ChinaNet Online Holdings, Inc. (Nasdaq:CNET) ("ChinaNet" or the
"Company"), a leading B2B (business to business) Internet
technology company providing online-to-offline (O2O) sales channel
expansion, business strategies and marketing solutions for small
and medium-sized enterprises (SMEs) by utilizing data analysis and
cloud computing technologies in the People's Republic of China,
today announced financial results for the third fiscal quarter of
2016.
Third Quarter & First Nine Months Financial
Highlights
- Revenues of $11.9 million in the third fiscal quarter of 2016,
up 40.1% from prior year’s quarter of $8.5 million
- Gross profit of $2.0 million generated in the third fiscal
quarter of 2016, a 39.8% increase from $1.5 million generated in
the same period a year ago
- Operating results showed a 46.7% improvement with an operating
loss of $1.4 million for the third quarter of 2016, compared to the
prior year's quarter loss of $2.6 million
- Overall gross margin increased to 24% for the nine months ended
September 30, 2016, compared to 19% for the same period last
year
- Nine months and three months’ internet advertising and data
service gross margin improved to 43% and 42%, respectively,
compared to 31% in the same periods a year ago
Third Quarter 2016 Financial Results
Chairman and CEO of ChinaNet, Mr. Handong Cheng commented,
"ChinaNet’s evolution has continued to gain traction in 2016,
leaving behind our low-margin television advertising business and
instead focusing on the business value created from the massive
amount of transaction data generated from our customers as an
internet and data service. The ongoing development of this data
service platform is the foundation for the ecosystem of products
and services that will serve any business at important early stages
of their business cycle with a one-stop solution. Called the
Business Intelligent Marketing Data Services System - CloudX, it is
officially in use for our existing clients and will soon launch to
our newer cloud service client base. It is driving revenue and
growth for us, along with our full suite of digital marketing
products and services which is also seeing year over year
growth.
“We also remain committed to our shareholders and investors,
reflected in our commitment to remain listed on the NASDAQ Capital
Markets, which we accomplished in the third quarter. We look
forward to further updates on our transition and future
developments.”
Revenues for the three months ended September 30, 2016 were
$11.9 million compared to $8.5 million for the three months ended
September 30, 2015, representing a 40.1% increase, which was
primarily due to an increase in revenues from search engine
marketing services during the period.
During the third quarter, revenues from internet advertisement
and data services was $4.4 million, which decreased 20.1% from $5.5
million in the third quarter of 2015. ChinaNet continues to focus
on integrating and upgrading its internet advertising and data
service to SME clients and investing in developing new service
modules for clients, and believes that the launch of new services
in future will help to increase market penetration and recurring
revenues. The decline was offset by a search engine marketing
services revenue increase by 160% from $2.9 million in the third
quarter of 2015 to $7.5 million in the third quarter of 2016. This
increase was supported by the CloudX system, which drove more
precision marketing and ROI for clients.
Gross profit for the three months ended September 30, 2016 was
$2.0 million compared to $1.5 million for the same period in 2015,
an improvement of 39.8%. Gross margin was 17.0%, down slightly from
17.1% in the third quarter of 2015, primarily due to the increase
in relative lower margin revenues from search engine marketing
services during the period. Internet advertising and data service
gross margin increased to 42% for the third quarter of 2016 from
31% for the third quarter of 2015. The improvement in gross margin
of the internet advertising and data service was primarily due to
optimizing and upgrading of the Company's online promotion analysis
and cost control system, which improved the promotion accuracy, Ad.
effect conversion rate and promotion cost control.
The Company incurred an operating loss of $1.4 million for the
three months ended September 30, 2016 compared to an operating loss
of $2.6 million in the same period a year ago.
Net loss attributable to ChinaNet for the three months ended
September 30, 2016 was $1.5 million and loss per share from
continuing operations was $0.13, compared to a net loss of $2.1
million and loss per share from continuing operations of $0.18 in
the third quarter of 2015.
First Nine Months 2016 Financial Results
Revenues for the nine months ended September 30, 2016 were $25.4
million, an increase of 6.7% from $23.8 million for the same period
a year ago.
Gross profit was $6.1 million, up 34.2% for the first nine
months of 2016, and gross profit margin of 24.1% was up from 19.2%
in 2015. Operating expenses decreased by 5.3% to $9.9 million
compared to $10.4 million for the first nine months of 2015. The
Company reported an operating loss of $3.8 million in the first
nine months of 2016.
