SHANGHAI, September 6, 2013 /PRNewswire-FirstCall/ -- The9 Limited (NASDAQ: NCTY) ("The9"), an online game developer and operator, announced its unaudited financial results for the first quarter ended March 31, 2013 and the second quarter ended June 30, 2013 today.
Financial Highlights:
Management Comments:
Jun Zhu, Chairman and Chief Executive Officer of The9 said, "Our net losses in the first and second quarters of 2013 in part reflected our ongoing investments related to the development and upcoming launch of our widely anticipated new games, Firefall and Qiji2. In the second half of 2013, we expect to commence the marketing campaign for Firefall in the U.S. and Europe. We also plan to launch Qiji2 in China in the second half of 2013. We have great expectation for these two games on which we have invested more than $100 million in the past three years."
Discussion of The9's Unaudited First and Second Quarter 2013 Results
Net Revenues
Our net revenues in the first quarter of 2013 amounted to RMB19.9 million (US$3.2 million), representing a 7% increase from RMB18.6 million (US$3.0 million) in the fourth quarter of 2012 and a 59% decrease from RMB48.6 million (US$7.9 million) in the first quarter of 2012. The increase from the previous quarter was primarily due to an increase in net revenues from Firefall close beta testing. The decrease from the first quarter of 2012 was primarily due to a decrease in net revenues from ShenXianZhuan.
Our net revenues in the second quarter of 2013 amounted to RMB26.2 million (US$4.3 million), representing a 32% increase from RMB19.9 million (US$3.2 million) in the first quarter of 2013 and a 52% decrease from RMB54.8 million (US$8.9 million) in the second quarter of 2012. The increase from the previous quarter was primarily due to an increase in net revenues from the games newly launched in the first quarter, including Firefall close beta testing, Planetside2 and ReXueWuShuang (a new web game). The decrease from the first quarter of 2012 was primarily due to a decrease in net revenues from ShenXianZhuan, partially offset by the net revenues from our newly launched games.
Gross Profit (Loss)
Our gross loss in the first quarter of 2013 amounted to RMB0.8 million (US$0.1 million), representing a 38% decrease from RMB1.3 million (US$0.2 million) in the fourth quarter of 2012. We recorded a gross profit of RMB32.8 million (US$5.3 million) in the first quarter of 2012. The decrease from the fourth quarter of 2012 was primarily due to the increase in net revenues from the games newly launched in the first quarter of 2013. We had a gross loss in the first quarter of 2013 compared to a gross profit in the same quarter in 2012, primarily reflected a decrease in net revenues from ShenXianZhuan and an increase of amortization costs related to Firefall in the first quarter of 2013.
Our gross profit in the second quarter of 2013 amounted to RMB3.0 million (US$0.5 million), compared to gross loss of RMB0.8 million (US$0.1 million) in the first quarter of 2013. Such gross profit in the second quarter of 2013 represented a 92% decrease from a gross profit of RMB38.8 million (US$6.3 million) in the second quarter of 2012. The difference between the first two quarters in 2013 reflected the increase in net revenues from the newly launched games. The year-over-year decrease was primarily due to a decrease in net revenues from ShenXianZhuan and an increase of amortization costs related to Firefall.
Operating Expenses
In the first quarter of 2013, our operating expenses were RMB125.4 million (US$20.4 million), representing a 16% decrease from RMB148.9 million (US$24.3 million) in the fourth quarter of 2012 and a 19% decrease from RMB154.9 million (US$25.2 million) in the first quarter of 2012. The decrease from the fourth quarter of 2012 was primarily due to a decrease in marketing expenses related to Firefall and Planetside 2, as well as a decrease in product development expenses related to Firefall, Qiji2 and mobile games. The decrease from the first quarter of 2012 was primarily due to a decrease in marketing expenses related to ShenXianZhuan, as well as a decrease in product development expenses as a result of our disposal of certain research and development entities in the third quarter of 2012. In the first quarter of 2013, our share-based compensation was RMB7.9 million (US$1.3 million), compared to RMB8.2 million (US$1.3 million) in the fourth quarter of 2012 and RMB9.0 million (US$1.5 million) in the first quarter of 2012.
