Reiterates FY2012 Revenue and Net Income Guidance
of $42 Million and $3.1 Million, Respectively
Management to Host Conference Call on Wednesday,
November 21st at 8:30 a.m. Eastern Time
BEIJING, Nov. 20, 2012 (GLOBE NEWSWIRE) --ChinaNet Online
Holdings, Inc. ("ChinaNet" or the "Company"), (Nasdaq:CNET), a
leading B2B (business to business) Internet technology company
providing online-to-offline ("O2O") sales channel expansion
services for small and medium-sized enterprises (SMEs) and
entrepreneurial management and networking services for
entrepreneurs in the People's Republic of China, today announced
financial results for the third quarter of 2012.
Summary Financials
Third quarter 2012
Results (USD) (Unaudited) |
|
|
Q3 2012 |
Q3 2011 |
CHANGE |
Sales |
$10.3 million |
$6.4 million |
+60% |
Gross Profit |
$4.1 million |
$3.0 million |
+37% |
Gross Margin |
40.1% |
46.7% |
-14% |
Net Income Attributable to Common
Stockholders |
$1.2 million |
$1.0 million |
+19% |
EPS (Diluted) |
$0.05 |
$0.06 |
-17% |
Third quarter 2012 Financial Results
Revenues increased by $3.9 million to $10.3 million for the
three months ended September 30, 2012 compared to the three months
ended September 30, 2011, representing a 60% increase.
Mr.Handong Cheng, Chairman and CEO of the Company stated, "We
made further progress expanding our service offerings and
diversifying our customer base. For example, brand management and
sales channel building, which we introduced five quarters ago, has
grown its sales by approximately 200% in the first nine months of
2012. We believe that these services provide us with a growing base
of customers to whom we can sell additional value-added services
once the economy in China improves. Furthermore, we will continue
to make prudent acquisitions of business and technology, such as
our acquisition of Sou Yi Lian Mei, that broaden our technology
depth, service portfolio or client base."
Third quarter 2012 Revenue Breakdown by Business Unit
(USD in thousands)
|
Q3 2012 |
% |
Q3 2011 |
% |
% Change |
Internet Advertisement |
$5,650 |
55% |
$3,860 |
60% |
+46% |
TV Advertisement |
$3,238 |
31% |
$1,972 |
31% |
+64% |
Bank Kiosk |
$72 |
1% |
$140 |
2% |
-49% |
Brand Mgmt. & Sales Channel Building |
$1,327 |
13% |
$446 |
7% |
+198% |
Revenue from Internet advertisements for the three months ended
September 30, 2012 increased by 46% to $5.7 million compared to the
three months ended September 30, 2011, primarily due to the
additional revenues from the acquisition of 51% of the equity
interests of Sou Yi Lian Mei ("SOOE") in December 2011. Sales of
brand management and sales channel building services increased 198%
to $1.3 million for the three months ended September 30,
2012. This increase was due to an increase in the average
advertising spending per customer from larger-sized clients. TV
advertising revenues increased from $2.0 million in the third
quarter of 2011 to $3.2 million in the third quarter of 2012.
Total cost of revenues increased to $6.2 million for the three
months ended September 30, 2012 from $3.4 million for the same
period in 2011. The increase in total cost of revenues for the
three months ended September 30, 2012 was primarily due to the
significant increase in costs associated with the TV advertising
business segment and the increase in internet resources costs
incurred by SOOE in connection with the internet advertising and
marketing services it provided for the three months ended September
30, 2012.
Gross profit for the three months ended September 30, 2012 was
$4.1 million, up 37% from $3.0 million in the same period one year
ago. Gross margin was 40.1%, an improvement from 28.7% in the
second quarter of 2012 and down from 46.7% in the third quarter of
2011.
