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500.com Limited Reports Fourth Quarter and Full Year 2013 Financial Results

February 21, 2014

SHENZHEN, China, Feb. 21, 2014 /PRNewswire/ — 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 full year and fourth quarter ended December 31, 2013.

Fourth Quarter 2013 Highlights

    --  Net revenues were RMB96.1 million (US$15.9 million), up 38.9%
        quarter-over-quarter and 135.5% year-over-year.
    --  Operating profit was RMB33.9 million (US$5.6 million), up 91.5%
        quarter-over-quarter.
    --  Net income attributable to ordinary shareholders was RMB85.5 million
        (US$14.1 million), up significantly quarter-over-quarter and
        year-over-year.
    --  Non-GAAP net income attributable to ordinary shareholders excluding
        share-based compensation, deferred tax benefit and costs incurred on the
        convertible note was RMB26.1 million (US$4.3 million), up 91.9%
        quarter-over-quarter.
    --  Basic and diluted earnings per ADS(1) attributable to ordinary
        shareholders were US$0.53 and US$0.48, respectively.
    --  Non-GAAP basic and diluted earnings per ADS attributable to ordinary
        shareholders excluding share-based compensation, deferred tax benefit
        and costs incurred on the convertible note were US$0.16 and US$0.15,
        respectively.

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

Full Year 2013 Highlights

    --  Net revenues were RMB259.5 million (US$42.9 million), up 51.3%
        year-over-year.
    --  Operating profit was RMB59.9 million (US$9.9 million), up 183.9%
        year-over-year.
    --  Net income attributable to ordinary shareholders was RMB106.1 million
        (US$17.5 million), up significantly year-over-year.
    --  Non-GAAP net income attributable to ordinary shareholders excluding
        share-based compensation, deferred tax benefit and costs incurred on the
        convertible note was RMB55.6 million (US$9.2 million), up 86.0%
        year-over-year.
    --  Basic and diluted earnings per ADS attributable to ordinary shareholders
        were US$0.74 and US$0.67, respectively.
    --  Non-GAAP basic and diluted earnings per ADS attributable to ordinary
        shareholders excluding share-based compensation, deferred tax benefit
        and costs incurred on the convertible note were US$0.39 and US$0.35,
        respectively.

“I am happy to announce strong quarterly results in our first quarter as a public company,” commented Mr. Man San Law, founder, chairman and chief executive officer of 500.com. “Our business continued to pick up momentum as we set new records for total active users, active mobile users and total purchase amount during the quarter. Our comprehensive and innovative mobile services form a key part of our overall strategy. Mobile-registered users increased significantly, accounting for approximately 67% of active users during the quarter. Mobile purchases now represent approximately 18% of our total purchase amount. Results like these demonstrate the enormous potential that our mobile services offer and are indicative of the direction we are headed. We recently signed an agreement with China Mobile E-Commerce that will greatly expand the reach of our mobile lottery products by providing convenient, safe and reliable payment services. We are also eager to take advantage of any opportunities that arise to invest in our mobile strategy as we work to prepare for this summer’s FIFA World Cup and build upon the solid foundation we have created as China’s leading online sports lottery service.”

Fourth Quarter 2013 Financial Results

Net revenues

Net revenues were RMB96.1 million (US$15.9 million), representing an increase of 135.5% from RMB40.8 million during the fourth quarter of 2012 and an increase of 38.9% from RMB69.2 million during the third quarter of 2013. The year-over-year increase in revenues was primarily due to the resumption of the Company’s online lottery sales and services for sports lottery products in November 2012. From March to November 2012, the Company voluntarily suspended online lottery sales services in response to the implementation of a new government regulation limiting sales of online lottery services to entities approved by the Ministry of Finance. The sequential increase was the result of increased user activity with the number of active users increasing significantly to approximately 894,000 during the fourth quarter of 2013 from 374,000 during the third quarter of 2013, and a 45.6% increase in the total purchase amount to RMB1.1 billion during the fourth quarter from RMB735.6 million during the third quarter of 2013.

Total service fees generated from sports lottery products were RMB119.7 million (US$19.8 million), representing an increase of 181.6% from RMB42.5 million during the fourth quarter of 2012 and an increase of 45.8% from RMB82.1 million during the third quarter of 2013. The sequential and year-over-year increases were primarily a result of the increase in the purchase amount by users.