In the second quarter of 2013, our operating expenses were RMB149.4 million (US$24.3 million), representing a 19% increase from RMB125.4 million (US$20.4 million) in the first quarter of 2013 and a 12% decrease from RMB168.8 million (US$27.5 million) in the second quarter of 2012. The increase from the first quarter of 2013 was primarily due to an increase in marketing expenses related to Planetside 2, an increase in product development expenses related to Firefall, Qiji2 and web games, and an increase in share-based compensation. The decrease from the second quarter of 2012 was primarily due to a decrease in marketing expenses related to ShenXianZhuan, as well as a decrease in product development expenses as a result of our disposal of certain research and development entities in the third quarter of 2012. In the second quarter of 2013, our share-based compensation was RMB11.8 million (US$1.9 million), compared to RMB7.9 million (US$1.3 million) in the first quarter of 2013 and RMB8.9 million (US$1.5 million) in the second quarter of 2012.
Interest Income
Our interest income in the first quarter of 2013 was RMB3.6 million (US$0.6 million), compared to RMB3.6 million (US$0.6 million) in the fourth quarter of 2012 and RMB6.8 million (US$1.1 million) in the first quarter of 2012. The decrease from the first quarter of 2012 was primarily due to a decrease in our cash balance.
Our interest income in the second quarter of 2013 was RMB2.2 million (US$0.4 million), compared to RMB3.6 million (US$0.6 million) in the first quarter of 2013 and RMB6.5 million (US$1.1 million) in the second quarter of 2012. Such decreases were primarily due to decreases in our cash balance.
Impairment Loss on Investments
In the second quarter of 2013, we recognized an impairment loss of RMB32.8 million (US$5.3 million) in relation to our investments in several early-stage mobile game and application development companies in the U.S and China.
Net Loss Attributable to Holders of Ordinary Shares
As a result of the foregoing, in the first quarter of 2013, our net loss attributable to holders of ordinary shares was RMB114.1 million (US$18.6 million), representing a 2% decrease from RMB115.9 million (US$18.9 million) in the fourth quarter of 2012 and a 3% increase from RMB111.4 million (US$18.1 million) in the first quarter of 2012. Our fully diluted loss per share and per ADS in the first quarter of 2013 was RMB4.79 (US$0.78), compared to RMB4.73 (US$0.77) in the fourth quarter of 2012 and RMB4.55 (US$0.74) in the first quarter of 2012.
In the second quarter of 2013, our net loss attributable to holders of ordinary shares was RMB167.8 million (US$27.3 million), representing a 47% increase from RMB114.1 million (US$18.6 million) in the first quarter of 2013 and a 42% increase from RMB118.0 million (US$19.2 million) in the second quarter of 2012. Our fully diluted loss per share and per ADS in the second quarter of 2013 was RMB7.34 (US$1.20), compared to RMB4.79 (US$0.78) in the first quarter of 2013 and RMB4.82 (US$0.79) in the second quarter of 2012.
Convenience Currency Translation
The translation of Renminbi (RMB) into US dollars (US$) in this press release is presented solely for the convenience of readers. The translation was made based on the noon buying rate for U.S. dollars in the City of New York for cable transfers in Renminbi as certified for customs purposes by the H.10 weekly statistical release of the Federal Reserve Board as of June 30, 2013, which was RMB 6.1374 to US$1.00. Such translations should not be construed as any representation that the related RMB amounts represent, have been or could be converted into U.S. dollars at that or any other exchange rate. The percentages stated in this press release are calculated based on the RMB amounts.
Conference Call / Webcast Information
The9's management team will host a conference call on Thursday, September 5, 2013 at 9:00 PM, U.S. Eastern Time, corresponding to Friday, September 6, 2013 at 9:00 AM, Beijing Time, to present an overview of The9's financial performance and business operations.
Investors, analysts and other interested parties will be able to access the live conference by calling:
US Toll Free: | +1-866-519-4004 |
Mainland China (mobile users): | 400-620-8038 |
Mainland China (fixed line users): | 800-819-0121 |
Hong Kong Toll: | +852-2475-0994 |
International Toll: | +65-6723-9381 |
Passcode: | 32285426 |
A digital recording of the conference will be available for replay from 12:00 AM ET on September 6, 2013 for 7 days.
