SHANGHAI, Sept. 8, 2017 /PRNewswire/ -- Acorn
International, Inc. (NYSE: ATV) ("Acorn" or the "Company"), today
announced its unaudited financial results for the second quarter
and six months ended June 30,
2017.
In the second quarter of 2017, Acorn continued to focus on its
business turnaround strategy, delivering double-digit revenue
growth, higher gross margins and a reduction in loss from
operations due to management's narrowed focus on Acorn's core
business and best performing brands. Management believes the
performance of Acorn's core business improved substantially in the
first half of 2017 compared to the same period in 2016, excluding
gains associated with the sale of non-core assets in both periods.
The Company closed the quarter with a cash position of $27.9 million, as compared to $25.6 million as of December 31, 2016.
In the first half of 2017, the Company further reduced its stake
in Yimeng Software Technology Co., Ltd. ("Yimeng"), a publicly
traded company in China and
recorded a pre-tax gain of approximately $9.1 million. In the year ago period, the Company
recorded a pre-tax gain on the sale of Yimeng shares of
$18.1 million and a $6.0 million pretax gain on the sale of non-core
real estate. Acorn anticipates further liquidation of non-core
assets, including a potential sale of non-core property in
Shanghai or potentially another
liquidity generating transaction involving such non-core property,
which has a carrying value of approximately $16.37 million, and may sell additional shares of
Yimeng, as appropriate.
In the remainder of 2017, Acorn will strive to increase revenue
by growing sales of its proprietary-branded products as well as
third-party branded products through e-commerce, outbound marketing
and its distribution network. The Company is placing greater
emphasis on its e-commerce channel, and expects sales from this
platform to have an increasing importance to the business going
forward. Management's medium-term goal is to achieve operating
profitability in order to position the business for long-term,
sustainable success. Management remains focused on maintaining
healthy margins, managing expenses and generating additional cash
flow.
Financial Results for the Second Quarter of 2017:
Total net revenues were $4.6
million in the second quarter of 2017, up 20.5% from
$3.9 million in the second quarter of
2016.
Cost of sales in the second quarter of 2017 was $2.0 million, up 20.2% from $1.7 million in the second quarter of 2016.
Gross profit in the second quarter of 2017 was $2.7 million, up 20.7% from $2.2 million in the second quarter of 2016. Gross
margin was 57.3% in the second quarter of 2017, up slightly from
57.2% in the second quarter of 2016.
Total operating expenses in the second quarter of 2017 were
$6.2 million, up 4.8% from operating
expenses of $5.9 million in the
second quarter of 2016.
Loss from operations was $3.5
million in the second quarter of 2017, as compared to loss
from operations of $3.7 million in
the second quarter of 2016.
Share-based compensation was nil in the second quarter of 2017,
as compared to $408,538 in the second
quarter of 2016.
Other expense was $70,000 in the
second quarter of 2017, as compared to other income of $12.4 million in the second quarter of 2016, with
the latter primarily attributable to gains from sales of Yimeng
shares.
Net loss was $3.4 million in the
second quarter of 2017 as compared to net income of $5.7 million in the second quarter of 2016.
As of June 30, 2017, Acorn's cash
and cash equivalents, with restricted cash, totaled $27.9 million, as compared to $25.6 million as of December 31, 2016.
As of June 30, 2017, the Company
had repurchased 258,949 ADSs at an average price of $7.83 per ADS under its share repurchase program,
which was suspended in the first quarter of 2017. On August 3, 2017, pursuant to a settlement
agreement related to a lawsuit against certain of its former
directors, the Company repurchased all of the ordinary shares of
the Company owned by SB Asia Investment Fund II L.P.,
representing 27.7% of the total outstanding ordinary
shares of the Company, for the purchase price of
approximately $4.17 million, the equivalent
of $4.05 per ADS. Immediately following the
repurchase, the Company had 53,626,050 ordinary shares
outstanding or the equivalent of 2,681,302 ADSs.
First Half 2017 Financial Results
Total net revenues were $10.7
million in the first half of 2017, down slightly from
$10.9 million in the first half of
2016.
Cost of sales in the first half of 2017 was $4.5 million, down 19.3% from $5.6 million in the first half of 2016.
Gross profit in the first half of 2017 was $6.2 million, up 15.6% from $5.3 million in the first half of 2016. Gross
margin was 57.9% in the first half of 2017, up from 48.9% in the
first half of 2016.
Total operating expenses in the first half of 2017 were
$10.8 million, up 94.0% from
operating expenses of $5.6 million in
the first half of 2016. In the first half of 2016, the
Company recorded a $6.0 million gain
from the sale of non-core real estate assets, which partially
offset operating expense for the period. There was no such gain in
the first half of 2017.
Loss from operations was $4.6
million in the first half of 2017, as compared to a loss
from operations of $0.2 million in
the first half of 2016.
Share-based compensation was nil in the first half of 2017, as
compared to $408,538 in the first
half of 2016.
Other income was $9.2 million in
the first half of 2017, as compared to other income of $18.1 million in the first half of 2016, with the
latter primarily attributable to gains from sales of Yimeng
shares.
