500.com Limited Reports Second Quarter 2014 Financial Results

SHENZHEN, China, August 11, 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 second quarter of 2014.

Second Quarter 2014 Highlights

  • Total purchase amount was RMB2,093.2 million (US$337.4 million), representing a 98.4% increase from the first quarter of 2014 and a 199.1% increase from the second quarter of 2013.
  • Net revenues were RMB156.1 million (US$25.2 million), representing a 73.8% increase from the first quarter of 2014 and a 185.4% increase from the second quarter of 2013.
  • Operating profit was RMB59.5 million (US$9.6 million), representing a 87.7% increase from the first quarter of 2014 and a 436.0% increase from the second quarter of 2013.
  • Net income attributable to ordinary shareholders was RMB75.4 million (US$12.2 million), representing a 174.2% increase from the first quarter of 2014 and a 544.4% increase from the second quarter of 2013.
  • Non-GAAP net income attributable to ordinary shareholders excluding share-based compensation expenses was RMB83.2 million (US$13.4 million), representing a 156.8% increase from the first quarter of 2014 and a 473.8% increase from the second quarter of 2013.
  • Basic and diluted earnings per ADS[1] attributable to ordinary shareholders were US$0.37 and US$0.34, respectively.
  • Non-GAAP basic and diluted earnings per ADS attributable to ordinary shareholders excluding share-based compensation expenses were US$0.40 and US$0.37, respectively.
  • Number of active users was approximately 2,530,000 during the second quarter of 2014, representing a 121.2% increase from the first quarter of 2014.

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

“I am pleased to report a record quarter of solid growth across the board,” commented Mr. Man San Law, Founder, Chairman and Chief Executive Officer of 500.com. “Our growth momentum continued with revenue increasing significantly during the quarter as a result of the 2014 FIFA World Cup. Total purchase amount increased 199.1% year-over-year to US$337.4 million; a new record for the Company. Traffic continued to grow during the quarter, particularly through our mobile channels which now account for 34.3% of total purchases made. With mobile purchases exceeding one third of total purchases made for the first time, we will continue to invest in R&D and marketing as we look for new ways to innovate our mobile services and expand our use base to solidify our leading position. Revenues continued to increase as a result of our growing active user base which increased 121.2% sequentially to 2,530,000 users during the quarter. We are confident that the strategy we have in place will continue to increase shareholder value as we work to strengthen the sustainable foundation we have created as China’s leading online sports lottery service.”

Second Quarter 2014 Operational Results

Active Users

Active users increased by 121.2% to approximately 2,530,000 during the second quarter of 2014 from 1,144,000 in the first quarter of 2014.

Active New Users[2]

The Company had a total of 2,160,000 active new users during the quarter, an increase of 193.1% from 737,000 active new users during the first quarter of 2014. Active new users accounted for RMB1228.3 million (US$198.0 million) of the Company’s total purchase amount during the second quarter of 2014, an increase of 660.1% from RMB161.6 million during the first quarter of 2014.

Active Users – Platforms

PC

The Company had a total of 1,067,000 active PC users during the quarter, an increase of 76.7% from 604,000 active PC users during the first quarter of 2014. Active PC users accounted for RMB1,374.9 million (US$221.6 million) of the Company’s total purchase amount during the second quarter of 2014, an increase of 74.1% from RMB789.5 million during the first quarter of 2014.

Mobile App

The Company had a total of 710,000 active mobile app users during the quarter, an increase of 193.4% from 242,000 active mobile app users during the first quarter of 2014. Active mobile app users accounted for RMB493.4 million (US$79.5 million) of the Company’s total purchase amount during the second quarter of 2014, an increase of 260.1% from RMB137.0 million during the first quarter of 2014.

Mobile Website

The Company had a total of 1,475,000 active mobile website users during the quarter, an increase of 124.5% from 657,000 active mobile website users during the first quarter of 2014. Active mobile website users accounted for RMB224.9 million (US$36.3 million) of the Company’s total purchase amount during the second quarter of 2014, an increase of 75.2% from RMB128.4 million during the first quarter of 2014.

[2] Active new user is defined as a user who made their first purchase during the current year.

Active Users – Direct and Third Party Channels

Direct Active Users

The Company had a total of 769,000 direct active users during the quarter, an increase of 134.5% from 328,000 direct active users during the first quarter of 2014. Direct active users accounted for RMB1831.1 million (US$295.2 million) of the Company’s total purchase amount during the second quarter of 2014, an increase of 96.7% from RMB931.0 million during the first quarter of 2014.

