BEIJING, July 15 /Xinhua-PRNewswire/ -- Ninetowns Internet Technology
Group Company Limited (Nasdaq: NINE) (''Ninetowns'' or the ''Company''),
one of China's leading providers of online solutions for international
trade, today announced that a conference call has been scheduled for 7:00
a.m. in Beijing on July 22, 2008, which is 7:00 p.m. on July 21, 2008 in
New York, to discuss its fiscal year 2007 financial results.
Fiscal Year 2007 Highlights:
Compared to fiscal year 2006 results,
-- Total net revenues decreased 32.5% to US$14.2 million.
-- Net loss was US$31.6 million, compared to a net profit of US$5.9
million in the full year 2006.
-- Basic net loss per ADS (each ADS represents one ordinary share) was
US$0.90, compared to a net profit per ADS of US$0.17 in the full year
2006.
-- Ninetowns sold approximately 8,400 iDeclare packages and approximately
37,700 iDeclare service contracts in 2007.
Fourth Quarter and Fiscal Year 2007 Business Highlights
tootoo.com (Business-to-business, or B2B): During the fourth quarter of
2007, Ninetowns focused on continued development of its B2B business by
enhancing user experience and site functionality through various efforts,
such as optimizing registration and inquiry procedures, providing an online
instant message helpdesk system called ''Trade Baby'', and improving the
functionality of the search system. As a result, the number of registered
users on March 31, 2008 was approximately 240,000, representing an increase
of 122% from 108,000 registered users on December 31, 2007.
As a part of its B2B optimization efforts, Ninetowns also deployed a
trial program targeted at suppliers who are willing to purchase the top
entry on search result pages in order to attract buyers. This trial package
was priced at RMB36,000 per year. Currently, there are approximately 150
users of this trial program. Ninetowns intends to continuously collect and
analyze feedback from these paying members in order to better understand
their needs and to further upgrade tootoo.com's services.
Enterprise software: Ninetowns continued to derive a significant
portion of its total net revenues from the sale and servicing of iDeclare
packages, Ninetowns' import/export enterprise software solution. During the
fourth quarter of 2007, the Company sold 2,000 iDeclare software packages
and 10,700 iDeclare service contracts. For the full year, Ninetowns sold
8,400 iDeclare software packages and 37,700 iDeclare service contracts. As
a result, the installed customer base reached 138,000 and the percentage of
iDeclare customers who purchased software service renewals was around 30%
at the end of the fourth quarter of 2007.
During the fourth quarter of 2007, Ninetowns launched a professional
version of iProcess, named iQM, which is an enterprise product quality
management application specifically designed in accordance with the quality
control requirements of the Hazard Analysis and Critical Control Point
(''HACCP'') and ISO9001 quality management system. iQM enables
international trade enterprises and their suppliers to collect, analyze,
monitor, rectify, track and submit real-time product quality-related data
via the Internet to the State Administration for Quality Supervision and
Inspection and Quarantine of the PRC (the ''PRC Inspections
Administration'') throughout the production process. Such information can
be submitted prior to the importing/exporting of finished products, which
may result in a faster declaration process.
Currently, iQM is available only in Guangdong on a trial basis. As of
March 31, 2008, there were approximately 800 paying customers. iQM is
currently priced at approximately US$400 to US$1,400 per package, with a
maintenance renewal fee payable after the first year. IQM is an industry-
specific solution and the currently covered industries include toy
processing, food processing, aquatic breeding, livestock breeding, and
vegetation planting.
Fiscal Year 2007 Financial Results
Total Net Revenues. Total net revenues decreased significantly to
US$14.2 million for the fiscal year 2007, from US$19.6 million in 2006.
Net revenues from sales of enterprise software for the fiscal year of
2007 was US$10.6 million, representing 74.7% of total net revenues, as
compared to 76.2% for the fiscal year of 2006. Net revenues from software
development services for the fiscal year of 2007 was US$3.5 million,
representing 24.8% of total net revenues, as compared to 23.5% for the
fiscal year of 2006.
The decrease in total net revenues was primarily due to the reduced
sale of our iDeclare packages, which we believe is a result of the negative
impact from the PRC Inspections Administration's free software
provisioning.
For the fiscal year 2007, the Company recognized net revenues of
US$0.07 million for the newly launched B2B business.
Gross Profit and Gross Margin. Gross profit decreased significantly to
US$11.1 million for the full year 2007, from US$17.5 million in 2006. Gross
margin for the fiscal year 2007 was 77.9%, representing a decrease from
88.9% in 2006.
