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Lenco Mobile Inc. Reports Second Quarter 2011 Financial Results

^{Published on 2011-08-08 19:01:09 - Market Wire}
 

SANTA BARBARA, Calif.--([ BUSINESS WIRE ])--Lenco Mobile Inc. (Pink Sheets:LNCM) today announced financial results for the quarter and six months ended June 30, 2011.

"We believe that the relationship with iLoop Mobile will enable us to leverage our superior technology platform and to begin earning revenue in the United States before the end of the 2011"

Financial and Operations Overview:

Announcing the results, Michael Levinsohn, CEO and President of Lenco Mobile Inc., said aRevenue in our mobile business in the second quarter of 2011, was $2.1 million, a decrease of $200,000 over the same period last year. This decrease is as a result of the unusually high number of public holidays in South Africa during April 2011. Revenue in our mobile business segment was $4.4 million for the first half of 2011 as compared to $3.7 million, for the first half of 2010, an increase of 19%. Current indications are that revenue growth in the mobile business, for the second half of 2011 will exceed the second half of 2010.

aRevenue in our mobile business is currently generated in South Africa and Australia, with Mexico, Colombia, Singapore, Korea, the United States and the United Kingdom all under development.a said Levinsohn. aDuring the second quarter of 2011 we continued to invest time and resources in developing relationships with wireless carriers in these new territories. In order to generate revenue in our mobile business we need connectivity with the wireless carrier and a rate agreement to cover the costs of messages that we transmit. We have successfully secured connectivity with three new carriers and are in advanced negotiations on rate agreements with several prospects in Africa and Asia. Our progress has been slower than anticipated, but we remain very optimistic about our opportunities for revenue growth over the next few months.a

aOur mobile services and solutions segment achieved an operating profit of approximately $200,000 and $750,000 for the three and six months ended June 30, 2011, respectively,a continued Levinsohn. aWhen depreciation and amortization is extracted, the remaining profits for the three and six months ended June 30, 2011 are $400,000 and $1,200,000, respectively. We feel the development investments we are making in the U.S. and other international territories, with stronger average revenues per users than our developed operations, remain sound investments.a

Lenco Mobile recently announced a strategic partnership with iLoop Mobile, a leading San Jose, California based mobile marketing company to bring Lenco Mobilea™s technology solutions to customers in the United States. iLoop Mobilea™s clients include many of the top brands in the United States, such as Microsoft, Coca-Cola, Lexus, Starwood Hotels, Starbucks CNN, Western Union, Warner Bros., General Motors, Deutsche Bank, Acxiom, Experian and E! Entertainment. aWe believe that the relationship with iLoop Mobile will enable us to leverage our superior technology platform and to begin earning revenue in the United States before the end of the 2011,a said Levinsohn.

During the second quarter, Lenco Mobilea™s MMS mobile statement solution was successfully launched to a number of new customers in the financial services, retail and mobile sectors. That service allows businesses to deliver account statements directly to a consumera™s mobile device, saving delivery time and postage costs. The solution has been well received and further commercial deployments are expected soon, both in South Africa and in Asia.

Commenting on the broadcast media business, Levinsohn said aOur broadcast media business is just starting to gain traction in a market segment that offers high growth potential, with more than half of online radio being consumed via mobile devices. We have continued to invest in the business through our wholly-owned subsidiary, Lenco Media and have spent the first half of the year ensuring that our platform is stable and scalable so that we can provide our broadcast partners with the best possible service levels. We currently have one of the largest online audiences in the high growth online entertainment sector. Together with the strong demand levels for our in-stream video ad inventory and our unique value proposition for our broadcast partners, as we roll out to more broadcast partners we expect to see an increase in revenue from our broadcast media business in the second half of 2011. Our RadioLoyaltya" application is now available in the Apple apps store and an Androida" version will be launched soon.a

Updating shareholders on the companya™s plans to move to a major stock exchange, Levinsohn said that there had been progress in recent weeks and the company expects to make a further announcement before the end of September.

