NET Qin second quarter main achievement

NetQin (NYSE:NQ) today released its unaudited earnings for the second quarter of fiscal year 2013 as at June 30. Net revenues in the second quarter of the net were $41.4 million, up 107.4% from a year earlier, up 24.6% from the previous quarter, with a net profit of 1.9 million dollars, down 2.1 million from the same period last year and 8.3% in the previous quarter, according to the report.

Main achievements:

-NetQin's net revenue for the second quarter was $41.4 million trillion, up 107.4% from a year earlier, exceeding the company's previously expected cap of 38.5 million dollars to 38.8 million dollar intervals;

-NetQin's operating profit for the second quarter was $500,000 trillion, down 65.5% from the same period last year. Excluding 6.8 million dollars in additional equity incentive spending, NetQin's second-quarter operating profit was 7.3 million U.S. dollars, up 388.8% from a year earlier. The second quarter of NetQin's additional equity rewards came from a nine-day technology company (hereinafter referred to as "nine Days"), which was bought by NetQin, surpassing specific operating and performance goals in the second quarter. Liu Fei nine days is a wholly-owned subsidiary of the Network Qin. Excluding equity incentive payments (not in accordance with U.S. General accounting standards), the second quarter of the net-Qin operating profit of 13.7 million U.S. dollars, compared with the same period last year 108.5%;

-NetQin's net profit for the second quarter was $1.9 million trillion, down 8.3% from 2.1 million a year earlier. Excluding 6.8 million of dollars in additional equity incentive spending, net-Qin's second-quarter net profit was $8.7 million, up 319.7% from a year earlier, with the extra equity incentive spending coming from a nine-day performance that exceeded specific operating and performance targets in the second quarter. Excluding equity incentive payments (not in accordance with U.S. General accounting standards), Net-Qin net profit of the second quarter of 15 million U.S. dollars, compared with the same period last year 111.1%;

-In the second quarter of the net, the U.S. depository receipts were fully diluted to 0.03 U.S. dollars. Excluding the U.S. depository receipts per share of 0.12 U.S. dollars in additional equity incentive expenditures, Net Qin second quarter of the United States depository receipts fully diluted earnings of 0.15 U.S. dollars, the additional equity incentive spending from the nine days of the second quarter performance exceeded the specific operating and performance goals.

Not in accordance with the United States General accounting standards, the second quarter of the Net Qin the United States depository receipts are fully diluted income of 0.26 U.S. dollars. Net Qin in the second quarter of the United States depository receipts of the thin weighted average number of 58.2 million shares, higher than the same period last year 56.4 million shares;

-NetQin's net cash flow from business operations in the second quarter was $11.1 million trillion, with a net cash flow of $1.9 million over the same period last year. As of the end of the second quarter of fiscal year 2013, the Net Qin held cash and cash equivalents and fixed deposits amounted to USD 128.4 million;

-By the end of the second quarter, NetQin's deferred revenue was 17.4 million U.S. dollars, up 20.8% from the end of the first quarter of fiscal year 2013;

-NetQin's second-quarter accounts receivable turnaround days were 145 days, down 8.2% from the 158 days of the previous quarter.

Operating indicators:

-As of June 30, 2013, NetQin's cumulative number of registered users account for 372.2 million, as at June 30, 2012, 203.5 million, as of March 31, 2013 for 326.6 million. As of June 30, 2013, the total number of registered user accounts in the nine days of Fei Liu, Net qin, was 459.5 million;

-During the quarter ended June 30, 2013, the number of online Qin's monthly average active user accounts was 122.2 million, as of June 30, 2012, the fiscal quarter was 69.2 million, and the quarter ended March 31, 2013 was 111 million. As of March 31, 2013, the 16.1 million monthly average active user accounts, which included nine days, were 138.3 million;

-In the fiscal quarter ended June 30, 2013, NetQin's monthly average paid user account number was 11.3 million, as of June 30, 2012, the fiscal quarter was 7.4 million, as of March 31, 2013, the quarter was 9.2 million. Our definition of an average paid user account is any user account that is indirectly paid through direct payment or through Third-party developers and advertisers, a definition that replaces our previously paid user account definition because of the commercial scope of our expanded active user account. As a result, the number of monthly average paid user accounts in the second quarter of NetQin should not be compared with the data for the same period last year and the previous quarter.

-As of June 30, 2013, nine days to run and distribute 18 games on the iOS platform, operating and distributing 42 games on the Android platform. In the second quarter, nine days a total of 9 games into the total application ranking of 100, of which 3 games in the Apple's Chinese itunes application store ranked in the top 30. In the first quarter, the average daily active user of nine days was 98595;

-As of June 30, 2013, the Beijing State-Smart Network Technology Co., Ltd. (hereinafter referred to as "state-smart") mobile device management enterprise users more than 20, the total number of enterprises users more than 1250.

Financial Analysis:

Revenue：

Net revenue for the second quarter was 41.4 million U.S. dollars, up 107.4% from a year earlier, up 24.6% per cent from the previous quarter.

