Chinese mobile security provider NetQin has filed its IPO prospectus to list American Depository Shares (ADSs) on the New York Stock Exchange under the ticker symbol "NQ," with Piper Jaffray serving as lead underwriter.
Total net revenues increased from USD 4.0 mln in 2008 to USD 5.3 mln in 2009 and USD 17.7 mln in 2010, representing a compound annual growth rate (CAGR) of 111.4%.
NetQin incurred a net loss of USD 3.6 mln in 2008, USD 5.2 mln in 2009, and USD 9.8 mln in 2010. Net loss amounts reflect the impact of non-cash share-based compensation expenses of USD 1.2 mln in 2008, USD 1.2 mln in 2009, and USD 12.6 mln in 2010.
NetQin generates revenues primarily through the sale of user subscriptions to its premium mobile Internet services. For the years ended December 31, 2008, 2009 and 2010, a substantial portion of NetQin's revenues were collected through the payment channels of wireless carriers. The company cooperates with wireless carriers, either directly or through mobile payment service providers. Wireless carriers provide NetQin with billing and collection services for a fixed percentage of the total billing. If NetQin cooperates with wireless carriers through mobile payment service providers, the company shares the payments with the mobile payment service providers.
NetQin offers products in three categories: mobile security (Mobile Guard, Mobile Anti-Virus, and Security Cloud Platform), mobile productivity (Mobile Manager and Smart Calendar), and personalized intelligent cloud service (NQ Space (beta)). Mobile Anti-Virus, Security Cloud Platform, Mobile Manager, and Smart Calendar all offer some premium features.
Net revenues generated through NetQin's top mobile payment service provider, Tianjin Yidatong Technology Development Co., Ltd., or Yidatong, as a percentage of total net revenues, were 52.7%, 20.0% and 21.4% in 2008, 2009 and 2010, respectively. Yidatong charges NetQin at a lower fee rate than other mobile payment service providers through which the company cooperates with wireless carriers. The principal shareholder of Yidatong was a consultant for NetQin in 2006 and 2007 and received certain share options and consulting fees in connection with her services.
Net revenues generated directly from China Mobile (NYSE: CHL; 0941.HK), as a percentage of total net revenues, were 28% in 2008, 48% in 2009 and 10% in 2010.
Net revenues attributable to overseas users as a percentage of total net revenues increased from 7.4% in 2008 to 21.0% in 2009 to 35.1% in 2010.
NetQin's cumulative registered user accounts as of December 31, 2008, 2009 and 2010 were 15.18 mln, 35.63 mln and 71.69 mln, respectively. Of these, mainland Chinese users totaled 12.41 mln, 26.88 mln and 48.5 mln, while overseas users reached 2.77 mln, 8.75 mln, and 23.19 mln as of the end of 2008, 2009, and 2010, respectively. Substantially all of NetQin's users are smartphone users.
Average monthly active user accounts for the three months ended December 31, 2008, 2009 and 2010 were 5.46 mln, 11.96 mln and 25.44 mln, respectively. Of these, mainland China user accounts reached 4.49 mln, 9.07 mln, and 17.39 mln, while overseas user accounts reached 0.97 mln, 2.89 mln, and 8.05 mln at the end of 2008, 2009, and 2010 respectively.
Average monthly paying user accounts for the three months ended December 31, 2008, 2009 and 2010 were 1.03 mln, 1.14 mln and 3.24 mln, respectively, with mainland China user accounts reaching 1 mln, 0.97 mln, and 2.55 mln, and overseas user accounts were 0.03 mln, 0.17 mln, and 0.69 mln.
According to market research firm Frost & Sullivan, as of December 31, 2010, NetQin had a 66.7% market share of China's mobile security market.
NetQin was established in Beijing in 2005, and its three founders Henry Yu Lin, Xu Zhou and Vincent Wenyong Shi, hold in aggregate 27.0% of outstanding share capital indirectly through RPL Holdings Limited, a limited liability company organized under the laws of the British Virgin Islands. In November 2010, the company established NetQin US Inc., in the United States, which is primarily tasked with analyzing market information in the U.S. mobile industry.
The prospectus noted that CCTV's 2011 World Consumer Rights Day live programming on March 15, 2011 reported various complaints of certain alleged fraudulent practices, such as uploading viruses to imported mobile phones to promote NetQin's mobile security products, by Beijing Feiliu, a company in which NetQin holds 33% of equity interests. NetQin said it does not believe that it has committed any wrongdoings and plans to publicly explain its practices in an objective manner.
To view NetQin's full IPO prospectus, please click here.