MOL Global Inc. Reports Unaudited Financial Results for the Three Month Period Ended September 30, 2014, and Other Material Developments
|MOL Global Inc. Reports Unaudited Financial Results for the Three Month Period Ended September 30, 2014, and Other Material Developments|
|KUALA LUMPUR, Malaysia, Dec. 1, 2014 (GLOBE NEWSWIRE) — MOL Global, Inc. (Nasdaq:MOLG) (“MOL” or the “Company”), a leading e-payment enabler for online goods and services in emerging and developed markets, today announced (i) its unaudited financial results for the third quarter of 2014; (ii) certain errors in Revenue and Direct Cost and Other Ancillary Expenses in its Consolidated Statements of Profit or Loss and Other Comprehensive Income for the six month periods ended June 30, 2013 and 2014 and the year ended December 31, 2013 associated with the Company’s Vietnam subsidiary; (iii) that following NASDAQ’s placing a T12 temporary trading halt on MOL’s American Depositary Shares (“ADSs”) on Monday, November 24, 2014, the Company has been formally requested to provide certain information to NASDAQ and (iv); the approval by the Board of Directors of the Company (the “Board”) of a share repurchase program.
Third Quarter 2014 Highlights
Mr. Ganesh Kumar Bangah, Chief Executive Officer of MOL, stated, “Despite some volatility in the start of our life as a public company, we are pleased to report growth for our core, e-payments platform. The discovery of an error in the presentation of revenue and direct costs and other ancillary expenses at our Vietnamese subsidiary as well as softness in our MMOG.asia gaming business have created volatility that we are addressing. On the gaming front, the softness was primarily due to a rapid shift in gaming habits whereby consumers are spending more time playing games on smartphones as compared to online. In order to address this, we are expanding our interaction with mobile app stores, game developers as well as other mobile partners.”
Mr. Bangah continued, “On our core e-payments business and growth front, we achieved several key business milestones during the quarter. These milestones included growth for MOLPoints, MOLReloads and MOLPay, the completion of our PayByMe carrier billing acquisition, the signing of a new licensing agreement to launch a game in the Middle East and Brazil as well as the signing of MOUs with several major retail chains to execute our gift cards strategy. Each of these milestones is vital for our strategy to expand into new markets, execute our mobile strategy, grow our online merchant network and accelerate real world payments in all of our key geographic markets. We believe that these initiatives are the key building blocks that will help us to meet our vision of becoming the leading e-payment platform for digital services in emerging markets.”
Third Quarter 2014 Business Milestones
Third Quarter 2014 Financial Results
Consolidated revenue increased by 5.6% to MYR47.7 million (US$14.5 million) in the third quarter of 2014 from MYR45.2 million in the corresponding period of 2013. Consolidated revenue increased primarily due to the growth of MOLPoints and MOLPay, despite the decline in MMOG.asia revenue over the corresponding quarter. MOLReloads’ grew marginally over the corresponding quarter.
DIRECT COST AND OTHER ANCILLARY EXPENSES
Direct cost and other ancillary expenses increased by 32.2% to MYR22.4 million (US$6.8 million) in the third quarter of 2014 from MYR16.9 million in the corresponding period of 2013.
GROSS PROFIT (1)
Gross profit decreased by 10.4% to MYR25.3 million (US$7.7 million) in the third quarter of 2014 from MYR28.2 million in the corresponding period of 2013. The decline was primarily driven by decreased segment gross profit in MMOG.asia, which has a higher gross profit margin than our other segments.
OPERATING EXPENSES (2)
Total operating expenses for the third quarter of 2014 increased by 8.1% to MYR20.8 million (US$6.3 million) from MYR19.2 million in the corresponding period of 2013. This increase was primarily attributable to an increase in employee expenses.
PROFIT FROM OPERATIONS
Profit from operations in the third quarter of 2014 decreased by 50.0% to MYR4.5 million (US$1.4 million) from MYR9.0 million in the corresponding period of 2013. This was mainly due to lower gross profit contribution from MMOG.asia and higher employee expenses.
Adjusted EBITDA in the third quarter of 2014 decreased by 28.5% to MYR10.8 million (US$3.3 million) from MYR15.1 million in the corresponding period of 2013.
Other income decreased by 20.2% to MYR0.5 million (US$0.1 million) in the third quarter of 2014 from MYR0.6 million in the corresponding period of 2013.
PROFIT FOR THE PERIOD
Profit for the period decreased by 65.3% to MYR3.0 million (US$0.9 million) in the third quarter of 2014 from MYR8.5 million in the corresponding period of 2013.
PROFIT ATTRIBUTABLE TO SHAREHOLDERS
Profit attributable to shareholders of MOL Global Inc. decreased 61.5% to MYR2.4 million (US$0.7 million) in the third quarter of 2014 from MYR6.3 million in the corresponding period of 2013.
