluted earnings per ADS were RMB0.20 (US$0.03). Non-IFRS basic and diluted earnings per ADS were RMB0.59 (US$0.09)

Commenting on the Company's results, Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi, remarked: "Our performance was in line with our expectations. The transition from feature phones to premium feature phones and smart phones in China is accelerating, as reflected in the decline in revenue from our application store. According to a report dated July 2011 issued by Analysys International, an independent research and advisory firm, the feature phone market is the largest mobile phone segment in China and is expected to continue to dominate the mobile phone market for the next few years. Therefore, the transition to smart phones is still in its early stages and we are adapting to these changes with increased focus on the Maopao Community and Android products."

"Given the macro decline in the feature phone market and overall more challenging economy, we will remain prudent on expenditures and focus on investing in areas of future growth such as Maopao Community and Android products," concluded Mr. Yeung.

Business Outlook

For the fiscal fourth quarter 2012 ending March 31, 2012, Sky-mobi expects total revenues to be in the range of RMB168 million to RMB178 million.

Revenues for the fiscal year ending March 31, 2012 are expected to be in the range of RMB 674 million to RMB 684 million.

These are Sky-mobi's current projections, which are subject to change. You are cautioned that operating results in third quarter 2012 are not necessarily indicative of operating results for any future periods.

Second Quarter 2012 Results

• Total revenues decreased 0.4% to RMB173.2 million (US$27.2 million) in second quarter 2012, compared to the fiscal second quarter ended September 30, 2010 ("second quarter 2011"). Revenues collected from third party channels, i.e., revenues not collected through mobile network operators, represented 15.2% of total revenues
• Basic and diluted earnings per ADS¹ were RMB0.22 (US$0.03). Non-IFRS basic and diluted earnings per ADS were RMB0.61 (US$0.10)

Commenting on the Company's results, Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi, remarked: "Our second quarter revenues were in line with our expectations. We continued to make good progress in socializing the Maopao application store, introducing 17 new single-user applications with social functions through the OPENSKY platform. This resulted in a 45 million year-over-year increase in the number of downloads to a near record 845.2 million. The Maopao Community grew to a record 16.7 million active users with 1.4 billion member logins."

"We continue to invest heavily in Android in order to best position Sky-mobi once Android handset shipments reach meaningful levels early next year. We recently made a strategic investment in an Android ROM developer and have a strong pipeline in development. Following the launch of a card game center in September, we plan to launch a full Android community including an application store, PC suite and multimedia player by year end," Mr. Song continued.

"We anticipate a continued growth in our user base, along with higher monetization rates, as we expand our relationships with leading Chinese social media and content partners, such as the recently announced SINA Weibo that went live on our community, encourage developers to provide compelling content via OPENSKY and establish our Android infrastructure. We are also exploring opportunities to expand our relationships beyond service providers to include carriers," Mr. Song concluded.

Commenting on the Company's results, Carl Yeung, Chief Financial Officer of Sky-mobi, said: "As our business becomes more established, we are better able to streamline our operations and manage costs to benefit from operating leverage. As a result, we saw significant improvement in gross margin and profitability during this quarter, with non-IFRS gross margin expanding 560 basis points to 34% and non-IFRS net income increasing almost 70% on a year over year basis. Going forward, we will continue to manage our business prudently while making strategic investments to ensure our profitable growth."

Business Outlook

For the fiscal third quarter 2012 ending December 31, 2011, Sky-mobi expects total revenues to be in the range of RMB 163 million to RMB 171 million.

These are Sky-mobi's current projections, which are subject to change. You are cautioned that operating results in second quarter 2012 are not necessarily indicative of operating results for any

First Quarter 2012 Results

• Total revenues increased 2.0% to RMB166.0 million (US$25.7 million) in first quarter 2012, compared to the fiscal first quarter ended June 30, 2010 ("first quarter 2011").
• Basic and diluted earnings per ADS¹ were RMB0.23 (US$0.04). Non-IFRS basic and diluted earnings per ADS were RMB0.62 (US$0.10) and RMB0.61 (US$0.09), respectively
   

Commenting on the Company's results, Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi, remarked: "While our Maopao application store generated a record 5.8 billion user visits, downloads were lower than anticipated at 787.2 million during the quarter. As a result, our first quarter revenues came in slightly below our expectations. This mainly reflects lower than expected overall China handset sales and lower store monetization rate with a tougher operating environment for the mobile service providers."