Third Party Channels

The Company had a total of 1,761,000 third party channel active users during the quarter, an increase of 115.8% from 816,000 third party channel active users during the first quarter of 2014. Third party channel active users accounted for RMB262.1 million (US$42.2 million) of the Company’s total purchase amount during the second quarter of 2014, an increase of 111.5% from RMB123.9 million during the first quarter of 2014.

Second Quarter 2014 Financial Results

Net Revenues

Net revenues were RMB156.1 million (US$25.2 million), representing an increase of 185.4% from RMB54.7 million during the second quarter of 2013 and an increase of 73.8% from RMB89.8 million during the first quarter of 2014.

Total purchase amount was RMB2,093.2 million (US$337.4 million), an increase of 199.1% from RMB699.9 million during the second quarter of 2013 and an increase of 98.4% from RMB1,054.9 million during the first quarter of 2014.

The significant increase in net revenues and total purchase amount was mainly due to the month-long FIFA World Cup which kicked off on June 13, 2014. Increased marketing efforts also contributed to the increase in total purchase amount.

Total service fees received from provincial sports lottery administration centers were RMB221.2 million (US$35.7 million), representing an increase of 196.9% from RMB74.5 million during the second quarter of 2013 and an increase of 97.3% from RMB112.1 million during the first quarter of 2014, an increase approximately in-line with the increase in total purchase amount.

Operating Expenses

Operating expenses were RMB99.4 million (US$16.0 million), representing an increase of 104.9% from RMB48.5 million in the second quarter of 2013 and an increase of 64.3% from RMB60.5 million during the first quarter of 2014.

Cost of services were RMB14.1 million (US$2.3 million), representing an increase of 110.4% from RMB6.7 million during the second quarter of 2013 and 65.9% from RMB8.5 million during the first quarter of 2014. The year-over-year increases were mainly a result of the increase in the total purchase amount. Cost of services represented 9.0% of net revenues, compared with 12.2% in the second quarter of 2013 and 9.5% in the first quarter of 2014.

Sales and marketing expenses were RMB50.4 million (US$8.1 million), representing an increase of 143.5% from RMB20.7 million during the second quarter of 2013 and an increase of 141.1% from RMB20.9 million during the first quarter of 2014. Sales and marketing expenses represented 32.3% of net revenues, compared with 37.8% in the second quarter of 2013 and 23.3% in the first quarter of 2014. The year-over-year decrease in sales and marketing expenses as a percentage of net revenues was mainly due to the high sales and marketing expenses incurred during the first half of 2013 in promoting the Company’s business after having obtained Ministry of Finance approval while the sequential increase was mainly due to costs incurred in connection with increased promotional activities during the FIFA World Cup.

General and administrative expenses were RMB26.1 million (US$4.2 million), representing an increase of 75.2% from RMB14.9 million during the second quarter of 2013 and an increase of 9.2% from RMB23.9 million during the first quarter of 2014. Both the year-over-year and quarter-over-quarter increases were mainly a result of the increase in share-based compensation expenses associated with the share options granted to the Company’s employees during the fourth quarter of 2013 and the second quarter of 2014. On June 19, 2014, the Company granted certain directors, officers and employees options to acquire 34,561,800 shares with an exercise price of US$3.23 per share; equivalent to the market price of the Company’s publically traded shares on the previous day . General and administrative expenses represented 16.7% of net revenues, compared with 27.2% in the second quarter of 2013 and 26.6% in the first quarter of 2014. The decrease in general and administrative expenses as a percentage of net revenues was mainly due to the economies of scale created by the increase in net revenue.

Service development expenses were RMB8.8 million (US$1.4 million), representing an increase of 41.9% from RMB6.2 million during the second quarter of 2013 and an increase of 23.9% from RMB7.1 million during the first quarter of 2014. The increase was mainly due to an increase in the bonus accrued and the share-based compensation expenses associated with the share options granted to the Company’s employees in the Company’s research and developments departments. Service development expenses represented 5.6% of net revenues, compared with 11.3% in the second quarter of 2013 and 7.9% in the first quarter of 2014.

Operating Profit

Operating profit was RMB59.5 million (US$9.6 million), representing an increase of 436.0% from RMB11.1 million during the second quarter of 2013 and an increase of 87.7% from RMB31.7 million during the first quarter of 2014.