Operating expenses for the three months ended September 30, 2012
were approximately $2.3 million, representing an increase of 25%
from $1.8 million in the comparable period in 2011. General and
administrative expenses increased by $0.4 million to $1.3 million
due to higher salaries and benefits expenses and higher
amortization expenses of intangible assets identified in the SOOE
acquisition. Selling expenses increased 11% year-over-year to $0.6
million as a result of higher salaries and benefits expenses due to
inclusion of SOOE and other expansion of our sales department.
The Company generated $1.9 million of operating income in the
three months ended September 30, 2012 compared to $1.2 million in
the same period one year ago. Operating margin was 18.2% compared
to 18.5% in the same period one year ago.
Net income attributable to common stockholders for the three
months ended September 30, 2012 was $1.2 million and earnings per
share was $0.05, compared to $1.0 million and $0.06 for the three
months ended September 30, 2011, respectively. The weighted average
shares outstanding for the three months ended September 30, 2012
and 2011 was 22.2 million shares and 18.6 million shares,
respectively.
Year to date 2012
Results (USD) (Unaudited) |
|
|
YTD 2012 |
YTD 2011 |
CHANGE |
Sales |
$38.3 million |
$22.5 million |
+70% |
Gross Profit |
$10.3 million |
$13.7 million |
-25% |
Gross Margin |
26.8% |
60.6% |
-56% |
Net Income Attributable to Common
Stockholders |
$1.7 million |
$6.5 million |
-73% |
Adjusted Net Income Attributable to
Common Stockholders |
$1.7 million |
$6.3 million(1) |
-73% |
EPS (Diluted) |
$0.08 |
$0.34 |
-76% |
Adjusted EPS (Diluted) |
$0.08 |
$0.33(1) |
-76% |
(1) Non-GAAP adjusted net income attributable to common
stockholders and EPS exclude a $0.23 million non-cash gain on
deconsolidation of a subsidiary in the nine month period ended
September 30, 2011.
Nine months Ended September 30, 2012 Revenue Breakdown
by Business Unit (USD in thousands)
|
YTD 2012 |
% |
YTD 2011 |
% |
% Change |
Internet Advertisement |
$15,353 |
40% |
$16,434 |
73% |
-7% |
TV Advertisement |
$19,751 |
52% |
$4,742 |
21% |
+317% |
Bank Kiosk |
$214 |
1% |
$415 |
2% |
-48% |
Brand Mgmt. & Sales Channel Building |
$3,031 |
8% |
$943 |
4% |
+221% |
Net revenues for the nine months ended September 30, 2012
increased 70% to $38.3 million compared to $22.5 million for the
nine months ended September 30, 2011. Higher revenues from TV
advertisement and brand management and sales channel building
services offset lower revenues in Internet advertising and the bank
kiosk business.
Total cost of revenues increased to $28.1 million for the nine
months ended September 30, 2012 from $8.9 million for the same
period in 2011. The increase of total cost of revenues for the nine
months ended September 30, 2012 was primarily due to the
significant increase in costs associated with the TV advertising
business segment.
Gross profit for the nine months ended September 30, 2012 was
$10.3 million compared to $13.7 million in the same period a year
ago. Gross margin decreased to 26.8% from 60.6% for the same period
in 2011 as a result of the significant increase in revenues from TV
advertising, which is a lower margin business. Revenues from TV
advertising accounted for approximately 52% of total revenues in
the nine months ended September 30, 2012 compared to 21% for the
same period of 2011.
Operating expenses for the nine months ended September 30, 2012
were approximately $7.5 million, representing an increase of 24%
from $6.0 million in the comparable period in 2011. The primary
reason for the year-over-year increase was higher amortization
expenses of intangible assets identified in the SOOE acquisition
and allowance for doubtful debts provided for the nine months ended
September 30, 2012. Selling expenses decreased 7%
year-over-year to $2.0 million as the Company reduced brand
building investments in the first nine months of 2012 in response
to the slowdown in small business activity in China.
Operating income in the nine months ended September 30, 2012 was
$2.8 million, representing an operating margin of 7.3% compared to
$7.6 million and 33.9%, respectively, in the same period one year
ago.
