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The9 Misses Consensus EPS Estimate, but Beats Consensus Revenue Estimate Due to "World of Warcraft" (NCTY 2Q05 Earnings Results)

Aug. 24, 2005 10:00 PM ETThe9 Limited (NCTY)
Ezra Marbach profile picture
Ezra Marbach

The9 (ticker: NCTY) reported Q2 2005 earnings results that missed consensus EPS estimates -- but generated strong revenue growth driven by newly introduced online game World of Warcraft (WoW). WoW was launched on June 7, 2005. Key stats from the quarter:

Q2 Results:
(all percentage changes and comparisons are year on year, unless stated otherwise; assumes conversion of RMB 8.2765 : US $1)

  • Total revenue rose 385.3% to $7.1 million.
  • Net revenue rose 386.0% to $6.7 million above consensus estimate of $5.37 million.
  • Net revenue rose 354.5% sequentially.
  • Online game and virtual community services revenue rose 48,732.8% to $6.7 million.
  • Net revenue from World of Warcraft (WoW) was $6.3 million.
  • Game operating support, web site solution and ad revenue fell 84.5% to $134,245 (due to decline in online game MU).
  • Other revenue (sales of game-related accessories and promotional activities related to WoW and MU) rose 1,545.0% to $255,603, but fell 66.3% sequentially.
  • Gross margin was 51.5% vs 76.9%.
  • Operating expenses rose 802.4% to $6.8 million.
  • Product development expenses rose 1,655.9% to $2.6 million.
  • Sales and marketing expenses rose 1,348.9% to $2.5 million.
  • G&A expenses rose 281.3% to $1.7 million.
  • Operating loss of $3.1 million vs operating income of $368,544.
  • Net loss of $2.8 million vs net income of $1.2 million, and vs loss of $1.3 million in Q1.
  • Loss of $0.11 vs gain of $0.05. Consensus loss of $0.07.

Balance Sheet

  • Cash and equivalents of $63.2 million as of June 30, 2005.

WoW Stats

  • Paying accounts surpassed 2.0 million.

NCTY chart.


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This article was written by

Ezra Marbach profile picture
Ezra Marbach is a former investment banker who lived in Beijing in 2002-03 where he studied Mandarin Chinese and worked for a venture capitalist. Ezra previously worked for Internet-based venture capital firm UniversityAngels.com. Prior to that, he worked in the corporate finance department of Gerard Klauer Mattison, a NY-based boutique investment bank. Ezra graduated from Cornell University.

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