2007'02.16.Fri
The9 Limited Reports Fourth Quarter and Fiscal Year 2006 Unaudited Financial Results
February 15, 2007
SHANGHAI, China, Feb. 15 /Xinhua-PRNewswire/ -- The9
Limited (Nasdaq: NCTY)("The9"), a leading online
game operator in China, today announced its unaudited
financial results for the fourth quarter and fiscal year
ended December 31, 2006.
Fourth Quarter 2006 Financial Highlights:
-- Net revenues for the fourth quarter of 2006
increased by 21% quarter-
over-quarter and 33% year-over-year to RMB282.7
million (US$36.2
million).
-- Net revenues attributable to the operations of
Blizzard
Entertainment(R)'s World of Warcraft(R)
("WoW")(1), which included
revenues from game playing time, merchandise and
installation package
sales, increased by 22% quarter-over-quarter and 33%
year-over-year to
RMB281.4 million (US$36.1 million) in the fourth
quarter of 2006.
-- Net income for the fourth quarter of 2006 was
RMB105.1 million (US$13.5
million), a 63% increase from RMB64.3 million
(US$8.2 million) in the
third quarter of 2006, and a 54% increase from
RMB68.3 million (US$8.8
million) in the fourth quarter of 2005. Excluding a
financial subsidy
of RMB19.8 million (US$2.5 million) received from
the local government
in the fourth quarter of 2006, net income for the
fourth quarter of
2006 increased by 33% from the previous quarter.
-- EBITDA (non-GAAP) was RMB146.6 million (US$18.8
million) in the fourth
quarter of 2006, a quarter-over-quarter increase of
39% from RMB105.4
million (US$13.5 million) in the third quarter of
2006, and a year-
over-year increase of 35% from RMB 108.9 (US$14.0
million) in the
fourth quarter of 2005.
-- Fully diluted earnings per share (one American
Depositary Share "ADS"
represents one ordinary share) were RMB4.25
(US$0.54) for the fourth
quarter of 2006, compared with RMB2.61 (US$0.33) for
the third quarter
of 2006, and RMB2.82 (US$0.36) for the fourth
quarter of 2005. Fully
diluted EBITDA (non-GAAP) per share were RMB5.93
(US$0.76) for the
fourth quarter of 2006, compared with RMB4.28
(US$0.55) for the third
quarter of 2006 and RMB4.50 (US$0.58) for the fourth
quarter of 2005.
Fiscal Year 2006 Financial Highlights:
-- Net revenues for the fiscal year 2006 increased by
112% year-over-year
to RMB985.8 million (US$126.3 million) from RMB465.0
million (US$59.6
million) for the fiscal year 2005.
-- Net income for the fiscal year 2006 was RMB312.5
million (US$40.0
million), a 331% increase year-over-year from
RMB72.5 million (US$9.3
million) for the fiscal year 2005. Excluding
financial subsidies of
RMB31.0 million (US$4.0 million) and RMB13.4 million
(US$1.7 million)
received from the local government in fiscal year
2006 and 2005
respectively, net income for fiscal year 2006
increased by 376% from
fiscal year 2005.
-- EBITDA (non-GAAP) was RMB476.3 million (US$61.0
million) for fiscal
year 2006, compared with EBITDA (non-GAAP) of
RMB151.6 million (US$19.4
million) for fiscal year 2005.
-- Fully diluted earnings per share were RMB12.72
(US$1.63) and EBITDA
(non-GAAP) per share were RMB19.39 (US$2.48) for the
fiscal year 2006,
compared with fully diluted earnings per share
RMB2.92 (US$0.37) and
fully diluted EBITDA (non-GAAP) per share RMB6.11
(US$0.78) for the
fiscal year 2005.
Management Comments:
Commenting on the fourth quarter 2006 results, Jun Zhu,
Chairman and Chief Executive Officer of The9 said, "We
are very pleased to report record revenues and earnings for
our fourth quarter and fiscal year 2006. In the fourth
quarter of 2006, Blizzard Entertainment's World of Warcraft
game attained peak and average concurrent users of over
680,000 and 340,000, respectively, in mainland China. As
of December 31, 2006, approximately 6.8 million paid
accounts had been activated(2).