The Company ceased to provide sales services for, and did not generate any service fees from, welfare lottery products during the year ended December 31, 2013.

Operating Expenses

Operating expenses were RMB68.1 million (US$11.2 million), representing an increase of 66.9% from RMB40.8 million in the fourth quarter of 2012 and 26.6% from RMB53.8 million in the third quarter of 2013.

Cost of services were RMB8.3 million (US$1.4 million), representing an increase of 80.4% from RMB4.6 million during the fourth quarter of 2012 and 10.7% from RMB7.5 million during the third quarter of 2013. The sequential and year-over-year increases were mainly a result of the increase in our net revenues. Cost of services represented 8.6% of net revenues, compared with 11.3% in the fourth quarter of 2012 and 10.8% in the third quarter of 2013. Cost of services as a percentage of net revenues decreased due to the decrease in business tax as a result of VAT reform.

Sales and marketing expenses were RMB23.4 million (US$3.9 million), a significant increase from RMB9.5 million during the fourth quarter of 2012 and a decrease of 5.3% from RMB24.7 million during the third quarter of 2013. Sales and marketing expenses represented 24.3% of net revenues, compared with 23.3% in the fourth quarter of 2012 and 35.7% in the third quarter of 2013. The year-over-year increases in sales and marketing expenses and their percentage of net revenues were primarily due to the Company’s expanded marketing efforts in 2013. The sequential decrease in sales and marketing expenses and their percentage of net revenues was primarily a result of the slight tapering in the Company’s promotional activities in response to the continued recover in user activity levels.

General and administrative expenses were RMB26.7 million (US$4.4 million), representing an increase of 49.2% from RMB17.9 million during the fourth quarter of 2012 and 78.0% from RMB15.0 million during the third quarter of 2013. The sequential and year-over-year increases were mainly a result of the increase in share-based compensation expenses arising from the share options granted to the Company’s employees during the fourth quarter of 2013. General and administrative expenses represented 27.8% of net revenues, compared with 43.9% in the fourth quarter of 2012 and 21.7% in the third quarter of 2013. The year-over-year decrease in general and administrative expenses as a percentage of net revenues was primarily due to the increase in net revenues as a result of the recovery and growth of users with the resumption of the Company’s online lottery sales and services for sports lottery products in November 2012. The sequential increase in general and administrative expenses as a percentage of net revenues was primarily due to the increase in salary and benefit expenses as a result of the Company’s year-end bonuses and share-based compensation expenses arising from the share options granted to the Company’s employees during the fourth quarter of 2013.

Service development expenses were RMB9.8 million (US$1.6 million), representing an increase of 10.1% from RMB8.9 million during the fourth quarter of 2012 and 46.3% from RMB6.7 million during the third quarter of 2013. The sequential and year-over-year increases were primarily attributable to increases in salary and benefit expenses as a result of the year-end bonuses granted to the Company’s employees during the fourth quarter of 2013. Service development expenses represented 10.2% of net revenues, compared with 21.8% in the fourth quarter of 2012 and 9.7% in the third quarter of 2013.

Operating Profit

Operating profit was RMB33.9 million (US$5.6 million), representing an increase of 91.5% from an operating profit of RMB17.7 million during the third quarter of 2013 and an increase from an operating loss of RMB164,000 in the fourth quarter of 2012.

Net Income

Net income was RMB85.5 million (US$14.1 million), compared with a net loss of RMB6.2 million during the fourth quarter of 2012 and net income of RMB12.5 million during the third quarter of 2013. The Company recorded a one-time income tax benefit of RMB94.7million (US$15.6 million) as a result of the reversal of deferred tax liabilities relating to outside basis differences in the Company’s consolidated affiliated entities, offset by the costs incurred on the convertible note of RMB30.7 million (US$5.1 million).

Non-GAAP net income attributable to ordinary shareholders excluding share-based compensation, deferred tax benefit and costs incurred on the convertible note was RMB26.1 million (US$4.3 million), an increase of 91.9% from the third quarter of 2013. In order to streamline 500.com’s corporate structure, the Company, a Cayman entity, replaced E-Sun Sky Computer (Shenzhen) Co., Ltd, a PRC entity, as the primary beneficiary of Shenzhen E-Sun Network Co., Ltd., Shenzhen Youlanguang Science and Technology Co., Ltd. (“E-Sun Sky Computer”) and Shenzhen Guangtiandi Science and Technology Co., Ltd. (the “VIEs”) on December 28, 2013. As management is asserting indefinite reinvestment of undistributed earnings of the Group’s foreign subsidiaries located in the PRC, the deferred tax liabilities relating to outside basis differences arising from (i) aggregate undistributed earnings and share capital of the VIEs that are available for distribution to E-Sun Sky Computer, and (ii) aggregate undistributed earnings of the foreign subsidiaries that are available for distribution to the Company, were reversed during the fourth quarter of 2013.

