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GigaMedia: Renewed Growth and Operating Profitability in 2011

HONG KONG Jan. 26, 2011 Europe

Arthur Wang

Thomas Hui China

Thomas Hui

May 2010

Thomas Hui Asia SpongeBob SquarePants

Strategic Position

Asia

Arthur Wang

Arthur Wang

Arthur Wang

Financial Results

$7.8 million

US$0.17

China Thomas Hui

Consolidated Financial Results

Asia Greater China Southeast Asia

GIGAMEDIA 3Q10 CONSOLIDATED FINANCIAL RESULTS

(unaudited, all figures in US$ thousands, except per share amounts)

3Q10

3Q09

Change (%)

3Q10

2Q10

Change (%)

Revenues (A)

7,831

37,184

-79

7,831

10,864

-28

Gross Profit (A)

4,262

27,689

-85

4,262

7,243

-41

Loss from Operations (A)

(4,903)

(3,285)

NA

(4,903)

(11,756)

NA

Income (Loss) from Continuing Operations (A)

(9,775)

(3,207)

NA

(9,775)

52,568

NA

Net Income (Loss) Attributable to GigaMedia

(9,960)

(2,371)

NA

(9,960)

52,549

NA

Net Income (Loss)  Per Share, Diluted

(0.18)

(0.04)

NA

(0.18)

0.87

NA

Non-GAAP Loss from Operations (A)(B)

(4,328)

(2,460)

NA

(4,328)

(7,402)

NA

Non-GAAP Net Loss (A) (B)

(9,420)

(1,621)

NA

(9,420)

(8,536)

NA

Non-GAAP Net Loss Per Share, Diluted (A) (B)

(0.17)

(0.03)

NA

(0.17)

(0.15)

NA

EBITDA (C)

(8,708)

(10)

NA

(8,708)

59,843

NA

Cash, Cash Equivalents, Restricted Cash, and Marketable Securities-Current

94,420

97,197

-3

94,420

116,515

-19

China China

(B)  Non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share exclude results from discontinued operations, non-cash share-based compensation expenses, and certain non-cash write-downs. (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 $7.8 million $37.2 million $10.9 million China China

Taiwan Hong Kong China Southeast Asia

Taiwan Hong Kong $5.3 million $7.1 million $5.8 million $26.40

Games Southeast Asia Games Games July 2010 Southeast Asia $2.5 million FIFA Online 2 Dragonica Online Granado Espada

Consolidated gross profit $4.3 million $27.7 million $7.2 million China Taiwan Hong Kong Southeast Asia

$4.3 million $7.1 million $7.2 million Southeast Asia Taiwan Hong Kong

Consolidated operating expenses $9.2 million $31.0 million $19.0 million

$508 thousand China

$4.8 million $8.3 million $10.3 million China China Taiwan

$550 thousand $285 thousand $2.1 million SpongeBob SquarePants

$2.0 million $5.1 million $2.2 million China China Southeast Asia

$2.2 million $2.8 million $3.3 million China Southeast Asia

$3.8 million $6.1 million

Consolidated loss from operations $4.9 million $3.3 million $11.8 million

China

$4.3 million $2.5 million $7.4 million

$495 thousand $909 thousand $129 thousand

Consolidated non-operating income/loss $4.8 million $204 thousand $70.6 million $5.7 million $1.2 million

Consolidated net income/loss $10.0 million $2.4 million $52.5 million

$9.4 million $1.6 million $8.5 million $0.17

$8.7 million $10 thousand $59.8 million $7.4 million $1.7 million

$94.4 million $116.5 million China $15.0 million $14.0 million

Additional Information

The loss on equity method investments during the third quarter of 2010 reported in the consolidated financial statements attached hereto includes GigaMedia’s 40 percent share of the gambling software business (Everest Gaming’s) net loss for the third quarter of 2010.

In addition, GigaMedia is providing the following supplemental figures related to Everest Gaming’s operations in order to facilitate investors’ understanding of GigaMedia’s results. All amounts were provided to GigaMedia by Everest Gaming’s management and are unaudited.

$14.3 million $9.1 million $14.1 million

Business Outlook

The following forward-looking statements reflect GigaMedia’s expectations as of January 26 , 201 1 . Given potential changes in economic conditions and consumer spending, the evolving nature of gambling software, online games, and various other risk factors, including those discussed in the company’s 200 9 Annual Report on Form 20-F fi led with the U.S. Securities and Exchange Commission as referenced below, actual results may differ materially.

China

GigaMedia expects to report a 4Q net loss due largely to the deconsolidation of T2CN and the potential impairment and other charges related to the T2CN legal dispute.

Europe

Use of Non-GAAP Measures

To supplement GigaMedia’s consolidated financial statements presented in accordance with US GAAP, the company uses the following measures defined as non-GAAP by the SEC: EBITDA, and US GAAP income from operations, 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 impairment losses related to game licensing, game studios and other related assets, gains and losses on the sale of businesses and discontinued operations, and impairment losses on marketable securities and 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 US 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.

GigaMedia records the expensing of share-based compensation based on the FASB Accounting Standards Codification. 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-offs of loan receivables, game capitalized costs and investments is useful for itself and for investors as such write-offs do not impact cash and are 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 income from operations, 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 share-based compensation, 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 US 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 US GAAP, do not reflect any benefit that such items may confer to the company. A limitation of using non-GAAP income from operations 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 US GAAP and by providing specific information regarding the US 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

Consolidation of IAHGames

Games July 2010

China

November 15 Wang Ji July 2010 July 1, 2010

July 1, 2010 November 26, 2010 September 30, 2010 US$25.5 million US$1.4 million

China June 30, 2010

  • China US$5 million June 30, 2010
  • June 30, 2010

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.

July 2010 Games China China Southeast Asia China

Segmental results

the United States

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