Press Release

03/18/15

Renren Announces Unaudited Fourth Quarter and Fiscal Year 2014 Financial Results

BEIJING, March 18, 2015 /PRNewswire/ -- Renren Inc. (NYSE: RENN) ("Renren" or the "Company"), a leading real-name social networking internet platform in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2014. 

Renren's financial statements will reflect the deconsolidation of 56.com's operating results. Retrospective adjustments to the historical statement of operations have also been made to provide a consistent basis of comparison for the financial results. Specifically, 56.com's operational results have been excluded from the Company's financial results from continuing operations and have been separately itemized under discontinued operations.

Fourth Quarter 2014 Highlights

  • Total net revenues were US$17.2 million, a 38.5% decrease from the corresponding period in 2013.
    • Renren net revenues were US$10.7 million, a 13.4% decrease from the corresponding period in 2013.
    • Games net revenues were US$6.5 million, a 58.4% decrease from the corresponding period in 2013.
  • Gross profit was US$4.9 million, a 65.3% decrease from the corresponding period in 2013.
  • Operating loss was US$32.4 million, compared to an operating loss of US$38.5 million in the corresponding period in 2013.
  • Net income attributable to the Company was US$35.0 million, compared to a net income of US$100.8 million in the corresponding period in 2013.
  • Adjusted net income (1) (non-GAAP) was US$43.2 million, compared to an adjusted net income of US$104.7 million in the corresponding period in 2013.

(1)    

Adjusted net income (loss) is a non-GAAP measure, which is defined as net income (loss) excluding share-based compensation expenses, amortization of intangible assets and impairment of intangible assets and goodwill. See "About Non-GAAP Financial Measures" below.

Fiscal Year 2014 Highlights

  • Total net revenues were US$83.0 million, a 43.9% decrease from 2013.
    • Renren net revenues were US$45.9 million, a 26.6% decrease from 2013.
    • Games net revenues were US$37.1 million, a 56.6% decrease from 2013.
  • Gross profit was US$35.0 million, a 62.7 % decrease from 2013.
  • Operating loss was US$159.4 million, compared to an operating loss of US$99.4 million in 2013.
  • Net income attributable to the Company was US$60.5 million, compared to a net income of US$63.7 million in 2013.
  • Adjusted net income (1) (non-GAAP) was US$145.9 million, compared to an adjusted net income of US$81.6 million in 2013.

"2014 was an important year of transformation for Renren. We reallocated our resources from group-buy e-commerce, on-line video and games development to new growth areas such as internet finance, leveraging our strength with college students from our core Renren social network," said Joseph Chen, Chairman and Chief Executive Office. "With a better cost structure in place, we believe the most challenging part of the transition is past us. Our recent initiatives in internet financial services have made an exciting start and we believe this can become a future growth engine. Meanwhile, we will continue to innovate and develop new services for our core SNS, which is the foundation of all our services including internet finance."

Fourth Quarter 2014 Results

Total net revenues for the fourth quarter of 2014 were US$17.2 million, representing a 38.5% decrease from the corresponding period in 2013.

Renren net revenues were US$10.7 million, representing a 13.4% decrease from the corresponding period of 2013. Within Renren net revenues, online advertising revenues were US$4.2 million for the fourth quarter of 2014, a 44.1% decrease from the corresponding period of 2013. The decrease was due to increasing competition and the continuing migration of our traffic to mobile. Internet Value-Added Services (IVAS) revenues were US$6.5 million, representing a 33.6% increase from the corresponding period in 2013, primarily due to the increase in revenue from the social video platform "Woxiu". Monthly unique log-in users increased from approximately 45 million in December 2013 to approximately 46 million in December 2014.

Games net revenues were US$6.5 million for the fourth quarter of 2014, a 58.4% decrease from the corresponding period of 2013.  The decrease was due to the lack of new titles and previously launched games having reached their mature stages. 

Cost of revenues was US$12.3 million, a 10.8% decrease from the corresponding period of 2013.

Operating expenses were US$37.3 million, a 29.1% decrease from the corresponding period of 2013.

Selling and marketing expenses were US$8.5 million, a 52.6% decrease from the corresponding period of 2013. The decrease was primarily due to the decrease in advertising and promotions for online games and a significant decrease in expenses incurred for Renren branding campaigns.