Net-Qin's second-quarter revenue from mobile value-added services (including consumer mobile security revenue and mobile gaming revenues) was $26.8 million, up 66.7% from a year earlier, up 17.8% per cent from the previous quarter. Net-Qin mobile value-added services revenue growth, mainly due to the company's fee-based services in the overseas paid user account (defined as the account outside China) in the increase in usage, while the overseas paid users for the company paid services to pay higher membership fees. Net-Qin's second-quarter revenue from overseas users accounted for 57.2% per cent of consumer mobile security revenue, up from 51.2% in the same period last year and 55.5% in the previous quarter. The growth of mobile gaming revenues in the second quarter was mainly due to the rapid growth in the number of users of the nine-day gaming platform and the company's release of new games in the second quarter of fiscal year 2013.

Net-Qin's advertising revenue for the second quarter was $5.5 million, up 149% from a year earlier, up 66.8% per cent from the previous quarter. The strong growth of net-Qin advertisement revenue is mainly due to the increase of advertising and promotion revenue through third-party applications, thus increasing the commercialization.

In the second quarter, the company's revenue from the company's mobile business was 8.1 million U.S. dollars, up 31.7% from the previous quarter, mainly due to strong business growth and a strong growth in the number of new customers it acquired. In the first quarter, it has become Apple's front-line distributor, and its MDM business has been growing, thus driving the hardware sales of netqin to achieve significant growth. Net-Qin's second-quarter sales of hardware were 5.2 million U.S. dollars, up 25.4% from the previous quarter; revenue from software and services was 2.9 million dollars, up 44.7% per cent from the previous quarter.

Net revenue from other services in the second quarter was $1 million, up 287.9% from a year earlier, down 3.9% from the previous quarter. NetQin's other revenues come mainly from the provision of technical contract services to third parties, which fluctuate as they are driven by various projects.

Revenue Cost:

Net-Qin's second-quarter revenue cost was $13.8 million, up 194.1% from a year earlier, up 31.9% per cent from the previous quarter. NET Qinying cost increase year-on-year, mainly due to the company in 2012, the acquisition of the country's well-informed and nine-day trading, the impact of increasing user access costs to boost user growth, intangible asset amortization from the country's well-informed and nine-day takeover, and staff cost growth resulting from increased staff salaries and numbers. NET Qinying the growth of the chain cost, mainly due to the growth of hardware purchasing cost, the increase of users ' cost and the increase of staff cost in the mobile business.

Gross profit and gross margin:

Net Qin's second-quarter gross profit was $27.6 million, an increase of 80.7% over the same period last year, up 21.2% from the previous quarter. Net Qin's second-quarter gross profit margin was 66.7%, down from 76.5% in the same period last year and 68.5% in the previous quarter. Excluding the impact of the acquisition country's well-informed trading, net-Qin's second-quarter gross profit margin was 74.6%, below the 76.3% in the previous quarter, and 80.8% in the same period last year. China's second-quarter profit margin of about 33.9%, with the previous quarter flat, higher than the same period last year 19.9%, its revenue costs mainly include hardware equipment procurement costs.

Operating expenses:

Net-Qin's operating expenses for the second quarter were $27.1 million trillion, up 96.7% from a year earlier, up 32.5% per cent from the previous quarter. Excluding equity incentive payments (not in accordance with US general accounting standards), the second-quarter operating expenses of the NetQin were $14.1 million, up 60.2% from a year earlier, and 8.7% per cent from the previous quarter.

Net Qin's second-quarter sales and marketing spending was $6.4 million, up 70.9% from a year earlier, up 26.2% per cent from the previous quarter. NET Qin sales and marketing expenditure of the year-on-year growth, mainly because the company has taken more advertising and marketing activities in developed markets such as Hong Kong, China and the United States, thus boosting the growth of marketing and advertising expenditure; The increase in the number of employees as a result of the company's acquisition of nine-day and country-smart transactions has led to a rise in staff costs As well as equity incentive spending increases. NET Qin sales and marketing expenditure of the chain growth, mainly due to the growth of marketing and advertising expenditure and staff expenditure growth, but the equity incentive spending is partially offset by the decline. In line with US GAAP, sales and marketing spending for the second quarter was $5.8 million, up 70.9% from a year earlier, up 38.5% per cent from the previous quarter. Not in accordance with the United States General accounting standards, NetQin Sales and marketing expenditure year-on-year and chain growth, mainly due to the growth of marketing and advertising spending, as well as the company's acquisition of nine days and the country's well-informed transactions to increase the number of employees, resulting in staff costs growth.

The second quarter of NetQin's general and administrative spending was $17 million, up 108.5% from a year earlier, and 43.5% per cent from the previous quarter. The annual growth of General affairs and administrative expenditure was mainly due to the increase of equity incentive expenditure, the increase of staff cost and the growth of tourism and entertainment expenditure. NetQin General Affairs and administrative expenditure of the chain growth, mainly due to equity incentive spending growth and bad debt spending growth, but the judicial and professional costs of the decline in part offset. Not in accordance with the United States General accounting standards, the second quarter of the net-Qin general and administrative expenditure for 5.2 million U.S. dollars, the same period last year, 39.7%, compared to the previous quarter 11.6% decline. Not in accordance with the United States General accounting standards, the Net Qin General Affairs and administrative expenditure of the year-on-year growth, mainly due to the staff cost growth, bad debt spending growth and tourism and entertainment spending growth. Not in accordance with the United States General accounting standards, NetQin general and administrative expenditure of the chain decline, mainly due to the judicial and professional costs are reduced, but by the increase in bad debt expenditure offset.

