December 31, 2007 at 08:55 AM EST
Ninetowns Reports Second Quarter 2007 Results

BEIJING, Dec. 31 /PRNewswire/ -- Ninetowns Internet Technology Group Company Limited (NASDAQ:NINE), China's leading provider of online solutions for international trade, today reported its financial results for the second quarter of 2007.

Second Quarter 2007 Business Highlights

During the second quarter 2007, Ninetowns remained focused on developing its B2B business by completing the acquisition of Ample Spring Holdings Limited(1), a vertical search engine provider, and by formally launching tootoo.com, Ninetowns' B2B search and service platform. Ninetowns will continue to optimize tootoo.com and will deploy a nationwide sales and marketing network to support its B2B services in the coming months.

At the same time, Ninetowns continued to maintain the value contribution from the sale and servicing of the existing iDeclare package, Ninetowns' import/export enterprise software solution. During the quarter, the Company sold 2,100 iDeclare software packages and 11,800 iDeclare service contracts. The installed customer base reached 134,300 and the free import/export e- filing software user base had 32,200 user accounts at the end of the quarter. In addition, the percentage of iDeclare customers who purchase software service renewals was around 26% at the end of the second quarter.

Second Quarter 2007 Financial Results

Total net revenue for the second quarter of 2007 was US$3.1 million, representing a 40.7% decrease, as compared to US$5.0 million for the second quarter of 2006. Net revenue from sales of enterprise software for the second quarter of 2007 was US$2.5 million, representing 79.4% of total net revenue, as compared to 80.0% for the second quarter of 2006. Net revenue from software development services for the second quarter of 2007 was US$0.6 million, representing 20.5% of total net revenue, as compared to 20.0% for the second quarter of 2006. The decrease in total net revenues was primarily due to the reduced sale of our iDeclare packages, resulted from the negative impact from the government agency's free software provisioning.

Gross profit for the second quarter of 2007 was US$2.5 million, or 79.0% of total net revenue, representing a decrease of 49.3% compared to US$4.6 million, or 92.4% of total net revenue for the second quarter of 2006. The decrease in gross profit was mainly attributable to the decrease in the sales of enterprise software.

Total operating expenses for the second quarter of 2007 were US$5.2 million, representing an increase of 70.3% from the second quarter of 2006. The increase of operating expenses is primarily attributable to the increased investment to develop and promote our B2B initiatives.

As a result, operating loss for the second quarter of 2007 was US$2.7 million, representing a decrease as compared to operating income of US$1.8 million for the second quarter of 2006. Operating margin for the second quarter of 2007 was (85.0%), compared to 35.2% for the second quarter of 2006.

Net loss for the second quarter of 2007 was US$1.7 million, representing a decrease as compared to net income of US$2.3 million for the second quarter of 2006. Both basic and diluted net loss per ADS for the second quarter of 2007 were US$0.05, compared to basic and diluted net income per ADS of US$0.07 and US$0.06 for the second quarter of 2006, respectively.

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 June 30, 2007, which was RMB7.6120 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.

Management Commentary

Mr. Shuang Wang, Chief Executive Officer of Ninetowns, said, "We are pleased to have completed several milestones within our B2B business, including the integration of the business operation and the technology platform for tootoo.com, the launch of the third generation tootoo.com platform, and continuing expansion of our service offerings through tootoo.com. For example, we recently executed a strategic investment into a leading Chinese B2B food and beverage trade facilitator. Furthermore, in an ongoing effort to promote our expanding B2B search and value-added services, we are in the process of deploying a nationwide sales and marketing network. We are encouraged by our progress to date, and remain focused on improving our revenue streams by diversifying and enhancing our services, expanding our customer bases, and converting free users to our paid services."

