The9 (NCTY) has reported its unaudited financial results for the second quarter of 2005. Net revenues for the second quarter of 2005 grew by 354.5% quarter-over-quarter and 386.0% year-over-year to CNY55.7 million.
The company also recorded a loss from operations of CNY26.0 million in the second quarter of 2005. The loss from operations increased 50.3% from a loss of CNY17.3 million in the first quarter of 2005.
Specifically, its net revenues were CNY55.7 million, which the company says was mainly due to a significant contribution in revenues from "online game and virtual community services" as a result of The9's commercial operations of World of Warcraft (WoW), which was commercially launched in June 2005.
Net revenue attributable to the operation of WoW for the second quarter of 2005 was CNY52.3 million following its commercial launch on June 7, 2005.
Gross profit for the second quarter of 2005 increased by 551% to CNY30.1 million from CNY4.6 million million in the first quarter of 2005. Gross profit margin rose to 54.1% for the second quarter of 2005 from 37.8% in the first quarter of 2005.
Operating expenses increased by 155.9% to CNY56.1 million in the second quarter of 2005 from CNY21.9 million in the first quarter of 2005. The company says this was mainly due to an increase in advertising and promotional costs related to the launch of WoW as well as expensing early stage game development advances previously capitalized and impairment of licensing fee relating to Mystina Online.
As of June 30, 2005, the company's total cash and cash equivalents balance was CNY523.3 million. The decrease in cash and cash equivalents from CNY793.4 million as at December 31, 2004 was mainly a result of WoW server purchases, WoW prepaid royalty payment for the first year of WoW's operating term and being expensed as game revenues are recognized, and payments to 9Webzen, offset in part by receipts of prepaid card revenues and payments against loan receivable.