Non-GAAP operating profit excluding share-based compensation expenses was RMB67.3 million (US$10.8 million), representing an increase of 480.2% from RMB11.6 million during the second quarter of 2013 and an 83.9% increase from RMB36.6 million in the first quarter of 2014.

Operating profit as a percentage of net revenue was 38.1% for the second quarter of 2014, compared 20.3% during the second quarter of 2013, and 35.3% in the first quarter of 2014. Operating profit as a percentage of total service fees was 26.9%.

Non-GAAP operating profit as a percentage of net revenue was 43.1% for the second quarter of 2014, compared to 25.2% during the second quarter of 2013, and 40.8% in the first quarter of 2014. Non-GAAP operating profit as a percentage of total service fees was 30.4%.

Net Income

Net income was RMB75.4 million (US$12.2 million), compared with a net income of RMB11.7 million during the second quarter of 2013 and RMB27.5 million during the first quarter of 2014. The increase in net income was in-line with the increase in total purchase amount and was also attributable to the Company’s designation as a ‘Nation Key Software Enterprise’ by several government ministries which reduces the Company’s applicable tax rate to 10%.

Non-GAAP net income attributable to ordinary shareholders excluding share-based compensation expenses was RMB83.2 million (US$13.4 million), an increase of 156.8% sequentially.

Basic and Diluted Earnings per ADS

Basic and diluted earnings per ADS attributable to ordinary shareholders were US$0.37 and US$0.34, respectively.

Non-GAAP basic and diluted earnings per ADS excluding share-based compensation expenses were US$0.40 and US$0.37.

Cash and Cash Equivalents

As of June 30, 2014, the Company had cash and cash equivalents of RMB439.3 million (US$70.8 million), restricted cash[3] of RMB15.6 million (US$2.5 million) and time deposits[4] of RMB260.6million (US$42.0million) compared with cash and cash equivalents of RMB271.6 million, restricted cash of RMB16.2 million and time deposits of RMB435.3 million as of March 31, 2013.

[3] Restricted cash represents government grants received but pending final clearance.

[4] Time deposits represent six-month fixed-interest deposits with commercial banks.

Account Receivables

As of June 30, 2014, the Company had account receivables of RMB118.4 million (US$19.1 million), compared with RMB77.2 million as of March 31, 2014 mainly as a result of increased lottery purchase amount during the second quarter of 2014. As of July 31, 2014, RMB98.8 million, or 83.4% of total account receivables outstanding as of June 30, 2014 were collected.

Prepayments and Other Current Assets

As of June 30, 2014, the balance of prepayment and other current assets was RMB231.0 million (US$37.2 million), compared with RMB136.5 million as of March 31, 2014. The current period end balance mainly included: i) RMB125.4 million (US$20.2 million) of prepayments deposited with lottery administration centers for future lottery ticket purchases; ii) RMB50.5 million (US$8.1 million) of receivables from third party payment service providers; iii) RMB32.9 million (US$5.3 million) of receivables from lottery administration centers for winnings; iv) RMB22.2 million (US$3.6 million) of the current portion of deferred expenses and others.

Business Outlook

For the third quarter of 2014, the Company expects the total purchase amount to be between RMB2,200 million (US$354.6 million) and RMB2,300 million (US$370.8 million), representing a sequential increase of 5.1% – 9.9% and a year-over-year increase of 214.3% – 228.6%. 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 Monday, August 11, 2014 at 8:00 a.m. U.S. Eastern Daylight Time (8:00 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 Daylight Time, August 18, 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:

10050699

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 RMB6.2036 to US$1.00, as set forth in the H.10 statistical release of the Federal Reserve Board on June 30, 2014.

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.

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, deferred tax expense/benefit relating to outside basis differences in our consolidated affiliated entities and costs incurred on convertible note. 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.

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

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

As of

December 31,
2013

June
30,2014

June
30,2014

RMB

RMB

US$

Audited

Unaudited

Unaudited

ASSETS

Current assets:

Cash and cash equivalents

544,318

439,251

70,806

Restricted cash

71,662

15,610

2,516

Time deposits

121,085

260,576

42,004

Accounts receivable

62,522

118,374

19,082

Prepayments and other current assets

94,273

230,998

37,237

Deferred offering expenses

3,269

527

Deferred tax assets, current portion

16,016

27,309

4,402

Total current assets

909,876

1,095,387

176,574

Non-current assets:

