- 6,500 iDeclare service contracts signed in First Quarter 2007
- Installed customer base increased to 132,200
BEIJING, July 27 /Xinhua-PRNewswire/ -- Ninetowns Internet Technology Group Company Limited (Nasdaq: NINE), China's leading provider of online solutions for international trade, today reported its financial results for the first quarter of 2007.
First Quarter 2007 Business Highlights
Despite the negative impact on the financial results of the Company from the offering of free software by the State Administration for Quality Supervision and Inspection and Quarantine of the People's Republic of China (the "PRC Inspections Administration"), Ninetowns continued to execute on its strategy to transform its business-to-government ("B2G") business from a licensing to a service-based model, and to develop its business-to-business ("B2B") offering by leveraging on the experience, knowledge and customer base of the B2G platform.
Ninetowns maintained the value contribution from its existing B2G client base in the first quarter 2007 through the sale and servicing of its enterprise software products. Ninetowns offers import/export software solutions through its iDeclare products, iDeclare service contracts and free software services. During the quarter, the Company sold 2,200 iDeclare software packages and 6,500 iDeclare service contracts. The installed customer base reached 132,200 and the free import/export e-filing software user base had 30,000 user accounts at the end of the quarter. In addition, the paying iDeclare customer service renewal rate was maintained at a relatively stable level of 23% at the end of the first quarter.
Ninetowns remains focused on developing its B2B business and has been making significant progress on various fronts. In the second quarter, the Company began several major research and development initiatives to build its B2B technology platform, including the acquisition of Ample Spring for its vertical search engine, a partnership with Thomas Industrial Network for catalog solutions, and the launch of tootoo.com, Ninetown's B2B search and service platform. Ninetowns has recently further enhanced its B2B service with the launch of the second generation of tootoo.com. Ninetowns will continue to revitalize its B2G business while leveraging its B2G experience to offer value-added services for the B2B platform.
Financial Results
Total net revenue for the first quarter of 2007 was US$2.8 million, representing a 55.3% decrease compared to US$6.1 million for the first quarter of 2006. Net revenue from sales of enterprise software for the first quarter of 2007 was US$2.4 million, representing 83.5% of total net revenue, as compared to 82.0% for the first quarter of 2006. Net revenue from software development services for the first quarter of 2007 was US$0.4 million, representing 16.5% of total net revenue, as compared to 17.4% for the first quarter of 2006.
Gross profit for the first quarter of 2007 was US$2.5 million, or 88.3% of total net revenue, representing a decrease of 58.3% compared to US$5.8 million, or 94.6% of total net revenue for the first quarter of 2006.
Operating loss for the first quarter of 2007 was (US$1.5) million, representing a decrease compared to an operating income of US$2.4 million for the first quarter of 2006. Loss from operations as a percentage of net revenues for the first quarter of 2007 was (52.0%), compared to an operating margin of 39.6% for the first quarter of 2006.
Net loss for the first quarter of 2007 was (US$0.8) million, representing a decrease compared to net income of US$2.9 million for the first quarter of 2006. Both basic and diluted net loss per ADS/share for the first quarter of 2007 were (US$0.02), compared to both basic and diluted net income per ADS/share of US$0.08 for the first quarter of 2006. Basic net loss per ADS/share computations for the first quarter of 2007 were based on 35.0 million weighted average of ADSs/shares outstanding, compared to 35.0 million in the first quarter of 2006. Diluted net loss per ADS / share computations for the first quarter of 2007 were based on 35.0 million weighted average of ADSs / shares outstanding, compared to 35.7 million in the first quarter of 2006.
The conversion of Renminbi into U.S. dollars in this release, made solely for the convenience of the reader, is based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York as of March 31, 2007, which was RMB7.7232 to US$1.00. Certain comparative figures extracted from the past releases are converted by using the rate as of the respective balance sheet dates. The percentages stated in this press release are calculated based on Renminbi.
Management Commentary
Mr. Shuang Wang, Chief Executive Officer of Ninetowns, said, "In the first quarter of 2007, Ninetowns delivered significant progress on a number of tactical and strategic fronts for our B2G and B2B businesses. Whilst we maintained our leading position in the B2G space with our installed customer base reaching 132,200, and are further encouraged by sustained paying customer renewal rate, we are actively researching and testing the market to develop new bundled pricing packages that better represent our service and support capabilities. This, in conjunction with our efforts to shift our B2G business from a licensing to a service-based model, underpins our efforts to extend our customer base, develop new markets, and expand our product offerings.