GAAP net income attributable to common stockholders for the year
to date of 2012 was $1.7 million and earnings per share was $0.08
compared to $6.5 million and $0.34 for the year to date of 2011,
respectively. Non-GAAP adjusted net income attributable to common
stockholders and earnings per share for the year to date of 2011
were $6.3 million and $0.33, respectively. The weighted average
shares outstanding for the first nine months of 2012 and 2011 was
22.2 million shares and 20.3 million shares, respectively.
Balance Sheet and Cash Flow
The Company had $8.5 million in cash and cash equivalents as of
September 30, 2012, compared to $10.7 million as of December 31,
2011, working capital of $23.7 million, compared to $27.0 million
as of December 31, 2011, and a current ratio of 2.8 to 1 compared
4.5 to 1 as of December 31, 2011. Total shareholders' equity of
ChinaNet was $42.9 million at September 30, 2012 compared to $41.7
million at December 31, 2011.
The Company had cash flow from operations of $2.5 million for
the first nine months of 2012.
Guidance for 2012
Management reiterates its full year 2012 forecasts of revenues
to be at least $42 million and net income of at least $3.1
million.
Business Updates
ChinaNet attended the 2012 Shanghai International Franchise
Exhibition from September 15, 2012 to September 17, 2012. The
Exhibition was attended by over 30,000 business representatives,
entrepreneurs and franchisees.
On September 17, 2012, the Company announced its purchase of the
remaining 49% equity interest in Sou Yi Lian Mei Network for
approximately $6.5 million in cash. The acquisition broadens the
Company's client base to smaller startup businesses that are
growing quickly. Founded in 2007, Sou Yi Lian Mei Network provides
online advertising and marketing services to small businesses in
China.
Liansuo.com introduced a new cloud-based software system that
allows sales channel partners to reach businesses more efficiently
by converting all incoming calls to a toll free telephone number
starting with the "400" prefix to the party they are trying to
reach. ChinaNet expects the new cloud-based software system to
drive additional spending for value-added services on
Liansuo.com.
The Company's board of directors approved a $1 million share
repurchase program on October 15, 2012 to be executed over the next
twelve months at the Company's discretion.
Conference Call
Date: |
Wednesday, November 21, 2012 |
Time: |
8:30 a.m. Eastern Time |
Conference Line (U.S.): |
1-877-317-6776 |
International Dial-In: |
1-412-317-6776 |
Conference ID: |
10021620 |
Webcast: |
http://webcast.mzvaluemonitor.com/Home/Login/647 |
A power point presentation will be available for downloading on
the date of the conference call on ChinaNet's corporate website
www.chinanet-online.com; under Investor
Relations-News/Events-Events and Presentations.
Please dial in at least 10 minutes before the call to ensure
timely participation.
A playback of the call will be available until 9:00 a.m. Eastern
Time on December 3, 2012. To listen, call 1-877-344-7529 within the
United States or 1-412-317-0088 when calling internationally.
Please use the replay pin number 10021620.
About ChinaNet Online Holdings, Inc.
ChinaNet Online Holdings, Inc., a parent company of ChinaNet
Online Media Group Ltd., incorporated in the BVI, is a leading
business to business Internet technology company focusing on
providing online-to-offline sales channel expansion service for
small and medium-sized enterprises and entrepreneurial management
and networking service for entrepreneurs in China. Founded in 2003
and based in Beijing, PRC, the Company's services include its
28.com portal to connect SME franchisors with new franchisees,
Internet advertising and marketing with other value-added
communication channels, brand management and sales channel
solutions, and cloud-computing based management tools, expected to
be officially commercialized in 2012. Website:
http://www.chinanet-online.com.