EARNINGS PER ADS
Earnings per ADS in the third quarter of 2014 decreased by 61.8% to Malaysian sen 4.09 (US$0.01), from Malaysian sen 10.72 in the corresponding period of 2013.
DILUTED EARNINGS PER ADS
Diluted earnings per ADS in the third quarter of 2014 decreased by 61.9% to Malaysian sen 4.08 (US$0.01), from Malaysian sen 10.72 in the corresponding period of 2013.
As of September 30, 2014, MOL had cash and cash equivalents of MYR60.3 million (US$18.4 million) and total borrowings of MYR72.6 million (US$22.1 million).
As of September 30, 2014, the Company had a total of 60.0 million common shares outstanding, or the equivalent of 60.0 million ADSs outstanding. As of October 9, 2014, after the IPO, the Company had a total of 67.5 million common shares outstanding, of which 13.5 million are in the form of ADSs.
This press release contains translations of certain Ringgit amounts into U.S. dollars solely for the convenience of readers. Unless otherwise noted, all translations from Ringgit to U.S. dollars, in this press release, were made at a rate of MYR3.2790 to US$1.00, the noon buying rate in effect on September 30, 2014 in the City of New York for cable transfers in Ringgit per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.
Certain Errors in the Company’s Revenue and Direct Cost and Other Ancillary Expenses in its Consolidated Statements of Profit or Loss and Other Comprehensive Income for the Six Month Periods ended June 30, 2013 and 2014, the Three Month Periods ended March 31, 2014 and June 30, 2014 and the year ended December 31, 2013.
During the course of the Company’s review of its financial results for the third quarter of 2014, the Company’s auditor discovered that its Vietnamese subsidiary, Nganluong Joint Stock Company (“Nganluong”), which was acquired by the Company in March 2013, reported revenue from its payment business on a gross basis, and accounted for the corresponding fees payable to merchants being included in direct cost and other ancillary expenses. However, the Company’s accounting policy is to account for such transactions on a net basis because the Company acts as an agent with respect to these revenue arrangements, such that the corresponding fees payable to merchants should have been netted out of revenue and not included in direct cost and other ancillary expenses. The effect of the errors was to overstate the Revenue and Direct Cost and Other Ancillary Expenses line items by equal amounts in the Company’s consolidated statements of profit or loss and other comprehensive income for the six month periods ended June 30, 2013 and 2014 and the year ended December 31, 2013. The errors do not affect any other items (including the implied gross profit and the published net income) in the Company’s consolidated statements of profit or loss and other comprehensive income for the six month periods ended June 30, 2013 and 2014, respectively, and for the year ended December 31, 2013.
The effects of such errors on the consolidated statements of profit or loss and other comprehensive income of the Company (with percentages against corrected amounts) were that:
(i) revenues have been overstated by MYR1.3 million (1.7%) and MYR9.3 million (9.7%) for the six month periods ended June 30, 2013 and 2014, respectively, by RM2.1 million (4.5%) and RM7.2 (14.7%) for the three month periods ended March 31, 2014 and June 30, 2014, respectively, and by RM3.7 million (2.2%) for the year ended December 31, 2013; and
(ii) direct cost and other ancillary expense have been overstated by MYR1.3 million (4.0%) and MYR9.3 million (21.7%) for the six month periods ended June 30, 2013 and 2014, respectively, by RM2.1 million (10.2%) and RM7.2 (32.2%) for the three month periods ended March 31, 2014 and June 30, 2014, respectively, and by MYR3.7 million (5.7%) for the year ended December 31, 2013.
The Company has considered the changes in accounting for payments on a gross basis rather than a net basis on the revenue and direct cost and ancillary expenses from the Vietnam operation (NganLuong) and determined not to restate its financial statements for the full year or any interim period in 2013. In relation to the relevant financial periods of 2014, the Company finds it is appropriate to restate the financial statements for the three month periods ended March 31, 2014 and June 30, 2014 and six months period ended June 30, 2014, respectively.
NASDAQ’s Temporary Trading Halt on MOL’s ADS’s
On Monday, November 24, 2014, following the Company’s announcement of a delay in the release of its third quarter 2014 financial results and the resignation of the Company’s Group Chief Financial Officer, NASDAQ placed a T12 temporary trading halt on MOL’s ADSs. NASDAQ has now formally requested certain information from the Company relating to the delays in the release of its third quarter financial results and such resignation. The Company has been working expeditiously to respond to NASDAQ’s request in order that trading of its ADSs may resume as soon as possible.
Resignation of Mr. Allan Wong as Chief Financial Officer
The Company announced in its release on November 20, 2014 that Mr. Allan Wong, who joined the Company in August 2014, tendered his resignation as the Group Chief Financial Officer of the Company due to personal reasons. Mr. Wong subsequently met with the Company’s independent auditor to discuss the reasons for his resignation, and the chairman of the Company’s Audit Committee also phoned Mr. Wong and spoke with him regarding his resignation. Mr. Wong reiterated in those discussions that his resignation was for personal reasons and was not related to any accounting or financial reporting matters.
