SHANGHAI, March 21, 2012 /PRNewswire-Asia-FirstCall/ -- The9 Limited NCTY ("The9"), an online game developer and operator, announced its unaudited financial results for the third quarter ended September 30, 2011 and the fourth quarter ended December 31, 2011 today.

Financial Highlights:

• Net revenues in the second half of 2011 amounted to RMB55.1 million (US$8.7 million), representing an increase of 7% from the first half of 2011 and a slight decrease of 1% from the second half of 2010.
• Net revenues for the fiscal year 2011 amounted to RMB106.4 million (US$16.9 million), representing an increase of 3% from the fiscal year 2010.
• Net loss attributable to holders of ordinary shares in the second half of 2011 amounted to RMB219.7 million (US$34.9 million), representing an increase of 240% from the first half of 2011 and a decrease of 39% from the second half of 2010.
• Net loss attributable to holders of ordinary shares for the fiscal year 2011 amounted to RMB284.3 million (US$45.2 million), representing a decrease of 43% from the fiscal year 2010.

Management Comments:

Commenting on the results of the second half and fiscal year of 2011, Jun Zhu, Chairman and Chief Executive Officer of The9 said, "In 2011, we are still undergoing the strategic transition from a domestic online game operator to an international online game developer and operator with diversified platforms. In the second half of 2011, we further strengthened our MMORPG and web and social game pipeline by following our strategy of focusing on games with the highest quality. Among our robust game pipeline, Firefall, a revolutionary next-generation triple-A title MMOFPS game, will be presented to online gaming enthusiasts worldwide."

Discussion of The9's Unaudited Third and Fourth Quarter 2011 Results

Net Revenues

Our net revenues in the third quarter of 2011 amounted to RMB27.2 million (US$4.3 million), representing an increase of 6% from RMB25.5 million (US$4.1 million) in the second quarter of 2011 and an increase of 2% from RMB26.6 million (US$4.2 million) in the third quarter of 2010. These increases were primarily due to an increase in net revenues from our TV game platform and overseas licensing operations.

Our net revenues in the fourth quarter of 2011 amounted to RMB27.9 million (US$4.4 million), representing an increase of 3% from RMB27.2 million (US$4.3 million) in the third quarter of 2011 and a decrease of 3% from RMB28.8 million (US$4.6 million) in the fourth quarter of 2010. The increase from the third quarter of 2011 was primarily due to an increase in net revenues from ShenXianZhuan. The year-over-year decrease was primarily due to a decrease in net revenues from our then operating MMORPGs.

Gross Profit

Our gross profit in the third quarter of 2011 amounted to RMB13.6 million (US$2.2 million), representing an increase of 8% from RMB12.7 million (US$2.0 million) in the second quarter of 2011 and an increase by 17 times compared to RMB0.8 million (US$0.1 million) in the third quarter of 2010. The year-over-year increase in gross profit in the third quarter was primarily due to a decrease in royalties, as we have more games in our games portfolio developed in-house compared to last year.

Our gross profit in the fourth quarter of 2011 amounted to RMB13.3 million (US$2.1 million), representing a decrease of 3% from RMB13.6 million (US$2.2 million) in the third quarter of 2011 and an increase by 7 times from RMB1.6 million (US$0.3 million) in the fourth quarter of 2010. The year-over-year increase in gross profit in the fourth quarter of 2011 was primarily due to a decrease in royalties, as we have more games in our games portfolio developed in-house compared to last year.

Operating Expenses

In the third quarter of 2011, our operating expenses were RMB141.4 million (US$22.5 million), representing a 37% increase from RMB103.6 million (US$16.5 million) in the second quarter of 2011 and a 79% increase from RMB79.0 million (US$12.6 million) in the third quarter of 2010. The increase in operating expenses was mainly due to an increase in marketing expenses relating to Chinajoy game exhibition and our online game promotion efforts, as well as an increase in development expenses, including those incurred by Red5 Studios, Inc.

In the third quarter of 2011, share-based compensation was RMB10.8 million (US$1.7 million), compared to RMB16.1 million (US$2.6 million) in the second quarter of 2011 and RMB2.1 million (US$0.3 million) in the third quarter of 2010.

In the fourth quarter of 2011, our operating expenses were RMB140.2 million (US$22.3 million), representing a 1% decrease from RMB141.4 million (US$ 22.5 million) in the third quarter of 2011 and an 18% increase from RMB118.7 million (US$18.9 million) in the fourth quarter of 2010. The increase from the fourth quarter of 2010 was primarily due to an increase in marketing expenses for Firefall and G-star game exhibition in Korea, an increase in development expenses due to the increased research and development headcount and an increase in general and administrative expenses as a result of our establishment of overseas offices and increased share-based compensation.

In the fourth quarter of 2011, share-based compensation was RMB10.0 million (US$1.6 million), compared to RMB10.8 million (US$1.7 million) in the third quarter of 2011 and RMB8.4 million (US$1.3 million) in the fourth quarter of 2010.

Other Operating Income

As a result of non-renewal of WoW license in 2009, we announced a refund plan for the unactivated WoW game point cards, which we recorded as advance from customers in September 2009.  The legal liability relating to the unactivated WoW game point cards was extinguished in September 2011 under applicable laws and the associated liability amounting to RMB26.0 million (US$4.1 million) was recognized as other operating income for the year ended December 31, 2011.

