The9 Limited (NCTY)

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The9 Limited (NCTY)

Q4 2008 Earnings Call Transcript

February 23, 2009 8:00 pm ET


Phyllis Sai – IR Manager, Investor Relations

Xiaowei Chen – President

George Lai – CFO


Jason Brueschke – Citigroup

Paul Keung – Oppenheimer

Chung [ph] – Susquehanna International Group

Andrey Glukhov – Brean Murray

Dick Wei – JP Morgan

Wallace Cheung – Credit Suisse

Paul Wuh – Nomura International

Adam Krejcik – Roth Capital Partners

James Lee – Sterne, Agee Capital Markets

Atul Bagga – ThinkEquity

Wendy Huang – RBS



Good day, ladies and gentlemen, and welcome to The9 Limited Fourth Quarter and Fiscal Year 2008 Financial Results Conference Call. My name is Anton and I will be your coordinator for today. At this time, all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today’s conference call. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s conference, Ms. Phyllis Sai, IR Manager of The9 Limited. Please proceed, ma’am.

Phyllis Sai

Thank you, operator. Hello, everyone, and thank you for joining us today for The9's fourth quarter and fiscal year 2008 financial results conference call. The management with me today are Ms. Xiaowei Chen, President, and Mr. George Lai, Chief Financial Officer. As always, I will start the call with a review of the Safe Harbor statement before our management begins their prepared remarks.

During the course of today’s call, certain projections or forward-looking statements may be made regarding The9's future financial performance or future events. We wish to caution you that such statements or predictions are based on current information and expectations and actual results may differ materially from those projected in the forward-looking statements.

We would also like to refer you to documents that the company filed with the United States Securities and Exchange Commission. Those documents contain additional information concerning factors that could cause actual results to differ materially from those contained in the management’s projections or forward-looking statements.

Now we would like to begin with our President, Ms. Xiaowei Chen, who will give you an overview of our financial results and operational report for the quarter and fiscal year, followed by our Chief Financial Officer, Mr. George Lai, who will follow with a detailed discussion of our financials. Xiaowei?

Xiaowei Chen

Thank you, Phyllis. Good day and evening ladies and gentlemen. Thank you for participating in our discussion of The9’s fourth quarter and fiscal year 2008 results.

2008 was an eventful year both for China and the world. In China, in particular, the year started with a snowstorm that severely affected most of the coastal areas. In midyear, the Wenchuan earthquake struck as one of the most tragic disasters in Chinese history. In August, China proudly staged its first Olympic Games. TV viewership soared yet game player numbers decreased. And starting late September, we witnessed the financial crisis streaking across the globe.

Despite all these events mentioned above, The9 closed the year 2008 with a strong financial performance. Our total net revenues increased 33% year over year to US $250.4 million. Our net income increased 45% year over year to US$51.1 million. And our earnings per ADS increased 44% year over year to US$1.84.

We were able to achieve such results due to our intensified efforts to improve service to our players, aggressively promote our games in major cities as well as rural areas, to provide content most suited to local taste, and to strengthen the communications with our partners to provide the best gaining experience together to our players. We were able to achieve such results in a year and there were major negatively impacting factors in China and worldwide. We were able to achieve such results in a year when no new expansion of Blizzard Entertainment’s World of Warcraft was launched in China. In the year past, we not only reinforced our reputation as a partner of choice of leading worldwide game developers, but also further strengthened our proprietary game d development capability.

In January 2009, The9 declared a special cash dividend. In early February we paid out $1.11 per share to our shareholders and the total dividend payment was approximately US$29.4 million. This is the first time in The9’s history that we have declined a special cash dividend. The payment of this special cash dividend is a significant return of value to our shareholders. We appreciate the support of our shareholders and believe that The9 will continue to provide solid long-term value for our shareholders. As another way of returning value to our shareholders, starting from November 2008, The9 has actively repurchased its shares from open markets. Up to February 20, 2009, we have spent approximately US$18.1 million on share repurchases.

Now let me go over some highlights of our games operations during the fourth quarter. First of all, World of Warcraft. After more than one year since the launch of The Burning Crusade, Blizzard Entertainment’s phenomenal first expansion pack of World of Warcraft, the game continued to enjoy a strong momentum in the fourth quarter, achieving peak concurrent users or PCCU levels of approximately 1.02 million. The average concurrent users, APCU level in the fourth quarter increased approximately to 422,000. Average revenue per user hour or ARPU remained stable at RMB 43.1 [ph] cents, while the number of active users increased significantly by 49% from 6.1 million in the last quarter to 9.1 million in this quarter. The9 defines active users as the number of users who have spent money during the past three months.

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