Furthermore, as announced in April 2007, subsequent to the first quarter ended March 31, 2007, we closed two major transactions which served as critical building blocks in the development of our B2B strategy. These included the acquisition of Ample Spring, providing us with a unique vertical search engine and capabilities, and our partnership with Thomas Industrial Network, enabling Chinese suppliers to publish detailed product and service information online. On May 9, these developments culminated in the launch of tootoo.com, our leading-edge B2B search and service platform. We are encouraged by our progress to date, and remain committed to our core strategy of leveraging our dominant market position and customer base, maintaining the value of our B2G offerings and generating new revenue streams through our next-generation B2B search platform."
Mr. Tommy Fork, Chief Financial Officer of Ninetowns, said, "Our first quarter results reflect the continuation of the challenging operational environment faced by Ninetowns since the provisioning of free import/export e- filing software by the PRC Inspections Administration. In addition, the first quarter revenue was affected by seasonal factors and a decline in software development revenues. However, R&D expenses declined from US$1.7 million in the fourth quarter of 2006 to US$971,000 in the first quarter of 2007 as the initial R&D activities for the B2B platform have been completed. We maintained a total cash and term deposit balance of US$114.3 million."
Investor Conference Call / Webcast Details
A conference call has been scheduled for 7:00 a.m. in Beijing on July 27, 2007. This will be 7:00 p.m. on July 26, 2007 in New York. During the call, time will be set-aside for analysts and interested investors to ask questions of executive officers.
The call may be accessed by dialing +1-617-213-8833 and the passcode is 48719997. A live webcast of the conference call will be available on our website at http://www.ninetowns.com/english. A replay of the call will be available from 9:00 a.m. Beijing time on July 27, 2007 (9:00 p.m. in New York on July 26, 2007) through 9:00 a.m. on August 3, 2007 in Beijing (9:00 p.m. in New York on August 2, 2007) by telephone at +1-617-801-6888 and through www.ninetowns.com/english. The passcode to access the call replay is 40358138.
About Ninetowns Internet Technology Group Company Limited
Ninetowns (Nasdaq: NINE) is the leading provider of online solutions for international trade, with its key services in automating import/export e- filing, as well as in operating tootoo.com, the leading B2B search and service provider for international trade. Ninetowns has been listed on the NASDAQ Stock Exchange since December 2004 under the symbol "NINE." More information can be found at www.ninetowns.com/english
Forward-Looking Statements
Certain statements in this press release include forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of forward-looking terminology, such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "project" or "continue" or the negative thereof or other similar words. All forward-looking statements involve risks and uncertainties, including, but not limited to, customer acceptance and market share gains, competition from companies that have greater financial resources; introduction of new products into the marketplace by competitors; successful product development; dependence on significant customers; the ability to recruit and retain quality employees as the Company grows; and economic and political conditions globally. Actual results may differ materially from those discussed in, or implied by, the forward-looking statements. The forward-looking statements speak only as of the date of this release and the Company assumes no duty to update them to reflect new, changing or unanticipated events or circumstances.