Commenting on the Company's results, Carl Yeung, Chief Financial Officer of Sky-mobi, said: "During the quarter, while net margin was very healthy, we saw some pressure on gross margins, primarily due to higher costs associated with our carrier-based collection channels. However, we are encouraged by the record levels of revenue through K Currency, the primary form of payment allowed for purchases in the Maopao Community, as this is a critical element of our strategy to diversify payment channels. We expect the contribution from K Currency as part of our revenue mix will continue to increase with the growth of the Maopao Community, relieving gross margin pressure for the rest of the year."

"We want to take a conservative approach as we provide revenue guidance for the fiscal year ending March 31, 2012, as the sales of mobile phones in China and the operating environment for service providers are not expected to improve significantly. However, we are taking this opportunity to accelerate the transformation of business model from a visitor-based application store to a mobile community with sticky users. The operating metrics of our community currently all point in the right direction. We believe investing in increasing user traffic and allocating resources into the community will yield better long-term value than squeezing near-term revenue from the application store." concluded Mr. Yeung.

Business Outlook

For the fiscal second quarter 2012 ending September 30, 2011, Sky-mobi expects total revenues to be in the range of RMB170 million to RMB175 million.

Revenues for the fiscal year ending March 31, 2012 are expected to be in the range of RMB680 million to RMB690 million.

These are Sky-mobi's current projections, which are subject to change. You are cautioned that operating results in first quarter 2012 are not necessarily indicative of operating results for any future periods.

Preliminary Fourth Quarter 2011 Highlights

• Total revenues increased 20.8% to RMB177.5 million (US$27.1 million) in fourth quarter 2011, compared to the fiscal fourth quarter ended March 31, 2010 ("fourth quarter 2010"). Maopao Community revenues through K Currency, i.e., revenues not collected through mobile network operators represented 12.1% of total revenues, compared to 1.6% in fourth quarter 2010
• Profit from operations was RMB14.4 million (US$2.2 million) in fourth quarter 2011, down 35.2% from fourth quarter 2010
• Non-IFRS profit from operations was RMB27.5 million (US$4.2 million) in fourth quarter 2011, up 13.9% from fourth quarter 2010
• Net profit was RMB4.4 million (US$0.7 million) in fourth quarter 2011, compared to net loss of RMB109.9 million in fourth quarter 2010
• Non-IFRS net profit was RMB17.5 million (US$2.7 million) in fourth quarter 2011, up 48.4% from fourth quarter 2010
• Basic and diluted earnings per common share were RMB0.02 (US$0.00) and RMB0.02 (US$0.00), respectively. Non-IFRS basic and diluted earnings per common share were RMB0.07 (US$0.01) and RMB0.07 (US$0.01), respectively
• Application store revenue increased 5.7% to RMB149.4 million (US$22.8 million) in fourth quarter 2011 from fourth quarter 2010. Sky-mobi's application store experienced 5.0 billion user visits with 847.7 million downloads in fourth quarter 2011
• Maopao Community revenue through K Currency increased 798.3% to RMB21.4 million (US$3.3 million) in fourth quarter 2011 from fourth quarter 2010. Sky-mobi had 11.0 million active members of the Maopao Community with 884.1 million member log-ins in fourth quarter 2011

"We are pleased with our fiscal fourth quarter 2011 performance. Our application store had a record 5 billion user visits and 847.7 million downloads and our Maopao Community grew to a record 11 million active members and 884.1 million member log-ins," stated Mr. Michael Tao Song, Chairman and Chief Executive Officer of Sky-mobi. "We entered into important partnerships during the fiscal fourth quarter 2011. We signed a strategic partnership with Tencent in January and a mobile advertising contract with Sohu in March. More recently, in conjunction with the launch of OPENSKY, we announced SINA Mobile, SNS Game (the promoter of the Chinese version of a hit game, Zombie Farm) and other major Internet and videogame companies became the first international players to join the Maopao Community. We look forward to more exciting partnerships as Maopao becomes the platform of choice to access the hundreds of millions of mobile users in China. In addition, OPENSKY will offer our users an unprecedented experience in enjoying applications with other users, increasing our user stickiness and monetization."

For the fiscal first quarter 2012 ending June 30, 2011, Sky-mobi expects total revenues to be in the range of RMB180 million to RMB190 million.