Research and development expenses were US$10.6 million, a 38.2% decrease from the corresponding period in 2013. The decrease was primarily due to headcount reduction and the resulting decrease in personnel related expense.

General and administrative expenses were US$14.0 million, a 0.7% increase from the corresponding period in 2013. 

Restructuring costs were US$4.2 million, representing the gaming business restructuring cost that occurred during the reporting quarter.

Share-based compensation expenses, all of which were included in operating expenses, were US$8.3 million, compared to US$3.2 million in the corresponding period in 2013. 

Operating loss was US$32.4 million, compared to an operating loss of US$38.5 million in the corresponding period in 2013.

Realized gain on short-term investments was US$21.6 million, compared to US$9.0 million in the corresponding period in 2013. The gain was primarily derived from sales of marketable securities.

Earnings in equity method investments were US$52.1 million. These earnings were mainly derived from earnings in Japan Macro Opportunities Offshore Partners, LP.

Net income attributable to the Company was US$35.0 million, compared to a net income of US$100.8 million in the corresponding period in 2013.  In the fourth quarter of 2013 the Company recognized a US$132.7 million gain from the deconsolidation of subsidiaries whereas only US$0.5 million corresponding gain in 2014.

Adjusted net income (non-GAAP) was US$43.2 million, compared to an adjusted net income of US$104.7 million in the corresponding period in 2013.

Fiscal Year 2014 Results

Total net revenues in 2014 were US$83.0 million, a 43.9% decrease from 2013.

Renren net revenues in 2014 were US$45.9 million, representing a 26.6% decrease from 2013. Within Renren net revenues, online advertising revenues were US$26.9 million in 2014, a 35.3% decrease from 2013. The decrease in advertising revenues was due to the continuing migration of our traffic from PC to mobile coupled with increasing competition. Internet Value-Added Services (IVAS) revenues were US$19.0 million for 2014, representing a 9.3% decrease from 2013.  The decrease was mainly due to decreased revenue from VIP memberships and third party application developer revenues on renren.com.

Games net revenues in 2014 were US$37.1 million, a 56.6% decrease from 2013.  The decrease was due to our previously launched games having reached mature stages and the fact that the restructuring of our gaming business since late 2013 has yet to result in the launch of successful new titles. 

Cost of revenues in 2014 was US$48.0 million, an 11.6% decrease from 2013.

Gross profit in 2014 was US$35.0 million, a 62.7% decrease from US$93.7 million in 2013. Gross margin in 2014 was 42.2%, compared to 63.3% in 2013. 

Operating expenses in 2014 were US$194.4 million, a 0.7% increase from 2013.

Selling and marketing expenses in 2014 were US$38.3 million, a 38.4% decrease from 2013, primarily due to decreased promotional expenses for our games and Renren branding.

Research and development expenses in 2014 were US$50.7 million, a 35.0% decrease from 2013, primarily due to headcount reduction and the resulting decrease in personnel related expenses.

General and administrative expenses in 2014 were US$51.4 million, a 4.4% increase from 2013.

Impairment of intangible assets and goodwill were US$0.7 million and US$46.9 million respectively. The fair value of the goodwill of the Renren platform reporting unit, which included 56.com, were reviewed and estimated in September 2014 based on the operating results and market conditions at time of the review, and the Company determined that such impairments were required.

Restructuring costs in 2014 were US$6.4 million, compared to US$3.5 million in 2013.

Share-based compensation expenses in 2014, all of which were included in the operating expenses, were US$23.6 million, compared to US$16.1 million in 2013. The increase was mainly due to additional share-based incentive awards granted to employees and directors.

Operating loss in 2014 was US$159.4 million, compared to US$99.4 million operating loss in 2013.

Realized gain on short-term investments was US$139.3 million, compared to US$56.0 million in 2013. The gain was primarily derived from sales of marketable securities.

Earnings in equity method investments were US$49.0 million, compared to US$20.3 million in 2013. These earnings were mainly derived from earnings in Japan Macro Opportunities Offshore Partners, LP.