Net Qin's second-quarter research and development spending was $3.7 million trillion, up 96.7% from a year earlier, up 4.7% per cent from the previous quarter. The growth of the net-qin research and development expenditure is mainly due to the increase of employee cost, equity incentive expenditure and office related expenditure. According to the U.S. General accounting standards, Net Qin's second-quarter research and development spending was $3.1 million, up 83.6% from a year earlier, up 6.8% from the previous quarter. In accordance with the United States General accounting standards, the Net Qin research and development expenditure year-on-year growth, mainly due to staff cost growth and office-related expenditure growth.

Operating profit and operating profit margin:

NetQin's operating profit for the second quarter was $500,000, down 65.5% from the same period last year, down 77.8% from the previous quarter. NetQin's operating profit margin for the second quarter was 1.3%, down from 7.5% in the same period last year and 7% in the previous quarter. Excluding 6.8 million dollars in additional equity incentive spending, the second-quarter operating profit was 7.3 million U.S. dollars, up 388.8% from the same period last year, up 214.5% per cent from the previous quarter. The second quarter of NetQin's additional equity incentive spending came from nine days in the second quarter, surpassing specific operating and performance goals.

Excluding equity incentive payments (not in accordance with US general accounting standards), the second-quarter operating profit of NetQin was 13.7 million U.S. dollars, up 108.5% from a year earlier, compared with a 37.2% increase in the U.S. dollar in the previous quarter. Not in accordance with U.S. general accounting standards, the second quarter of NetQin's operating profit margin of 33%, the same period last year 32.8%, the previous quarter of 29.9%. Excluding the impact from the country's well-informed (not in accordance with the United States General Accounting Standards), the second quarter of the net-Qin operating profit margin of 38.3%, the previous quarter of 33.4%. China's second-quarter operating profit was about 10.8%, down from 14.8% in the previous quarter.

Exchange gains and interest income:

Net Qin the second quarter of the exchange gain of 900,000 U.S. dollars, the same period last year exchange losses of 300,000 U.S. dollars, the previous quarter exchange earnings of 100,000 U.S. dollars. Net-Qin's exchange gains in the second quarter came mainly from the appreciation of the renminbi against the dollar. Net Qin's second-quarter interest income was $900,000, with interest earned at $800,000 last year and interest income at $800,000 in the previous quarter. The interest income of NetQin mainly comes from the company's specific fixed deposit.

Income tax Expenditure:

Net Qin second quarter income tax expenditure is 60,000 U.S. dollars, effective tax rate is 2.7%; Net Qin last year the same period of income tax expenditure for 100,000 U.S. dollars, the last quarter of the income tax expenditure of 300,000 U.S. dollars. NET Qin second quarter effective tax rate is low, mainly because of the special subsidiary of the Network Qin enjoys preferential tax treatment.

Net profit:

NetQin's net profit for the second quarter was $1.9 million trillion, down 8.3% from $2.1 million a year earlier. Excluding 6.8 million of dollars in additional equity incentive spending, net-Qin's second-quarter net profit was $8.7 million, up 319.7% from a year earlier, and 205.5% per cent higher than in the previous quarter, with the extra equity incentive spending coming in the second quarter from a nine-day performance beyond specific operating and performance targets.

Excluding equity incentive payments (not in accordance with U.S. General accounting standards), Net-Qin net profit for the second quarter of 15 million U.S. dollars, the same period last year, 7.1 million U.S. dollars, the previous quarter of 10.5 million U.S. dollars.

Cash flow and deferred revenue:

NetQin's net cash flow from business operations in the second quarter was $11 million trillion, with a net cash flow of $1.9 million over the same period last year, with a net cash flow of $4.4 million in the previous quarter. As of the end of the second quarter of fiscal year 2013, the Net Qin held cash and cash equivalents and fixed deposits amounted to USD 128.4 million. As of the end of the second quarter of fiscal year 2013, NetQin's deferred revenue was 17.4 million U.S. dollars, up 208% per cent from the end of the first quarter of fiscal year 2013.

Performance Outlook:

NetQin estimated that the third quarter of the fiscal year 2013 net revenue of 50 million U.S. dollars to 51 million U.S. dollars. NetQin also estimated that the net revenue for fiscal year 2013 was 185 million U.S. dollars to 188 million U.S. dollars, higher than the previous expected 179 million dollars to 184 million U.S. dollars.

These expectations reflect the current and preliminary views of netqin and may be adjusted in the future.

Conference：

After the release of the newspaper, the Network Qin management team will be in the United States Eastern Time August 12, 2013 Night 8 O'Clock (Beijing time August 13 morning 9) to hold a conference call.