EX-99.1 2 v440367_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

 

500.com Limited Announces Financial Results For the First Quarter of 2016

 

 

SHENZHEN, China, May 20, 2016—500.com Limited (NYSE: WBAI) (“500.com” or the “Company”), a leading online sports lottery service provider in China, today reported its unaudited financial results for the first quarter of 2016.

 

Temporary Suspension of Online Lottery Sales

 

Since March 2015, all provincial sports lottery administration centers to which the Company provides sports lottery sales services have temporarily suspended accepting online purchase orders for lottery products in response to the Notice related to Self-Inspection and Self-Remedy of Unauthorized Online Lottery Sales, (the “Self-Inspection Notice”), which was jointly promulgated by the Ministry of Finance, the Ministry of Civil Affairs and the General Administration of Sports of the People’s Republic of China on January 15, 2015.

 

On February 24, 2015, the Company was informed by certain provincial sports lottery administration centers that, as part of their respective self-inspection processes, such provincial sports lottery administration centers planned to temporarily suspend accepting online purchase orders for lottery products starting from February 25, 2015. On March 2, 2015, the Company was further informed by the remaining provincial sports lottery administration centers to which it provides sports lottery sales services that they also planned to temporarily suspend accepting online purchase orders for lottery products, in response to the Self-Inspection Notice.

 

As a result of the provincial sport lottery administration centers’ decision to temporarily suspend accepting online lottery orders, or temporary suspension, the Company did not generate any revenue from sports lottery sales in the first quarter of 2016. The Company recorded an operating loss for the first quarter of 2016. 

 

Disposal of Investment in Sumpay.cn

 

On March 31, 2016, the Company announced that it has disposed of its 63% equity interest in Sumpay.cn for a total consideration of RMB359.1 million. According to the purchase agreement filed with Zhejiang Administration of Industry & Commerce (“AIC”), 20% of the total consideration, or RMB71.8 million, will be transferred immediately to the Company by the acquirer, and the remaining 80%, or RMB287.3 million, will be settled within 10 days after Sumpay.cn successfully renews its online payment license in 2016.

 

First Quarter 2016 Highlights

 

• Total purchase amount of sports lottery was nil, compared with nil for the fourth quarter of 2015, and RMB1,305.5 million for the first quarter of 2015.
   
• Net revenues were RMB2.2 million (US$0.3 million), compared with RMB0.7 million for the fourth quarter of 2015, and RMB98.8 million for the first quarter of 2015.
   
• Operating loss was RMB97.3 million (US$15.1 million), compared with operating loss of RMB72.3 million for the fourth quarter of 2015, and operating loss of RMB53.5 million for the first quarter of 2015.
   
• Non-GAAP1 operating loss was RMB49.3 million (US$7.7 million), compared with non-GAAP operating loss of RMB37.8 million for the fourth quarter of 2015, and non-GAAP operating loss of RMB14.6 million for the first quarter of 2015.
   
• Net loss attributable to 500.com was RMB90.9 million (US$14.1 million), compared with net loss attributable to 500.com of RMB109.7 million for the fourth quarter of 2015, and net loss attributable to 500.com of RMB52.0 million for the first quarter of 2015.

 

 

 

1 Non-GAAP financial measures exclude the impact of share-based compensation expenses, and deferred tax expenses relating to valuation allowance. Reconciliations of non-GAAP financial measures to U.S. GAAP financial measures are set forth in table at the end of this release.

 

 

  

 

 

Mr. Zhengming Pan, the CEO of 500.com, stated, “We voluntarily and temporarily suspended our online lottery sales operations in response to the promulgation of the Self-Inspection Notice. Such temporary and voluntary suspension materially and adversely impacted our financial and operational results for the first quarter of 2016. We want to restate that the Company was one of the two entities approved by the Ministry of Finance in 2012 to provide online lottery sales services on behalf of the China Sports Lottery Administration Center. In particular, such approval mandated that the China Sports Lottery Administration Center use its best effort to develop an online lottery sales management system as part of a pilot program for online lottery sales in China, and once such a management system is finished, the China Sports Lottery Administration Center should apply again for approval from the Ministry of Finance for official commencement of online lottery sales in China. The Company notes it has been working and will continue to work with the China Sports Lottery Administration Center to develop the management system. To the best of the Company’s knowledge, the approval by the Ministry of Finance for the Company to provide online lottery sales services on behalf of the China Sports Lottery Administration Center is valid and has not been revoked or amended as of the date of this earnings release.”