Class Action Complaints
Two putative class action complaints have been filed against the Company and certain of its officers and directors alleging certain untrue statements and omissions in its registration statement and prospectus for the Company’s initial public offering and seeking unspecified damages and other relief.
Share Repurchase Program
The Company believes that the decline in the trading price of its American Depositary Shares (“ADSs”) since the announcement on November 20, 2014 has been excessive, and that the ADSs of the Company represent good value at their last sale market price. In view of the aforesaid, the Company believes that purchasing its ADSs at reasonable prices is an excellent use of the Company’s capital and will increase shareholder value over time.
Accordingly, the Company’s Board of Directors has approved a share repurchase program, authorizing the Company to repurchase at any time during the next twelve months an aggregate of up to US$15 million of ADSs, from time to time, subject to customary blackout periods, including periodic blackout periods pending the release of its financial results. Any ADSs purchased by the Company under this program will be cancelled with the underlying common stock held in treasury. Purchases by the Company under the share repurchase program may be made from time to time at prevailing market prices in open market purchases, privately negotiated transactions, block purchases or otherwise, as determined by the Company’s management. The purchases will be funded from the Company’s cash balances.
The timing, frequency and amount of repurchase activity will depend on a variety of factors such as levels of cash generation from operations, cash requirements for investment in the Company’s business, current stock price, market conditions and other factors. The share repurchase program may be suspended, modified or discontinued at any time and has no set expiration date.
Mr. Ganesh Kumar Bangah, Chief Executive Officer of MOL, has also informed the Company’s Board of Directors that he plans to purchase at any time during the next twelve months an aggregate of up to US$500,000 of ADSs, from time to time, subject to customary blackout periods, including periodic blackout periods pending the release of the Company’s financial results.
About MOL Global, Inc.
MOL Global, Inc. (Nasdaq:MOLG) is a leading e-payment enabler for online goods and services in emerging and developed markets. MOL operates a payments platform that connects consumers with digital content providers, telecommunications service providers and online merchants by providing a vast network of distribution channels that accepts cash and online payment methods. Its physical distribution network comprises more than 970,000 locations in 13 countries across 4 continents. The Company also has mobile payment channels, electronic distribution channels that accept major credit cards and online banking from more than 100 banks.
For more information, please visit ir.mol.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,” “target,” “going forward” and similar statements. Among other things, our strategic and operational plans contain forward-looking statements. We may also make written or oral forward-looking statements in our periodic reports to the U.S. Securities and Exchange Commission, in our annual report to shareholders, in press releases and other written materials and in oral statements made by our officers, directors or employees to third parties. Statements that are not historical facts, including statements about our 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; our future business development, including development of new products and services; our ability to attract and retain users and customers; competition in each of the markets in which we operate; changes in our revenues and certain cost or expense items as a percentage of our revenues; and the expected growth of the e-payment market and the number of e-payment users. Further information regarding these and other risks is included in our filings with the Securities and Exchange Commission. We do 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 we undertake no duty to update such information, except as required under applicable law.
About Non-IFRS Financial Measures
To supplement our consolidated financial results presented in accordance with International Financial Reporting Standards (“IFRS”), we present adjusted EBITDA, which is a non-IFRS financial measure. You should not consider adjusted EBITDA as a substitute for or superior to profit for the period prepared in accordance with IFRS. Furthermore, because adjusted EBITDA is not determined in accordance with IFRS, it is susceptible to varying calculations and may not be comparable to other similarly titled measures presented by other companies. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.
We present adjusted EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation and amortization expenses), changes in foreign exchange rates that impact financial assets and liabilities denominated in currencies other than our functional currency (affecting unrealized gain/(loss) on foreign exchange and realized gain/(loss) on foreign exchange), variations in capital structures (affecting interest income and interest expenses), provision for impairment loss on trade and other receivables, share of results of operation of associates and tax positions (affecting income tax expenses) (such as the impact on periods or companies of changes in effective tax rates). In addition, adjusted EBITDA the non-cash impact of changes in the fair value of derivative, that, in each case, we do not believe reflect the underlying performance of our business.
Some limitations of adjusted EBITDA are that: (i) adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us; and (ii) adjusted EBITDA excludes depreciation and amortization and although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future.
The following table reconciles adjusted EBITDA to profit for the period for the three months ended September 30, 2013 and 2014:
(1) Gross profit is determined by revenue less direct cost and other ancillary expenses.
(2) Total operating expenses included employee expenses, depreciation and amortization, marketing, advertising and promotion, communication and travelling, office related and other expenses.
CONTACT: Investor Relations Contact MOL Global, Inc. Alvin Tan Tel: +65-6221-5680 Email: IR@mol.com ICR, Inc. Calvin Jiang Tel: +1 (646) 405-4884 Email: IR@mol.com
MOL Global, Inc.