Net loss attributable to ChinaNet common shareholders and net
loss per share from continuing operations was $4.2 million and
$0.36 for the nine months ended September 30, 2016. The weighted
average diluted shares outstanding were 11.4 million shares.
Balance Sheet and Cash Flow
The Company had $1.2 million in cash and cash equivalents as of
September 30, 2016, compared to $5.5 million as of December 31,
2015, working capital of $9.8 million, compared to $13.7 million as
of December 31, 2015, and a current ratio of 2.3 to 1, compared to
2.9 to 1 as of December 31, 2015. Total stockholders' equity of
ChinaNet was $24.3 million at September 30, 2016 compared to $27.3
million at December 31, 2015.
The Company had a $1.9 million of cash outflows from operations
in the nine months ended September 30, 2016 compared to a $1.3
million of cash inflows in the first nine months of 2015.
Business Updates
In August, ChinaNet announced a 1-for-2.5 reverse stock split of
its issued and outstanding shares of common stock. The reverse
stock split was intended to increase the per share trading price of
the Company's common stock to satisfy the $1.00 minimum bid price
requirement for continued listing on The NASDAQ Capital Market. In
September, the Company announced it had regained compliance with
requirement to continue the listing of the Company's common
stock.
The reverse stock split reduced the number of shares of the
Company's common stock outstanding from approximately 30.4 million
shares of common stock pre-reverse split to approximately 12.2
million shares of common stock post-reverse split. The number of
authorized shares of common stock and the par value per share
remained unchanged. As a result of the reverse stock split, every
2.5 shares of the Company's pre-reverse split common stock was
combined and reclassified into 1 share of common stock. The number
of outstanding options was adjusted accordingly, with outstanding
options being reduced from approximately 2.1 million to
approximately 835,000.
Conference Call
Management will host a conference call with investors on
Wednesday, November 16, 2016 at 8:30 am ET
Date: Wednesday, November 16th, 2016Time: 8:30 a.m. Eastern
TimeConference Line (U.S.): 1-888-455-2263International Dial-In:
1-719-325-2289Webcast:
http://public.viavid.com/index.php?id=121881
A replay of the call will be available from 11:30 am ET on
November 16, 2016 to 11:59 pm ET on December 16, 2016. To access
the replay, please dial 1- 844-512-2921 from the U.S. and 1-
412-317-6671 from outside the U.S. The PIN is 2363154.
About ChinaNet Online Holdings, Inc.
The Company, a parent company of ChinaNet Online Media Group
Ltd., incorporated in the BVI ("ChinaNet"), is a leading digital
B2B (business to business) Internet technology company focusing on
providing O2O sales channel expansion service for small and
medium-sized enterprises (SMEs) and entrepreneurial management and
networking service for entrepreneurs in China. The Company, through
certain contractual arrangements with operating companies in the
PRC, provides Internet advertising and other services for Chinese
SMEs via its portal websites, 28.com, Liansuo.com and Chuangye.com.
Website: http://www.chinanet-online.com.
Safe Harbor
This release contains certain "forward-looking statements"
relating to the business of ChinaNet Online Holdings, Inc., which
can be identified by the use of forward-looking terminology such as
"believes," "expects," "anticipates," "estimates" or similar
expressions. Such forward-looking statements involve known and
unknown risks and uncertainties, including business uncertainties
relating to government regulation of our industry, market demand,
reliance on key personnel, future capital requirements, competition
in general and other factors that may cause actual results to be
materially different from those described herein as anticipated,
believed, estimated or expected. Certain of these risks and
uncertainties are or will be described in greater detail in our
filings with the Securities and Exchange Commission. These
forward-looking statements are based on ChinaNet's current
expectations and beliefs concerning future developments and their
potential effects on the Company. There can be no assurance that
future developments affecting ChinaNet will be those anticipated by
ChinaNet. These forward-looking statements involve a number of
risks, uncertainties (some of which are beyond the control of the
Company) or other assumptions that may cause actual results or
performance to be materially different from those expressed or
implied by such forward-looking statements. ChinaNet undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required under applicable securities
laws.
