Ninetowns Reports First Half 2009 Financial Results

BEIJING, Oct. 28  /PRNewswire-Asia/ -- 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 reports its financial results for the six month period ended June 30, 2009.

  Financial Highlights:
  -- Total net revenues were US$6.3 million, representing a 15% decrease as
     compared to US$7.4 million for the first half of 2008.
  -- Net income was US$0.4 million, as compared to a net loss of US$4.2
     million for the first half of 2008.
  -- Both basic and diluted net income per ADS (each ADS represents one
     ordinary share) were US$0.01, compared to basic and diluted net loss
     per ADS of US$0.12 for the first half of 2008.

  First Half 2009 Business Highlights


Enterprise software: Ninetowns continued to derive a significant portion of its total net revenues from the sale and servicing of iDeclare software packages, Ninetowns' import/export enterprise software solution. During the first half of 2009, the Company sold 800 iDeclare software packages and 9,800 iDeclare service contracts. The sale of iDeclare software packages decreased compared to the same period last year primarily due to the decline in international trade activities and the associated decline in the number of customers engaged in international trade under the current global economic downturn. Among the total installed customer base of 141,700 users, approximately 70,000 users had more than one successful e-filing within the past 12 months. In addition, the percentage of iDeclare customers who purchased software service renewals was approximately 19% as of June 30, 2009.

During the first half of 2009, Ninetowns did not continue deploying iQM, the professional version of iProcess, in the Guangdong province due to the continued slowdown of the global trading environment. Ninetowns will continue to evaluate the opportune moment for possible re-deployment of iQM while continuing to service its existing users.

In addition, during the first half of 2009, Ninetowns sold approximately 500 annual maintenance service contracts to users who are currently using the free software offered by the PRC Inspection Administration. These contracts average approximately US$250 per contract per year. The charged maintenance services include installation, remote technical support, automatic upgrades and user training. Ninetowns will continue to promote its paid maintenance services to the free software users.

e-Grocery Food Business: During the first half of 2009, Ninetowns launched a portal site, http://www.tootoo.cn/ , to serve as an e-grocery platform targeting Chinese consumers primarily in Beijing and Shanghai metropolitan areas. This platform is designed as an online grocery store, with offerings of organic products and other fresh and natural products, as well as convenient delivery services direct from farm to table. Currently, tootoo.cn carries over 700 products across 18 different categories and serves approximately 2,000 customers. As part of the efforts in building this e-grocery platform, Ninetowns established partnerships with two local Beijing organic farms, Beijing Qingpuyuan Farm Land and Huaixiang Organic Farm Land, to assist Ninetowns with upholding and maintaining stringent and reliable quality control standards for product sourcing. In addition, in order to attract potential customers to this e-grocery platform as well as to promote the tootoo.cn branding, Ninetowns organized and participated in various events such as mother and baby health seminars, organic farm field trips, and various food-related exhibitions.

Mr. Shuang Wang, Chief Executive Officer of Ninetowns, commented: "As the global economic downturn continues to impact the import/export sector of China including many of our clients, we remain committed to our core strategic priorities and focus on client retention and new client acquisition through our versatile pricing structure and enhanced product features and services. Our goal with tootoo.cn is to continue building on our core strength of providing quality control management for qualified and reliable products and services to our customers, from sourcing to final delivery. We believe that this unique competitive advantage will enable us to deliver long-term shareholder value."

Mr. Tommy Fork, Chief Financial Officer of Ninetowns, commented, "For the first half of 2009, we were able to maintain a streamlined operation through stringent cost controls in our core businesses as well as disciplined investment into our e-grocery initiative. In addition, we continue to maintain a debt-free balance sheet with close to US$79.0 million in cash and cash equivalents. We expect that these financial resources will enable us to adequately weather the challenges from the global financial crisis and to continue executing our growth plans."

First Half 2009 Financial Results

Total Net Revenues. Total net revenues decreased by 15% to US$6.3 million for the first half of 2009, from US$7.4 million in the first half of 2008. The primary reason for the year-on-year decrease was the continued deterioration of the import/export sector of China and the corresponding decline in demand for Ninetowns' enterprise software packages and services.

Net revenues from sales of enterprise software for the first half of 2009 was US$4.6 million, representing 73% of total net revenues, as compared to 78% for the same reporting period of last year. Net revenues from software development services was US$0.9 million for the first half of 2009, representing 15% of total net revenues, as compared to 20% for the same reporting period of last year. Net revenues from the e-grocery food business were US$0.7 million, for the first half of 2009, representing 11%, of total net revenues.

Gross Profit and Gross Margin. Gross profit was US$4.4 million for the first half of 2009, compared to US$5.3 million for the first half of 2008.

Gross margin for this reporting period was 69%, representing a decrease from 72% in the first half of 2008. The year-on-year gross margin decrease was due to the lower gross margins of the e-grocery food business.

