CMGE Reports First Quarter 2014 Unaudited Financial Results

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Friday, 16 May 2014, 19:40 HKT/SGT

HONG KONG, May 16, 2014 - (ACN Newswire) - China Mobile Games and Entertainment Group Limited ("CMGE" or the "Company") (Nasdaq: CMGE), a leading mobile game company in China, today reported its unaudited financial results for the first quarter ended March 31, 2014.

First Quarter 2014 Financial Highlights

-- Revenues were RMB214.7 million (US$34.5 million ), compared with RMB36.5 million in the first quarter of 2013 and RMB146.4 million in the fourth quarter of 2013. Revenues were 488.2% higher year-over-year and 46.7% higher quarter-over-quarter.

-- Operating income was RMB37.6 million (US$6.0 million), compared with operating loss of RMB18.2 million in the first quarter of 2013 and operating income of RMB6.4 million in the fourth quarter of 2013. Operating income was RMB55.8 million higher year-over-year and 487.5% higher quarter-over-quarter.

-- Pre-tax income was RMB40.6 million (US$6.5 million), compared with pre-tax loss of RMB20.5 million in the first quarter of 2013 and pre-tax income of RMB34.2 million in the fourth quarter of 2013. Pre-tax income was RMB61.1 million higher year-over-year and18.7% higher quarter-over-quarter.

-- Net income was RMB34.7 million (US$5.6 million), compared with net loss of RMB21.6 million in the first quarter of 2013 and net income of RMB35.3 million in the fourth quarter of 2013. Net income was RMB56.3 million higher year-over-year and 1.7% lower quarter-over-quarter. Net income was lower sequentially because net income for the prior quarter at RMB35.3 million included other non-operating income of RMB27.8 million while other non-operating income for the current quarter was RMB3.0 million, and also the tax benefit was RMB1.1 million for the prior quarter, while tax expense of RMB6.0 million was incurred for the current quarter.

Ken Xiao, Chief Executive Officer of CMGE, said "I am delighted to see our strong financial performance in the first quarter of 2014. I am also pleased with a number of recent structural developments and achievements with respect to self-developed games, game publishing, intellectual property, user acquisitions, game engine improvement and user community development. We believe that these developments and achievements will position our company for long-term growth and continued financial success.

"Since the end of 2013, we have substantially boosted our capabilities in localizing foreign games and adapting them to local preferences, as well as marketing its games outside China. These capabilities are supported by CMGE's strong experience in marketing and distribution. In addition to localizing foreign games, CMGE has begun in marketing its own games outside of China. CMGE has localization and publishing teams located in Taiwan, Korea and Thailand and plans to set up a United States office in the near future. Our successful overseas publishing products include Wu Shuang San Guo and Monster Island.

"CMGE has also entered into an exclusive agreement with Shenzhen Ju Yang Information Media Co. Ltd. to provide a game operating platform for their "Egogo WiFi" service. This company is a new media company specializing in online advertisement. In addition, CMGE has entered into strategic cooperation with Bus Online Holdings Company Limited ("Bus Online"), Shenzhen Pay1pay Technology Co., Ltd.("Pay1pay") and two free Wifi providers in China, namely Beijing Zhong Jiao Xun Tong and Beijing Zhong Jiao Hui Neng.

"Based on our strategic positioning since the second half of 2013 and our implementation efforts during the first quarter of 2014, CMGE has made progress in building its publishing business, increasing its number of self-developed games, enhancing its position in the mobile game value chain, sourcing content, increasing user traffic and intensifying integration and collaboration with strategic business partners. This has made CMGE stronger and more competitive."

Mr. Ken Chang, CMGE's Chief Financial Officer, added, "The growth was driven by the continued success of our self-developed games as well as our publishing distribution platform. Our operating data for both social games and single-player games has recorded impressive growth in the first quarter. Paying users for social games and single-player games have increased by 15.3% and 28.1%, respectively, since the last quarter of 2013. ARPU for social games has also increased from RMB36.6 to RMB39.8 and for single-player games from RMB7.4 to RMB13.6. We were also pleased to complete a successful follow-on offering in the first quarter of 2014 which was oversubscribed and raised gross proceeds of US$82.6 million. The proceeds from this offering will help us invest in game development, acquire game licenses and intellectual property and expand overseas."

"Our operating margin has improved to 17.5%, up from 4.4% in the fourth quarter of 2013. Our operating expenses as a percentage of revenues have decreased to 45.4% from 58.7% in the fourth quarter of 2013. It is worth noting that during the first quarter of 2014, selling expenses as a percentage of revenues have decreased markedly to 26.5%, from 35.5% in the fourth quarter of 2013, due to effective marketing efforts, cost control and an increase in revenue scale. We expanded our top line while continuing to conduct prudent cost control management."

About CMGE

CMGE is the largest publisher and a leading developer of mobile games in China with integrated capabilities across the mobile game value chain. Its fully integrated capabilities include the development, licensing, publishing, distribution and operation of mobile games, primarily in China. Its social games are mainly developed for Android and iOS-based smartphones. CMGE's extensive distribution network includes its proprietary Game Center application, handset pre-installations, application stores and web platforms and mobile network operators. The Company's stock is traded on NASDAQ under the symbol CMGE. For more corporate and product information, please visit CMGE's website at http://www.cmge.com

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. CMGE may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about CMGE's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our growth strategies as well as our business plans; our future development, results of operations and financial condition; our ability to continue to develop new and attractive products and services; our ability to continue to develop new technologies or upgrade our existing technologies; our ability to attract and retain users and customers and further enhance our brand recognition; the expected growth of and trends in the mobile game industry in China; PRC governmental policies and regulations relating to the mobile game industry in China; competition in the mobile game industry; and general economic and business conditions in China. Further information regarding these and other risks is included in our registration statement on Form F-1 and other documents filed with the Securities and Exchange Commission. CMGE does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of the date of the press release, and CMGE undertakes no duty to update such information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement CMGE's financial results presented in accordance with U.S. GAAP, the Company uses non-GAAP financial measures, which are adjusted from results based on U.S. GAAP to exclude (1) share-based compensation expenses (2) intangible assets impairment loss. Reconciliations of non-GAAP financial measures to U.S. GAAP financial measures are set forth in tables at the end of this earnings release, which provide more details on the non-GAAP financial measures.

Non-GAAP financial information is provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors' overall understanding of the historical and current financial performance of the Company's continuing operations and prospects for the future. Non-GAAP financial information should not be considered a substitute for or superior to U.S. GAAP results. In addition, calculations of this non-GAAP financial information may be different from calculations used by other companies, and therefore comparability may be limited.

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