CHINANET ONLINE HOLDINGS,
INC. |
CONSOLIDATED BALANCE SHEETS |
(In thousands, except for number of shares and
per share data) |
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
(US $) |
|
(US $) |
|
|
(Unaudited) |
|
|
Assets |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
1,246 |
|
|
$ |
5,503 |
|
Term deposit |
|
|
3,175 |
|
|
|
3,265 |
|
Accounts receivable, net |
|
|
3,484 |
|
|
|
2,549 |
|
Other receivables, net |
|
|
355 |
|
|
|
1,910 |
|
Prepayment and deposit to
suppliers |
|
|
6,844 |
|
|
|
5,843 |
|
Due from related parties |
|
|
368 |
|
|
|
41 |
|
Other current assets |
|
|
28 |
|
|
|
45 |
|
Assets classified as held for
sale |
|
|
1,764 |
|
|
|
1,882 |
|
Total current
assets |
|
|
17,264 |
|
|
|
21,038 |
|
|
|
|
|
|
Long-term
investments |
|
|
1,550 |
|
|
|
1,133 |
|
Property and equipment,
net |
|
|
511 |
|
|
|
681 |
|
Intangible assets,
net |
|
|
6,467 |
|
|
|
5,638 |
|
Deposit and prepayment
for purchasing of software technology |
|
|
996 |
|
|
|
1,024 |
|
Goodwill |
|
|
4,275 |
|
|
|
4,396 |
|
Deferred tax assets-non
current |
|
|
1,365 |
|
|
|
1,550 |
|
Total
Assets |
|
$ |
32,428 |
|
|
$ |
35,460 |
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Short-term bank loan |
|
$ |
449 |
|
|
$ |
- |
|
Accounts payable |
|
|
115 |
|
|
|
95 |
|
Advances from customers |
|
|
1,177 |
|
|
|
1,313 |
|
Accrued payroll and other
accruals |
|
|
537 |
|
|
|
685 |
|
Guarantee payment and prepayment
from new investors |
|
|
918 |
|
|
|
944 |
|
Taxes payable |
|
|
3,068 |
|
|
|
3,186 |
|
Other payables |
|
|
517 |
|
|
|
234 |
|
Liabilities classified as held for
sale |
|
|
710 |
|
|
|
913 |
|
Total current
liabilities |
|
|
7,491 |
|
|
|
7,370 |
|
|
|
|
|
|
Long-term
liabilities: |
|
|
|
|
Deferred tax liability-non
current |
|
|
29 |
|
|
|
118 |
|
Long-term borrowing from a
director |
|
|
131 |
|
|
|
135 |
|
Total Liabilities |
|
|
7,651 |
|
|
|
7,623 |
|
|
|
|
|
|
Commitments and
contingencies |
|
|
- |
|
|
|
129 |
|
|
|
|
|
|
Equity: |
|
|
|
|
ChinaNet Online Holdings, Inc.’s
stockholders’ equity |
|
|
|
|
Common stock (US$0.001 par value;
authorized 50,000,000 shares; issued and outstanding 12,158,542
shares and 11,856,304 shares at September 30, 2016 and December 31,
2015, respectively) |
|
|
12 |
|
|
|
12 |
|
Additional paid-in capital |
|
|
28,246 |
|
|
|
26,528 |
|
Statutory reserves |
|
|
2,607 |
|
|
|
2,607 |
|
Retained deficit |
|
|
(8,033 |
) |
|
|
(3,870 |
) |
Accumulated other comprehensive
income |
|
|
1,457 |
|
|
|
2,056 |
|
Total ChinaNet Online Holdings,
Inc.’s stockholders’ equity |
|
|
24,289 |
|
|
|
27,333 |
|
|
|
|
|
|
Noncontrolling interests |
|
|
488 |
|
|
|
375 |
|
Total
equity |
|
|
24,777 |
|
|
|
27,708 |
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
32,428 |
|
|
$ |
35,460 |
|
|
|
|
|
|
CHINANET ONLINE HOLDINGS, INC. |
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS |
(In thousands, except for number of shares and
per share data) |
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
Three Months Ended September 30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
(US $) |
|
(US $) |
|
(US $) |
|
(US $) |
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
Revenues |
|
|
|
|
|
|
|
|
From unrelated parties |
|
$ |
25,017 |
|
|
$ |
23,114 |
|
|
$ |
11,741 |
|
|
$ |