Gain on deconsolidation of the subsidiaries in 2014 was US$0.5 million, compared to US$132.7 million in 2013. The gain in 2014 was due to a one-time gain from the deconsolidation of 56.com.

Gain on disposal of equity method investment, net of income taxes was US$57.0 million, due to the one-time gain from the disposal of our remaining equity interest in Nuomi. 

Net income attributable to the Company in 2014 was US$60.5 million, compared to a net income of US$63.7 million in 2013.

Adjusted net income (non-GAAP) in 2014 was US$145.9 million, compared to an adjusted net income of US$81.6 million in 2013.

Share Repurchase Program

On June 28, 2014, the Company announced a share repurchase program to repurchase up to US$100 million of its ADSs and shares.  During the fourth quarter of 2014, Renren repurchased approximately 9.3 million ADSs in an aggregate amount of approximately US$28.9 million.

Business Outlook

The Company expects to generate revenues in an amount ranging from US$11 million to US$13 million in the first quarter of 2015, representing 44.2% to 52.8% year-over-year decline. This forecast reflects Renren's current and preliminary view, which is subject to change.

Conference Call Information

Management will host an earnings conference call at 9:00 p.m. Eastern Time on Wednesday, March 18, 2015 (Beijing/Hong Kong Time: 9:00 a.m., Thursday, March 19, 2015).

Interested parties may participate in the conference call by dialing the numbers below and entering passcode 10-15 minutes prior to the initiation of the call.

Dial-in Information:

US: +1 845-675-0437
Hong Kong: +852-3018-6771
China: +86 800-819-0121
International: + 65-6723-9381
Passcode: Renren

A replay of the call will be available for one week and dial-in information is as follows:

International: + 61 2-8199-0299
Passcode: 98122505

This call will be webcast live and the replay will be available on Renren's corporate web site at http://ir.renren-inc.com for 12 months.

About Renren Inc.

Renren Inc. (NYSE: RENN) operates a leading real name social networking internet platform in China. It enables users to connect and communicate with each other, share information and user generated content, play online games, watch videos and enjoy a wide range of other features and services. Renren's businesses primarily include the main social networking website renren.com and the game operating platform Renren Games. Renren.com had approximately 223 million activated users as of December 31, 2014. Renren's American depositary shares, each of which represents three Class A ordinary shares, trade on NYSE under the symbol "RENN".

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of 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" and similar statements. Among other things, the business outlook for the first quarter of 2015 and quotations from management in this announcement, as well as Renren's strategic and operational plans, contain forward-looking statements. Renren may also make written or oral forward-looking statements in its filings with the U.S. Securities and Exchange Commission ("SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Renren's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our goals and strategies; our future business development, financial condition and results of operations; the expected growth of the social networking site market in China; our expectations regarding demand for and market acceptance of our services; our expectations regarding the retention and strengthening of our relationships with key advertisers and customers; our plans to enhance user experience, infrastructure and service offerings; competition in our industry in China; and relevant government policies and regulations relating to our industry. Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Renren does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Renren's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Renren uses "adjusted net income (loss)" which is defined as "a non-GAAP financial measure" by the SEC, in evaluating its business. We define adjusted net income (loss) as net income (loss) excluding share-based compensation expenses, amortization of intangible assets and impairment of intangible assets and goodwill. We present adjusted net income (loss) because it is used by our management to evaluate our operating performance. We also believe that this non-GAAP financial measure provide useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies.

The presentation of this non-GAAP financial measure is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliation of non-GAAP results of operations measures to the comparable GAAP financial measures" at the end of this release.

For more information, please contact:

Cynthia Liu
Investor Relations Department
Renren Inc.
Tel: (86 10) 8448 1818 ext 1300
Email: ir@renren-inc.com

 

RENREN INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

























(Amounts in US dollars, in thousands, except shares,





December 31,



September 30,



December 31,

per shares, ADS, and per ADS data)



2013



2014



2014













 ASSETS 
























 Current assets: 












