Projects $36
million Revenue and $1.2
million Net Income for Full Year 2013
Management to Host Conference Call on Tuesday,
May 21st at 8:30 a.m. ET
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 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 first quarter of 2013 and guidance for
fiscal year 2013.
Summary Financials
First quarter 2013
Results (USD) (Unaudited) |
|
Q1 2013 |
Q1 2012 |
CHANGE |
Sales |
$7.0 million |
$14.9 million |
-53% |
Gross Profit |
$2.6 million |
$2.4 million |
+8% |
Gross Margin |
36.6% |
16.0% |
+129% |
Net Income/(Loss) Attributable to
Common Stockholders |
$0.0 million |
-$0.4 million |
N/A |
EPS (Diluted) |
$0.00 |
-$0.02 |
N/A |
First Quarter 2013 Financial Results
Revenues for the three months ended March 31, 2013 were $7.0
million compared to $14.9 million for the three months ended March
31, 2012, representing a 53% decrease. Low margin TV advertising
fell by $7.7 million, accounting for the majority of the
year-over-year revenue decline.
Mr. George Chu, Chief Operation Officer of the Company, stated,
"Our financial results for the first quarter of 2013 reflect
successful execution of our long term strategy. We continued to
invest in new services such as mobile advertising and marketing,
brand management and sales channel building and flying cloud during
the 2012 economic downturn. We expect 2013 to be a challenging year
as the overall economy has slowed further due to the economic
policies set by the government. However, our expansion strategy and
targeted investments in technology and new products will not be
held back because these investments have already helped us win new
business and enter new markets. Our strong financial position
allows us to maintain these strategic investments, which will only
strengthen our company for the eventual rebound in our clients'
spending."
First Quarter 2013 Revenue Breakdown by Business Unit
(USD in thousands)
|
Q1 2013 |
% |
Q1 2012 |
% |
% Change |
Internet Advertisement |
$3,811 |
54% |
$4,345 |
29% |
-12% |
TV Advertisement |
$2,638 |
37% |
$10,369 |
69% |
-75% |
Bank Kiosk |
$69 |
1% |
$71 |
1% |
-3% |
Brand Mgmt. & Sales Channel Building |
$531 |
8% |
$150 |
1% |
+254% |
Revenue from Internet advertisements for the three months ended
March 31, 2013 decreased by 12% to $3.8 million compared to the
same period a year ago, primarily due to lower spending per
customer caused by the general decline in spending by China's SMEs.
Sales of brand management and sales channel building services
increased by 254% to $0.5 million, representing 8% of total sales
for the three months ended March 31, 2013. This increase was due to
the timing of projects completed and successful efforts by ChinaNet
in expanding its customer base. TV advertising revenues fell to
$2.6 million in the first quarter of 2013 from $10.4 million as the
Company had significantly higher TV advertising activity in the
first quarter of 2012 related to the launch of its entrepreneurial
reality show.
Gross profit for the three months ended March 31, 2013 was $2.6
million, up 8% from $2.4 million in the same period one year ago.
Gross margin was 36.6%, up significantly from 16.0% in the first
quarter of 2012. Gross margins improved due to significantly lower
sales of TV advertisements, which carry much lower margins.
Operating expenses for the three months ended March 31, 2013
were approximately $2.6 million compared to $2.3 million in the
same period in 2012. The Company increased selling expenses and
research and development expenses by 14% and 36%, respectively, to
expand its sales force and increase investments in cloud-based
application software and mobile advertising platforms.
The Company had a slight operating loss of $0.1 million in the
three months ended March 31, 2013 compared to $0.1 million of
operating income in the same period one year ago.
Net income attributable to common stockholders for the three
months ended March 31, 2013 was $0.0 million and earnings per share
was $0.00, compared to -$0.4 million and -$0.02 for the three
months ended March 31, 2012, respectively.
Balance Sheet and Cash Flow
The Company had $7.2 million in cash and cash equivalents as of
March 31, 2013, compared to $8.8 million as of December 31, 2012,
working capital of $25.6 million, compared to $25.2 million as of
December 31, 2012, and a current ratio of 3.6 to 1 compared 3.5 to
1 as of December 31, 2012. Total shareholders' equity of ChinaNet
was $44.5 million at March 31, 2013 compared to $44.2 million at
December 31, 2012.
The Company had $0.4 million of cash outflows from operations
for the first three months of 2013 compared to a $0.4 million of
cash inflows for the first three months of 2012.
Guidance for 2013
Management is providing the following guidance for fiscal year
2013.
Revenues: $36 million
Net Income: $1.2 million
Business Updates
Super 8 International Limited ("Super 8"), a subsidiary of
Wyndham Worldwide, selected Liansuo.com, a subsidiary of ChinaNet,
to help expand its franchise outside the U.S. Super 8 International
Limited is one of the largest economy hotel operators in the world,
operating more than 2,600 hotels worldwide, representing over
56,000 rooms in total. Liansuo.com will help Super 8 franchise
hotels quickly expand its franchise footprint in Tier 1 and Tier 2
cities in China.
