Renren Announces Unaudited Third Quarter 2017 Financial Results and Updates on Proposed Transaction

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BEIJING, Dec. 15, 2017 — Renren Inc. (NYSE: RENN) (“Renren” or the “Company”), which operates a social networking service and internet finance business in China, today announced its unaudited financial results for the third quarter ended September 30, 2017.

Third Quarter 2017 Highlights

  • Total net revenues were US$61.8 million, a 245.3% increase from the corresponding period in 2016.
    • Advertising and Internet Value-Added Services (IVAS) net revenues were US$12.9 million, a 34.6% increase from the corresponding period in 2016.
    • Financing income was US$6.6 million, a 20.2% decrease from the corresponding period in 2016.
    • Used car sales revenue was US$42.3 million.
  • Gross profit was US$6.1 million, compared to US$3.5 million in the corresponding period of 2016.
  • Operating loss was US$27.4 million, compared to an operating loss of US$18.6 million in the corresponding period in 2016.
  • Net loss attributable to the Company was US$22.8 million, compared to a net loss of US$22.8 million in the corresponding period in 2016.
  • Adjusted net loss (1) (non-GAAP) was US$10.5 million, compared to an adjusted net loss of US$17.3 million in the corresponding period in 2016.

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

Third Quarter 2017 Results

Total net revenues for the third quarter of 2017 were US$61.8 million, representing a 245.3% increase from the corresponding period in 2016.

Advertising and IVAS net revenues were US$12.9 million, representing a 34.6% increase from the corresponding period of 2016. Advertising revenues were US$0.1 million for the third quarter of 2017. IVAS revenues were US$12.8 million, representing a 34.5% increase from the corresponding period in 2016. The increase was mainly due to the revenue from our Renren mobile live streaming service. Monthly unique log-in users of the Renren SNS platform decreased from approximately 35 million in September 2016 to approximately 34 million in September 2017.

Financing income was US$6.6 million for the third quarter of 2017, compared to US$8.3 million in the corresponding period of 2016. The decrease was in line with the decrease of financing receivable from US$268.3 million as of September 30, 2016 to US$172.3 million as of September 30, 2017.

Used car sales revenue of US$42.3 million was generated through one of our subsidiaries conducting a used car retail business, which is a new business that we initiated in the second quarter of 2017. As of September 30, 2017, we had a presence in 10 cities in China conducting a used car retail business.

Cost of revenues was US$55.6 million, compared to US$14.4 million in the corresponding period of 2016. The increase was primarily due to the increase in the cost of used car sales.

Operating expenses were US$33.5 million, a 51.3% increase from the corresponding period of 2016.

Selling and marketing expenses were US$8.4 million, a 40.5% increase from the corresponding period of 2016. The increase was primarily due to an increase in advertising and promotion expenses. 

Research and development expenses were US$6.3 million, a 14.8% increase from the corresponding period in 2016. The increase was primarily due to personnel related expense increases.

General and administrative expenses were US$18.8 million, a 76.0% increase from the corresponding period in 2016. The increase was primarily due to the increase in share-based compensation expenses and the related professional fees for a proposed transaction.

Share-based compensation expenses, which were all included in operating expenses, were US$12.2 million, compared to US$5.5 million in the corresponding period in 2016. The increase was mainly due to a modification which repriced the exercise price with respect to options.

Operating loss was US$27.4 million, compared to an operating loss of US$18.6 million in the corresponding period in 2016.

Non-operating loss was US$0.1 million, compared to a loss of US$2.3 million in the corresponding period in 2016. Non-operating loss for the third quarter of 2017 was mainly comprised of a US$35.0 million impairment on long-term investments and a US$32.7 million gain on disposal of the shares of Mapbar Technology Limited (“Mapbar”). The Company acquired a 35% equity interest in Mapbar for total cash consideration of $26.6 million in 2011 and subsequently fully impaired the investment in 2013 due to uncertainty in the investee's business model. In the current period, the Company sold the investment to an unrelated party and received US$32.7 million.

Earnings in equity method investments were US$5.7 million, compared to loss of US$1.3 million in the corresponding period in 2016.

Net loss attributable to the Company was US$22.8 million, compared to a net loss of US$22.8 million in the corresponding period in 2016.

Adjusted net loss (non-GAAP) was US$10.5 million, compared to an adjusted net loss of US$17.3 million in the corresponding period in 2016. Adjusted net loss is defined as loss excluding share-based compensation expenses and amortization of intangible assets.

Business Outlook

The Company expects to generate revenues in an amount ranging from US$95 million to US$100 million in the fourth quarter of 2017, representing a 367% to 392% year-over-year increase. This forecast reflects Renren's current and preliminary view, which is subject to change.

Updates on Proposed Transactions

As described in the Company's most recent annual report on Form 20-F, filed on May 15, 2017, and as further updated in the Company's most recent quarterly earnings release, filed on Form 6-K on August 31, 2017, the Company is continuing to pursue its plan to dispose of a newly formed subsidiary (the “Subsidiary”) that would hold its advertising agency business and most of its investments in minority stakes in its investee companies. The plan is intended primarily to address the risk that the Company could be deemed to be an investment company as defined under the Investment Company Act of 1940.

