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, announced today
financial results for the fiscal year 2014.
Summary Financials
Fiscal Year 2014 Results
(USD) |
|
|
FY 2014 |
FY 2013 |
CHANGE |
Sales |
$38.9 million |
$30.3 million |
+28.4% |
Gross Profit |
$6.6 million |
$13.7 million |
-51.8% |
Gross Margin |
17.0% |
45.3% |
-62.5% |
Net Loss Attributable to ChinaNet |
($13.7) million |
($0.2) million |
-- |
EPS (Diluted) |
($0.61) |
($0.01) |
-- |
Non-GAAP Adjusted Net Loss Attributable
to ChinaNet (1) |
(3.4) million |
-- |
-- |
Non-GAAP Adjusted EPS (Diluted)
(1) |
($0.15) |
-- |
-- |
|
|
|
|
(1) Non-GAAP Adjusted Net
Loss Attributable to ChinaNet and EPS excluded (1) Share-based
compensation expenses related to restricted shares of common stock
and common stock purchase options issued to employees, management
and directors in December 2014 of $4.7 million; (2) goodwill
impairment and impairment of intangible assets of $5.6 million
incurred in the fourth fiscal quarter of 2014. |
Revenue for the fiscal year ended December 31, 2014 was $38.9
million compared to $30.3 million for the fiscal year ended
December 31, 2013, primarily due to an increase in search engine
marketing service revenue. Internet advertising and related
services, TV advertising, and brand management and sales channel
building revenues were $31.3 million, $6.4 million, and $0.9
million in fiscal year 2014, respectively.
Fiscal Year 2014 Revenue
Breakdown by Business Unit (USD in thousands) |
|
|
FY 2014 |
% |
FY 2013 |
% |
% Change |
Internet Advertisement and Related
Services |
$31,261 |
80% |
$20,672 |
68% |
+51% |
TV Advertisement |
$6,429 |
17% |
$6,801 |
23% |
-5% |
Bank Kiosk |
$276 |
1% |
$251 |
1% |
-- |
Brand Mgmt. & Sales Channel Building |
$931 |
2% |
$2,569 |
8.5% |
-64% |
Gross profit and gross margin for the fiscal year ended December
31, 2014 were $6.6 million and 17% compared to $13.7 million and
45.3%, respectively, for the fiscal year ended December 31, 2013.
The primary reason for the year-over-year decrease in the gross
margin were lower margin for the new search engine marketing
services and the increased costs of internet resources purchased
from key search engines and technical services providers related to
lead generation, and direct labor and other costs for brand
management and sales channel building services to clients.
Operating expenses excluding gain/losses related to disposal of
intangible assets and VIEs increased by 76% to $21.5 million for
the fiscal year ended December 31, 2014. Excluding the Share-based
compensation expenses related to restricted shares of common stock
and common stock purchase options issued to employees, management
and directors included in operating expenses, general and
administrative expenses decreased by 58% from $7.7 million to $3.2
million, as a result of decrease in allowance for doubtful accounts
and overall cost reduction plan executed by management during the
year,sales and marketing expenses increased to $6.0 million from
$2.6 million, which was primarily due to the increase in brand
building expenses for promoting websites and services to enhance
brand awareness. Goodwill impairment and impairment of intangible
assets was $5.6 million for the year ended December 31, 2014, with
no comparable losses incurred for the year ended December 31, 2013.
ChinaNet loss from operations was $14.6 million in 2014, compared
to $0.6 million income from operations in 2013.
Net loss attributable to ChinaNet common stockholders and net
loss per share were $13.7 million and $0.61, respectively, for the
fiscal year ended December 31, 2014. The weighted average diluted
shares outstanding was 22.4 million shares in 2014 versus 22.3
million in 2013. Excluding the share-based compensation expenses
and assets impairment losses as discussed above, the Non-GAAP
adjusted net loss attributable to ChinaNet common stockholders and
net loss per share were 3.4 million and 0.15, respectively.
Balance Sheet and Cash Flow
The Company had $5.0 million in cash and cash equivalents as of
December 31, 2014, compared to $3.4 million as of December 31,
2013, working capital of $17.3 million, compared to $24.0 million
as of December 31, 2013, and a current ratio of 2.7 to 1, compared
3.3 to 1 as of December 31, 2013. Total shareholders' equity of
ChinaNet was $36.2 million at December 31, 2014 compared to $45.1
million at December 31, 2013.