The decrease in gross profit was mainly attributable to the decrease in
the sales of enterprise software, which commands higher margins than our
software development service business.
Operating Expenses. For the fiscal year 2007, total operating expenses
increased significantly to US$51.5 million from US$14.0 million in 2006.
For the fiscal year 2007, research and product development expenses
increased by 7.3% to US$4.4 million from US$3.8 million in 2006. This
increase was mainly attributable to our investment in the research and
development of new enterprise platform products and search platform
products and the increase in the number of research and development
personnel.
Sales and marketing expenses were US$5.6 million for fiscal year 2007,
a significant increase over 2006. The year-on-year rise in sales and
marketing expenses was mainly due to an increased number of our B2B sales
and marketing staff and promotional activities to develop our new B2B
business.
General and administrative expenses increased by 28.0% to US$11.8
million in 2007 from US$8.6 million in 2006. The year-on-year rise in
general and administrative expenses was due to the increases in (i)
professional fees incurred related to our status as a public company and
our acquisition and investment activities, (ii) depreciation and
amortization charges on fixed assets and intangible assets and (iii)
increase in the number of employees due to our expansion into and
development of our B2B business.
Provision for doubtful accounts increased significantly to US$ 3.1
million in 2007 from US$ 0.2 million in 2006. The year-on-year rise in
provision for doubtful accounts was due to the provision made based on the
uncertainty of collection under certain software development contracts we
entered into with the PRC Inspections Administration. Such software
development contracts relate to the free software that we believe that the
PRC Inspections Administration has since decreased its efforts to promote.
Goodwill Impairment. As previously announced, the Company's financial
outlook from maintenance servicing of the free software offered by the PRC
Inspections Administration has been negatively impacted due to several
factors. First, we believe that the PRC Inspections Administration's
decreased efforts to promote its free software have resulted in a
corresponding decline in the need for Ninetowns' maintenance services.
Additionally, we believe that there is uncertainty surrounding the PRC
Inspections Administration's future promotional plans for its free
software. As a result, the Company reported a non-cash impairment charge of
approximately US$26.5 million against its goodwill that was derived from
the acquisition of minority interests in the Company's
business-to-government ("B2G") business division during its pre-IPO
restructuring in June 2004. We believe that this one-time non-cash
impairment charge will not impact Ninetowns' business fundamentals, current
cash position, current cash flows from operating activities, or future cash
expenditures.
Operating Loss. As a result, operating loss for the fiscal year 2007
was US$40.3 million, compared to operating income of US$3.5 million for the
fiscal year 2006.
Net Loss. Net loss for the fiscal year of 2007 was US$31.6 million, as
compared to net income of US$5.9 million for the fiscal year of 2006. Both
basic and diluted net loss per ADS for the fiscal year of 2007 were
US$0.90, compared to basic and diluted net income per ADS of US$0.17 and
US$0.17 for the fiscal year of 2006, respectively.
Cash and Cash Equivalents. Cash and cash equivalents as of December 31,
2007 were US$89.1 million, compared to US76.7 million as of December 31,
2006.
Unearned Revenue. Unearned revenue as of December 31, 2007 was US$4.5
million, compared to US3.4 million as of December 31, 2006.
Management Commentary and Outlook
Mr. Shuang Wang, Chief Executive Officer of Ninetowns, said, ''We are
encouraged by the progress we have made on our B2B service to date. While
our online services are still very much in a development mode, we will
continue to improve the user experience and enhance our services for
quality product searches, aided by the continuous feedback we are receiving
from our existing paying members. Currently, we estimate that tootoo.com
features and services will be fully operational in the first half of 2009,
at which time we will deploy our full scale sales and marketing efforts
globally.''
''For our enterprise software business, we are pleased with the
continued market penetration of our iDeclare software, as well as the
successful acceptance of our newly launched iQM package. The combination of
these two software systems will help drive our continued market leadership
in providing a robust and total solution for enterprise users. Our
integrated solution can increase import/export processing efficiency,
accuracy and further reduce time and cost associated with the declaration
process.''
Mr. Tommy Fork, Chief Financial Officer of Ninetowns, said, ''We are
witnessing the early stages of revenue diversification from the expansion
of our service offerings with the B2B platform, and have worked to increase
the value contribution of our import/export e-filing integrated solutions.
We will continue our strategic initiative to provide total online solutions
for international trade. In addition to our operational efforts, we have
been conservative in our financial management efforts in order to maintain
sufficient cash on hand for business development purposes.''