ChinaNet received the awards of "The Most Leading Enterprise of
Chinese Entrepreneurial Merchandising and Franchising Marketing
Industry" as well as "The Most Trustworthy E-Commerce Platform in
Entrepreneurial Merchandising and Franchising Industry" in China by
the China Electronic Commerce Association (CECA). These awards are
only awarded to one enterprise in each industry.
The Beijing Zhongguancun Enterprises Credit Promotion
Association (ECPA) completed a credit assessment for the Company.
ChinaNet was awarded a high grade, which makes the Company eligible
to receive future subsidies and funding from the State Development
Bank, local governments and related entities.
Liansuo.com, co-hosted the 19th Annual Beijing International
Franchise Expo held at the Beijing National Agricultural Exhibition
from April 5 to April 6, 2013. As the media co-host of this year's
Franchise Expo, Liansuo.com ran promotions and publicity for the
Franchise Expo, provided video interviews for the companies in
attendance, offered project consulting services on site for
entrepreneurs, and disseminated news reports after the
exhibition.
Flying Cloud plans to host 10,000 SMEs APP and Mobile sites for
the customers. In addition, Flying Cloud expects to update its new
products website in the first half of 2013.
ChinaNet participated in the 14th Taiwan Franchise Expo held at
the Taipei World Trade Center from April 5 to April 7, 2013. In the
process, the Company was able to learn what concerns and priorities
franchise owners in Taiwan are considering in their evaluation of
entering the mainland China market.
Liansuo.com, signed an agreement with Mendale Textile Limited
("Mendale") to help expand its franchise in China and
internationally. Mendale has successfully expanded its owned and
operated stores, as well as its franchise stores, across several
provinces in China. Liansuo.com will provide online advertising and
marketing to help Mendale further increase its brand recognition
among consumers and entrepreneurs.
Liansuo.com participated in the 2013 Chinese Franchise Expo held
at the China National Convention Center in Beijing from April 26 to
April 28, 2013. As the strategic partner of the live webcast of
this event, Liansuo.com invited various business leaders to share
their valuable experiences in the franchise industry.
Conference Call
Date: Tuesday, May 21, 2013
Time: 8:30 a.m. Eastern Time
Conference Line (U.S.): 1-877-317-6776
International Dial-In: 1-412-317-6776
Conference ID: 10029114
Webcast:
http://webcast.mzvaluemonitor.com/Cover.aspx?PlatformId=1313
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 8:30 am Eastern
Time on May 28, 2013. 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 10029114.
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 2013. 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) |
|
March 31, 2013 |
December 31,
2012 |
|
(US $) |
(US $) |
|
(Unaudited) |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 3,792 |
$ 5,483 |
Term deposit |
3,375 |
3,357 |
Accounts receivable, net |
9,831 |
8,486 |
Other receivables, net |
3,128 |
3,103 |
Prepayment and deposit to suppliers |
14,822 |
14,596 |
Due from related parties |
260 |
210 |
Other current assets |
135 |
136 |
Deferred tax assets-current |
42 |
50 |
Total current
assets |
35,385 |
35,421 |
|
|
|
Investment in and advance to equity
investment affiliates |
892 |
959 |
Property and equipment, net |
1,501 |
1,636 |
Intangible assets, net |
6,944 |
7,167 |
Goodwill |
11,144 |
11,083 |
Deferred tax assets-non current |
794 |
652 |
Total Assets |
$ 56,660 |
$ 56,918 |
Liabilities and Equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 219 |
$ 110 |
Advances from customers |
1,636 |
1,065 |
Accrued payroll and other accruals |
877 |
904 |
Payable for acquisition |
-- |
1,266 |
Taxes payable |
6,846 |
6,683 |
Other payables |
240 |
217 |
Total current
liabilities |
9,818 |
10,245 |
Long-term
liabilities: |
|
|
Deferred tax liability-non current |
1,643 |
1,689 |
Long-term borrowing from director |
139 |
139 |
Total Liabilities |
11,600 |
12,073 |
Commitments and
contingencies |
|
|
Equity: |
|
|
ChinaNet Online Holdings, Inc.'s
stockholders' equity |
|
|
Common stock (US$0.001 par
value; authorized 50,000,000 shares; issued and outstanding
22,186,540 shares at March 31, 2013 and December 31, 2012) |
22 |
22 |