Operating Expenses. For the first half of 2009, total operating expenses were US$8.1 million, representing a decrease of 32% from US$11.8 million in the first half of 2008, and a decline of 73% compared to US$29.5 million in the second half of 2008, which included a provision for impairment of goodwill of US$11.4 million, a provision for impairment of property and equipment of US$0.6 million, a provision for impairment of intangible assets of US$6.4 million, and an allowance for doubtful accounts of US$0.4 million.

For the first half of 2009, research and product development expenses decreased by 31% to US$1.6 million from US$2.3 million in the first half of 2008, but the research and product development expenses were stable compared to US$1.7 million during the second half of 2008. The year-over-year decrease was a result of the non-occurrence of the research and product development expenses from the discontinued business-to-business ("B2B") search business.

Sales and marketing expenses were US$1.4 million for the first half of 2009, a decrease of 53% from US$3.0 million in the first half of 2008 and were relatively stable compared to US$1.4 million in the second half of 2008. This year-on-year decrease was primarily due to the reduced advertising and marketing activities and the reduction in the number of employees associated with the discontinued B2B search business.

General and administrative expenses decreased to US$4.3 million in the first half of 2009, representing a decline of 33% compared to US$6.5 million in the first half of 2008 and a reduction of 43% compared to US$7.5 million in the second half of 2008. This decline was primarily due to the implementation of a "cost-cutting" program, decreased share-based compensation charges, reduced number of employees and decreased amortization expenses resulted from the impaired intangible assets.

Operating Loss. As a result, operating loss for the first half of 2009 was US$3.7 million, compared to an operating loss of US$6.5 million for the first half of 2008.

Other Income. For the first half of 2009, other income, primarily including interest income, realized gains on marketable securities and unrealized gains on the changes in fair value of marketable derivatives, amounted to US$4.1 million, as compared to other income of US$1.6 million for the same period in 2008.

Net Income. Net income for the first half of 2009 was US$0.4 million, as compared to a net loss of US$4.2 million for the same period in 2008. Both basic and diluted net income per ADS for the first half of 2009 were US$0.01, compared to basic and diluted net loss per ADS of US$0.12 for the first half of 2008.

Cash, Cash Equivalents and Term Deposits. Cash, cash equivalents and term deposits decreased to US$79.0 million as of June 30, 2009, compared to US$88.6 million as of December 31, 2008. The decrease was primarily due to Ninetowns' use of cash and cash equivalents in investments in marketable securities.

Deferred Revenue. Deferred revenue as of June 30, 2009 was US$1.9 million, a decrease of 40% from US$3.1 million as of December 31, 2008, primarily due to the overall decline in iDeclare operation.

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 June 30, 2009, which was RMB6.8302 to US$1.00. Certain comparative figures extracted from 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 8:00 a.m. in Beijing on October 29, 2009. This will be 8:00 p.m. on October 28, 2009 in New York. During the call, Ninetowns' management will be available to discuss first half 2009 financial results and recent business activities.

The call may be accessed by dialing [phone] and the passcode is 23642630. A live webcast of the conference call will be available on Ninetowns' website at http://www.ninetowns.com/english . A replay of the call will be available from 11:00 a.m. Beijing time on October 29, 2009 (11:00 p.m. in New York on October 28, 2009) through 11:00 a.m. on November 5, 2009 in Beijing (10:00 p.m. in New York on November 4, 2009) by telephone at [phone] and through http://www.ninetowns.com/English . The passcode to access the replay is 44093656.

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. 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 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:   [phone]
   Email: 

  Investor Relations (US):
   Mahmoud Siddig, Director
   Taylor Rafferty
   Tel:   [phone]
   Email: 

  Investor Relations (HK):
   Ruby Yim, Managing Director
   Taylor Rafferty
   Tel:   [phone]
   Email: 




           NINETOWNS INTERNET TECHNOLOGY GROUP COMPANY LIMITED
        CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
   SIX MONTHS ENDED JUNE 30, 2008, DECEMBER 31, 2008 AND JUNE 30, 2009
                (In thousands, except share-related data)

                                          For the six months ended
                                  Jun. 30,       Jun. 30,         Dec. 31,
                                    2008           2008             2008
                                     RMB            US$              RMB
                                (unaudited)    (unaudited)      (unaudited)
  Total net revenues               51,004          7,436            56,009
  Total cost of revenues          (14,347)        (2,092)          (17,859)

  Gross profit                     36,657          5,344            38,150

  Selling and marketing
   expenses                        (20,742)        (3,024)          (9,596)
  General and
   administrative expenses         (44,372)        (6,469)         (51,264)
  Research and
   development expenses            (16,026)        (2,336)         (11,673)
  Allowance for doubtful
   accounts                           (132)           (19)          (2,749)
  Impairment of goodwill                --             --          (78,081)
  Impairment of property
   and equipment                        --             --           (4,339)
  Impairment of
   intangible assets                    --             --          (43,747)

  Loss from operations             (44,615)        (6,504)        (163,299)

  Interest income                    3,160            461            3,866
  Realized gains on sales
   of marketable equity
   securities and
   derivatives                       7,410          1,080            2,456
  Unrealized gains on
   change in fair value of
   marketable derivatives               --             --               --
  Gain from disposal of
   investment under cost
   method                               --             --            2,187
  Other income                          62              9              296