In addition to the World of Warcraft, which continues
to experience steady growth, two of our new games, Guild
Wars and Soul of The Ultimate Nation(TM) are currently in
limited open beta testing and close beta testing
respectively. In addition, to date in 2007, we have
obtained exclusive licenses to operate in mainland China
Ragnarok Online 2 and Emil Chronicle Online, two
cartoon-style massively multiplayer online role playing
games, and Huxley, a highly-rated massively multiplayer
online first-person shooting game. Entering 2007, we
believe The9 possesses one of the strongest and most
diversified game portfolios in the China online game
industry. With our strong pipeline of games, The9 will
continue to leverage its solid operating capabilities to
deliver multiple high-caliber games in the mainland China
market and will provide fulfilling and exciting
entertainment to Chinese online game players."
Hannah Lee, Vice President and Chief Financial Officer,
commented, "We are encouraged to see Blizzard
Entertainment's World of Warcraft game resumed strong
growth momentum in the fourth quarter of 2006, proving that
the strategy in the third quarter of 2006, such as merging
servers and opening new server sites, were worthwhile
investments for the WoW game. In the meantime, several of
our new games are being prepared for the Chinese market.
We expect the year 2007 will be an even more exciting year
as we plan to roll out the highly anticipated expansion
pack for World of Warcraft: The Burning Crusade(TM), to
introduce multiple high-caliber games to the mainland China
market, and to further enhance and diversify our product
pipeline. Executing on our strategy, we will continue to
leverage The9's leading market position as well as
operational experiences and strengths to drive long-term
sustainable shareholder value."
(1) World of Warcraft and Blizzard Entertainment are
trademarks or
registered trademarks of Blizzard Entertainment,
Inc. in the U.S.
and/or other countries.
(2) Activated paid accounts represent the number of CD
Keys that we sold
to customers and have been activated by customers
to log-on to
Blizzard Entertainment's World of Warcraft game in
China.
Discussion of The9's Fourth Quarter and Fiscal Year
2006 Results (Preliminary Unaudited)
Revenues
For the fourth quarter of 2006, The9 reported net
revenues of RMB282.7 million (US$36.2 million), a 21%
increase from the third quarter of 2006 and 33% increase
from the fourth quarter of 2005. For fiscal year 2006, net
revenues increased by 112% to RMB985.8 million (US$126.3
million) from RMB 465.0 million (US$59.6 million) in fiscal
year 2005.
The substantial year-over-year revenue increase is
primarily the result of The9 commencing commercial
operation of Blizzard Entertainment's World of Warcraft
game in mainland China in June 2005. In fiscal year 2005,
approximately seven months of revenues from WoW was
recorded, whereas in fiscal year 2006, WoW was in full year
operations. For the fourth quarter and fiscal year 2006,
net revenues attributable to the operations of WoW,
including game playing time, merchandise sales and other
related revenues, were RMB281.4 million (US$36.1 million)
and RMB977.6 million (US$125.3 million), respectively.
For the fourth quarter of 2006, online game services
gross revenues were RMB296.7 million (US$38.0 million), a
23% increase from the third quarter of 2006 and 34%
increase from the fourth quarter of 2005. For fiscal year
2006, these revenues were RMB1,028.0 million (US$131.7
million), compared with RMB466.6 million (US$59.8 million)
in fiscal year 2005.
For the fourth quarter of 2006, gross revenues from
game operating support, website solutions and
advertisement, were RMB0.5 million (US$0.06 million), a
decrease of 81% from the previous quarter and 44% from the
same period of last year. For fiscal year 2006, these
revenues were RMB4.8 million (US$0.6 million), a decrease
of 21% from RMB6.1 million (US$0.8 million) in fiscal year
2005. The decrease in these revenues was mainly due to the
decline in revenues of the MU game.
Other gross revenues mainly included sales of WoW
related merchandise and installation packages. For the
fourth quarter of 2006, other gross revenues decreased to
RMB0.6 million (US$0.08 million) from RMB1.9 million
(US$0.2 million) in the third quarter of 2006 and RMB1.8
million (US$0.2 million) in the fourth quarter of 2005.