8,279 |
|
From related parties |
|
|
381 |
|
|
|
687 |
|
|
|
161 |
|
|
|
219 |
|
Total revenues |
|
|
25,398 |
|
|
|
23,801 |
|
|
|
11,902 |
|
|
|
8,498 |
|
Cost of
revenues |
|
|
19,269 |
|
|
|
19,234 |
|
|
|
9,874 |
|
|
|
7,047 |
|
Gross
profit |
|
|
6,129 |
|
|
|
4,567 |
|
|
|
2,028 |
|
|
|
1,451 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
Sales and marketing expenses |
|
|
3,069 |
|
|
|
3,437 |
|
|
|
1,126 |
|
|
|
1,207 |
|
General and administrative
expenses |
|
|
5,290 |
|
|
|
5,346 |
|
|
|
1,752 |
|
|
|
2,207 |
|
Research and development
expenses |
|
|
1,530 |
|
|
|
1,658 |
|
|
|
514 |
|
|
|
595 |
|
Total operating
expenses |
|
|
9,889 |
|
|
|
10,441 |
|
|
|
3,392 |
|
|
|
4,009 |
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
|
(3,760 |
) |
|
|
(5,874 |
) |
|
|
(1,364 |
) |
|
|
(2,558 |
) |
|
|
|
|
|
|
|
|
|
Other income
(expenses) |
|
|
|
|
|
|
|
|
Interest income |
|
|
72 |
|
|
|
91 |
|
|
|
19 |
|
|
|
28 |
|
Interest expense |
|
|
(4 |
) |
|
|
(46 |
) |
|
|
(4 |
) |
|
|
(12 |
) |
Other (expenses)/income |
|
|
(112 |
) |
|
|
26 |
|
|
|
(99 |
) |
|
|
(5 |
) |
Total other
(expenses)/income |
|
|
(44 |
) |
|
|
71 |
|
|
|
(84 |
) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
Loss before
income tax expense, equity method investments, noncontrolling
interests and discontinued operation |
|
|
(3,804 |
) |
|
|
(5,803 |
) |
|
|
(1,448 |
) |
|
|
(2,547 |
) |
Income tax (expense)/benefit |
|
|
(155 |
) |
|
|
699 |
|
|
|
(3 |
) |
|
|
391 |
|
Loss before
equity method investments, noncontrolling interests and
discontinued operation |
|
|
(3,959 |
) |
|
|
(5,104 |
) |
|
|
(1,451 |
) |
|
|
(2,156 |
) |
Share of losses in equity
investment affiliates |
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
|
|
(4 |
) |
Loss from
continuing operations |
|
|
(3,959 |
) |
|
|
(5,106 |
) |
|
|
(1,451 |
) |
|
|
(2,160 |
) |
Loss from and
on disposal of discontinued operation, net of income
tax |
|
|
(60 |
) |
|
|
(204 |
) |
|
|
- |
|
|
|
(95 |
) |
Net
loss |
|
|
(4,019 |
) |
|
|
(5,310 |
) |
|
|
(1,451 |
) |
|
|
(2,255 |
) |
Net (income)/loss attributable to
noncontrolling interests from continuing operations |
|
|
(144 |
) |
|
|
232 |
|
|
|
(21 |
) |
|
|
174 |
|
Net loss
attributable to ChinaNet Online Holdings, Inc. |
|
$ |
(4,163 |
) |
|
$ |
(5,078 |
) |
|
$ |
(1,472 |
) |
|
$ |
(2,081 |
) |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(4,019 |
) |
|
$ |
(5,310 |
) |
|
$ |
(1,451 |
) |
|
$ |
(2,255 |
) |
Foreign currency translation
loss |
|
|
(630 |
) |
|
|
(1,127 |
) |
|
|
(152 |
) |
|
|
(1,150 |
) |
Comprehensive
loss |
|
$ |
(4,649 |
) |
|
$ |
(6,437 |
) |
|
$ |
(1,603 |
) |
|
$ |
(3,405 |
) |
Comprehensive (income)/loss
attributable to noncontrolling interests |
|
|
(113 |
) |
|
|
226 |
|
|
|
(19 |
) |
|
|
168 |
|
Comprehensive
loss attributable to ChinaNet Online Holdings,
Inc. |
|
$ |
(4,762 |
) |
|
$ |
(6,211 |
) |
|
$ |
(1,622 |
) |
|
$ |
(3,237 |
) |
|
|
|
|
|
|
|
|
|
Loss per
share |
|
|
|
|
|
|
|
|
Loss from continuing
operations per common share |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.36 |
) |
|
$ |
(0.46 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.18 |
) |
Loss from discontinued
operations per common share |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.02 |
) |
|
$ |