Property and equipment, net

36,213

36,345

5,859

Intangible assets, net

3,377

4,271

688

Deposits

5,939

8,369

1,349

Long-term investment

6,037

973

Deferred tax assets, non-current

157

199

32

Other non-current assets

2,738

1,845

297

Total non-current assets

48,424

57,066

9,198

TOTAL ASSETS

958,300

1,152,453

185,772

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Short term loan

12,802

Accrued payroll and welfare payable

13,012

9,128

1,471

Accrued expenses and other current liabilities

88,246

126,151

20,335

Income tax payable

4,507

12,963

2,090

Total current liabilities

118,567

148,242

23,896

Non-current liabilities:

Long-term payables

30,313

23,037

3,713

Total non-current liabilities

30,313

23,037

3,713

Total liabilities

148,880

171,279

27,609

Shareholders’ Equity:

Class A ordinary shares, par value US$0.00005 per share, 700,000,000 shares authorized as of December 31, 2013 and June 30, 2014; 66,539,000 and 198,709,412 shares issuedas of December 31, 2013 and June 30, 2014, respectively

20

67

11

Class B ordinary shares, par value US$0.00005 per share; 300,000,000 shares authorized as of December 31, 2013 and June 30, 2014; 262,197,451 and 149,081,359 shares issued and outstanding as of December 31, 2013 and June 30, 2014, respectively

94

53

9

Additional paid-in capital

967,233

1,024,188

165,096

Accumulated other comprehensive income

10,492

22,361

3,605

Accumulated deficit

(168,419)

(65,495)

(10,558)

Total shareholders’ equity

809,420

981,174

158,163

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

958,300

1,152,453

185,772

500.com Limited

Condensed Consolidated Statement of 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

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

RMB

RMB

RMB

USD

Unaudited

Unaudited

Unaudited

Unaudited

Net Revenues

54,689

89,785

156,137

25,169

Operating expenses:

Cost of services

(6,729)

(8,529)

(14,126)

(2,277)

Sales and marketing

(20,659)

(20,946)

(50,389)

(8,123)

General and administrative

(14,875)

(23,903)

(26,053)

(4,200)

Service development expenses

(6,201)

(7,097)

(8,790)

(1,417)

Total operating expenses

(48,464)

(60,475)

(99,358)

(16,017)

Other operating income

6,849

2,559

3,292

531

Government grant

46

796

157

25

Other operating Expense

(2,028)

(999)

(748)

(121)

Operating profit

11,092

31,666

59,480

9,587

Interest income

79

4,030

5,033

811

Interest expense

(152)

(230)

(120)

(19)

Income before income tax

11,019

35,466

64,393

10,379

Income tax benefit (expense)

703

(7,945)

11,010

1,775

Net income

11,722

27,521

75,403

12,154

Other Comprehensive Income (loss), net of tax

Foreign currency translation gain (loss)

65

12,930

(1,111)

(179)

Comprehensive Income

11,787

40,451

74,292

11,975

Earnings per share for Class A and Class B ordinary shares:

Basic

0.05

0.08

0.23

0.04

Diluted

0.05

0.08

0.21

0.03

Earnings per ADS*

Basic

0.84

2.28

0.37

Diluted

0.77

2.08

0.34

Weighted average number of Class A and Class B ordinary shares outstanding:

Basic

228,768,220

328,736,451

331,116,713

331,116,713

Diluted

243,925,327

357,078,738

361,789,103

361,789,103

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

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 number of shares, per share (or ADS) data)

Three Months Ended

June 30, 2013

March 31, 2014

June 30, 2014

June 30, 2014

RMB

RMB

RMB

USD

Unaudited

Unaudited

Unaudited

Unaudited

Operating profit

11,092

31,666

59,480

9,587

Adjustment for share-based compensation expenses

519

4,910

7,790

1,256

Adjusted operating profit (non-GAAP)

11,611

36,576

67,270

10,843

Net income

11,722

27,521

75,403

12,154

Adjustment for deferred tax expense relating to outside basis differences

2,214

Adjustment for share-based compensation expenses

519

4,910

7,790

1,256

Adjusted net income (non-GAAP) (unaudited)

14,455

32,431

83,193

13,410

Earnings per share for Class A and Class B ordinary shares (non-GAAP)

Basic

0.06

0.10

0.25

0.04

Diluted

0.06

0.09

0.23

0.04

Earnings per ADS* (non-GAAP)

Basic

0.63

0.99

2.51

0.40

Diluted

0.59

0.91

2.30

0.37

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