About Non-GAAP Financial Measures
To supplement the unaudited interim consolidated statement of
income and comprehensive income presented in accordance with GAAP,
we are also providing non-GAAP measures of income before income tax
expenses, equity method investments and noncontrolling interests,
net income, net income attributable to us, net income attributable
to our common stockholders and basic and diluted earnings per share
for the nine months ended September 30, 2011, which are adjusted
from results based on GAAP to exclude the non-cash gain recognized
on deconsolidation of a subsidiary incurred during the nine months
ended September 30, 2011. For the nine months ended September 30,
2012 and for the three months ended September 30, 2012 and 2011,
there is no non-cash income or expenses from nonrecurring
transaction under non-GAAP measures. The non-GAAP financial
measures are provided to enhance the investors' overall
understanding of our current performance in on-going core
operations as well as prospects for the future. These measures
should be considered in addition to results prepared and presented
in accordance with GAAP, but should not be considered a substitute
for or superior to GAAP results. We use both GAAP and non-GAAP
information in evaluating our operating business results internally
and therefore deemed it important to provide all of this
information to investors.
The following table presents reconciliations of our non-GAAP
financial measures to the unaudited interim consolidated statements
of income and comprehensive income for the nine months ended
September 30, 2011 (all amounts, except number of shares and per
share data, are presented in thousands of US dollars):
|
Nine Months
Ended |
|
September
30, 2011 |
|
GAAP |
NON GAAP |
|
US$ |
US$ |
|
(Unaudited) |
(Unaudited) |
|
|
|
Income from operations |
$7,642 |
$7,642 |
Other income
(expenses): |
|
|
Interest income |
9 |
9 |
Gain on deconsolidation of
subsidiaries |
232 |
- |
Other income |
5 |
5 |
|
246 |
|
|
|
14 |
Income before income tax expense,
equity method investments and noncontrolling
interests |
7,888 |
|
Adjusted income before income tax
expense, equity method investments and noncontrolling
interests |
|
7,656 |
Income tax expense |
861 |
861 |
Income before equity method
investments and noncontrolling interests |
7,027 |
|
Adjusted income before equity method
investments and noncontrolling interests |
|
6,795 |
Share of losses in equity investment
affiliates |
(180) |
(180) |
Net income |
6,847 |
|
Adjusted net income |
|
6,615 |
Net loss attributable to
noncontrolling interest |
96 |
96 |
Net income attributable to ChinaNet
Online Holdings, Inc. |
6,943 |
|
Adjusted net income attributable to
ChinaNet Online Holdings, Inc. |
|
6,711 |
Dividend for series A
convertible preferred stock |
(407) |
(407) |
Net income attributable to common
stockholders of ChinaNet Online |
$6,536 |
|
Adjusted net income attributable to
common stockholders of ChinaNet Online |
|
$6,304 |
|
|
|
Earnings per common
share-Basic |
$0.37 |
|
Adjusted earnings per common
share-Basic |
|
$0.35 |
|
|
|
Earnings per common
share-Diluted |
$0.34 |
|
Adjusted earnings per common
share-Diluted |
|
$0.33 |
|
|
|
Weighted average number of common
shares outstanding: |
|
|
Basic |
17,806,818 |
17,806,818 |
Diluted |
20,265,764 |
20,265,764 |
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.