The Company generated approximately $2.0 million of cash flows
from operations for the year ended December 31, 2014 compared to a
$2.8 million of cash inflows for the year ended December 31,
2013.
Guidance for 2015
Management anticipates releasing the revenues and net income
guidance for fiscal year 2015 in June 2015.
Business Updates
In November 2014 ChinaNet gave a major update to its 28.com
website with upgrades in site navigation and streamlining of its
comprehensive category listings. The site received upgrades to its
aesthetics and style, with dynamic features to attract customers
including new photography. Additionally, larger image dimensions on
the site gave customers more visual area to their exhibit
space.
ChinaNet launched a new value-added service for SMEs, Wisdom
Eye, a two-way online to offline (O2O) Customer Relationship
Management (CRM) system individually customized for the SME
industry in December 2014. SMEs using Wisdom Eye can now seamlessly
and efficiently manage their marketing, advertising and sales
resources, track their cost per lead (CPL) and cost per sales
(CPS), improve digital advertising effectiveness and monitor sales
efficiency. In addition, Wisdom Eye can automatically generate
extensive reports and conduct intelligent data analysis, providing
a strong basis for business decisions to support their sales
growth. Wisdom Eye includes modern authentication, access controls
and encryption to create a completely secure platform.
The Company received a "Diamond Partner" Award in December 2014
from Baidu, China's leading internet search provider, in honor of
the significant level of partnership and long-standing
collaboration between the two companies.
The following month in January 2015 ChinaNet launched "Business
Direct 3.0" in cooperation with Baidu Direct Reach of Baidu.
Business Direct 3.0 is a technically marked-up service based on the
Baidu Direct Reach mobile platform for traditional service
enterprises, which is centered on mobile search, accounts, maps,
personalized recommendations and other ways for customers to direct
Reach Marketing services. The introduction of Business Direct 3.0
provides an opportunity for the traditional service industry to
transit to the mobile Internet, helping companies and their sublets
attain new users, and providing users with a better service
experience. The service also provides mobile enterprise solutions,
allowing users direct access to businesses in the mobile terminal
service, making online users into offline customers. ChinaNet
expects this underdeveloped market will reach a potential market
size of USD $12 billion or more. Additionally, very few competitors
are engaged in this market, and the Company believes none have the
penetration that ChinaNet holds in SME sectors. Business Direct 3.0
will complete a full information cycle from B2b2c, making
businesses marketing more direct, effective and easier.
In March 2015, ChinaNet and Baidu further cemented their
relationship and demonstrated the quick success of Business Direct
3.0 by signing a service partner agreement to cross-sell branded
services and products in conjunction with Business Direct 3.0 and
Baidu's Baidu Direct Reach. The service partner agreement, with
power of attorney authorized by Baidu, allows ChinaNet to resell
any related Baidu Direct Reach service with the Baidu name and
conversely allows Baidu to leverage the ChinaNet brand and Business
Direct 3.0 name, products and services. ChinaNet will now be
positioned within Baidu's service provider ecosystem of internet
and mobile products.
In the first quarter of 2015, ChinaNet made a cash investment
for an approximately 10% ownership stake in O'Yummy Investment
Management (Beijing) Co., Ltd., a food brand management company and
exclusive partner of South Korea ice cream restaurant chain "Snow
Hill". In connection with its investment, ChinaNet will cooperate
with the company to expand the Snow Hill chain in China.
ChinaNet also made a strategic alliance with Gridsum Technology
Co., Ltd. to develop an all-around O2O internet and mobile search
engine marketing and search engine optimization solution for SMEs
in China. The exclusive strategic alliance represents the
collaboration between ChinaNet and Gridsum in 5 areas for serving
SMEs. These include (1) the mutual development of search engine
optimizing and analytical tools and products for SMEs; (2)
establishing an internet and mobile development O2O solution; (3)
provision of service and the architecture of a new value added
service through Baidu Branding Zone and Baidu Forum; (4) a 360
search engine marketing service and extended value added service,
and (5) potential joint funding of an internet and mobile marketing
and advertising technology research centre for SMEs in China.
In April 2015, ChinaNet subsidiary, Quanzhou Zhilang Company
partnered with a real estate developer to initiate an O2O business
zone near Huaqiao University in Quanzhou, Fujian Province, China to
help establish and grow new commercial occupants by using "Business
Direct 3.0" solutions in connection with brand management and
developing solution, iMAP.