For fiscal year 2006, other gross revenues decreased by 66%
to RMB5.6 million (US$0.7 million) from RMB16.6 million
(US$2.1 million) in fiscal year 2005, primarily due to a
decrease of sales of WoW installation packages in fiscal
year 2006 compared to such sales in fiscal year 2005, when
more installation packages were sold with the
commercialization of the WoW game in June 2005.
Gross Profit
Gross profit for the fourth quarter of 2006 increased
by 25% quarter-over-quarter and 38% year-over-year to
RMB134.7 million (US$17.3 million), mainly due to increased
revenues. Gross profit margin increased to 48% for the
fourth quarter of 2006 from 46% in both the previous
quarter and the same period of last year. The sequential
improvement in gross profit margin was mainly because of
increased player usage and utilization of server capacities
in the fourth quarter of 2006 following the completion of
planned server merges and opening of a new server site in
the third quarter of 2006.
For fiscal year 2006, gross profit increased by 106% to
RMB461.8 million (US$59.2 million) from RMB224.6 million
(US$28.8 million) in fiscal year 2005. The year-over-year
increase of gross profit was primarily due to full year
revenue contribution from operations of Blizzard
Entertainment's World of Warcraft in fiscal year 2006
versus only approximately seven months of revenue
contribution in fiscal year 2005. Gross profit margin for
fiscal year 2006 was 47%, remained relatively stable
compared to 48% for fiscal year 2005.
Operating Expenses
For the fourth quarter of 2006, operating expenses were
RMB54.7 million (US$7.0 million), a 23% increase from
RMB44.6 million (US$5.7 million) in the previous quarter
and 22% increase from RMB44.7 million (US$5.7 million) in
the same period of last year. The sequential increase in
operating expenses was a combined result of increased sales
and marketing expenses relating to the preparation for the
launch of Guild Wars and the Soul of the Ultimate
Nation(TM) games in mainland China, and increased general
and administrative expenses due to higher year-end related
professional fees.
For fiscal year 2006, operating expenses totaled
RMB191.6 million (US$24.6 million), a 16% increase from
RMB164.9 million (US$21.1 million) for the fiscal year of
2005. This was primarily due to increased general and
administrative expenses primarily related to headcount
increase, share-based compensation expenses resulting from
the adoption of SFAS 123(R), Share-Based Payment, effective
from January 1, 2006, and higher professional fees.
Income from Operations
For the fourth quarter of 2006, profit from operations
increased by 26% quarter-over-quarter and 52%
year-over-year to RMB80.0 million (US$10.3 million).
Operating margin for the fourth quarter of 2006 was 28%,
compared to 27% in the third quarter of 2006 and 25% in the
fourth quarter of 2005.
For fiscal year 2006, we recorded profit from
operations of RMB270.2 million (US$34.6 million), a 352%
increase compared with RMB59.7 million (US$7.6 million) in
fiscal year 2005. Operating margin for the fiscal year
2006 was 27%, compared to 13% in the fiscal year 2005.
Consistent with revenue growth, this significant
improvement was primarily due to full year commercial
operations of World of Warcraft in fiscal year 2006 versus
approximately seven months in fiscal year 2005.
Other Income (Expenses)
Other income for the fourth quarter of 2006 was RMB19.1
million (US$2.5 million) compared to other expenses of
RMB1.0 million (US$0.1 million) in the third quarter of
2006 and RMB12.2 million (US$1.6 million) in the fourth
quarter of 2005. The sequential improvement was primarily
due to the receipt of a financial subsidy of RMB19.8
million (US$2.5 million) from the local government, whereas
no similar financial subsidy was received in the third
quarter of 2006.
For fiscal year 2006, other income increased by 96% to
RMB28.4 million (US$3.6 million) from RMB14.5 million
(US$1.9 million) in fiscal year 2005. This was primarily
because in fiscal year 2006, we received financial
subsidies from the local government which amounted to
RMB31.0 million (US$4.0 million), whereas in fiscal year
2005, such financial subsidies only amounted to RMB13.4
million (US$1.7 million).