Interest Income

Interest income in the third quarter of 2011 was RMB8.6 million (US$1.4 million), compared to RMB7.5 million (US$1.2 million) in the second quarter of 2011 and RMB5.6 million (US$0.9 million) in the third quarter of 2010. Such increase was due to an increase in bank interest rate.

Interest income in the fourth quarter of 2011 was RMB7.1 million (US$1.1 million), compared to RMB8.6 million (US$1.4 million) in the third quarter of 2011 and RMB5.8 million (US$0.9 million) in the fourth quarter of 2010. The decrease from the third quarter of 2011 was due to a decrease of cash balance and the increase from the fourth quarter of 2010 was due to an increase in bank interest rate.

Other (Expenses) Income, net

Other expenses in the third quarter of 2011 was RMB5.7 million (US$0.9 million), compared to other income of RMB6.7 million (US$1.1million) in the second quarter of 2011 and other expenses of RMB0.1 million (US$0.02 million) in the third quarter of 2010. Other expenses in the third quarters of 2010 and 2011 primarily represented the foreign exchange loss. Other income in the second quarter of 2011 primarily represented the income from a one-off settlement fee.

Other expenses in the fourth quarter of 2011 was RMB0.8 million (US$0.1 million), compared to other expenses of RMB5.7 million (US$0.9 million) in the third quarter of 2011 and other income of RMB22.6 million (US$3.6 million) in the fourth quarter of 2010. The decrease from the third quarter of 2011 was primarily due to a decrease of foreign exchange loss. Other income in the fourth quarter of 2010 mainly represented a government subsidy of RMB23.0 million (US$3.6 million).

Gain on Investment Disposal

In the fourth quarter of 2011, we reversed RMB15.7 million (US$2.5 million) from the gain on investment disposal. In April 2011, we disposed of our equity interest in OpenFeint Inc. and recognized a gain on investment disposal with a total amount of RMB60.1 million in the second quarter of 2011. As a result of third parties' claims against OpenFeint Inc. and our potential indemnification obligations to the buyer of OpenFeint Inc., we made a provision of RMB15.7 million on the receivable from the disposal withheld in an escrowed account established to secure our indemnification obligations and reversed the gain on investment disposal accordingly.

Net (Loss) Income attributable to holders of ordinary shares

In the third quarter of 2011, net loss attributable to holders of ordinary shares was RMB93.7 million (US$14.9 million), representing a 678% increase from RMB12.0 million (US$1.9 million) in the second quarter of 2011 and a 37% increase from RMB68.5 million (US$10.9 million) in the third quarter of 2010.

Fully diluted loss per share and per ADS in the third quarter of 2011 was RMB3.74 (US$0.59), compared to RMB0.48 (US$0.08) in the second quarter of 2011 and RMB2.73 (US$0.43) in the third quarter of 2010.

In the fourth quarter of 2011, net loss attributable to holders of ordinary shares was RMB126.0 million (US$20.0 million), representing a 35% increase from RMB93.7 million (US$14.9 million) in the third quarter of 2011 and a 56% decrease from RMB289.5 million (US$46.0 million) in the fourth quarter of 2010.

Fully diluted loss per share and per ADS for the fourth quarter of 2011 was RMB5.14 (US$0.82), compared to RMB3.74 (US$0.59) in the third quarter of 2011 and RMB11.52 (US$1.83) in the fourth quarter of 2010.

Currency Convenience Translation

The conversion of Renminbi (RMB) into US dollars (US$) in this press release is based on the noon buying rate in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the H.10 weekly statistical release of the Federal Reserve Board as of December 31, 2011, which was RMB 6.2939 to US$1.00. The percentages stated in this press release are calculated based on the RMB amounts.

Form 20-F

The9 will file its annual report on Form 20-F for the fiscal year ended December 31, 2011 with the U.S. Securities and Exchange Commission on or about March 22, 2011, U.S. Eastern Time. The annual report may be accessed in the Investor Relations section of the The9's website at http://www.corp.the9.com. Upon request, The9 will provide a hard copy of its annual report to its shareholders free of charge. Requests should be made to The9 Limited, No. 3 Building, No. 690, Bibo Road, Pu Dong New Area, Shanghai 201203, People's Republic of China.

Conference Call / Webcast Information

The9's management team will host a conference call on Wednesday, March 21, 2012 at 9:00 PM, U.S. Eastern Time, corresponding to Thursday, March 22, 2012 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:

A telephone replay of the call will be available from 12:00am ET on March 22, 2012 for 7 days.

The dial-in details for the replay are:

The9 will also provide a live webcast of the earnings call. Participants in the webcast should 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 3Q & 4Q 2011 Earnings Conference Call" and follow the instructions.

About The9 Limited

The9 Limited is an online game developer and operator. The9 operates, directly or through its affiliates, its proprietary massively multiplayer online role playing games, or MMORPGs, and web and social games including ShenXianZhuan, World of Fighter, Winning Goal and Q Jiang San Guo, as well as licensed MMORPGs, including Soul of The Ultimate Nation™, Atlantica and Kingdom Heroes 2 Online, in mainland China. The9 is developing various proprietary games, including FireFall, Era Zero and other MMORPGs and web and social games. In addition, it has obtained exclusive licenses to operate various other games in mainland China, including Seoyugi, Rosh, Free Realms and Planetside 2. The9 also commenced its mobile internet business operations and launched The9 Game Zone, a mobile social gaming platform in China which is powered by OpenFeint.

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/

 

 

SOURCE The9 Limited