Conference Call
ChinaNet will host a conference call at 8:30 am ET on Friday,
April 17th to discuss its fourth quarter and full year 2014
results. Please use the following information:
Date: |
Friday, April 17, 2015 |
Time: |
8:30 am Eastern Time |
Conference Line (U.S.): |
1-888-576-4398 |
International Dial-In: |
1-719-325-2454 |
Conference ID: |
2232899 |
Webcast: |
http://public.viavid.com/index.php?id=113825 |
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 ET on
April 24, 2015. To listen, call 1-877-870-5176 within the United
States or 1-858-384-5517 when calling internationally. Please use
the replay pin number 2232899.
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 sooe.cn, TV
commercials and program production via China-Net TV, and in-house
LCD advertising on banking kiosks targeting Chinese banking
patrons. 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) |
|
|
As of December 31, |
|
2014 |
2013 |
|
(US $) |
(US $) |
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 5,037 |
$ 3,442 |
Term deposit |
3,465 |
3,467 |
Accounts receivable, net |
2,407 |
7,673 |
Other receivables, net |
8,392 |
4,299 |
Prepayment and deposit to suppliers |
8,092 |
14,692 |
Due from related parties |
51 |
502 |
Other current assets |
61 |
27 |
Deferred tax assets-current |
176 |
153 |
Total current
assets |
27,681 |
34,255 |
|
|
|
Long-term investments |
909 |
845 |
Property and equipment, net |
943 |
1,057 |
Intangible assets, net |
9,238 |
6,015 |
Deposit and prepayment for purchasing of
software technology |
850 |
2,453 |
Goodwill |
6,772 |
11,450 |
Deferred tax assets-non current |
1,037 |
759 |
Total Assets |
$ 47,430 |
$ 56,834 |
Liabilities and Equity |
|
|
Current liabilities: |
|
|
Short-term bank loan * |
$ 817 |
$ 818 |
Accounts payable * |
782 |
421 |
Advances from customers * |
832 |
995 |
Accrued payroll and other accruals * |
585 |
676 |
Due to noncontrolling interest of VIE
* |
638 |
-- |
Payable for purchasing of software
technology * |
2,826 |
-- |
Taxes payable * |
3,332 |
7,029 |
Other payables * |
602 |
288 |
Total current
liabilities |
10,414 |
10,227 |
Long-term
liabilities: |
|
|
Deferred tax liability-non current * |
964 |
1,439 |
Long-term borrowing from director |
143 |
143 |
Total Liabilities |
11,521 |
11,809 |
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 29,030,130
shares and 22,376,540 shares at December 31, 2014 and 2013,
respectively) |
29 |
22 |
Additional paid-in capital |
24,703 |
19,870 |
Statutory reserves |
2,607 |
2,602 |
Retained earnings |
5,222 |
18,965 |
Accumulated other comprehensive
income |
3,625 |
3,689 |
Total ChinaNet Online Holdings, Inc.'s
stockholders' equity |
36,186 |
45,148 |
|
|
|
Noncontrolling interests |
(277) |
(123) |
Total equity |
35,909 |
45,025 |
|
|
|
Total Liabilities and
Equity |
$ 47,430 |
$ 56,834 |
|
|
|
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED STATEMENTS
OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME |
(In thousands, except for
number of shares and per share data) |
|
|
Year Ended
December 31, |
|
2014 |
2013 |
|
(US $) |
(US $) |
|
|
|
Sales |
|
|
From unrelated parties |
$ 38,544 |
$ 29,932 |
From related parties |
353 |
361 |
|
38,897 |
30,293 |
Cost of sales |
32,275 |
16,563 |
Gross margin |
6,622 |
13,730 |
Operating expenses |
|
|
Sales and marketing expenses |
7,017 |
2,574 |
General and administrative expenses |
6,207 |
7,691 |
Research and development expenses |
2,659 |
1,995 |
Loss on disposal of intangible asset |
-- |
315 |
(Gain)/loss on disposal of VIEs |
(266) |
543 |
Goodwill impairment and impairment of
intangible assets |
5,639 |
-- |
|
21,256 |
13,118 |
|
|
|
(Loss)/income from
operations |
(14,634) |
612 |
Other income (expenses) |
|
|
Interest income |
122 |
125 |
Interest expense |
(52) |
(26) |
Other (expenses)/income |
(28) |
5 |
|
42 |
104 |