Sky-mobi Limited plans for Initial Public Offering

Company Snapshot:

Operates the leading mobile application store in China

Industry Snapshot:

• China has the world’s largest mobile subscriber market. According to reports released by the PRC Ministry of Industry and Information Technology, or MIIT, in January 2006 and February 2010, the number of mobile subscriptions in China increased from 393.4 million as of the end of 2005 to 747.4 million as of the end of 2009, representing a CAGR of 17.4%. Correspondingly, the Chinese mobile handset installed base has also grown to 792.2 million units at the end of 2009, according to the Analysys Report. The handset market in China can be divided into three segments: feature phones, smart phones and basic phones. Feature phones are low cost multi-function mobile communication devices that have proprietary operating systems which make it difficult for users to install and remove software. According to the Analysys Report, the feature phone market segment represented approximately 64.2% of the total mobile handset installed base in China in 2009, and is expected to remain the largest segment in the foreseeable future as feature phones offer China’s price-sensitive mobile phone users broad functionality at compelling price points. Smart phones accounted for 15.8% of the total mobile handset installed base in China in 2009, according to the Analysys Report, and they are expected to grow rapidly, reaching approximately 36.9% market share in 2013.

• Historically, the majority of applications and services provided through mobile data services were based on short messages, or SMSs, and were either accessed through a mobile carrier operated menu or pre-installed on mobile handsets. These services included ring tones, simple games and wallpapers, among others. Today, users seek to consume more sophisticated multimedia and interactive functions via mobile phones. Increasingly rich content and more complex applications are therefore becoming available. Key growth areas of mobile applications and services include mobile social games and social network applications and content.

• Despite relatively modest average income levels of mobile users, mobile services are used by a wide spectrum of Chinese consumers, with users younger than 30 years old representing 59.3% of all mobile subscribers in 2009, according to the Analysys Report. These users have a strong desire for social interaction, acceptance and affordable entertainment. The majority of the growth of mobile Internet application and services revenues in China has been derived from users younger than 30 years old, who accounted for 71.2% of the mobile Internet user base as of June 2010, according to a report released by China Internet Network Information Center, or CNNIC, in July 2010.

• Independent mobile application stores have emerged in China to aggregate applications or content from different content providers in a central platform which enables a large number of users to easily browse, find and pay for applications and content. These mobile application stores enable a more efficient ecosystem for mobile Internet application and content development, distribution and consumption by addressing major challenges facing the mobile Internet application and services market in China, including limited payment alternatives, the difficulty for users to find content and for content providers to reach users, the high cost of content development and the lack of incentive for handset manufacturers. These independent mobile application stores allow more flexible payment options, enhance user experience through content aggregation, enable more efficient and cost-effective content development and increase incentives for content distribution. The mobile Internet application and services market size in China is expected to increase from RMB7.7 billion in 2008 to RMB260.4 billion in 2013, according to the Analysys Report, representing a CAGR of 102.2%.

Use Of proceeds:

• approximately $20 million for the enhancement and expansion of the Maopao application store to support further development of our Maopao Community and community-based applications and other content;

• approximately $5 million for sales and marketing activities, including the promotion of our brand among users;

• the balance for general corporate purposes, including overseas expansions and research and development activities.

Underwriter:

• Citi
• Piper Jaffray
• Oppenheimer & Co.
• Rodman & Renshaw, LLC

Proposed offering price: $8.00 and $10.00

Post IPO Share Calculation: (Using a 8 to 1 Ordinary to ADS conversion ratio).

• 25,090,700: Pre IPO fully diluted share count used in EPS calculation.(Includes shares from convertible preferred) 
•  7,250,000: Newly issued ADS shares (6,125,000from company + 1,125,000 from selling shareholders).  
•  1,087,500: Underwriter over-allotments ADS shares (918,750 from company + 168,75 from selling shareholders). 

GeoTeam® best effort calculation of total post IPO ADS count to be used in EPS calculations, assuming full conversions and a Ordinary to ADS conversion ratio of 8 to 1:   32,134,450

Financial Snapshot: March Year End

2010 vs. 2009

• Revenues: $81.3 million vs $30.9 million
• Adjusted Net Income: $17.3 million vs. $6.6 million

Six Months September 2010 vs 2009

• Revenues: $50.3 million vs. $35.8 million 
• Adjusted Net Income: $3.6 million vs. $10.3 million 

Please note that 2009 net income figures  includes a small tax benefit vs. tax expense in 2010.

Pro Forma Valuation:using mid point offering price of $9.00 and new share count

• Trailing EPS (ADS): $0.33
• Trailing P/E: 27.3