Gain on Investment Disposal
In the fourth quarter of 2006, we recognized a gain of
approximately RMB23.4 million (US$3.0 million) from the
sale of our equity interest in the joint venture in Taiwan
that operates Blizzard Entertainment's World of Warcraft in
other greater China regions.
Impairment Loss on Investment
In the fourth quarter of 2006, we recorded an
impairment provision of RMB20.4 million (US$2.6 million) in
connection with an investment accounted for by the Company
under the equity method. No such impairment was recognized
in fiscal year 2005.
Loss on Equity Investments
For the fourth quarter of 2006, loss on equity
investments, net of taxes, amounted to RMB1.1 million
(US$0.1 million), which remained relatively stable compared
to a loss of RMB1.2 million (US$0.2 million) for the third
quarter of 2006, but represented a 75% improvement compared
to a loss of RMB4.6 million (US$0.6 million) for the fourth
quarter of 2005. The significant year-over-year
improvement was primarily due to the joint venture that
operates World of Warcraft in other greater China regions,
which we disposed of in late fiscal year 2006, recorded a
profit during the fourth quarter of 2006, which offset, to
a large extent, the losses made by other affiliated
companies that were still in the development or early game
commercialization stages. The joint venture recorded a
loss during the same period of last year.
For fiscal year 2006, we recorded RMB0.9 million
(US$0.1 million) of loss on equity investments, net of
taxes, compared to a loss of RMB13.7 million (US$1.8
million) for fiscal year 2005. This is also due to the
reasons explained above.
Net Income
For the fourth quarter of 2006, net income was RMB105.1
million (US$13.5 million), which increased by 63%
quarter-over-quarter from RMB64.3 million (US$8.2 million)
in the third quarter of 2006 and 54% year-over-year from
RMB68.3 million (US$8.8 million) in the fourth quarter of
2005. This was a result of the cumulative effect of the
foregoing factors. Fully diluted earnings per share and
per ADS for the fourth quarter of 2006 was RMB4.25
(US$0.54), compared to RMB2.61 (US$0.33) in the third
quarter of 2006 and RMB2.82 (US$0.36) in the fourth quarter
of 2005.
For fiscal year 2006, net income totaled RMB312.5
million (US$40.0 million), a 331% increase from RMB72.5
million (US$9.3 million) for fiscal year 2005. This was a
result of the cumulative effect of the foregoing factors.
Fully diluted earnings per share and per ADS for fiscal
year 2006 was RMB12.72 (US$1.63), compared to RMB2.92
(US0.37) in fiscal year 2005.
EBITDA (non-GAAP) is defined as earnings or loss,
respectively, before depreciation of fixed assets,
amortization of intangibles and income tax
expenses/benefits, as applicable. For the fourth quarter
of 2006, EBITDA (non-GAAP) was RMB146.6 million (US$18.8
million) compared to EBITDA (non-GAAP) of RMB105.4 million
(US$13.5 million) for the previous quarter and RMB108.9
million (US$14.0 million) for the same period of last year.
For fiscal year 2006, EBITDA (non-GAAP) totaled RMB476.3
million (US$61.0 million) compared to EBITDA (non-GAAP) of
RMB151.6 million (US$19.4 million) for the fiscal year
2005.
For the fourth quarter of 2006, fully diluted EBITDA
(non-GAAP) per share was RMB5.93 (US$0.76) compared with
RMB4.28 (US$0.55) for the third quarter of 2006 and RMB4.50
(US$0.58) in the fourth quarter of 2005. For fiscal year
2006, fully diluted EBITDA (non-GAAP) per share was
RMB19.39 (US$2.48) compared with EBITDA (non-GAAP) per
share of RMB6.11 (US$0.78) for fiscal year of 2005.