-- FINANCIAL TABLES –
|
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED BALANCE
SHEETS |
(In thousands, except for
number of shares and per share data) |
|
|
|
|
September 30, |
December 31, |
|
2012 |
2011 |
|
(US $) |
(US $) |
|
(Unaudited) |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash
equivalents |
$8,513 |
$10,695 |
Accounts receivable, net |
9,822 |
4,444 |
Other receivables, net |
5,702 |
3,631 |
Prepayment and deposit to
suppliers |
12,037 |
15,360 |
Due from related
parties |
321 |
324 |
Contingent consideration
receivables |
160 |
159 |
Other current assets |
96 |
129 |
Deferred tax
assets-current |
95 |
- |
Total current
assets |
36,746 |
34,742 |
Investment in and advance to equity
investment affiliates |
1,010 |
1,396 |
Property and equipment, net |
1,654 |
1,902 |
Intangible assets, net |
7,408 |
8,151 |
Goodwill |
11,052 |
10,999 |
Deferred tax assets-non current |
582 |
92 |
Total Assets |
$58,452 |
$57,282 |
|
|
|
Liabilities and Equity |
|
|
Current liabilities: |
|
|
Accounts payable * |
$98 |
$268 |
Advances from customers * |
839 |
724 |
Accrued payroll and other
accruals * |
483 |
616 |
Due to equity investment
affiliate * |
- |
220 |
Due to related parties * |
- |
161 |
Payable for acquisition * |
5,210 |
550 |
Taxes payable * |
6,272 |
5,040 |
Other payables * |
159 |
114 |
Dividend payable |
- |
5 |
Total current
liabilities |
13,061 |
7,698 |
Long-term liabilities: |
|
|
Deferred tax liability-non
current * |
1,739 |
1,893 |
Long-term borrowing from
director |
138 |
137 |
Total Liabilities |
14,938 |
9,728 |
Commitments and
contingencies |
|
|
Equity: |
|
|
Common stock (US$0.001 par
value; authorized 50,000,000 shares; issued and outstanding
22,186,540 shares and 22,146,540 shares at September 30, 2012 and
December 31, 2011, respectively) |
22 |
22 |
Additional paid-in capital |
19,998 |
20,747 |
Statutory reserves |
2,117 |
2,117 |
Retained earnings |
18,437 |
16,688 |
Accumulated other comprehensive
income |
2,287 |
2,132 |
Total ChinaNet Online Holdings,
Inc.'s stockholders' equity |
42,861 |
41,706 |
Noncontrolling interests |
653 |
5,848 |
Total equity |
43,514 |
47,554 |
Total Liabilities and
Equity |
$58,452 |
$57,282 |
|
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME |
(In thousands, except for
number of shares and per share data) |
|
|
|
|
|
|
Nine Months
Ended |
Three Months
Ended |
|
September
30, |
September
30, |
|
2012 |
2011 |
2012 |
2011 |
|
(US $) |
(US $) |
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
Sales |
|
|
|
|
From unrelated parties |
$38,232 |
$21,987 |
$10,236 |
$6,329 |
From related parties |
117 |
547 |
51 |
89 |
|
38,349 |
22,534 |
10,287 |
6,418 |
Cost of sales |
28,065 |
8,868 |
6,163 |
3,418 |
Gross margin |
10,284 |
13,666 |
4,124 |
3,000 |
|
|
|
|
|
Operating expenses |
|
|
|
|
Selling expenses |
2,042 |
2,198 |
640 |
575 |
General and administrative
expenses |
4,320 |
2,726 |
1,260 |
861 |
Research and development
expenses |
1,112 |
1,100 |
356 |
376 |
|
7,474 |
6,024 |
2,256 |
1,812 |
|
|
|
|
|
Income from operations |
2,810 |
7,642 |
1,868 |
1,188 |
Other income (expenses) |
|
|
|
|
Interest income |
123 |
9 |
2 |
5 |
Gain on deconsolidation of
subsidiaries |
- |
232 |
- |
- |
Other (expenses)/income |
(148) |
5 |
(148) |
- |
|
(25) |
246 |
(146) |
5 |
|
|
|
|
|
Income before income tax expense,
equity method investments and noncontrolling
interests |
2,785 |
7,888 |
1,722 |
1,193 |
Income tax expense |
196 |
861 |
182 |
107 |
Income before equity method
investments and noncontrolling interests |
2,589 |
7,027 |
1,540 |
1,086 |
Share of losses in equity