  (Loss) income before
   income taxes benefit
   (provision)                     (33,983)        (4,954)        (154,494)
  Income taxes benefit
   (provision)                         958            140           12,424

  Net (loss) income                (33,025)        (4,814)        (142,070)
  Less: Net loss
   attributable to the
   noncontrolling interest           4,269            622            1,214

  Net (loss) income
   attributable to
   Ninetowns                       (28,756)        (4,192)        (140,856)

  Net (loss) income per
   share:
    Basic                         (RMB0.82)      (US$0.12)        (RMB4.02)
    Diluted                       (RMB0.82)      (US$0.12)        (RMB4.02)

  Weighted average number
   of shares used in
   computing net (loss)
   income per share:
    Basic                       34,991,834     34,991,834       34,997,505
    Diluted                     34,991,834     34,991,834       34,997,505



                                            For the six months ended
                                     Dec. 31,         Jun. 30,     Jun. 30,
                                       2008             2009         2009
                                        US$              RMB          US$
                                   (unaudited)      (unaudited)   (unaudited)
  Total net revenues                   8,209          43,202         6,325
  Total cost of revenues              (2,618)        (13,334)       (1,952)

  Gross profit                         5,591          29,868         4,373

  Selling and marketing
   expenses                           (1,407)         (9,784)       (1,432)
  General and
   administrative expenses            (7,514)        (29,515)       (4,321)
  Research and
   development expenses               (1,711)        (11,024)       (1,614)
  Allowance for doubtful
   accounts                             (403)         (4,806)         (704)
  Impairment of goodwill             (11,445)             --            --
  Impairment of property
   and equipment                        (636)             --            --
  Impairment of
   intangible assets                  (6,412)             --            --

  Loss from operations               (23,937)        (25,261)       (3,698)
  Interest income                        567           2,874           421
  Realized gains on sales
   of marketable equity
   securities and
   derivatives                           360           5,212           763
  Unrealized gains on
   change in fair value of
   marketable derivatives                 --          18,907         2,768
  Gain from disposal of
   investment under cost
   method                                321              --            --
  Other income                            43           1,138           167

  (Loss) income before
   income taxes benefit
   (provision)                       (22,646)          2,870           421
  Income taxes benefit
   (provision)                         1,821             (32)           (5)

  Net (loss) income                  (20,825)          2,838           416
  Less: Net loss
   attributable to the
   noncontrolling interest               178             129            19

  Net (loss) income
   attributable to                   (20,647)          2,967           435
   Ninetowns

  Net (loss) income per
   share:
    Basic                           (US$0.59)        RMB0.08       US$0.01
    Diluted                         (US$0.59)        RMB0.08       US$0.01

  Weighted average number
   of shares used in
   computing net (loss)
   income per share:
    Basic                         34,997,505      35,083,975    35,083,975
    Diluted                       34,997,505      35,083,975    35,083,975





           NINETOWNS INTERNET TECHNOLOGY GROUP COMPANY LIMITED
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                AS OF DECEMBER 31, 2008 AND JUNE 30, 2009
                              (In thousands)

                                  December 31,            June 30,
                                 2008      2008       2009         2009
                                 RMB       US$         RMB          US$
                                (note)    (note)   (unaudited)  (unaudited)
  ASSETS
  Current assets:
    Cash, cash equivalents
     and term deposits         604,642    88,625      539,247       78,950
    Restricted cash                670        98          787          115
    Investment in available-
     for-sale securities        10,024     1,469      100,818       14,761
    Inventories                  1,367       200        3,532          517
    Trade receivable-net        33,943     4,975       41,638        6,096
    Other current assets         7,119     1,043        9,952        1,457

  Total current assets         657,765    96,410      695,974      101,896

  Non-current assets           295,560    43,322      287,150       42,041

  TOTAL ASSETS
                               953,325   139,732      983,124      143,937

  LIABILITIES AND EQUITY

  Current liabilities:
    Deferred revenue            21,392     3,136       12,893        1,888
    Other current liabilities   29,946     4,389       47,739        6,989

  Total current liabilities     51,338     7,525       60,632        8,877

  Non-current liabilities:
    Deferred tax liabilities     1,807       265          898          131

  Total liabilities             53,145     7,790       61,530        9,008

  Total equity                 900,180   131,942      921,594      134,929

  TOTAL LIABILITIES AND
   EQUITY                       953,325  139,732      983,124      143,937



  Note: The information contained in the condensed consolidated balance
        sheet as of December 31, 2008 is derived from the Company's audited
        financial statements included in the annual report on Form 20-F.


DATASOURCE: Ninetowns Internet Technology Group Company Limited



CONTACT: Helen Wu, Investor Relations, Ninetowns Internet Technology

Group Company Limited, [phone], ; Investor Relations

(US): Mahmoud Siddig, Director, Taylor Rafferty, [phone],

; Investor Relations (HK): Ruby Yim, Managing

Director, Taylor Rafferty, [phone], 



Web site:  http://www.ninetowns.com/

http://www.ninetowns.com/english 

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