The Company is waiting for approval from the New York Department of Financial Services for the transfer of the Company's shares of Social Finance, Inc. from Renren Inc. to the Subsidiary. This approval is required because Social Finance, Inc. holds a mortgage banker license in New York State, and approval by the state regulator is required whenever there is a change in control of ownership. In addition, the plan remains subject to the approval of the special committee of the Company's board of directors, which will make the final determination as to whether the Company will carry out the plan in the proposed form or in any other form, or carry out a different transaction or no transaction at all. The terms of the plan also remain subject to the approval of SoftBank Group Corp.in accordance with the Company's articles of association. The Company expects to carry out the proposed transaction as soon as possible after all required approvals are obtained.

On November 6, 2017, the Company announced that it will hold its annual general meeting of shareholders in Hong Kong on December 22, 2017. The annual general meeting will serve as an open forum for shareholders and beneficial owners of the Company's ADSs to discuss the Company's affairs with management. However, the proposed transaction will not be discussed at the annual general meeting and the Company will not answer any questions about it at the annual general meeting. The Company will provide full and detailed information about the final terms of the proposed transaction at the time when the transaction is launched.

Conference Call Information

The Company will not host a conference call. Please contact our Investor Relations Department if you have any questions.

About Renren Inc.

Renren Inc. (NYSE: RENN) operates a social networking service (SNS) and an internet finance business in China. Our SNS enables users to connect and communicate with each other, share photos and access mobile live streaming. Our internet finance business includes primarily auto financing. Renren.com and our Renren mobile application had approximately 254 million activated users as of September 30, 2017. Renren's American depositary shares, each of which represents fifteen Class A ordinary shares, trade on the 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 fourth quarter of 2017 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 and amortization of intangible assets. 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: [email protected]

RENREN INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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

December 31,

September 30,

per share, ADS, and per ADS data)

2016

2017

 ASSETS 

 Current assets: 

 Cash and cash equivalents 

$

79,370

$

162,948

 Restricted Cash 

30,390

77,968

 Short-term investments 

410

 Accounts receivable, net 

4,702

5,736

 Financing receivable, net 

301,773

172,263

 Prepaid expenses and other current assets 

20,749

32,596

 Amounts due from related parties 

13,419

15,932

 Inventory 

75,137

 Total current assets 

450,813

542,580

 Non-current assets: 

 Long-term financing receivable, net 

330

12

 Property and equipment, net 

28,666

29,096

 Goodwill and intangible assets, net 

5,531

 Long-term investments 

695,348

592,944

 Other non-current assets 

1,687

1,340

 Total non-current assets 

726,031

628,923

 TOTAL ASSETS 

$

1,176,844

$

1,171,503

 LIABILITIES AND EQUITY 

 Current liabilities: 

 Accounts payable 

$

5,561

$

11,589

 Short-term debt 

37,202

90,120

 Accrued expenses and other current liabilities 

19,781

41,104

 Payable to investors 

182,951

184,487

 Amounts due to related parties 

10,914

10,868

 Deferred revenue and advance from customers  

5,954

9,988

 Income tax payable 

7,860

10,693

 Total current liabilities 

270,223

358,849

 Non-current liabilities: 

 Long-term debt 

95,390

80,410

 Long-term payable to investors 

59,916

 Other non-current liabilities 

12,849

16,558

 Total non-current liabilities 

168,155

96,968

 TOTAL LIABILITIES 

438,378

455,817

 Shareholders' Equity: 

 Class A ordinary shares 

720

725

 Class B ordinary shares 

305

305

 Additional paid-in capital 

1,266,592

1,289,343

 Statutory reserves 

6,712

6,712

 Accumulated deficit 

(542,746)

(598,884)

 Accumulated other comprehensive income 

6,883

16,444

 TOTAL EQUITY 

738,466

714,645

 Non-controlling interest 

1,041

 TOAL LIABILITIES AND EQUITY 

$

1,176,844

$

1,171,503

RENREN INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the Three Months Ended

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

September 30,

June 30,

September 30,

per shares, ADS, and per ADS data)

2016

2017

2017

 Net revenues 

 Advertising and IVAS 

$

9,578

$

12,731

$

12,888

 Financing income 

8,308

8,559

6,630

 Used car sales 

1,042

42,245

 Total net revenues 

17,886

22,332

61,763

 Cost of revenues  

(14,352)

(17,376)

(55,645)

 Gross profit 

3,534

4,956

6,118

 Operating expenses: 

 Selling and marketing 

(5,971)

(6,017)

(8,390)

 Research and development 

(5,478)

(4,611)

(6,290)

 General and administrative 

(10,693)

(9,784)

(18,820)

 Total operating expenses 

(22,142)

(20,412)

(33,500)

 Loss from operations 

(18,608)

(15,456)

(27,382)

 Other income  

404

477

4,157

 Interest income 

101

371

720

 Interest expenses 

(2,686)

(2,379)

(2,741)

 Realized (loss) gain on short-term investments 

(71)

(201)

1

 Realized gain on disposal of long-term investments 

32,726

 Impairment of long term investments 

(61,021)

(35,000)

 Total non-operating loss 

(2,252)

(62,753)

(137)

 Loss before provision of income tax
and loss in equity method investments, net of
tax 

(20,860)

(78,209)

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Sarah Thompson

Sarah Thompson

Sarah is a financial reporter, focusing on technology, national security, and policing. Before joining Daily Telescope she worked as a staff writer at Fast Company and spent two years as a foreign correspondent in Turkey. Her work has been published in Al Jazeera America, The Nation, Vice News, Motherboard, and many other outlets.
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