 

First Quarter 2016 Operational Results

 

Due to the voluntary temporary suspension, no operational results were recorded and presented currently.

 

First Quarter 2016 Financial Results

 

Net Revenues

Net revenues were RMB2.2 million (US$0.3 million), compared with RMB0.7 million for the fourth quarter of 2015, and RMB98.8 million for the first quarter of 2015. Net revenues for the first quarter of 2016 and the fourth quarter of 2015 were primarily generated from the rendering of technical and data maintenance services by Sumpay.cn.

 

Operating Expenses

Operating expenses were RMB100.1 million (US$15.5 million), representing a decrease of 34.5% from RMB152.8 million during the first quarter of 2015, and an increase of 32.1% from RMB75.8 million during the fourth quarter of 2015. The year-over-year decrease was mainly due to a decrease in promotional and advertising expenses of RMB34.0 million, a decrease in account handling expenses related to the Company’s mobile distribution channels of RMB6.9 million, both as a result of the voluntary temporary suspension, and a decrease in bad debt provision of RMB30.3 million which was made during the first quarter of 2015. These were partially offset by an increase in share-based compensation expenses associated with share options granted to the Company’s employees of RMB9.2 million, and an increase in salary expenses of RMB7.5 million as a result of the business combination of Sumpay.cn starting from December 20, 2015. The sequential increase was mainly due to an increase in share-based compensation expenses associated with share options granted to the Company’s employees of RMB13.5 million, an increase in the amortization of the online payment and other licenses of RMB2.8 million, and an increase in salary expense of RMB6.8 million as a result of the business combination of Sumpay.cn starting from December 20, 2015.

 

Cost of services was RMB3.8 million (US$0.6 million), representing a decrease of 69.4% from RMB12.4 million during the first quarter of 2015, and an increase of 8.6% from RMB3.5 million during the fourth quarter of 2015. The year-over-year decrease was mainly due to a decline in account handling expenses related to the Company’s mobile distribution channels of RMB6.9 million as a result of the voluntary temporary suspension since March 2015.

 

Sales and marketing expenses were RMB13.1 million (US$2.0 million), representing a decrease of 71.3% from RMB45.6 million during the first quarter of 2015, and an increase of 50.6% from RMB8.7 million during the fourth quarter of 2015. The year-over-year decrease was mainly due to a decline in promotional activities of RMB18.5 million as a result of the voluntary temporary suspension, and a decline in advertising expenses associated with the Company’s marketing campaign on TV and other media of RMB15.5 million. The sequential increase was mainly attributable to an increase in salary expenses of RMB3.1 million as a result of the business combination of Sumpay.cn starting from December 20, 2015, and an increase in share-based compensation expenses associated with share options granted to the Company’s employees of RMB1.1 million.

 

General and administrative expenses were RMB61.5 million (US$9.5 million), representing a decrease of 23.3% from RMB80.2 million during the first quarter of 2015, and an increase of 28.4% from RMB47.9 million during the fourth quarter of 2015. The year-over-year decrease was attributable to a bad debt provision of RMB30.3 million made during the first quarter of 2015, which was partially offset by an increase in share-based compensation expenses associated with share options granted to the Company’s employees of RMB6.4 million, an increase in the amortization of the online payment and other licenses of RMB3.1 million, and an increase in salary expenses of RMB1.3 million as a result of the business combination of Sumpay.cn starting from December 20, 2015. The sequential increase was mainly due to an increase in the amortization of the online payment and other licenses of RMB2.8 million, and an increase in share-based compensation expenses associated with share options granted to the Company’s employees of RMB9.8 million.

 

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Service development expenses were RMB21.7 million (US$3.4 million), representing an increase of 48.6% from RMB14.6 million during the first quarter of 2015, and an increase of 38.2% from RMB15.7 million during the fourth quarter of 2015. The year-over-year and sequential increases were mainly due an increase in share-based compensation expenses associated with share options granted to the Company’s employees of RMB1.8 million and RMB2.3 million, respectively, and an increase in salary expenses of RMB3.2 million and RMB3.1 million, respectively, as a result of the business combination of Sumpay.cn starting from December 20, 2015.