The dial-in details for the replay are:
U.S. Toll Free: | +1-855-452-5696 |
International Toll: | +1-646-254-3697 |
Passcode: | 32285426 |
The9 will also provide a live webcast of the earnings call. Participants in the webcast may log onto the Company's Investor Relations website http://www.corp.the9.com 15 minutes prior to the call, then click on the icon for "The9 Limited 1Q & 2Q 2013 Earnings Conference Call" and follow the instructions.
About The9
The9 Limited is an online game developer and operator. The9 develops and operates, directly or through its affiliates, its proprietary MMO games including Firefall and Qiji2. The9 also develops and operates web games and social games including ReXueWuShuang and Winning Dunk. The9 has also obtained exclusive licenses to operate other MMO games in mainland China such as Planetside 2. In 2010, The9 established its Mobile Internet Unit to focus on mobile internet business.
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" and similar statements. Among other things, the business outlook and quotations from management in this press release contain forward-looking statements. The9 may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., 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 The9's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, political and economic policies of the Chinese government, the laws and regulations governing the online game industry, information disseminated over the Internet and Internet content providers in China, intensified government regulation of Internet cafes, The9's ability to retain existing players and attract new players, license, develop or acquire additional online games that are appealing to users, anticipate and adapt to changing consumer preferences and respond to competitive market conditions, and other risks and uncertainties outlined in The9's filings with the U.S. Securities and Exchange Commission, including its annual reports on Form 20-F. The9 does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
For further information, please contact:
Ms. Phyllis Sai
Manager, Investor Relations
The9 Limited
Tel: +86 (21) 5172-9990
Email: IR@corp.the9.com
Website: http://www.corp.the9.com/
- Tables follow -
THE9 LIMITED | ||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||||
(Expressed in Renminbi - RMB and US Dollars - US$, except share data) | ||||||||||||||
Quarter ended | ||||||||||||||
March 31, 2012 | June 30, 2012 | December 31, 2012 | March 31, 2013 | June 30, 2013 | March 31, 2013 | June 30, 2013 | ||||||||
RMB | RMB | RMB | RMB | RMB | US$ | US$ | ||||||||
Revenues: | ||||||||||||||
Online game services | 51,591,154 | 57,422,981 | 15,480,802 | 18,853,262 | 23,862,119 | 3,071,865 | 3,887,985 | |||||||
Other revenues | 527,388 | 716,506 | 3,813,959 | 1,530,828 | 2,895,626 | 249,426 | 471,800 | |||||||
52,118,542 | 58,139,487 | 19,294,761 | 20,384,090 | 26,757,745 | 3,321,291 | 4,359,785 | ||||||||
Sales Taxes | (3,510,585) | (3,343,719) | (706,456) | (492,703) | (583,489) | (80,279) | (95,071) | |||||||
Net Revenues | 48,607,957 | 54,795,768 | 18,588,305 | 19,891,387 | 26,174,256 | 3,241,012 | 4,264,714 | |||||||
Cost of Services | (15,817,867) | (16,045,323) | (19,921,262) | (20,720,433) | (23,169,282) | (3,376,093) | (3,775,097) | |||||||
Gross Profit (loss) | 32,790,090 | 38,750,445 | (1,332,957) | (829,046) | 3,004,974 | (135,081) | 489,617 | |||||||
Operating Expenses: | ||||||||||||||
Product development | (69,261,659) | (78,253,825) | (68,702,039) | (53,510,806) | (59,174,437) | (8,718,806) | (9,641,614) | |||||||