As at December 31, 2006, the Company's total cash and
cash equivalents balance was RMB937.8 million (US$120.2
million). The increase in cash and cash equivalents from
RMB488.2 million (US$62.6 million) as at December 31, 2005
was mainly due to the combined result of increased receipts
from prepaid game points, and the above-mentioned financial
subsidies, offset in part by purchases of servers, prepaid
royalty payments to the licensor relating to WoW's China
operations, the final payments in early 2006 relating to
the purchase of the remaining interest in the entity that
operates WoW in China, and payments relating to the license
fees for the Guild Wars and Hellgate: London games as well
as an equity investment made during the year.
The conversion of Renminbi (RMB) into U.S. dollars
(US$) 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 Federal Reserve Bank of New York as of December 29,
2006 (the last business day of fourth quarter and fiscal
year 2006), which was RMB7.8041 to US$1.00. The
percentages stated in this press release are calculated
based on the RMB amounts.
Note to the Financial Information
The unaudited financial information disclosed above is
preliminary. The audit of the financial statements and
related notes to be included in our annual report on Form
20-F for the year ended December 31, 2006 is still in
progress. Adjustments to the financial statements may be
identified when audit work is completed, which could result
in significant difference from the audited financial
statements to this preliminary unaudited financial
information. In addition, because management's evaluation
of our internal controls over financial reporting in
connection with of the Sarbanes-Oxley Act of 2002 has not
yet been completed, we make no representations as to the
effectiveness of those internal controls as of the end of
our 2006 fiscal year.
Non-GAAP Measure
To supplement the consolidated financial statements
presented in accordance with accounting principles
generally accepted in the United States ("GAAP"),
The9 uses the non-GAAP measure of EBITDA, which is adjusted
from the most directly comparable financial measures
calculated and presented in accordance with GAAP to exclude
certain expenses. The non-GAAP financial measure is
provided to enhance investors' overall understanding of the
Company's operating performance.
EBITDA (non-GAAP) is defined as earnings before
depreciation of fixed assets, amortization of intangibles
and income tax expenses/benefits, as applicable. The
Company believes its EBITDA provides useful information to
both management and investors as it excludes certain
expenses that are not expected to result in future cash
payments. The use of EBITDA has certain limitations.
Depreciation and amortization expense for various assets
and income tax expenses/benefits have been and will be
incurred and are not reflected in the presentation of
EBITDA. Each of these items should also be considered in
the overall evaluation of our results. EBITDA should not be
considered as a measure of our liquidity. We compensate for
these limitations by providing the relevant disclosure of
our depreciation and amortization, and income tax
expenses/benefits in our reconciliations to the GAAP
financial measure, which should be considered when
evaluating our performance. EBITDA is not defined under
GAAP, and our EBITDA is not a measure of net income,
operating income, operating performance or liquidity
presented in accordance with GAAP. When assessing our
operating performance, you should not consider this data in
isolation or as a substitute for our net income, operating
income or any other operating performance measure that is
calculated in accordance with GAAP. In addition, our
EBITDA may not be comparable to similarly titled measures
utilized by other companies since such other companies may
not calculate EBITDA in the same manner as we do. For more
information on this non-GAAP financial measure, please see
the tables captioned "Reconciliation of non-GAAP to
GAAP results" set forth at the end of this release.
Management Appointment
The9 today announced that it has appointed Fumin
(Benjamin) Lin as Vice President, effective February 14,
2007. Mr. Lin will participate in leading various aspects
of The9's game operations.
Before joining The9, since January 2006, Mr. Lin has
served as General Manager of Joypark Webstar Technology
Co., Ltd. in Beijing, an affiliated company of Softstar
Entertainment Inc. From October 2001 to December 2005, Mr.
Lin has served various management functions at Square-Enix
Webstar Inc., a joint venture between Softstar
Entertainment Inc. in Taiwan and Square Enix Co., Ltd. in
Japan, and led it to be the leading game developer and
publisher in Asia. From October 2000 to September 2001, he
had served as Assistant Vice President of Webstar Inc. in
Taipei. Prior to that, Benjamin had worked as a product
manager at Softstar Entertainment Inc. and Dynalab Inc.
Mr. Lin is experienced in leading MMORPG operations in
China. Mr. Lin received his Bachelor's degree in Arts
& Advertisement from the Chinese Culture University in
Taipei, Taiwan.