 

Operating Loss

Operating loss was RMB97.3 million (US$15.1 million), compared with operating loss of RMB53.5 million during the first quarter of 2015, and operating loss of RMB72.3 million during the fourth quarter of 2015. The Company did not generate any revenue from sports lottery sales in the first quarter of 2016 due to the voluntary temporary suspension, which materially affected operating results for the first quarter of 2016.

 

Non-GAAP operating loss was RMB49.3 million (US$7.7 million), compared with non-GAAP operating loss of RMB14.6 million during the first quarter of 2015, and non-GAAP operating loss of RMB37.8 million during the fourth quarter of 2015.

 

Net Loss Attributable to 500.com

Net loss attributable to 500.com was RMB90.9 million (US$14.1 million), compared with net loss attributable to 500.com of RMB52.0 million during the first quarter of 2015, and net loss attributable to 500.com of RMB109.7 million during the fourth quarter of 2015.

 

Non-GAAP net loss attributable to 500.com was RMB42.9 million (US$6.7 million), compared with non-GAAP net loss attributable to 500.com of RMB13.2 million during the first quarter of 2015, and non-GAAP net loss attributable to 500.com of RMB31.3 million during the fourth quarter of 2015.

 

Basic and Diluted Net Loss per ADS

Basic and diluted net loss per ADS were RMB2.17 and RMB2.17, respectively.

 

Non-GAAP basic and diluted net loss per ADS were RMB1.03 and RMB1.03, respectively.

 

Cash and Cash Equivalents

As of March 31, 2016, the Company had cash and cash equivalents of RMB1,024.1 million (US$158.8 million), restricted cash2 of RMB8.2 million (US$1.3 million) and time deposits3 of RMB396.7 million (US$61.5 million), compared with cash and cash equivalents of RMB400.7 million, restricted cash of RMB10.6 million and time deposits of RMB1,220.8 million as of December 31, 2015.

 

Account Receivables

As of March 31, 2016, the Company had gross account receivables of RMB20.3 million (US$3.1 million), compared with RMB23.6 million as of December 31, 2015. The Company made a bad debt provision of RMB19.9 million in 2015, after assessing the collectability of the account receivables.

 

Prepayments and Other Current Assets

As of March 31, 2016, the balance of prepayment and other current assets was RMB81.4 million (US$12.6 million), compared with RMB30.9 million as of December 31, 2015. The balance as of March 31, 2016 mainly included: (i) the current portion of deferred expenses of RMB48.1 million (US$7.5 million); (ii) interest receivable of RMB2.1 million (US$0.3 million); (iii) receivables from third party payment service providers of RMB8.2 million (US$1.3 million); (iv) deposits receivable from merchants of RMB7.5 million (US$1.2 million); and (v) other receivables of RMB15.6 million (US$2.3 million).

 

 

 

2 Restricted cash represents government grants received but pending final clearance.

3 Time deposits represent six-month fixed-interest deposits with commercial banks.

 

 

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Business Outlook

 

The Company will not make earnings forecast until it receives clear instruction on the resumption date of online sports lottery sales from the Ministry of Finance.

 

Currency Convenience Translation

 

This announcement contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars were made at the exchange rate of RMB6.4480 to US$1.00, as set forth in the H.10 statistical release of the Federal Reserve Board on March 31, 2016.

 

About 500.com Limited

 

500.com Limited (NYSE:WBAI) is a leading online sports lottery service provider in China. The Company offers a comprehensive and integrated suite of online lottery services, information, user tools and virtual community venues to its users. 500.com was among the first companies to provide online lottery services in China, and is one of two entities that have been approved by the Ministry of Finance to provide online lottery sales services on behalf of the China Sports Lottery Administration Center, which is the government authority that is in charge of the issuance and sale of sports lottery products in China.

 

Safe Harbor Statements

 

This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “target,” “going forward,” “outlook” and similar statements. Such statements are based upon management’s current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company’s control, which may cause the Company’s actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company’s filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.