Net income was $2.6 million in the
first half of 2017 as compared to net income of $13.1 million in the first half of 2016.
Recent Event
On August 11, 2017, the Company
announced it had recently reached an agreement to sell a majority
stake in its HJX business to a third-party investor and operator.
Specifically, the agreement includes the establishment of a joint
venture that will be controlled and operated by such third party.
Acorn's HJX business engages in direct sales of Ozing branded
electronic learning devices incorporating mobile internet
interactive features, such as online tutoring services. The partial
divestiture of this business unit represents an exit of day-to-day
management by Acorn from this business, allowing Acorn to focus on
its already profitable businesses and brands, as well as on
achieving profitable growth of new businesses within the Group.
Conference Call
The Company will host a conference call at 8:30 a.m.
ET (5:30 a.m.
PT), September 8, 2017 to discuss financial
results. Dial-in details for the earnings conference call are as
follows:
US/Canada:
|
+1-888‑428‑9473
|
International:
|
+1-719‑457‑2640
|
Please dial in 10 minutes before the call is scheduled to begin
and provide the passcode 2460196 to join the call. A replay will be
available approximately two hours following the conclusion of the
conference call through September 15,
2017 and can be accessed by dialing (866) 375-1919, or (719)
457-0820, passcode 2460196. An archived audio file of the
call will be available on the Company's website
http://www.acorninternationalir.com/home/news-and-events/webcasts-and-presentations/.
About Acorn International, Inc.
Co-founded in 1998 by Executive Chairman Robert Roche, Acorn is
a marketing and branding company in China with a proven track record of
developing, promoting and selling a diverse portfolio of
proprietary-branded products, as well as well-established and
promising new products from third parties. Its business is
currently comprised of two main divisions, its direct sales
platforms and its nationwide distribution network. For more
information visit www.acorninternationalir.com.
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995
This press release contains forward-looking statements. These
statements constitute "forward-looking" statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be
identified by terminology such as "anticipates," "believes,"
"estimates," "strives," "expects," "future," "going forward,"
"intends," "outlook," "plans," "target," "will," and similar
statements and include statements with respect to the Company's
ability to increase revenue, maintain margins, manage expenses and
generate additional cash flow; the Company's ability to grow
sales of its proprietary-branded products as
well as third-party products and brands through e-commerce,
its other direct sales platforms as well as its distribution
network; and the Company ability to sell its non-core assets as
planned. The Company's efforts to implement its proposed
business plans, reduction of operating expenses or sale of its
assets may not succeed as anticipated or at all. Such
statements are based on management's current expectations and
current market and operating conditions, and relate to events that
involve known or unknown risks, uncertainties, and other factors,
all of which are difficult to predict and many of which are beyond
the Company's control, which may cause the Company's actual
results, performance, or achievements to differ materially from
those in these preliminary financial results and the
forward-looking statements. Further information regarding these and
other risks, uncertainties, or factors is included in the Company's
filings with the U.S. Securities and Exchange Commission. The
Company does not undertake any obligation to update any
forward-looking statement as a result of new information, future
events, or otherwise, except as required by law.
Other factors that could cause forward-looking statements to
differ materially from actual future events or results include
risks and uncertainties related to: the Company's ability to
successfully improve or introduce new products and services,
including to offset declines in sales of existing products and
services; the Company's ability to stay abreast of consumer market
trends and maintain the Company's reputation and consumer
confidence; the Company's ability to execute and maintain a
successful market strategy; potential unauthorized use of the
Company's intellectual property; potential disruption of the
Company's manufacturing processes; increasing competition in
China's consumer market; the
Company's U.S. tax status as a passive foreign investment company;
and general economic and business conditions in China. The
financial information contained in this release should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's 2016 annual report on Form 20-F
filed with SEC on May 15, 2017. For a discussion of other
important factors that could adversely affect the Company's
business, financial condition, results of operations and prospects,
see "Risk Factors" beginning on page 9 of the Company's Form 20-F
for the fiscal year ended December 31, 2016. The Company's
actual results of operations for the second quarter of 2017 are not
necessarily indicative of its operating results for any future
periods. Any projections in this release are based on limited
information currently available to the Company, which is subject to
change. Although such projections and the factors influencing them
will likely change, the Company will not necessarily update the
information. Such information speaks only as of the date of this
release.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is
preliminary and subject to potential adjustments. Adjustments to
the consolidated financial statements may be identified when audit
work has been performed for the Company's year-end audit, which
could result in significant differences from this preliminary
unaudited condensed financial information.