New Reporting Schedule
We do not expect to release earnings information on a quarterly basis
in the future. As we develop and grow our B2B platform, we believe the
interests of our shareholders and the Company will be better served through
management's continued focus on execution of our long-term strategic and
operational initiatives. The Securities and Exchange Commission's rules and
regulations do not require us, as a foreign private issuer, to report
earnings information on a quarterly basis. Additionally, the NASDAQ
Marketplace Rules also do not require companies with securities listed on
its exchange to report earnings information on a quarterly basis. The
NASDAQ Marketplace Rules require us, as a foreign private issuer, to file
an interim balance sheet and income statement as of and for the end of our
second quarter no later than six months following the end of our second
quarter. We expect to comply with such requirement.
Currency Convenience Translation
The conversion of Renminbi into U.S. dollars in this release, made
solely for the convenience of the reader, is based on the noon buying rate
in the City of New York for cable transfers of Renminbi as certified for
customs purposes by the Federal Reserve Bank of New York as of December 31,
2007, which was RMB7.2946 to US$1.00. Certain comparative figures extracted
from the past releases are converted by using the rate as of the respective
balance sheet date. The percentages stated in this earnings release are
calculated based on Renminbi.
Investor Conference Call / Webcast Details
A conference call has been scheduled for 7:00 a.m. in Beijing on July
22, 2008. This will be 7:00 p.m. on July 21, 2008 in New York. During the
call, time will be set-aside for analysts and interested investors to ask
questions of executive officers.
The call may be accessed by dialing +1-617-614-6207 and the passcode is
55272252. A live webcast of the conference call will be available on our
website at http://www.ninetowns.com/english . A replay of the call will be
available from 9:00 a.m. Beijing time on July 22, 2008 (9:00 p.m. in New
York on July 21, 2008) through 9:00 a.m. on August 7, 2008 in Beijing (9:00
p.m. in New York on August 6, 2008) by telephone at +1-617-801-6888 and
through http://www.ninetowns.com/english . The passcode to access the call
replay is 32521734.
About Ninetowns Internet Technology Group Company Limited
Ninetowns (Nasdaq: NINE) is a leading provider of online solutions for
international trade, with its key services in automating import/export
e-filing, as well as in providing effective and efficient
business-to-business search. Ninetowns has been listed on the NASDAQ Stock
Exchange since December 2004 under the symbol "NINE." More information can
be found at http://www.ninetowns.com/english .
Forward-Looking Statements
Certain statements in this press release, including statements relating
to the non-cash impairment charge and the Chinese government's future
promotional plans for its free software, include forward-looking statements
within the meaning of the U.S. Private Securities Litigation Reform Act of
1995. Forward-looking statements generally can be identified by the use of
forward-looking terminology, such as "may,'' ''will,'' ''expect,''
''intend,'' ''estimate,'' ''anticipate,'' ''believe,'' ''project'' or
''continue'' or the negative thereof or other similar words. All
forward-looking statements involve risks and uncertainties, including, but
not limited to, customer acceptance and market share gains; competition
from companies that have greater financial resources; introduction of new
products into the marketplace by competitors; successful product
development; dependence on significant customers; the ability to recruit
and retain quality employees as the Company grows; and economic and
political conditions globally. Actual results may differ materially from
those discussed in, or implied by, the forward-looking statements. The
forward-looking statements speak only as of the date of this release and
the Company assumes no duty to update them to reflect new, changing or
unanticipated events or circumstances.
For more information, please contact:
Helen Wu
Investor Relations
Ninetowns Internet Technology Group Company Limited
Tel: +86-10-6589-9901
Email: ir@ninetowns.com
Investor Relations (US):
Mahmoud Siddig, Director
Taylor Rafferty
Tel: +1-212-889-4350
Email: ninetowns@taylor-rafferty.com
Investor Relations (HK):
Ruby Yim, Managing Director
Taylor Rafferty
Tel: +852 3196-3712
Email: ninetowns@taylor-rafferty.com
SOURCE Ninetowns Internet Technology Group Company Limited
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Related links:
http://www.ninetowns.com/
CONTACT:
Helen Wu, Investor Relations of Ninetowns
Internet Technology Group Company Limited, +86-10-6589-9901, or
ir@ninetowns.com; or Investor Relations (US): Mahmoud Siddig,
Director of Taylor Rafferty, +1-212-889-4350, or
ninetowns@taylor-rafferty.com; or Investor Relations (HK): Ruby
Yim, Managing Director of Taylor Rafferty, +852 3196-3712,or
ninetowns@taylor- rafferty.com
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