 Cash and cash equivalents 




$

154,308


$

169,500


$

183,025

 Term deposits 





492,699



570,680



494,065

 Restricted Cash 







2,060



 Short-term investments 





301,995



72,016



29,384

 Accounts and notes receivable, net 





15,958



16,125



18,044

 Prepaid expenses and other current assets 





34,080



25,433



37,638

 Amounts due from related parties 





62,411



405



1,047

 Deferred tax assets-current 





628



458



 Equity method investment-current 





60,508





 Total current assets 





1,122,587



856,677



763,203













 Non-current assets: 












 Property and equipment, net 





58,560



49,654



43,690

 Intangible assets, net 





27,397



12,935



2

 Goodwill 





61,407



13,700



 Long-term investments 





107,842



206,293



320,414

 Deferred tax assets-non-current 





1,109



1,560



 Other non-current assets 





6,784



23,707



21,844

 Total non-current assets 





263,099



307,849



385,950













 TOTAL ASSETS 




$

1,385,686


$

1,164,526


$

1,149,153













 LIABILITIES AND EQUITY 
























 Current liabilities: 












 Accounts payable 




$

10,170


$

8,355


$

5,501

 Accrued expenses and other payables 





33,314



21,853



24,094

 Amounts due to related parties 





61,062



87



303

 Deferred revenue and advance from customers  





8,639



7,662



6,917

 Derivative contract liabilities 







2,866



 Income tax payable 





2,077



8,629



9,229

 Total current liabilities 





115,262



49,452



46,044













 Non-current liabilities: 












 Other non-current liabilities 





156



154



730

 Total non-current liabilities 





156



154



730













 TOTAL LIABILITIES 





115,418



49,606



46,774













 Shareholders' Equity: 












 Class A ordinary shares 





790



744



720

 Class B ordinary shares 





305



305



305

 Additional paid-in capital 





1,285,283



1,244,690



1,224,393

 Statutory reserves 





6,712



6,712



6,712

 Accumulated deficit 





(197,726)



(172,225)



(137,266)

 Accumulated other comprehensive income  





174,781



34,694



7,774













 Total Renren Inc. shareholders' equity 





1,270,145



1,114,920



1,102,638













 Noncontrolling Interests 





123





(259)













 TOTAL EQUITY 





1,270,268



1,114,920



1,102,379













 TOTAL LIABILITIES AND EQUITY 




$

1,385,686


$

1,164,526


$

1,149,153

























 

RENREN INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)




For the Three Months Ended


 For the Twelve Months Ended 

(Amounts in US dollars, in thousands, except shares,



December 31,



September 30,



December 31,



December 31,



 December 31, 

per shares, ADS, and per ADS data)


2013



2014



2014



2013



2014

















 Net revenues 
















 Renren 


$

12,368


$

11,458


$

10,713


$

62,474


$

45,853

 Games 



15,557



8,071



6,466



85,473



37,101

 Total net revenues 



27,925



19,529



17,179



147,947



82,954

















 Cost of revenues  



(13,727)



(12,402)



(12,250)



(54,280)



(47,972)

















 Gross profit 



14,198



7,127



4,929



93,667



34,982

















 Operating expenses: 
















 Selling and marketing 



(17,902)



(9,974)



(8,490)



(62,198)



(38,340)

 Research and development 



(17,176)



(12,147)



(10,609)



(77,956)



(50,675)

 General and administrative 



(13,923)



(13,246)



(14,018)



(49,275)



(51,429)

 Impairment of intangible assets 



(208)



(203)





(208)



(714)

 Impairment of goodwill 





(46,864)







(46,864)

 Restructuring cost 



(3,475)



(2,110)



(4,244)



(3,475)



(6,354)

















 Total operating expenses 



(52,684)



(84,544)



(37,361)



(193,112)



(194,376)

















 Loss from operations 



(38,486)



(77,417)



(32,432)



(99,445)



(159,394)

















 Other income 



603



1,214



697



1,039



2,448

 Other expense 







(1,812)





(1,812)

 Exchange gain (loss) on offshore bank accounts 



1,036



930



(981)



1,476



(2,277)

 Interest income 



2,885



3,260



3,792



12,778



12,677

 Realized gain on short-term investments 



9,049



4,602



21,576



56,022



139,265

 Impairment of short-term investments 



(2,098)







(2,098)



 Impairment of equity method investments 



(23,025)







(23,025)



