ACORN
INTERNATIONAL, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In US
dollars)
|
|
|
|
|
|
|
|
|
|
3 Months Ended
June 30
|
|
6 Months Ended
June 30
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net
revenues
|
3,857,726
|
|
4,648,122
|
|
10,915,966
|
|
10,675,644
|
Cost of
revenues
|
(1,650,582)
|
|
(1,983,803)
|
|
(5,574,994)
|
|
(4,499,033)
|
Gross
profit
|
2,207,144
|
|
2,664,320
|
|
5,340,972
|
|
6,176,611
|
Operating
(expenses) income
|
|
|
|
|
|
|
|
Advertising
expenses
|
-
|
|
-
|
|
(23,701)
|
|
-
|
Other selling
and marketing expenses
|
(2,894,496)
|
|
(2,692,290)
|
|
(5,581,752)
|
|
(5,735,618)
|
General and
administrative expenses
|
(3,431,840)
|
|
(3,727,867)
|
|
(6,756,414)
|
|
(5,589,128)
|
Other operating
income, net
|
418,376
|
|
226,064
|
|
6,792,640
|
|
522,242
|
Total operating
(expenses) income
|
(5,907,960)
|
|
(6,194,093)
|
|
(5,569,227)
|
|
(10,802,504)
|
Income (Loss) from
operations
|
(3,700,816)
|
|
(3,529,773)
|
|
(228,255)
|
|
(4,625,893)
|
Other
income
|
12,402,783
|
|
(69,773)
|
|
18,090,579
|
|
9,187,256
|
Income before
income taxes and equity
in losses of
affiliates
|
8,701,967
|
|
(3,599,546)
|
|
17,862,324
|
|
4,561,363
|
Income tax
benefit (expenses)
|
(2,989,278)
|
|
177,582
|
|
(4,759,291)
|
|
(1,949,894)
|
Equity in
losses of affiliates
|
-
|
|
-
|
|
-
|
|
-
|
Net
income
|
5,712,689
|
|
(3,421,964)
|
|
13,103,033
|
|
2,611,469
|
Net (loss)
attributable to
noncontrolling interests
|
(12,375)
|
|
(1,234)
|
|
(22,838)
|
|
(2,256)
|
Net income (loss)
attributable to Acorn
International, Inc.
|
5,725,064
|
|
(3,420,730)
|
|
13,125,871
|
|
2,613,725
|
ACORN
INTERNATIONAL, INC.
|
CONSOLIDATED
BALANCE SHEETS
(In US
dollars)
|
|
|
|
|
|
December 31,
2016
|
|
June 30,
2017
|
|
|
|
(Unaudited)
|
Assets
|
|
|
|
Cash and cash
equivalents
|
25,505,731
|
|
27,816,585
|
Restricted
cash
|
72,077
|
|
73,807
|
Accounts
receivable, net
|
1,271,209
|
|
1,017,887
|
Inventory
|
3,977,336
|
|
1,684,099
|
Prepaid
advertising expenses
|
10,689
|
|
-
|
Other prepaid
expenses and current assets, net
|
2,667,930
|
|
4,133,339
|
Deferred tax
assets, net
|
588,493
|
|
602,618
|
Current
assets
|
34,093,465
|
|
35,328,335
|
|
|
|
|
Prepaid land use
rights
|
6,578,765
|
|
6,656,481
|
Property and
equipment, net
|
13,885,079
|
|
13,681,196
|
Acquired intangible
assets, net
|
575,273
|
|
424,425
|
Available-for-sale
securities
|
74,666,865
|
|
56,081,546
|
Convertible
loan
|
3,218,665
|
|
3,381,402
|
Other long-term
assets
|
301,752
|
|
201,224
|
Total
assets
|
133,319,864
|
|
115,754,609
|
|
|
|
|
Liabilities and
equity
|
|
|
|
Accounts
payable
|
2,614,118
|
|
1,537,157
|
Accrued
expenses and other current liabilities
|
9,132,166
|
|
8,233,091
|
Income taxes
payable
|
3,665,757
|
|
3,345,377
|
Deferred
revenue
|
380,526
|
|
441,757
|
Current
liabilities
|
15,792,567
|
|
13,557,382
|
|
|
|
|
Deferred tax
liability
|
18,017,610
|
|
13,413,020
|
Total
liabilities
|
33,810,177
|
|
26,970,402
|
|
|
|
|
Equity
|
|
|
|
Ordinary
shares
|
918,185
|
|
918,185
|
Additional
paid-in capital
|
161,938,330
|
|
161,938,330
|
Accumulated
deficits
|
(122,910,876)
|
|
(120,297,151)
|
Accumulated
other comprehensive income
|
80,865,261
|
|
68,025,640
|
Treasury stock,
at cost
|
(21,640,346)
|
|
(22,145,786)
|
Total Acorn
International, Inc. shareholders' equity
|
99,170,554
|
|
88,439,218
|
|
|
|
|
Noncontrolling
interests
|
339,133
|
|
344,989
|
Total
equity
|
99,509,687
|
|
88,784,207
|
Total liabilities
and equity
|
133,319,864
|
|
115,754,609
|
Contact:
Acorn International,
Inc.
|
Compass Investor
Relations
|
Ms. Naomi
Deng
|
Ms. Elaine Ketchmere,
CFA
|
Phone
+86-21-5151-2944
|
Phone:
+1-310-528-3031
|
Email:
dengqi@chinadrtv.com
|
Email:
Eketchmere@compass-ir.com
|
www.chinadrtv.com
|
www.compassinvestorrelations.com
|
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SOURCE Acorn International, Inc.