Other Developments
The9 also announced that it has entered into an
agreement to purchase the office building in Shanghai, PRC,
in which it is currently headquartered, and has leased since
mid 2005. It is expected that The9 will utilize its
existing working capital to fund this capital investment.
Conference Call / Webcast Information
The9's management team will host a conference call on
Wednesday, February 14, 2007 at 8:00 PM, US Eastern Time,
corresponding with Thursday, February 15, 2007 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
+1-617-597-5325, password "88306312". In the
U.S., members of the financial community may also
participate in the call by dialing toll-free
+1-866-713-8566, password "88306312". A replay
of the call will be available through February 22, 2007.
The dial-in details for the replay: U.S. toll free number
+1-888-286-8010, International dial-in number
+1-617-801-6888; Password "34934768".
The9 Limited will also provide a live webcast of the
earnings call. Participants in the webcast should log onto
the Company's web site http://www.corp.the9.com 15 minutes
prior to the call, then click on the icon for "The9
Limited Q4 and Fiscal Year 2006 Earnings Conference
Call" and follow the instructions.
About The9 Limited
The9 Limited is a leading online game operator in
China. The9's business is primarily focused on operating
and developing MMORPGs for the Chinese online game players
market. The9 directly or through affiliates operates
licensed MMORPGs, consisting of MU(R), Mystina Online,
Blizzard Entertainment(R)'s World of Warcraft(R), and its
first proprietary MMORPG, Joyful Journey West(TM), in
China. It has also obtained exclusive licenses to operate
additional MMORPGs in China, including Granado Espada, Soul
of The Ultimate Nation(TM), Guild Wars, Hellgate: London,
Ragnarok Online 2, Emil Chronicle Online and Huxley. In
addition, The9 is also working on the development of a 3D
fantasy MMORPG game, Fantasy Melody Online(TM).
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, The9's limited operating history as an
online game operator, 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.
THE9 LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(Expressed in Renminbi - RMB and US Dollars - US$, except
share data)
Quarter Ended
December 31, September 30,
December 31, December 31,
2005 2006
2006 2006
RMB RMB RMB
US$
(unaudited) (unaudited)
(unaudited) (unaudited)
Revenues:
Online game
services 220,717,384 241,164,777
296,721,036 38,021,173
Game operating
support,
website
solutions and
advertisement 887,822 2,671,945
495,169 63,450
Other revenues 1,795,408 1,917,314
598,872 76,738
223,400,614 245,754,036
297,815,077 38,161,361
Sales Taxes (11,164,248) (12,367,467)
(15,138,187) (1,939,774)
Net Revenues 212,236,366 233,386,569
282,676,890 36,221,587
Cost of Services (114,950,079) (125,522,051)
(147,970,185) (18,960,570)
Gross Profit 97,286,287 107,864,518
134,706,705 17,261,017
Operating Expenses:
Product
development (7,825,264) (7,749,225)
(5,176,455) (663,299)
Sales and
marketing (14,172,398) (11,699,467)
(17,982,287) (2,304,210)
General and
administrative (22,666,412) (25,112,296)
(31,501,431) (4,036,523)
Total operating
expenses: (44,664,074) (44,560,988)
(54,660,173) (7,004,032)
Profit from
operations 52,622,213 63,303,530
80,046,532 10,256,985
Interest income,
net 642,082 2,479,258
3,023,648 387,444
Other income
(expenses), net 12,208,696 (1,034,921)
19,123,592 2,450,455
Income before
income tax
benefit (expense),
gain on investment
disposal, minority