Contacts:
Ms. Xiaoyan Su or Ms. Lisa Zheng
Investor Relations
Ninetowns Internet Technology Group Company Limited
(+86-10) 6588-2256
ir@ninetowns.com
Investor Relations (HK)
Ruby Yim, Managing Director
Taylor Rafferty
+852 3196-3712
ninetowns@taylor-rafferty.com
Investor Relations (US):
Mahmoud Siddig, Director
Taylor Rafferty
+1 (212) 889-4350
ninetowns@taylor-rafferty.com
Investor Relations (HK):
David Dambro, Director
Taylor Rafferty
+852 3196-3712
ninetowns@taylor-rafferty.com
NINETOWNS INTERNET TECHNOLOGY GROUP COMPANY LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS INFORMATION
THREE MONTHS ENDED MARCH 31, 2006, DECEMBER 31, 2006 AND MARCH 31, 2007
(In thousands, except share-related data)
For the three months ended
Mar 31, Mar 31, Dec 31,
2006 2006 2006
RMB US$ RMB
(unaudited) (unaudited) (unaudited)
Total net revenues 48,792 6,086 35,046
Cost of revenues (2,634) (328) (9,818)
______ ______ ______
Gross profit 46,158 5,758 25,228
Selling expenses (6,824) (851) (2,671)
General and administrative
expenses (15,344) (1,914) (21,240)
Research and development
expenses (4,670) (583) (13,197)
Other operating income - - 47
______ ______ ______
Income (loss) from operations 19,320 2,410 (11,833)
Interest income 4,431 553 5,267
Gain on sale of marketable
equity securities - - -
______ ______ ______
Income (loss) before provision
for income taxes 23,751 2,963 (6,566)
(Provision) benefit for income
taxes (766) (96) 428
______ ______ ______
Net income (loss) 22,985 2,867 (6,138)
______ ______ ______
Net income per share:
Basic RMB 0.66 US$0.08 (RMB 0.18)
Diluted RMB 0.64 US$0.08 (RMB 0.18)
______ ______ ______
Weighted average number of
shares used in computing
net income per share:
Basic 34,991,834 34,991,834 34,773,005
Diluted 35,721,211 35,721,211 34,773,005
_______ _______ _______
For the three months ended
Dec 31, Mar 31, Mar 31,
2006 2007 2007
US$ RMB US$
(unaudited) (unaudited) (unaudited)
Total net revenues 4,491 21,801 2,823
Cost of revenues (1,258) (2,558) (331)
______ ______ ______
Gross profit 3,233 19,243 2,492
Selling expenses (342) (7,491) (970)
General and administrative
expenses (2,722) (15,908) (2,060)
Research and development
expenses (1,691) (7,501) (971)
Other operating income 6 310 40
______ ______ ______
Income (loss) from operations (1,516) (11,347) (1,469)
Interest income 675 4,822 624
Gain on sale of marketable
equity securities - 480 62
______ ______ ______
Income (loss) before provision
for income taxes (841) (6,045) (783)
(Provision) benefit for income
taxes 55 (136) (18)
_____ ______ _____
Net income (loss) (786) (6,181) (801)
______ ______ ______
Net income per share:
Basic (US$0.02) (RMB0.18) (US$0.02)
Diluted (US$0.02) (RMB0.18) (US$0.02)
______ ______ ______
Weighted average number of
shares used in computing
net income per share:
Basic 34,773,005 34,954,753 34,954,753
Diluted 34,773,005 34,954,753 34,954,753
_______ _______ _______
NINETOWNS INTERNET TECHNOLOGY GROUP COMPANY LIMITED
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
AS OF DECEMBER 31, 2006 AND MARCH 31, 2007
(In thousands, except share-related data)
December 31, March 31,
2006 2006 2007 2007
RMB US$ RMB US$
(note) (note) (unaudited)(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
and term deposits 905,857 116,074 882,457 114,261
Investment in available-
for-sale securities - - 3,176 411
Inventories 6,820 874 6,422 832
Trade receivable 47,105 6,036 54,760 7,090
Other current assets 30,207 3,871 27,373 3,544
_______ _______ _______ _______
Total current assets 989,989 126,855 974,188 126,138
Other non-current assets 181,730 23,286 188,790 24,444
Goodwill 193,570 24,804 193,570 25,063
_______ _______ _______ _______
TOTAL ASSETS 1,365,289 174,945 1,356,548 175,645
_______ _______ _______ _______
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Deferred revenue 26,383 3,381 25,675 3,324
Other current liabilities 33,299 4,267 30,780 3,985
_______ _______ _______ _______
Total current liabilities 59,682 7,648 56,455 7,309
Non-current liabilities:
FIN48 liabilities - - 772 100
Deferred tax liabilities 627 80 593 77
_______ _______ _______ _______
Total liabilities 60,309 7,728 57,820 7,486
Total shareholders' equity 1,304,980 167,217 1,298,728 168,159
_______ _______ _______ _______
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 1,365,289 174,945 1,356,548 175,645
_______ _______ _______ _______
Note: The condensed balance sheet information is derived from the
Company's audited financial statements included in the annual
report on Form 20-F.