 

About Non-GAAP Financial Measures

 

To supplement the Company’s financial results presented in accordance with U.S. GAAP, the Company uses non-GAAP financial measures, which are adjusted from results based on U.S. GAAP to exclude share-based compensation expenses in our consolidated affiliated entities, and deferred tax expense relating to valuation allowance. Reconciliations of non-GAAP financial measures to U.S. GAAP financial measures are set forth in table at the end of this release, which provide more details on the non-GAAP financial measures.

 

Non-GAAP financial information is provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors’ overall understanding of the historical and current financial performance of the Company’s continuing operations and prospects for the future. Non-GAAP financial information should not be considered a substitute for or superior to U.S. GAAP results. In addition, calculations of this non-GAAP financial information may be different from calculations used by other companies, and therefore comparability may be limited.

 

 

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For more information, please contact:

 

500.com Limited

 

ir@500wan.com

 

 

Christensen

 

In China

Mr. Christian Arnell

Phone: +86-10-5900-1548

E-mail: carnell@christensenir.com

 

In US

Ms. Linda Bergkamp

Phone: +1-480-614-3004

Email: lbergkamp@ChristensenIR.com

 

 

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500.com Limited
Condensed Consolidated Balance Sheets
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares)

 

 

   December 31,
2015		   March 31,
2016		   March 31,
2016		 
   RMB   RMB   US$ 
   Audited   Unaudited   Unaudited 
             
ASSETS               
Current assets:               
Cash and cash equivalents   400,657    1,024,144    158,831 
Restricted cash   10,599    8,165    1,266 
Time deposits   1,220,797    396,741    61,529 
Short-term investments   45,540    161,100    24,984 
Accounts receivable   3,638    352    55 
Prepayments and other current assets   30,855    81,401    12,625 
Total current assets   1,712,086    1,671,903    259,290 
                
Non-current assets:               
Property and equipment, net   44,194    44,456    6,895 
Intangible assets, net   200,148    196,400    30,459 
Goodwill   64,899    64,899    10,065 
Deposits   1,217    992    154 
Long-term investments   60,332    59,482    9,225 
Other non-current assets   1,621    1,621    251 
Total non-current assets   372,411    367,850    57,049 
                
TOTAL ASSETS   2,084,497    2,039,753    316,339 
                
                
LIABILITIES AND SHAREHOLDERS’ EQUITY               
Current liabilities:               
Accounts payable   106    141    22 
Accrued payroll and welfare payable   15,890    10,418    1,616 
Accrued expenses and other current
  liabilities		   140,612    212,997    33,032 
Income tax payable   1,214    1,365    212 
Total current liabilities   157,822    224,921    34,882 
                
Non-current liabilities:               
Long-term payables   46,928    48,399    7,506 
Deferred tax liabilities   13,411    13,187    2,045 
Total non-current liabilities   60,339    61,586    9,551 
                
Total liabilities   218,161    286,507    44,433 
                
Shareholders’ Equity:               
Class A ordinary shares, par value
US$0.00005 per share, 700,000,000
shares authorized as of  December 31,
2015 and March 31, 2016; 334,034,932 and
339,390,262 shares issued and outstanding as of
December 31, 2015 and March 31, 2016, respectively		   110    114    18 
Class B ordinary shares, par value
US$0.00005 per share; 300,000,000 shares
authorized as of December 31, 2015 and
March 31, 2016; 84,999,159 and 74,400,299
shares issued and outstanding as of
December 31, 2015 and March 31, 2016, respectively		   32    29    4 
Additional paid-in capital   2,022,369    2,072,890    321,478 
Treasury shares   (8,773)   (71,148)   (11,034)
Accumulated deficit   (335,363)   (426,293)   (66,112)
Accumulated other comprehensive income   89,488    83,436    12,940 
Total 500.com Limited shareholders’ equity   1,767,863    1,659,028    257,294 
Noncontrolling interests   98,473    94,218    14,612 
Total shareholders' equity   1,866,336    1,753,246    271,906 
                
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY		   2,084,497    2,039,753    316,339 

 

 

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500.com Limited
Condensed Consolidated Statements of Comprehensive Income
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares, per share (or ADS) data)

 

   Three Months Ended 
   March 31,
2015		   December 31,
2015		   March 31,
2016		   March 31,
2016		 
   RMB   RMB   RMB   US$ 
   Unaudited   Unaudited   Unaudited   Unaudited 
Net Revenues   98,845    707    2,221    344 
                     