interest and loss
on equity
investments 65,472,991 64,747,867
102,193,772 13,094,884
Income tax benefit
(expense) 733,186 794,368
1,015,569 130,133
Income before gain
on investment
disposal,
impairment loss
on investment and
loss on equity
investments 66,206,177 65,542,235
103,209,341 13,225,017
Gain on investment
disposal 6,715,917 --
23,409,702 2,999,667
Impairment loss on
investment -- --
(20,401,915) (2,614,256)
Loss on equity
investments, net
of taxes (4,601,416) (1,208,010)
(1,148,792) (147,204)
Minority interests -- --
-- --
Net income 68,320,678 64,334,225
105,068,336 13,463,224
Other
comprehensive
income:
Translation
adjustments 1,115,748 --
-- --
Comprehensive
Income 69,436,426 64,334,225
105,068,336 13,463,224
Earnings per share
- Basic 2.82 2.62
4.28 0.55
- Diluted 2.82 2.61
4.25 0.54
Weighted average
shares
outstanding
- Basic 24,206,154 24,508,974
24,564,824 24,564,824
- Diluted 24,218,551 24,615,761
24,713,922 24,713,922
THE9 LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(Expressed in Renminbi - RMB and US Dollars - US$, except
share data)
Year
ended
December 31, December
31, December 31,
2005 2006
2006
RMB RMB
US$
(audited)
(unaudited) (unaudited)
Revenues:
Online game services 466,554,760
1,027,963,574 131,720,964
Game operating support,
website solutions and
advertisement 6,050,065
4,800,019 615,064
Other revenues 16,586,027
5,564,186 712,982
489,190,852
1,038,327,779 133,049,010
Sales Taxes (24,164,182)
(52,501,980) (6,727,487)
Net Revenues 465,026,670
985,825,799 126,321,523
Cost of Services (240,415,737)
(524,031,705) (67,148,256)
Gross Profit 224,610,933
461,794,094 59,173,267
Operating Expenses:
Product development (40,642,275)
(30,781,632) (3,944,290)
Sales and marketing (61,805,046)
(59,574,787) (7,633,781)
General and administrative (62,450,984)
(101,282,708) (12,978,141)
Total operating expenses: (164,898,305)
(191,639,127) (24,556,212)
Profit from operations 59,712,628
270,154,967 34,617,055
Interest income, net 10,021,605
9,136,273 1,170,702
Other income (expenses), net 14,467,150
28,416,722 3,641,255
Income before income tax
benefit (expense), gain on
investment disposal, minority
interest and loss on equity
investments 84,201,383
307,707,962 39,429,012
Income tax benefit (expense) (168,255)
2,669,763 342,097
Income before gain on
investment disposal,
impairment loss on investment
and loss on equity investments 84,033,128
310,377,725 39,771,109
Gain on investment disposal 6,715,917
23,409,702 2,999,667
Impairment loss on investment --
(20,401,915) (2,614,256)
Loss on equity investments, net
of taxes (13,736,790)
(908,464) (116,409)
Minority interests (4,540,568)
-- --
Net income 72,471,687
312,477,048 40,040,111
Other comprehensive income:
Translation adjustments 73,963
-- --
Comprehensive Income 72,545,650
312,477,048 40,040,111
Earnings per share
- Basic 3.00
12.78 1.64
- Diluted 2.92
12.72 1.63
Weighted average shares
outstanding
- Basic 24,192,113
24,456,507 24,456,507
- Diluted 24,804,997
24,565,947 24,565,947
THE9 LIMITED
CONSOLIDATED BALANCE SHEETS
(Expressed in Renminbi - RMB and US Dollars - US$)
As
at
December 31,
December 31, December 31,
2005
2006 2006
RMB RMB
US$
(audited)
(unaudited) (unaudited)
Assets
Current Assets
Cash and cash equivalents 488,244,667
937,845,817 120,173,475
Accounts receivable 10,593,866
10,174,484 1,303,736
Due from related parties 12,395,125
-- --
Advances to suppliers 4,289,443
9,036,620 1,157,932
Prepayments and other current
assets 28,395,864
69,153,131 8,861,128
Prepaid royalties 42,995,946
27,558,207 3,531,247