Mr. Tommy Fork, Chief Financial Officer of Ninetowns, said, "We have made good progress to expand our service offerings over the B2B platform and revitalize the value contribution of our existing import/export enterprise solutions as we firmly committed on our strategic initiative to provide total online solutions for international trade. In addition to the business operation efforts, we have also been cautious in our financial management such as maintaining a total cash and term deposit balance of US$103 million as of the end of the second quarter 2007."

About Ninetowns Internet Technology Group Company Limited

Ninetowns (NASDAQ:NINE) is the leading provider of online solutions for international trade, with its key services in automating import/export e- filing, as well as in operating tootoo.com, the leading B2B search and service provider for international trade. Ninetowns has been listed on the NASDAQ Stock Exchange since December 2004 under the symbol "NINE." More information can be found at www.ninetowns.com/english

Forward-Looking Statements

Certain statements in this press release 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.

    Contacts:
    Xiaoyan Su
    Investor Relations Ninetowns Internet Technology Group Company
    Limited
    (+86-10) 6588-2256
    ir@ninetowns.com

    Investor Relations (US):
    Mahmoud Siddig, Director
    Taylor Rafferty
    +1 (212) 889-4350
    ninetowns@taylor-rafferty.com

    Investor Relations (HK):
    Ruby Yim, Managing Director
    Taylor Rafferty
    +852 3196-3712
    ninetowns@taylor-rafferty.com

(1) As of the date of this earnings release, valuation and purchase price allocation relating to the accounting for the acquisition of Ample Spring is still in progress, therefore, certain balance sheet amounts, including goodwill and acquired intangible assets, may be adjusted in subsequent periods when valuation and purchase price allocation are completed.



    NINETOWNS INTERNET TECHNOLOGY GROUP COMPANY LIMITED
    CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
    THREE MONTHS ENDED JUNE 30, 2006, MARCH 31, 2007 AND JUNE 30, 2007

     (In thousands, except share-related data)

                                                For the three months ended
                                              June 30,    June 30,    Mar. 31,
                                                 2006        2006        2007
                                                  RMB         US$         RMB
                                           (unaudited) (unaudited) (unaudited)

    Total net revenues                         40,223       5,031      21,801
    Cost of revenues                           (3,059)       (383)     (2,558)
                                                ______      ______      ______
    Gross profit                               37,164       4,648      19,243
    Selling expenses                           (2,682)       (335)     (7,491)
    General and administrative expenses       (15,588)     (1,950)    (15,908)
    Research and development expenses          (4,751)       (594)     (7,501)
    Other operating income                          -           -         310
                                                ______      ______      ______
    Income(loss) from operations               14,143       1,769     (11,347)
    Interest income                             4,605         576       4,822
    Gain on sale of marketable equity
     securities                                     -           -         480
                                                ______      ______      ______
    Income(loss) before provision for
     income taxes and minority interest        18,748       2,345      (6,045)
    Provision for income taxes                   (519)        (65)       (136)
                                                ______      ______      ______
                                               18,229       2,280      (6,181)
    Income (loss) before minority interest
                                                    -           -           -
    Minority interest
                                                ______      ______      ______

    Net income(loss)                           18,229       2,280      (6,181)
                                                ______      ______      ______

    Net income(loss) per share:
      Basic                                  RMB 0.52     US$0.07    (RMB0.17)
      Diluted                                RMB 0.51     US$0.06    (RMB0.17)
                                                ______      ______      ______

    Weighted average number of shares used
     in computing net income per share:
      Basic                                34,991,834  34,991,834  34,954,753
      Diluted                              35,561,327  35,561,327  34,954,753
                                               ______      _______     _______


    NINETOWNS INTERNET TECHNOLOGY GROUP COMPANY LIMITED
    CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
    THREE MONTHS ENDED JUNE 30, 2006, MARCH 31, 2007 AND JUNE 30, 2007

     (In thousands, except share-related data)

                                                For the three months ended
                                              Mar. 31,    June 30,    June 30,
                                                 2007        2007        2007
                                                  US$         RMB         US$
                                           (unaudited) (unaudited) (unaudited)