Basic and Diluted Earnings per ADS

Basic and diluted earnings per ADS attributable to ordinary shareholders were US$0.53 and US$0.48, respectively.

Non-GAAP basic and diluted earnings per ADS excluding share-based compensation, deferred tax benefit and costs incurred on the convertible note were US$0.16 and US$0.15, respectively.

Cash and Cash Equivalents

As of December 31, 2013, the Company had cash and cash equivalents of RMB545.3 million (US$90.1 million), restricted cash of RMB70.7 million (US$11.7 million) and time deposits of RMB121.1 million (US$20.0 million), compared with cash and cash equivalents of RMB49.3 and restricted cash of RMB155.9 million as of September 30, 2013.

Full Year 2013 Financial Results

Net revenues for the full year 2013 were RMB259.5 million (US$42.9 million), compared with RMB171.5 million for the full year 2012.

Operating profit for the full year 2013 was RMB59.9 million (US$9.9 million), compared with RMB21.1 million for the full year 2012.

Net income for the full year 2013 was RMB106.1 million (US$17.5 million), compared with RMB4.2 million for the full year 2012.

Non-GAAP net income attributable to ordinary shareholders excluding share-based compensation, deferred tax benefit and costs incurred on the convertible note was RMB55.6 million (US$9.2 million), an increase of 86.0% from the full year 2012.

Basic and diluted earnings per ADS attributable to ordinary shareholders were US$0.74 and US$0.67 respectively.

Non-GAAP basic and diluted earnings per ADS attributable to ordinary shareholders excluding share-based compensation, deferred tax benefit and costs incurred on the convertible note were US$0.39 and US$0.35, respectively.

Business Outlook

For the first quarter of 2014, the Company expects the total purchase amount to be between RMB880.0 million (US$145.4 million) and RMB900.0 million (US$148.7 million), representing a sequential decrease of 16.0% – 17.8% and a year-over-year increase of 63.0% -66.7%. These estimates reflect the Company’s current and preliminary view, which is subject to possible material changes.

Conference Call

500.com’s management will host an earnings conference call on Friday, February 21, 2014 at 8:00 a.m. U.S. Eastern Standard Time (9:00 p.m. Beijing / Hong Kong the same day).

Dial-in details for the earnings conference call are as follows:


    International:               +1-412-317-0790

    U.S. Toll Free:              +1-877-870-4263

    Hong Kong:                   800-905945

    China:                       4001-201203

    Passcode:                    WBAI

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call.

A telephone replay of the call will be available after the conclusion of the conference call through 12:00 a.m. U.S. Eastern StandardTime, February 28, 2014. The dial-in details for the replay are as follows:


    International:               +1-412-317-0088

    U.S. Toll Free:              +1-877-344-7529

    Passcode:                                10041155

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of 500.com’s website at http://www.500.com.

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 RMB6.0537 to US$1.00, as set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2013.

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. According to iResearch, the Company had the largest market share among online lottery service providers for the first six months of 2013, in terms of the total purchase amount of sports lottery products.

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.

For more information, please contact:

500.com Limited

ir@500.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

E-mail: lbergkamp@ChristensenIR.com


                                                                                                                              500.com Limited

                                                                                                                   Condensed Consolidated Balance Sheets

                                                                                      (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for number of shares)

                                                                                                                                                                                   As of
                                                                                                                                                                                   -----

                                                                                                                                                                             December 31,           December 31,           December 31,

                                                                                                                                                                                              2012                   2013                  2013
                                                                                                                                                                                              ----                   ----                  ----

                                                                                                                                                                                  RMB                    RMB                    US$
                                                                                                                                                                                  ---                    ---                    ---

                                                                                                                                                                                Audited               Unaudited              Unaudited

    ASSETS

    Current assets:

           Cash and cash equivalents                                                                                                                                                        31,555                545,300                90,077

           Restricted cash                                                                                                                                                                  11,209                 70,680                11,676