 Loss before provision of income tax, earnings in equity method

     investments and noncontrolling interest, net of income taxes 



(50,036)



(67,411)



(9,160)



(53,253)



(9,093)

 Income tax (expenses) benefit 



3,773



(6)



(5,870)



3,980



(6,517)

















 Loss before earnings in equity method investments and
   noncontrolling interest, net of income taxes 



(46,263)



(67,417)



(15,030)



(49,273)



(15,610)

 Earnings in equity method investments, net of income taxes 



17,974



47,217



52,113



20,317



49,015

 Income (loss) from continuing operations 



(28,289)



(20,200)



37,083



(28,956)



33,405

















 Discontinued operation 
















 Loss from operations of discontinued operations, net of income taxes 



(3,546)



(18,045)



(2,773)



(40,068)



(30,809)

 Gain on deconsolidation of the subsidiaries 



132,665





489



132,665



489

 Gain on disposal of equity method investment, net of income tax 







(99)





56,993

 Gain (loss) from discontinued operations, net of income taxes 



129,119



(18,045)



(2,383)



92,597



26,673

















 Net income (loss) 



100,830



(38,245)



34,700



63,641



60,078

 Net loss attributable to noncontrolling interests 





122



259



92



382

















 Net income (loss) attributable to Renren Inc. 


$

100,830


$

(38,123)


$

34,959


$

63,733


$

60,460

















 Net income (loss) per share from continuing operations
   attributable to Renren Inc.shareholders:
















 Basic 


$

(0.03)


$

(0.02)


$

0.04


$

(0.03)


$

0.03

 Diluted 


$

(0.03)


$

(0.02)


$

0.04


$

(0.03)


$

0.03

 Net income (loss) per share from discontinued operations
    attributable to Renren Inc.shareholders: 
















 Basic 


$

0.12


$

(0.02)


$

(0.00)


$

0.08


$

0.03

 Diluted 


$

0.12


$

(0.02)


$

(0.00)


$

0.08


$

0.03

 Net income (loss) per share attributable to Renren Inc. shareholders: 
















 Basic 


$

0.09


$

(0.04)


$

0.03


$

0.06


$

0.06

 Diluted 


$

0.09


$

(0.04)


$

0.03


$

0.06


$

0.06

 Net income (loss) attributable to Renren Inc. shareholders per ADS: 
















 Basic 


$

0.27


$

(0.11)


$

0.10


$

0.17


$

0.17

 Diluted 


$

0.27


$

(0.11)


$

0.10


$

0.17


$

0.17

















 Weighted average number of shares used in calculating net
    income (loss) per ordinary share from continuing operations
    attributable to Renren Inc. shareholders: 
















 Basic 



1,106,742,708



1,057,907,133



1,034,933,302



1,118,091,879



1,059,446,436

 Diluted 



1,106,742,708



1,057,907,133



1,040,849,227



1,118,091,879



1,067,631,709

 Weighted average number of shares used in calculating net
    income (loss) per ordinary share from discontinued operations
    attributable to Renren Inc. shareholders: 
















 Basic 



1,106,742,708



1,057,907,133



1,034,933,302



1,118,091,879



1,059,446,436

 Diluted 



1,117,484,147



1,057,907,133



1,034,933,302



1,130,739,922



1,067,631,709

































 

 


 

 Reconciliation of Non-GAAP results of operations measures to the comparable GAAP financial measures 

















 Adjusted net income (loss) 



























 For the Three Months Ended 


 For the Twelve Months Ended 

 (Amounts in US dollars, in thousands) 



December 31,



September 30,



December 31,



December 31,



 December 31, 


2013



2014



2014



2013



2014

















 Net income (loss) 


$

100,830


$

(38,245)


$

34,700


$

63,641


$

60,078

 Add back: Shared-based compensation expenses 



3,188



6,615



8,325



16,138



23,604

     Add back: Amortization of intangible assets 



456



324



192



1,618



1,143

 Add back: Impairment of goodwill 





46,864







46,864

 Add back: Impairment of intangible assets 



208



13,739





208



14,250

 Adjusted net income 


$

104,682


$

29,297


$

43,217


$

81,605


$

145,939

















 

 

 

 

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SOURCE Renren Inc.