Additional paid-in capital |
20,019 |
20,008 |
Statutory reserves |
2,296 |
2,296 |
Retained earnings |
19,535 |
19,505 |
Accumulated other comprehensive
income |
2,605 |
2,393 |
Total ChinaNet Online Holdings,
Inc.'s stockholders' equity |
44,477 |
44,224 |
Noncontrolling interests |
583 |
621 |
Total equity |
45,060 |
44,845 |
Total Liabilities and
Equity |
$ 56,660 |
$ 56,918 |
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED STATEMENTS
OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS) |
(In thousands, except for
number of shares and per share data) |
|
Three Months
Ended March 31, |
|
2013 |
2012 |
|
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
Sales |
|
|
From unrelated parties |
$ 6,990 |
$ 14,920 |
From related parties |
59 |
15 |
|
7,049 |
14,935 |
Cost of sales |
4,467 |
12,538 |
Gross margin |
2,582 |
2,397 |
|
|
|
Operating expenses |
|
|
Selling expenses |
788 |
689 |
General and administrative expenses |
1,402 |
1,243 |
Research and development expenses |
449 |
331 |
|
2,639 |
2,263 |
|
|
|
Loss/(income) from
operations |
(57) |
134 |
|
|
|
Other income (expenses) |
|
|
Interest income |
32 |
5 |
Other expenses |
(1) |
(1) |
|
31 |
4 |
|
|
|
Loss/(income) before income tax
expense, equity method investments and noncontrolling
interests |
(26) |
138 |
Income tax benefit/(expense) |
86 |
(236) |
Income/(loss) before equity method
investments and noncontrolling interests |
60 |
(98) |
Share of losses in equity investment
affiliates |
(71) |
(193) |
Net loss |
(11) |
(291) |
Net loss/(income) attributable to
noncontrolling interests |
41 |
(75) |
Net income/(loss) attributable to
ChinaNet Online Holdings, Inc. |
30 |
(366) |
|
|
|
Net loss |
(11) |
(291) |
Foreign currency translation gain |
215 |
263 |
Comprehensive
income/(loss) |
$ 204 |
$ (28) |
Comprehensive loss/(income) attributable to
noncontrolling interests |
38 |
(112) |
Comprehensive income/(loss) attributable to
ChinaNet Online Holdings, Inc. |
$ 242 |
$ (140) |
|
|
|
Earnings/(loss) per
share |
|
|
Earnings/(loss) per common share |
|
|
Basic |
$ 0.00 |
$ (0.02) |
Diluted |
$ 0.00 |
$ (0.02) |
|
|
|
Weighted average number of common
shares outstanding: |
|
|
Basic |
22,186,540 |
22,182,584 |
Diluted |
22,186,540 |
22,182,584 |
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED STATEMENTS
OF CASH FLOWS |
(In thousands) |
|
Three Months
Ended March 31, |
|
2013 |
2012 |
|
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
Cash flows from operating
activities |
|
|
Net loss |
$ (11) |
$ (291) |
Adjustments to reconcile net
loss to net cash
provided by operating
activities |
|
|
Depreciation and amortization |
418 |
409 |
Share-based compensation
expenses |
11 |
17 |
Allowances for doubtful debts |
260 |
-- |
Share of losses in equity investment
affiliates |
71 |
193 |
Deferred taxes |
(185) |
(381) |
Changes in operating assets and
liabilities |
|
|
Accounts receivable |
(1,297) |
(3,154) |
Other receivables |
(8) |
261 |
Prepayment and deposit to
suppliers |
(406) |
1,740 |
Due from related parties |
(49) |
48 |
Other current assets |
(2) |
(22) |
Accounts payable |
105 |
(56) |
Advances from customers |
564 |
1,162 |
Accrued payroll and other
accruals |
(29) |
(133) |
Due to related parties |
-- |
(78) |
Other payables |
-- |
18 |
Taxes payable |
127 |
630 |
Net cash (used
in) provided by operating activities |
(431) |
363 |
|
|
|
Cash flows from investing
activities |
|
|
Purchases of vehicles and office
equipment |
(11) |
(9) |
Project development deposit to a third
party |
-- |
(2,452) |
Payment for acquisition of VIEs |
(1,272) |
-- |
Net cash
used in
investing activities |
(1,283) |
(2,461) |
|
|
|
Cash flows from financing
activities |
|
|
Dividend paid to convertible preferred
stockholders |
-- |
(5) |
Short-term loan borrowed from an equity
investment affiliate |
-- |
316 |
Net cash provided
by financing activities |
-- |
311 |
|
|
|
Effect of exchange rate fluctuation on cash
and cash equivalents |
23 |
56 |
|
|
|
Net decrease in cash and cash
equivalents |
(1,691) |
(1,731) |
|
|
|
Cash and cash equivalents at
beginning of the period |
5,483 |
10,695 |
Cash and cash equivalents at end of
the period |
$
3,792 |
$
8,964 |
CONTACT: MZ North America
Ted Haberfield, President
Direct: +1-760-755-2716
Email: thaberfield@mzgroup.us
Web: www.mzgroup.us
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