           Time deposits                                                                                                                                                                         -                121,085                20,002

           Accounts receivable                                                                                                                                                              22,937                 62,522                10,328

           Accounts receivable due from employees                                                                                                                                              225                      -                     -

           Amounts due from related parties                                                                                                                                                188,242                      -                     -

           Prepayments and other current assets                                                                                                                                             68,659                 94,273                15,573

           Deferred tax assets, current portion                                                                                                                                              6,994                 16,016                 2,646
                                                                                                                                                                                             -----                 ------                 -----

    Total current assets                                                                                                                                                                   329,821                909,876               150,302
                                                                                                                                                                                           -------                -------               -------

    Non-current assets:

           Property and equipment, net                                                                                                                                                      38,102                 36,213                 5,982

           Intangible assets, net                                                                                                                                                            2,229                  3,377                   558

           Deposits                                                                                                                                                                          5,463                  5,939                   981

           Deferred initial public offering costs                                                                                                                                            1,496                      -                     -

           Deferred tax assets, non-current                                                                                                                                                    841                    157                    26

           Other non-current assets                                                                                                                                                          1,391                  2,738                   452
                                                                                                                                                                                             -----                  -----                   ---

    Total non-current assets                                                                                                                                                                49,522                 48,424                 7,999
                                                                                                                                                                                            ------                 ------                 -----

    TOTAL ASSETS                                                                                                                                                                           379,343                958,300               158,301
                                                                                                                                                                                           =======                =======               =======

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:

           Short-term loan                                                                                                                                                                       -                 12,802                 2,115

           Dividends payable                                                                                                                                                               194,526                      -                     -

           Amounts due to a related party                                                                                                                                                    8,520                      -                     -

           Accrued payroll and welfare payable                                                                                                                                              10,408                 13,012                 2,149

           Accrued expenses and other current liabilities                                                                                                                                   67,008                 89,611                14,803

           Income tax payable                                                                                                                                                                1,554                  4,507                   745
                                                                                                                                                                                             -----                  -----                   ---

    Total current liabilities                                                                                                                                                              282,016                119,932                19,812
                                                                                                                                                                                           -------                -------                ------

    Non-current liabilities:

           Deferred tax liabilities, non-current                                                                                                                                            88,796                      -                     -

           Long-term payables                                                                                                                                                               11,151                 28,948                 4,782
                                                                                                                                                                                            ------                 ------                 -----

    Total non-current liabilities                                                                                                                                                           99,947                 28,948                 4,782
                                                                                                                                                                                            ------                 ------                 -----

    Total liabilities                                                                                                                                                                      381,963                148,880                24,594
                                                                                                                                                                                           -------                -------                ------

    Shareholders' Equity (Deficit):

           Ordinary shares, par value US$0.0005 per share, 931,878,540 shares                                                                                                                   84                      -                     -
              authorized and 228,768,220 shares issued and outstanding as of December
              31, 2012

           Class A Ordinary shares, par value US$0.0005 per share, 700,000,000 shares                                                                                                            -                     20                     3
              authorized and 66,539,000 shares issued and outstanding as of December

              31, 2013

           Class B Ordinary shares, par value US$0.0005 per share, 300,000,000 shares                                                                                                            -                     94                    16
              authorized and 262,197,451 shares issued and outstanding as of December
              31, 2013

    Additional paid-in capital                                                                                                                                                             255,781                967,233               159,776

    Accumulated other comprehensive income                                                                                                                                                  15,988                 10,492                 1,733

    Accumulated deficit                                                                                                                                                                   (274,473)              (168,419)              (27,821)
                                                                                                                                                                                          --------               --------               -------

    Total shareholders' equity (deficit)                                                                                                                                                    (2,620)               809,420               133,707
                                                                                                                                                                                            ------                -------               -------

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                                                                                                                                   379,343                958,300               158,301
                                                                                                                                                                                           =======                =======               =======


                                                                                                                                                      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                                                       Twelve Months Ended
                                                                                                         ------------------                                                     -------------------

                                                                                                           December 31,                         December 31,                         December 31,            December 31,            December 31,            December 31,

                                                                                                                             2012                                 2013                                 2013                    2012                    2013                    2013

                                                                                                               RMB                                   RMB                                  US$                     RMB                     RMB                     US$
                                                                                                               ---                                   ---                                  ---                     ---                     ---                     ---