Operating expenses:                    
Cost of services   (12,377)   (3,460)   (3,770)   (585)
Sales and marketing   (45,575)   (8,715)   (13,154)   (2,040)
General and administrative   (80,214)   (47,937)   (61,481)   (9,535)
Service development expenses   (14,593)   (15,721)   (21,655)   (3,358)
Total operating expenses   (152,759)   (75,833)   (100,060)   (15,518)
Other operating income   2,080    1,627    22    3 
Government grant   243    1,353    1,616    251 
Other operating expense   (1,904)   (140)   (1,148)   (178)
Operating loss   (53,495)   (72,286)   (97,349)   (15,098)
Interest income   2,912    7,698    3,761    583 
Interest expense   -    (310)   -    - 
Loss from equity method investments   -    (118)   (178)   (28)
Changes in fair value of the structured deposit   1,267    -    -    - 
Loss before income tax   (49,316)   (65,016)   (93,766)   (14,543)
Income tax expense   (2,729)   (45,004)   (1,419)   (220)
Net loss   (52,045)   (110,020)   (95,185)   (14,763)
Less: Net loss attributable to the non-controlling interests   -    (312)   (4,255)   (660)
Net loss attributable to 500.com Limited   (52,045)   (109,708)   (90,930)   (14,103)
Other comprehensive income                    
Foreign currency translation (loss) gain   (814)   26,257    (6,052)   (939)
Other Comprehensive Income (loss), net of tax   (814)   26,257    (6,052)   (939)
Comprehensive loss   (52,859)   (83,763)   (101,237)   (15,702)
Less: Comprehensive loss attributable to noncontrolling interests   -    (312)   (4,255)   (660)
Comprehensive loss attributable to 500.com Limited   (52,859)   (83,451)   (96,982)   (15,042)
                     
Losses per share attributable to 500.com Limited                    
Basic   (0.15)   (0.26)   (0.22)   (0.03)
Diluted   (0.15)   (0.26)   (0.22)   (0.03)
Losses per ADS*  attributable to 500.com Limited                    
Basic   (1.48)   (2.62)   (2.17)   (0.34)
Diluted   (1.48)   (2.62)   (2.17)   (0.34)
Weighted average number of  Class A and Class B ordinary shares outstanding:                    
Basic   351,510,694    418,952,526    418,584,825    418,584,825 
Diluted   351,510,694    418,952,526    418,584,825    418,584,825 
                     

 

* American Depositary Shares, which are traded on the NYSE. Each ADS represents ten Class A ordinary shares of the Company.

 

 

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500.com Limited
Reconciliation of non-GAAP results of operations measures to the nearest comparable GAAP measures
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for per share (or ADS) data)

 

   Three Months Ended 
   March 31,
2015		   December 31,
 2015		   March 31,
2016		   March 31,
2016		 
   RMB   RMB   RMB   US$ 
   Unaudited   Unaudited   Unaudited   Unaudited 
Operating loss   (53,495)   (72,286)   (97,349)   (15,098)
Adjustment for share-based compensation expenses   38,856    34,530    48,017    7,447 
Adjusted operating loss (non-GAAP)   (14,639)   (37,756)   (49,332)   (7,651)
                     
Net loss attributable to 500.com Limited   (52,045)   (109,708)   (90,930)   (14,103)
Adjustment for share-based compensation expenses   38,856    34,530    48,017    7,447 
Adjustment for deferred tax expenses relating to valuation allowance   -    43,851    -    - 
Adjusted net loss attributable to 500.com Limited (non-GAAP)   (13,189)   (31,327)   (42,913)   (6,656)
                     
Loss per share attributable to 500.com Limited (non-GAAP)                    
Basic   (0.04)   (0.07)   (0.10)   (0.02)
Diluted   (0.04)   (0.07)   (0.10)   (0.02)
Loss per ADS* attributable to 500.com Limited  (non-GAAP)                    
Basic   (0.38)   (0.75)   (1.03)   (0.16)
Diluted   (0.38)   (0.75)   (1.03)   (0.16)
                     

 

* American Depositary Shares, which are traded on the NYSE. Each ADS represents ten Class A ordinary shares of the Company.