investment affiliates |
(394) |
(180) |
(97) |
(75) |
Net income |
2,195 |
6,847 |
1,443 |
1,011 |
Net (income) / losses attributable to
noncontrolling interests |
(446) |
96 |
(223) |
100 |
Net income attributable to ChinaNet
Online Holdings, Inc. |
1,749 |
6,943 |
1,220 |
1,111 |
Dividend of Series A
convertible preferred stock |
- |
(407) |
-- |
(85) |
Net income attributable to common
stockholders of ChinaNet Online Holdings, Inc. |
$1,749 |
$6,536 |
$1,220 |
$1,026 |
|
|
|
|
|
Earnings per share |
|
|
|
|
Earnings per common
share |
|
|
|
|
Basic |
$0.08 |
$0.37 |
$0.05 |
$0.06 |
Diluted |
$0.08 |
$0.34 |
$0.05 |
$0.06 |
|
|
|
|
|
Weighted average number
of common shares outstanding: |
|
|
Basic |
22,185,226 |
17,806,818 |
22,186,540 |
18,632,103 |
Diluted |
22,185,226 |
20,265,764 |
22,186,540 |
18,632,103 |
|
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED STATEMENTS
OF CASH FLOWS |
(In thousands) |
|
|
|
|
Nine Months Ended
September 30, |
|
2012 |
2011 |
|
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
|
|
|
Cash flows from operating
activities |
|
|
Net income |
$2,195 |
$6,847 |
Adjustments to reconcile
net income to net cash provided by operating
activities |
|
Depreciation and
amortization |
1,223 |
727 |
Share-based compensation
expenses |
38 |
237 |
Allowances for doubtful
debts |
561 |
- |
Share of losses in equity
investment affiliates |
394 |
180 |
Gain on deconsolidation of
subsidiaries |
- |
(232) |
(Loss) / gain on disposal of
property and equipment |
2 |
(3) |
Deferred taxes |
(749) |
(65) |
Changes in operating assets and
liabilities |
|
|
Accounts receivable |
(5,712) |
(1,591) |
Other receivables |
198 |
3,768 |
Prepayment and deposit to
suppliers |
3,401 |
(19) |
Due from related parties |
4 |
(195) |
Other current assets |
34 |
(113) |
Accounts payable |
(172) |
(72) |
Advances from customers |
111 |
(1,320) |
Accrued payroll and other
accruals |
(134) |
(67) |
Due to director |
- |
(82) |
Due to Control Group |
- |
(559) |
Due to related parties |
(162) |
(138) |
Other payables |
25 |
238 |
Taxes payable |
1,210 |
902 |
Net cash provided by operating
activities |
2,467 |
8,443 |
Cash flows from investing
activities |
|
|
Purchases of vehicles and
office equipment |
(185) |
(245) |
Purchase of intangible
assets |
- |
(1,438) |
Project development deposit to
a third party |
(2,450) |
- |
Cash from acquisition of
VIEs |
- |
24 |
Cash effect on deconsolidation
of VIEs |
(15) |
(184) |
Long-term investment in and
advance to equity investment affiliates |
- |
(1,703) |
Disposal of investment in and
loan repayment from equity investment affiliate |
- |
2,613 |
Payment for acquisition of
VIEs |
(1,817) |
(2,183) |
Net cash used in investing
activities |
(4,467) |
(3,116) |
Cash flows from financing
activities |
|
|
Cash investment contributed by
noncontrolling interests |
- |
377 |
Dividend paid to convertible
preferred stockholders |
(5) |
(374) |
Short-term loan borrowed from
an equity investment affiliate |
316 |
- |
Short-term loan repaid to a
equity investment affiliate |
(537) |
- |
Net cash used in (provided by)
financing activities |
(226) |
3 |
Effect of exchange rate fluctuation on cash
and cash equivalents |
44 |
360 |
Net (decrease) / increase in cash and
cash equivalents |
(2,182) |
5,690 |
Cash and cash equivalents at
beginning of the period |
10,695 |
15,590 |
Cash and cash equivalents at
end of the period |
$8,513 |
$21,280 |
CONTACT: Ted Haberfield, President
MZ North America, IR
MZ Group
Direct: +1-760-755-2716
Email: thaberfield@mzgroup.us
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