BEIJING, Aug. 10 /PRNewswire-Asia/ -- KongZhong Corporation (Nasdaq: KONG), a leading mobile Internet company in China, today announced its unaudited second quarter 2009 financial results.

Second Quarter 2009 Financial Highlights:

(Note: Unless otherwise indicated, all financial statement amounts used in this press release are based on United States Generally Accepted Accounting Principles (GAAP) and denominated in US dollars)

    -- Revenues exceeded guidance - Total revenues for the Second Quarter of
       2009 ('2Q09') increased 37% year-over-year and increased 9%
       quarter-over-quarter to $32.3 million ('mn'), exceeding the Company's
       2Q09 revenue guidance of $30.5 mn to $31.5 mn.
    -- Gross margin increased - Total gross margin improved to 51% in the 2Q09
       from 49% in the 1Q09.
    -- Net income increased - Net income in 2Q09 was $3.55 mn, a 41% increase
       compared with 1Q09 net income of $2.52 mn.  Basic net income per ADS
       was $0.10 based on 34.71 mn ADS while diluted net income per ADS was
       $0.09 based on 38.53 mn ADS outstanding as of June 30, 2009.
    -- Non-GAAP net income increased - Non-GAAP net income was $4.71 mn and
       Non-GAAP diluted net income per ADS was $0.12  (Non-GAAP Financial
       Measures are described and reconciled to the corresponding GAAP
       measures in the section titled 'Non-GAAP Financial Measures.')
    -- Cash and cash equivalents - As of June 30, 2009, the Company had $132
       mn in cash and cash equivalents.

Commenting on the results, the Company's Chairman and Chief Executive Officer, Leilei Wang, said, 'I'm pleased to report that in the second quarter of 2009, KongZhong continued to grow overall profits driven by strong growth in our mobile games business, while at the same time, we were still able to maintain our long-term investment in Kong.net.

'In 2Q09, KongZhong maintained our leading position in the Chinese mobile game market and further strengthened our internal R&D game development capabilities through the acquisition of Simlife. We believe that Simlife's strong development capabilities, combined with our existing Tianjin Mammoth game development team, will extend our leadership in the Chinese mobile games market.

'We continued to make long-term investments in Kong.net, as we evolved Kong.net into a next-generation 3G mobile portal and social networking service. Although we believe we are still in the early development phase of the 3G market in China, during the quarter we attracted over 500,000 registered users to our first self-developed mobile social game, 'Nong Chang Da Heng' and have plans to launch additional social gaming and other community services over the next year.

'Once again, I'm very pleased with our results for 2Q09. More importantly, I believe KongZhong remains well positioned in the Chinese 3G market for future growth opportunities.'

    Financial Results:
                              For the Three    For the Three   For the Three
                               Months Ended     Months Ended    Months Ended
                                   June 30,        March 31,        June 30,
                                       2008             2009            2009
                             (US$ thousands)  (US$ thousands) (US$ thousands)
    Revenues                        $23,518          $29,586         $32,287
      WVAS                           21,675           23,658          23,925
      Mobile Games                    1,453            4,944           6,802
      Wireless Internet Service         390              984           1,560
    Cost of Revenue                 $12,812          $15,010         $15,733
      WVAS                           11,934           12,470          12,173
      Mobile Games                      600            2,045           2,791
      Wireless Internet Service         278              495             769
    Gross profit                    $10,706          $14,576         $16,554
      WVAS                            9,741           11,188          11,752
      Mobile Games                      853            2,899           4,011
      Wireless Internet Service         112              489             791
    Gross profit ratio                  46%              49%             51%
      WVAS                              45%              47%             49%
      Mobile Games                      59%              59%             59%
      Wireless Internet Service         29%              50%             51%

Revenues

WVAS revenues in 2Q09 increased 10% from 2Q08 and increased 1% from 1Q09 to $23.93 mn. Revenues from 2.5G services accounted for approximately 21% of total WVAS revenues and revenues from 2G services represented the remaining 79% in 2Q09.

Total mobile game revenues in 2Q09 were $6.8 mn, a 368% increase from the same period last year and a 38% increase from 1Q09.

Revenues from downloadable games were $5.04 mn, an increase of 335% from the same period last year and a 19% sequential increase. Revenues from downloadable games continued to perform well due to the overall growth of the mobile game market in China. In addition, as we continued to leverage our relationships with existing distribution partners and develop mobile games tailored for the local market, we were able to maintain our leadership in the Chinese market.

Revenues from our mobile multi-player online games ('MMO') were $1.76 mn, an increase of 497% from the same period last year and a 144% sequential increase. The bulk of these revenues were from 'Tian Jie', one of the most popular mobile MMOs in the China market. The year-over-year and sequential strong performance in mobile MMO was driven by the increased marketing activities and optimized game operations which led to an increase in Tian Jie users and a higher percentage of users purchasing in-game virtual items, compared to previous periods. Our new game, Feng Shen online did not contribute any significant revenues during 2Q09. However, due to a large portion of our mobile MMO users being students, we do not expect similar sequential performance in 3Q09 for our mobile MMO business as we enter the summer holiday season.

In 2Q09, revenues from mobile MMO made up 26% of total mobile game revenues compared to 15% in 1Q09.

Wireless Internet service revenues were $1.56 mn in 2Q09, representing an increase of 300% from the same period last year and an increase of 58% from 1Q09. In 2Q09, 41% of WIS revenues were from wireless advertising with the remaining 59% from premium services on the Kong.net wireless Internet site, including virtual item sales and cross-selling of our mobile game and WVAS services. Previously, wireless Internet services revenues were mainly from wireless advertising.

Gross Profit

Total gross profit was $16.55 mn in 2Q09, a 14% increase compared to 1Q09 and a 55% increase compared to the same period last year. Gross margin increased slightly in 2Q09 to 51% compared with 49% in 1Q09, and with 46% in the same period last year.

WVAS gross profit increased slightly in 2Q09 to $11.75 mn compared to $11.19 mn in 1Q09, a 21% increase compared to the same period last year or $9.74 mn. WVAS gross margin increased slightly in 2Q09 to 49% compared with 47% in 1Q09 and 45% in the same quarter last year.

Mobile games gross profit for 2Q09 was $4.01 mn compared to $2.90 mn in 1Q09 and $0.85 mn in the same period last year, or an increase of 38% and 370% respectively.