(Loss)/income before income tax
expense, equity method investments and noncontrolling
interests |
(14,592) |
716 |
Income tax benefit/(expense) |
653 |
(816) |
Loss before equity method investments
and noncontrolling interests |
(13,939) |
(100) |
Share of income/(losses) in equity
investment affiliates |
47 |
(183) |
Net loss |
(13,892) |
(283) |
Net loss attributable to noncontrolling
interests |
154 |
49 |
Net loss attributable to ChinaNet
Online Holdings, Inc. |
$ (13,738) |
$ (234) |
|
|
|
Net loss |
$ (13,892) |
$ (283) |
Foreign currency translation (loss)/gain |
(64) |
1,306 |
Comprehensive
(Loss)/income |
$ (13,956) |
$ 1,023 |
Comprehensive loss attributable to
noncontrolling interests |
154 |
39 |
Comprehensive (loss)/income
attributable to ChinaNet Online Holdings, Inc. |
$ (13,802) |
$ 1,062 |
|
|
|
Loss per share |
|
|
Loss per common share |
|
|
Basic and diluted |
$ (0.61) |
$ (0.01) |
|
|
|
Weighted average number of common
shares outstanding: |
|
|
Basic and diluted |
22,414,523 |
22,284,485 |
|
|
|
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED STATEMENTS
OF CASH FLOWS |
(In thousands) |
|
|
Year Ended
December 31, |
|
2014 |
2013 |
|
(US $) |
(US $) |
|
|
|
Cash flows from operating
activities |
|
|
Net loss |
$ (13,892) |
$ (283) |
Adjustments to reconcile net loss to
net cash provided by operating activities |
|
|
Depreciation and amortization |
1,437 |
1,617 |
Share-based compensation
expenses |
4,840 |
125 |
(Reverse of)/provision for allowances for
doubtful accounts |
(861) |
2,702 |
Share of (income)/losses in equity
investment affiliates |
(47) |
183 |
Goodwill impairment and impairment of
intangible assets |
5,639 |
-- |
Loss on disposal of property and
equipment |
-- |
3 |
(Gain)/loss on disposal of VIEs |
(266) |
543 |
Loss on disposal of intangible asset |
-- |
315 |
Deferred taxes |
(850) |
(486) |
Changes in operating assets and
liabilities |
|
|
Accounts receivable |
5,226 |
(3,676) |
Other receivables |
1,370 |
98 |
Prepayment and deposit to suppliers |
(1,499) |
380 |
Due from related parties |
449 |
(282) |
Other current assets |
(42) |
106 |
Accounts payable |
390 |
301 |
Advances from customers |
(118) |
(104) |
Accrued payroll and other accruals |
(60) |
(242) |
Other payables |
318 |
(69) |
Taxes payable |
(76) |
1,525 |
Net cash provided by operating
activities |
1,958 |
2,756 |
Cash flows from investing
activities |
|
|
Purchases of vehicles and office
equipment |
(280) |
(79) |
Deposit and prepayment for purchasing of
software technology |
(847) |
(2,420) |
Short-term loan to unrelated
entities |
-- |
(790) |
Repayment of short-term loan from
unrelated entities |
790 |
-- |
Long-term investment in cost/equity
method investees |
(18) |
(40) |
Collection of receivable on disposal of
VIEs |
1,604 |
-- |
Payment for acquisition of VIEs |
-- |
(2,258) |
Cash effect on deconsolidation of
VIEs |
(358) |
(146) |
Net cash provided by/(used in)
investing activities |
891 |
(5,733) |
Cash flows from financing
activities |
|
|
Proceeds from short-term bank loan |
814 |
807 |
Repayment of short-term bank loan |
(814) |
-- |
Short-term loan from noncontrolling
interest of VIE |
717 |
-- |
Repayment of short-term loan to
noncontrolling interest of VIE |
(81) |
-- |
Repayment to former VIE |
(1,893) |
-- |
Net cash (used in)/provided by
financing activities |
(1,257) |
807 |
|
|
|
Effect of exchange rate fluctuation on cash
and cash equivalents |
3 |
129 |
|
|
|
Net increase/(decrease) in cash and
cash equivalents |
1,595 |
(2,041) |
|
|
|
Cash and cash equivalents at beginning of
the year |
3,442 |
5,483 |
Cash and cash equivalents at end of the
year |
$ 5,037 |
$ 3,442 |
CONTACT: MZ North America
Ted Haberfield, President
Direct: +1-760-755-2716
Email: thaberfield@mzgroup.us
Web: www.mzgroup.us
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