Lenco Mobile Inc. recorded net income of $9.1 million in the second quarter of 2011 compared to a net loss of approximately $0.8 million in the second quarter of 2010. The large swing in net income during the second quarter of 2011 as compared to the same period in 2010, came from the reversal of a contingent consideration liability, leading to a gain of $12.2 million. This reversal was recorded based on the companya™s expectation that Lenco Media Inc. would not meet the prescribed revenue targets required to trigger certain earn out payments recorded as contingent consideration liability. The net income for the first half of 2011 was $5.2 million versus a net loss of $0.9 million in the first half of 2010.

Tempering the growth in net income, second quarter 2011 operating expenses were $5.7 million and increased by $2.4 million over the comparable period of 2010. Commenting, Levinsohn said, aThe increase in operating costs resulted from our significant investment into the broadcast media sector, as well as the expansion of our mobile operations in Mexico, Colombia, the UK, Singapore, South Korea and in the U.S. mobile market. We invested an additional $0.4 million over the second quarter of 2010, to advance relationships and connectivity with wireless carriers in these regions. We expect this spending to generate meaningful revenue over the course of 2011 and to form the foundation for revenues 2012. Also driving the increase in second quarter operating expenses was non-cash stock compensation expense of $0.6 million, as well as an increase of $0.9 million in depreciation and amortization from the second quarter of 2010 as compared to 2011.a

At June 30, 2011 the company had cash and cash equivalents of $2.7 million and working capital of $2.1 million. Net cash used in operations for the six month period ended June 30, 2011 was $4.4 million. The company expects significant improvement in our revenues and cash flows from operations during the second half of 2011. Levinsohn stated, aAt this time we do not anticipate that our cash, cash equivalents and short-term investment balances and any cash generated from operations and borrowings will be sufficient to meet our cash requirements. We intend to seek additional capital, through the sale of equity or debt securities, to provide sufficient working capital to continue to our operations and growth.a

SEGMENT INFORMATION

About Lenco Mobile Inc.

Lenco Mobile Inc. is a global developer, owner, and operator of proprietary advertising and technical platforms primarily for the high growth mobile and online marketing sectors. The platforms provide customers, including leading wireless carriers and consumer brands with turnkey solutions to attract, retain and monetize relationships with consumers. Lenco Mobile offers brand owners the ability to design, manage, and execute mobile marketing campaigns through a range of rich media solutions, includingour proprietary MMS messaging solutions, our Build.mobia" mobi site builder, mobile greeting cards, mobile statements, high-volume internet and mobile ad-impression serving, loyalty programs, online support, and search and database marketing. Our solutions provide improved messaging throughput, better quality, and reduced bandwidth usage on a per message basis.Our wholly owned subsidiary Lenco Media Inc. provides products that make internet and mobile broadcasting profitable for broadcasters and advertisers. Lenco Mediaa™s RadioLoyaltya", ReplaceAdsa", UniversalPlayera" and Jetcast® brand streaming products eliminate costs and increase revenue for broadcasters and increase advertisersa™ return on their advertising investment. The Company is headquartered in the U.S. and has operations in South Africa, South Korea, Singapore, Australia, the United Kingdom, Mexico and Colombia.

Forward Looking Statements.

"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements, including expectations concerning the Company's ability to successfully launch its mobile phone products or services in new geographic territories, market acceptance of its new Lenco Media Inc. internet broadcasting business, anticipated trends in financial results, and other financial and business results. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause its actual results, levels of activity, performance or achievements to differ materially from results expressed or implied by this press release. For a discussion of certain risk that may impact the Company's operations see the discussion under "Risk Factors" in the Company's annual report on Form 10-K and other documents filed with the SEC. Neither Lenco Mobile Inc. nor any Company mentioned in this release undertake any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Lenco Mobile Inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law.