                                                                                                            Unaudited                             Unaudited                            Unaudited                Audited                Unaudited               Unaudited

    Net Revenues                                                                                                           40,791                               96,123                               15,878                 171,527                 259,534                  42,872

    Operating expenses:

           Cost of services                                                                                                (4,554)                              (8,254)                              (1,363)                (18,476)                (27,818)                 (4,595)

           Sales and marketing                                                                                             (9,472)                             (23,395)                              (3,865)                (45,794)                (84,596)                (13,974)

           General and administrative                                                                                     (17,885)                             (26,673)                              (4,406)                (57,784)                (73,190)                (12,090)

           Service development expenses                                                                                    (8,898)                              (9,762)                              (1,613)                (26,571)                (28,686)                 (4,739)

           Write-off of deferred initial                                                                                        -                                    -                                    -                  (6,404)                      -                       -

              public offering expenses

    Total operating expenses                                                                                              (40,809)                             (68,084)                             (11,247)               (155,029)               (214,290)                (35,398)

    Other operating income                                                                                                     54                                3,189                                  527                   4,193                  14,560                   2,405

    Government grant                                                                                                           39                                2,653                                  438                   2,242                   2,792                     461

    Other operating expense                                                                                                  (239)                                 (31)                                  (5)                 (1,821)                 (2,678)                   (442)

    Operating profit                                                                                                         (164)                              33,850                                5,591                  21,112                  59,918                   9,898

    Interest income                                                                                                           319                                1,807                                  298                   1,132                   2,058                     340

    Interest expense                                                                                                            -                               (4,977)                                (822)                      -                  (5,407)                   (893)

    Changes in fair value of derivative                                                                                         -                              (26,809)                              (4,429)                      -                 (26,809)                 (4,429)

           component of the convertible note

    Income before income tax                                                                                                  155                                3,871                                  638                  22,244                  29,760                   4,916

    Income tax benefit (expense)                                                                                           (6,370)                              81,585                               13,477                 (18,001)                 76,294                  12,603

    Earnings (loss) per share for

           ordinary shares:

    Basic                                                                                                                   (0.03)                                   -                                    -                    0.02                       -                       -

    Diluted                                                                                                                 (0.03)                                   -                                    -                    0.02                       -                       -

    Earnings per share for Class A and

           Class B ordinary shares:

    Basic                                                                                                                       -                                 0.32                                 0.05                       -                    0.45                    0.07

    Diluted                                                                                                                     -                                 0.29                                 0.05                       -                    0.40                    0.07

    Earnings per ADS*

    Basic                                                                                                                       -                                 3.20                                 0.53                       -                    4.45                    0.74

    Diluted                                                                                                                     -                                 2.93                                 0.48                       -                    4.08                    0.67

    Weighted average number of

           ordinary shares outstanding:

    Basic                                                                                                             228,768,220                                    -                                    -             229,374,777                       -                       -

    Diluted                                                                                                           228,768,220                                    -                                    -             233,678,481                       -                       -

    Weighted average number of Class A

           and Class B ordinary shares

           outstanding:

    Basic                                                                                                                       -                          266,753,871                          266,753,871                       -             238,342,685             238,342,685

    Diluted                                                                                                                     -                          291,720,211                          291,720,211                       -             259,729,367             259,729,367

    Reconcilation of non-GAAP results of
           operations measure to the nearest
           comparable GAAP measures

           (unaudited)

    Net income (loss)                                                                                                      (6,215)                              85,456                               14,115                   4,243                 106,054                  17,519

    Adjustment for deferred tax expense                                                                                     5,449                              (94,685)                             (15,641)                 11,919                 (88,796)                (14,668)
           (benefit) relating to outside basis
           differences

    Adjustment for share-based                                                                                              2,704                                4,541                                  750                  13,704                   7,561                   1,249

           compensation

    Adjustment for costs incurred on                                                                                            -                               30,742                                5,078                       -                  30,742                   5,078

           convertible note

    Adjusted net income (non-GAAP)                                                                                          1,938                               26,054                                4,302                  29,866                  55,561                   9,178

           (unaudited)

    Earnings per ADS* (non-GAAP)

           (unaudited)

    Basic                                                                                                                       -                                 0.98                                 0.16                       -                    2.33                    0.39

    Diluted                                                                                                                     -                                 0.89                                 0.15                       -                    2.14                    0.35

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

SOURCE 500.com


Source: PR Newswire



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