Sales and marketing | (48,703,335) | (44,795,100) | (41,084,956) | (29,319,993) | (37,689,001) | (4,777,266) | (6,140,875) | |||||||
General and administrative | (36,952,477) | (45,156,943) | (39,068,639) | (42,530,459) | (52,504,655) | (6,929,719) | (8,554,869) | |||||||
Impairment of equipment and intangible assets | - | (569,139) | - | - | - | - | - | |||||||
- | ||||||||||||||
Total operating expenses | (154,917,471) | (168,775,007) | (148,855,634) | (125,361,258) | (149,368,093) | (20,425,791) | (24,337,358) | |||||||
Other operating Income | 30,000 | 30,000 | 30,000 | 30,000 | 34,628 | 4,888 | 5,642 | |||||||
Loss from operations | (122,097,381) | (129,994,562) | (150,158,591) | (126,160,304) | (146,328,491) | (20,555,984) | (23,842,099) | |||||||
Interest income, net | 6,771,491 | 6,517,258 | 3,548,297 | 3,561,357 | 2,209,606 | 580,271 | 360,023 | |||||||
Other (expenses) income, net | 875,783 | 1,621,895 | 2,258,930 | 144,567 | 2,171,902 | 23,555 | 353,880 | |||||||
Loss before gain on investment disposal, | (114,450,107) | (121,855,409) | (144,351,364) | (122,454,380) | (141,946,983) | (19,952,158) | (23,128,196) | |||||||
Gain on investment disposal | - | - | 15,725,792 | - | - | - | - | |||||||
Impairment loss on investments | - | - | - | - | (32,789,319) | - | (5,342,542) | |||||||
Share of loss in equity investments | (1,856,783) | (2,521,100) | (31,544) | (920,541) | (1,043,738) | (149,989) | (170,062) | |||||||
Net loss | (116,306,890) | (124,376,509) | (128,657,116) | (123,374,921) | (175,780,040) | (20,102,147) | (28,640,800) | |||||||
Less: Net loss attributable to noncontrolling interest | (4,953,916) | (6,356,698) | (12,766,951) | (9,280,345) | (7,973,642) | (1,512,097) | (1,299,189) | |||||||
Net loss attributable to | (111,352,974) | (118,019,811) | (115,890,165) | (114,094,576) | (167,806,398) | (18,590,050) | (27,341,611) | |||||||
Net loss | (116,306,890) | (124,376,509) | (128,657,116) | (123,374,921) | (175,780,040) | (20,102,147) | (28,640,800) | |||||||
Other Comprehensive loss: | ||||||||||||||
Unrealized loss on available-for-sale investments | - | - | (56,600) | (16,600) | - | (2,705) | - | |||||||
Currency translation adjustments | (41,316) | (111,701) | (1,830,684) | 121,010 | (1,727,211) | 19,717 | (281,424) | |||||||
Comprehensive loss | (116,348,206) | (124,488,210) | (130,544,400) | (123,270,511) | (177,507,251) | (20,085,135) | (28,922,224) | |||||||
Less: Comprehensive loss attributable to | (4,953,109) | (6,374,414) | (12,621,017) | (9,196,148) | (7,356,438) | (1,498,378) | (1,198,625) | |||||||
Comprehensive loss attributable to holders of | (111,395,097) | (118,113,796) | (117,923,383) | (114,074,363) | (170,150,813) | (18,586,757) | (27,723,599) | |||||||
Net loss attributable to holders of ordinary | ||||||||||||||
- Basic and diluted | (4.55) | (4.82) | (4.73) | (4.79) | (7.34) | (0.78) | (1.20) | |||||||
Weighted average number of shares outstanding | ||||||||||||||
- Basic and diluted | 24,459,891 | 24,474,211 | 24,518,298 | 23,838,496 | 22,850,083 | 23,838,496 | 22,850,083 | |||||||
THE9 LIMITED | ||||||||||
UNAUDITED CONSOLIDATED BALANCE SHEETS INFORMATION | ||||||||||
(Expressed in Renminbi - RMB and US Dollars - US$) | ||||||||||
As at | ||||||||||
December 31, 2012 | March 31, 2013 | June 30, 2013 | March 31, 2013 | June 30, 2013 | ||||||
RMB | RMB | RMB | US$ | US$ | ||||||
Assets | ||||||||||
Current Assets | ||||||||||
Cash and cash equivalents | 554,278,809 | 432,629,134 | 321,210,487 | 70,490,621 | 52,336,574 | |||||
Short term investment | 877,350 | 279,150 | 55,830 | 45,483 | 9,097 | |||||
