The9 Limited Reports Third and Fourth Quarter 2012 Unaudited Financial Results

14 April 2013 10 h 23 min Comments Off

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Shanghai, China – April 17, 2013.The9 Limited (NASDAQ: NCTY) (“The9”), an online game developer and operator, announced its unaudited financial results for the third quarter ended September 30, 2012 and the fourth quarter ended December 31, 2012 today.

 

 Financial Highlights:

 - Net revenues in the second half of 2012 amounted to RMB51.0 million (US$8.2 million), representing a decrease of 51% from RMB103.4 million (US$16.6 million) in the first half of 2012 and a decrease of 7% from RMB55.1 million (US$8.8 million) in the second half of 2011.

 - Net loss attributable to holders of ordinary shares in the second half of 2012 amounted to RMB284.6 million (US$45.7 million), representing an increase of 24% from RMB229.4 million (US$36.8 million) in the first half of 2012 and an increase of 30% from RMB219.7 million (US$35.3 million) in the second half of 2011.

 Management Comments:

Jun Zhu, Chairman and Chief Executive Officer of The9 said, “2012 was a difficult year for the company as we spent most of our resources on product development. I am pleased to announce that we currently plan to launch our three Massively Multiplayer Online games, or MMO games, including Planetside 2, Firefall and QiJi2 between June and September of 2013. We plan to commence the open beta test of Planetside 2 in China on June 25, 2013. The open beta test of Firefall in the U.S. and Europe is expected to commence on July 9, 2013. We also plan to commence the open beta test of QiJi2 in China on September 28, 2013. Our product development team has devoted significant resources to develop these games and we believe the launches of these three MMO games will help bring The9 into a new era. Coupled with our continued commitment to web games, social games and mobile games, we expect to enjoy positive results in the coming years and cement our status as one of the first-tier online game developers in China in 2013.”

Discussion of The9’s Unaudited Third and Fourth Quarter 2012 Results

Net Revenues

Our net revenues in the third quarter of 2012 amounted to RMB32.4 million (US$5.2 million), representing a decrease of 41% from RMB54.8 million (US$8.8 million) in the second quarter of 2012 and an increase of 19% from RMB27.2 million (US$4.4 million) in the third quarter of 2011. The decrease over the previous quarter was primarily due to a decrease in revenue from ShenXianZhuan which recorded a higher level of revenue in the second quarter of 2012. The increase from the third quarter of 2011 was primarily due to an increase in revenue from ShenXianZhuan which was commercially launched in August 2011.

 Our net revenues in the fourth quarter of 2012 amounted to RMB18.6 million (US$3.0 million), representing a decrease of 43% from RMB32.4 million (US$5.2 million) in the third quarter of 2012 and a decrease of 33% from RMB27.9 million (US$4.5 million) in the fourth quarter of 2011. Such decreases were primarily due to a decrease in revenues from ShenXianZhuan and other MMO games during the same periods. In August 2012, due to the weaker-than-expected performance of ShenXianZhuan, we restructured our investments in and deconsolidated Hangzhou Fire Rain Network Technology Co., Ltd.(“Fire Rain”), the developer of ShenXianZhuan.

 Gross Profit (Loss)

 Our gross profit in the third quarter of 2012 amounted to RMB14.8 million (US$2.4 million), representing a decrease of 62% from RMB38.8 million (US$6.2 million) in the second quarter of 2012 and an increase of 9% from RMB13.6 million (US$2.2 million) in the third quarter of 2011. The decrease over the second quarter of 2012 was primarily due to a decrease in net revenue from ShenXianZhuan and an increase of amortization costs related to Firefall upon its small-scale launch in September 2012. The increase over the third quarter of 2011 was primarily due to an increase in net revenue from ShenXianZhuan.

Our gross loss in the fourth quarter of 2012 amounted to RMB1.3 million (US$0.2 million), compared to gross profit of RMB14.8 million (US$2.4 million) in the third quarter of 2012 and gross profit of RMB13.3 million (US$2.1 million) in the fourth quarter of 2011, primarily reflecting a decrease in net revenue from ShenXianZhuan and other MMO games and increase of amortization costs related to Firefall.

 Operating Expenses

 In the third quarter of 2012, our operating expenses were RMB205.0 million (US$32.9 million), representing a 21% increase from RMB168.8 million (US$27.1 million) in the second quarter of 2012 and a 45% increase from RMB141.4 million (US$22.7 million) in the third quarter of 2011. These increases were primarily due to an increase in marketing expenses relating to Firefall and Planetside 2, an increase in product development expenses relating to Firefall and web and mobile games and a loss recorded in the third quarter of 2012 in connection with our restructuring of investments in and termination of certain contractual arrangements with two variable interest entities, namely Fire Rain and Wanyouyl, which primarily engaged in game development and operation activities. As a result of such restructuring, we deconsolidated Fire Rain and Wanyouyl and recorded a loss of RMB18.1 million (US$2.9 million). In the third quarter of 2012, share-based compensation was RMB11.4 million (US$1.8 million), compared to RMB8.9 million (US$1.4 million) in the second quarter of 2012 and RMB10.8 million (US$1.7 million) in the third quarter of 2011.

 In the fourth quarter of 2012, our operating expenses were RMB148.9 million (US$23.9 million), representing a 27% decrease from RMB205.0 million (US$32.9 million) in the third quarter of 2012 and a 6% increase from RMB140.2 million (US$22.5 million) in the fourth quarter of 2011. The decrease over the third quarter of 2012 was primarily due to a decrease in marketing expenses, a decrease in product development expenses relating to mobile game business and the loss recorded in the third quarter of 2012 in connection with our restructuring of investments in and termination of certain contractual arrangements with Fire Rain and Wanyouyl. The increase over the fourth quarter of 2011 was primarily due to an increase in marketing expenses related to Firefall and Planetside 2. In the fourth quarter of 2012, share-based compensation was RMB7.3 million (US$1.2 million), compared to RMB11.4 million (US$1.8 million) in the third quarter of 2012 and RMB10.0 million (US$1.6 million) in the fourth quarter of 2011.

 Interest Income

 Interest income in the third quarter of 2012 was RMB4.9 million (US$0.8 million), compared to RMB6.5 million (US$1.0 million) in the second quarter of 2012 and RMB8.6 million (US$1.4 million) in the third quarter of 2011.Such decreases were primarily due to a decrease in cash balance.

 Interest income in the fourth quarter of 2012 was RMB3.5 million (US$0.6 million), compared to RMB4.9 million (US$0.8 million) in the third quarter of 2012 and RMB7.1 million (US$1.1 million) in the fourth quarter of 2011. Such decreases were also primarily due to a decrease in cash balance.

full press release

About The9 Limited

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 games in mainland China such as Planetside 2. In 2010, The9 established its Mobile Internet Unit to focus on mobile internet business.

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