Deferred costs 24,075,214
33,324,942 4,270,184
Total current assets 610,990,125
1,087,093,201 139,297,702
Investments in equity investees 46,835,993
30,117,605 3,859,203
Property, equipment and
software 231,436,683
227,512,006 29,152,882
Goodwill 30,199,751
30,199,751 3,869,729
Intangible assets 289,035,226
244,271,279 31,300,378
Long-term deposits 3,132,338
-- --
Deferred tax assets, non-
current 2,104,464
5,391,123 690,806
Total Assets 1,213,734,580
1,624,584,965 208,170,700
Liabilities and Shareholders'
Equity
Current Liabilities
Accounts payable 15,948,674
12,692,978 1,626,450
Due to related parties 3,181,004
332,797 42,644
Other taxes payable 8,123,356
23,589,754 3,022,739
Advances from customers 61,651,267
88,040,975 11,281,375
Deferred revenue 76,514,940
111,302,531 14,262,059
Other payables and accruals 26,793,070
52,467,643 6,723,085
Acquisition related liability 79,537,653
-- --
Total current liabilities 271,749,964
288,426,678 36,958,352
Minority interests --
-- --
Commitments and contingencies --
-- --
Shareholders' Equity
Common shares (US$0.01 par
value; 24,214,130 and
24,688,038 shares issued and
outstanding as of December 31,
2005 and 2006) 2,004,033
2,041,673 261,615
Additional paid-in capital 860,068,478
941,786,807 120,678,465
Statutory reserves 54,172
20,745,422 2,658,272
Accumulated other comprehensive
income 59,346
-- --
Retained earnings 79,798,587
371,584,385 47,613,996
Total shareholders' equity 941,984,616
1,336,158,287 171,212,348
Total liabilities and
shareholders' equity 1,213,734,580
1,624,584,965 208,170,700
THE9 LIMITED
RECONCILIATION OF NON-GAAP TO GAAP RESULTS
(Expressed in Renminbi - RMB and US Dollars - US$, except
share data)
Quarter
Ended
December 31, September 30,
December 31, December 31,
2005 2006
2006 2006
RMB RMB
RMB US$
(unaudited) (unaudited)
(unaudited) (unaudited)
GAAP net income 68,320,678 64,334,225
105,068,336 13,463,224
Depreciation of fixed
assets 16,065,956 18,513,748
21,666,970 2,776,357
Amortization of
intangibles 25,248,349 23,306,626
20,885,566 2,676,230
Income tax expense
(benefit) (733,186) (794,368)
(1,015,569) (130,133)
EBITDA (Non-GAAP) 108,901,797 105,360,231
146,605,303 18,785,678
GAAP earnings per share
- Basic 2.82 2.62
4.28 0.55
- Diluted 2.82 2.61
4.25 0.54
Non-GAAP EBITDA per
share
- Basic 4.50 4.30
5.97 0.76
- Diluted 4.50 4.28
5.93 0.76
Weighted average shares
outstanding
- Basic 24,206,154 24,508,974
24,564,824 24,564,824
- Diluted 24,218,551 24,615,761
24,713,922 24,713,922
THE9 LIMITED
RECONCILIATION OF NON-GAAP TO GAAP RESULTS
(Expressed in Renminbi - RMB and US Dollars - US$, except
share data)
Year
ended
December 31,
December 31, December 31,
2005
2006 2006
RMB
RMB US$
(unaudited)
(unaudited) (unaudited)
GAAP net income 72,471,687
312,477,048 40,040,111
Depreciation of fixed assets 39,463,381
76,158,886 9,758,830
Amortization of intangibles 39,521,407
90,286,523 11,569,114
Income tax expense (benefit) 168,255
(2,669,763) (342,097)
EBITDA (Non-GAAP) 151,624,730
476,252,694 61,025,958
GAAP earnings per share
- Basic 3.00
12.78 1.64
- Diluted 2.92
12.72 1.63
Non-GAAP EBITDA per share
- Basic 6.27
19.47 2.50
- Diluted 6.11
19.39 2.48
Weighted average shares outstanding
- Basic 24,192,113
24,456,507 24,456,507
- Diluted 24,804,997
24,565,947 24,565,947
For further information, please contact:
Ms. Dahlia Wei
Senior Manager, Investor Relations
The9 Limited
Tel: +86-21-5172-9990
Email: IR@corp.the9.com
Web: http://www.corp.the9.com
SOURCE The9 Limited
PR
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