Accounts receivable | 15,621,678 | 19,437,139 | 19,990,552 | 3,166,999 | 3,257,169 | |||||
Due from related parties | - | - | 163,863 | - | 26,699 | |||||
Advances to suppliers | 2,094,525 | 3,079,581 | 6,364,475 | 501,773 | 1,036,999 | |||||
Prepayments and other current assets | 76,022,204 | 49,836,458 | 55,009,071 | 8,120,125 | 8,962,927 | |||||
Prepaid royalties | 14,820,331 | 14,781,163 | 12,051,430 | 2,408,375 | 1,963,605 | |||||
Deferred costs | 900,961 | 834,692 | 2,493,128 | 136,001 | 406,219 | |||||
Total current assets | 664,615,858 | 520,877,317 | 417,338,836 | 84,869,377 | 67,999,289 | |||||
Restricted cash | 737,959 | 737,959 | 700,000 | 120,240 | 114,055 | |||||
Investments in equity investees | 76,017,792 | 80,245,745 | 52,674,765 | 13,074,876 | 8,582,586 | |||||
Available-for-sale investments | 6,285,500 | 6,268,900 | - | 1,021,426 | - | |||||
Property, equipment and software | 64,575,315 | 62,002,915 | 60,630,081 | 10,102,473 | 9,878,789 | |||||
Goodwill | 10,011,247 | 9,984,807 | 9,841,141 | 1,626,879 | 1,603,471 | |||||
Intangible assets | 155,049,811 | 149,080,004 | 143,147,821 | 24,290,417 | 23,323,854 | |||||
Land use right | 74,115,115 | 73,634,888 | 73,154,660 | 11,997,733 | 11,919,487 | |||||
Other long-term assets | 60,936,775 | 51,305,441 | 50,207,883 | 8,359,475 | 8,180,644 | |||||
Total Assets | 1,112,345,372 | 954,137,976 | 807,695,187 | 155,462,896 | 131,602,175 | |||||
Liabilities and Shareholders' Equity | ||||||||||
Current Liabilities | ||||||||||
Accounts payable | 54,947,197 | 41,236,041 | 55,715,695 | 6,718,813 | 9,078,062 | |||||
Other taxes payable | 4,148,647 | 2,681,563 | 4,369,145 | 436,922 | 711,889 | |||||
Advances from customers | 17,878,053 | 19,502,390 | 17,813,636 | 3,177,631 | 2,902,473 | |||||
Deferred revenue | 20,255,327 | 23,711,065 | 30,035,379 | 3,863,373 | 4,893,828 | |||||
Refund of game points | 169,998,682 | 169,998,682 | 169,998,682 | 27,698,811 | 27,698,811 | |||||
Other payables and accruals | 50,484,656 | 42,607,932 | 45,814,808 | 6,942,342 | 7,464,856 | |||||
Total current liabilities | 317,712,562 | 299,737,673 | 323,747,345 | 48,837,892 | 52,749,919 | |||||
Long-term accounts payable | 39,912,925 | 39,807,515 | 39,234,745 | 6,486,055 | 6,392,731 | |||||
Deferred tax liabilities, non-current | 5,508,341 | 5,493,793 | 5,414,746 | 895,134 | 882,254 | |||||
Total Liabilities | 363,133,828 | 345,038,981 | 368,396,836 | 56,219,081 | 60,024,904 | |||||
Equity | ||||||||||
Common shares (US$0.01 par value; 24,484,634 shares issued and outstanding as of December 31, 2012, 23,080,797 shares issued and outstanding as of March 31, 2013, 22,830,431 shares issued and outstanding as of June 30, 2013) | 1,997,390 | 1,882,919 | 1,862,254 | 306,794 | 303,427 | |||||
Additional paid-in capital | 2,148,416,134 | 2,131,822,657 | 2,139,927,380 | 347,349,473 | 348,670,020 | |||||
Statutory reserves | 28,071,982 | 28,071,982 | 28,071,982 | 4,573,921 | 4,573,921 | |||||
Accumulated other comprehensive loss | (6,710,971) | (6,690,758) | (9,035,173) | (1,090,162) | (1,472,150) | |||||
Accumulated deficit | (1,386,308,302) | (1,500,402,878) | (1,668,209,276) | (244,468,811) | (271,810,422) | |||||
The9 Limited shareholders' equity | 785,466,233 | 654,683,922 | 492,617,167 | 106,671,215 | 80,264,796 | |||||
Noncontrolling interests | (36,254,689) | (45,584,927) | (53,318,816) | (7,427,400) | (8,687,525) | |||||
Total equity | 749,211,544 | 609,098,995 | 439,298,351 | 99,243,815 | 71,577,271 | |||||
Total liabilities and equity | 1,112,345,372 | 954,137,976 | 807,695,187 | 155,462,896 | 131,602,175 | |||||