    Total net revenues                          2,823      23,870       3,136
    Cost of revenues                             (331)     (5,014)       (659)
                                                ______      ______      ______
    Gross profit                                2,492      18,856       2,477
    Selling expenses                             (970)     (9,949)     (1,307)
    General and administrative expenses        (2,060)    (21,808)     (2,865)
    Research and development expenses            (971)     (7,447)       (978)
    Other operating income                         40          65           9
                                                ______      ______      ______
    Income(loss) from operations               (1,469)    (20,283)     (2,664)
    Interest income                               624       4,000         525
    Gain on sale of marketable equity
     securities                                    62       3,416         449
                                                ______      ______      ______
    Income(loss) before provision for
     income taxes and minority interest          (783)    (12,867)     (1,690)
    Provision for income taxes                    (18)        (52)         (7)
                                                ______      ______      ______
                                                 (801)    (12,919)     (1,697)
    Income (loss) before minority interest
                                                    -          -           -
    Minority interest
                                                ______      ______      ______

    Net income(loss)                             (801)    (12,919)     (1,697)
                                                ______      ______      ______

    Net income(loss) per share:
      Basic                                  (US$0.02)   (RMB0.37)   (US$0.05)
      Diluted                                (US$0.02)   (RMB0.37)   (US$0.05)
                                                ______      ______      ______

    Weighted average number of shares used
     in computing net income per share:
      Basic                                34,954,753  34,962,068  34,962,068
      Diluted                              34,954,753  34,962,068  34,962,068
                                               _______     _______     _______


    NINETOWNS INTERNET TECHNOLOGY GROUP COMPANY LIMITED
    CONDENSED CONSOLIDATED BALANCE SHEET  INFORMATION
    AS OF DECEMBER 31, 2006 AND JUNE 30, 2007

     (In thousands, except share-related data)

                                           December 31,           June 30,
                                          2006     2006       2007       2007
                                           RMB      US$        RMB        US$
                                         (note)   (note) (unaudited)(unaudited)
    ASSETS

    Current assets:
      Cash and cash equivalents and
       term deposits                     905,857  116,074    785,324  103,169
      Investment in available-for-sale
       securities                              -        -      8,252    1,084
      Inventories                          6,820      874      4,711      619
      Trade receivable, net               47,105    6,036     52,696    6,923
      Other current assets                30,207    3,871     28,784    3,782
                                          _______  _______    _______  _______
    Total current assets                 989,989  126,855    879,767  115,577

    Goodwill                             193,570   24,804    305,858   40,181

    Other non-current assets             181,730   23,286    231,336   30,391
                                          _______  _______    _______  _______
    TOTAL ASSETS                       1,365,289  174,945  1,416,961  186,149
                                          _______  _______    _______  _______

    LIABILITIES AND SHAREHOLDERS'
     EQUITY

    Current liabilities:
      Deferred revenue                    26,383    3,381     27,950    3,672
      Other current liabilities           33,299    4,267     59,366    7,799
                                          _______  _______    _______  _______
    Total current liabilities             59,682    7,648     87,316   11,471

    Non-current liabilities:                   -        -      1,020      134
      FIN 48 liabilities
      Deferred tax liabilities               627       80     12,028    1,580

                                          _______  _______    _______  _______
                                          60,309    7,728    100,364   13,185
    Total liabilities

    Minority interest                          -        -     30,788    4,045

    Total shareholders' equity         1,304,980  167,217  1,285,809  168,919
                                          _______  _______    _______  _______
    TOTAL LIABILITIES AND
     SHAREHOLDERS' EQUITY              1,365,289  174,945  1,416,961  186,149
                                          _______  _______    _______  _______


    Note: The condensed balance sheet information is derived from the
    Company's audited financial statements included in the annual report on
    Form 20-F.

Source: Ninetowns Internet Technology Group Company Limited

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