The9 Limited Reports First and Second Quarter 2013 Unaudited Financial Results

SHANGHAI, Sept. 5, 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:

• 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. 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.
• In the first quarter of 2013, net loss attributable to holders of ordinary shares was RMB114.1 million (US$18.6 million), representing a 2% decrease from a net loss of RMB115.9 million (US$18.9 million) in the fourth quarter of 2012. In the second quarter of 2013, 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, including an impairment loss on investments of RMB32.8 million (US$5.3 million) recorded in the second quarter of 2013.

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:	[phone]
Mainland China (mobile users):	400-620-8038
Mainland China (fixed line users):	800-819-0121
Hong Kong Toll:	[phone]
International Toll:	[phone]
Passcode:	32285426

A digital recording of the conference will be available for replay from 12:00 AMET on September 6, 2013 for 7 days.

The dial-in details for the replay are:

U.S. Toll Free:	[phone]
International Toll:	[phone]
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.com15 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: [phone]
Email: [e-mail]
Website: http://www.corp.the9.com/

- Tables follow -

THE9 LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in Renminbi - RMB and US Dollars - US$, except share data)
	Quarter ended
		March 31, 2012		June 30, 2012		December31, 2012		March 31, 2013		June 30, 2013		March 31, 2013		June 30, 2013
		RMB		RMB		RMB		RMB		RMB		US$		US$
Revenues:
Onlinegameservices		51,591,154		57,422,981		15,480,802		18,853,262		23,862,119		3,071,865		3,887,985
Otherrevenues		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
SalesTaxes		(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
CostofServices		(15,817,867)		(16,045,323)		(19,921,262)		(20,720,433)		(23,169,282)		(3,376,093)		(3,775,097)
GrossProfit(loss)		32,790,090		38,750,445		(1,332,957)		(829,046)		3,004,974		(135,081)		489,617
OperatingExpenses:
Productdevelopment		(69,261,659)		(78,253,825)		(68,702,039)		(53,510,806)		(59,174,437)		(8,718,806)		(9,641,614)
Salesandmarketing		(48,703,335)		(44,795,100)		(41,084,956)		(29,319,993)		(37,689,001)		(4,777,266)		(6,140,875)
Generalandadministrative		(36,952,477)		(45,156,943)		(39,068,639)		(42,530,459)		(52,504,655)		(6,929,719)		(8,554,869)
Impairmentofequipmentandintangibleassets		-		(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, impairment loss on investments and share of loss in equity investments		(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:Netlossattributabletononcontrolling 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 holders of ordinary shares		(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-saleinvestments		-		-		(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 noncontrolling interest		(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 ordinary shares		(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 shares per share
- 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$)
		As at
		December31,2012		March31,2013		June30,2013		March31,2013		June30,2013
		RMB		RMB		RMB		US$		US$
Assets
Current Assets
Cashandcashequivalents		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
Prepaymentsandothercurrentassets		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,equipmentandsoftware		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

SOURCE The9 Limited