- |
|
|
$ |
(0.01 |
) |
Weighted
average number of common shares outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
11,353,657 |
|
|
|
10,675,308 |
|
|
|
11,358,971 |
|
|
|
10,765,637 |
|
|
|
|
|
|
|
|
|
|
CHINANET ONLINE HOLDINGS, INC. |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
(US $) |
|
(US $) |
|
|
(Unaudited) |
|
(Unaudited) |
Cash flows from
operating activities |
|
|
|
|
Net loss |
|
$ |
(4,019 |
) |
|
$ |
(5,310 |
) |
Adjustments to
reconcile net loss to net cash (used in)/provided by operating
activities |
|
|
|
|
Depreciation and amortization |
|
|
1,170 |
|
|
|
1,321 |
|
Share-based compensation
expenses |
|
|
1,718 |
|
|
|
1,637 |
|
Loss on disposal of fixed
assets/other long-term assets |
|
|
117 |
|
|
|
63 |
|
Provision for allowances for
doubtful accounts |
|
|
- |
|
|
|
106 |
|
Share of losses in equity
investment affiliates |
|
|
- |
|
|
|
2 |
|
Loss on deconsolidation of
VIEs |
|
|
9 |
|
|
|
- |
|
Deferred taxes |
|
|
155 |
|
|
|
(723 |
) |
Changes in
operating assets and liabilities |
|
|
|
|
Accounts receivable |
|
|
(1,196 |
) |
|
|
(1,766 |
) |
Other receivables |
|
|
1,416 |
|
|
|
1,908 |
|
Prepayment and deposit to
suppliers |
|
|
(1,172 |
) |
|
|
2,099 |
|
Due from related parties |
|
|
(24 |
) |
|
|
(33 |
) |
Other current assets |
|
|
16 |
|
|
|
(32 |
) |
Accounts payable |
|
|
(129 |
) |
|
|
(53 |
) |
Advances from customers |
|
|
(109 |
) |
|
|
1,439 |
|
Accrued payroll and other
accruals |
|
|
(146 |
) |
|
|
81 |
|
Other payables |
|
|
403 |
|
|
|
140 |
|
Taxes payable |
|
|
66 |
|
|
|
(25 |
) |
Commitment and contingencies |
|
|
(128 |
) |
|
|
419 |
|
Net cash (used
in)/provided by operating activities |
|
|
(1,853 |
) |
|
|
1,273 |
|
|
|
|
|
|
Cash flows from
investing activities |
|
|
|
|
Payment for office equipment and
leasehold improvement |
|
|
(150 |
) |
|
|
(310 |
) |
Long-term investment in and advance
to cost/equity method investees |
|
|
(787 |
) |
|
|
(185 |
) |
Payment for purchasing of software
technology |
|
|
(1,977 |
) |
|
|
(3,878 |
) |
Proceeds from disposal of VIEs |
|
|
28 |
|
|
|
- |
|
Cash effect on deconsolidation of
VIEs |
|
|
(18 |
) |
|
|
- |
|
Net cash used
in investing activities |
|
|
(2,904 |
) |
|
|
(4,373 |
) |
Cash flows from
financing activities |
|
|
|
|
Proceeds from short-term bank
loan |
|
|
456 |
|
|
|
- |
|
Repayment of short-term bank
loan |
|
|
- |
|
|
|
(810 |
) |
Repayment of short-term loan to
noncontrolling interest of VIE |
|
|
- |
|
|
|
(81 |
) |
Guarantee payment and prepayment
from new investors |
|
|
- |
|
|
|
993 |
|
Net cash
provided by financing activities |
|
|
456 |
|
|
|
102 |
|
|
|
|
|
|
Changes in cash and
cash equivalents included in assets held for sale |
|
|
132 |
|
|
|
- |
|
|
|
|
|
|
Effect of exchange rate
fluctuation on cash and cash equivalents |
|
|
(88 |
) |
|
|
(98 |
) |
|
|
|
|
|
Net decrease in
cash and cash equivalents |
|
|
(4,257 |
) |
|
|
(3,096 |
) |
|
|
|
|
|
Cash and cash equivalents at
beginning of the period |
|
|
5,503 |
|
|
|
5,037 |
|
Cash and cash equivalents at end of
the period |
|
$ |
1,246 |
|
|
$ |
1,941 |
|
|
|
|
|
|
Contact:
MZ North America
Ted Haberfield, President
Direct: +1-760-755-2716
Email: thaberfield@mzgroup.us
Web: www.mzgroup.us
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