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 third fiscal quarter of 2015.
Summary Financials
Third Quarter 2015
Results (USD) (Unaudited) |
|
Q3 2015 |
Q3 2014 |
CHANGE |
Sales |
$8.5 million |
$12.1 million |
-29.2% |
Gross Profit |
$1.5 million |
$2.1 million |
-28.7% |
Gross Margin |
17.3% |
17.2% |
+0.7% |
Net Loss Attributable to ChinaNet |
($2.1) million |
($0.9) million |
-- |
EPS (Diluted) |
($0.08) |
($0.04) |
-- |
Non-GAAP Adjusted Net Loss Attributable
to ChinaNet (1) |
($1.5) million |
-- |
-- |
Non-GAAP Adjusted EPS (Diluted) (1) |
($0.06) |
-- |
-- |
|
|
|
|
(1) Non-GAAP Adjusted Net
Loss Attributable to ChinaNet and EPS excluded a
share-based compensation expense related to restricted shares of
the Company's common stock and common stock purchase options
awarded to employees, management and directors of $0.6
million. |
Third Quarter 2015 Financial Results
Revenues for the three months ended September 30, 2015 were $8.5
million compared to $12.1 million for the three
months ended September 30, 2014, representing a 29.2%
decrease. During the third quarter, revenues from improving
internet advertisement, which increased 19%, help to partially
offset declines in search engine marketing services, TV advertising
and brand management and sales channel building services from the
period a year ago. During 2015, ChinaNet continued to focus
integrating and upgrading its internet advertising and marketing
services to SME clients. As a result, starting from the second
fiscal quarter of 2015, the performance of the internet advertising
segment has improved. The number of larger customers served
continues to increase, and client's average consumption amount for
internet advertising services also increased compared to the same
period last year. ChinaNet continues to invest in developing new
service modules for clients, and believes that the launch of new
services in the future will help to increase market
penetration and recurring revenues.
Third Quarter 2015
Revenue Breakdown by Business Unit (USD in thousands) |
|
|
|
|
|
|
|
Q3 2015 |
% |
Q3 2014 |
% |
% Change |
Internet Advertisement and Related
Services |
$8,456 |
99% |
$9,969 |
82.6% |
-15.2% |
TV Advertisement |
$19 |
0.2% |
$1,812 |
15.0% |
-99.0% |
Bank Kiosks |
$22 |
0.3% |
$69 |
0.6% |
-68.1% |
Brand Mgmt. & Sales Channel
Building |
$45 |
0.5% |
$217 |
1.8% |
-79.3% |
Gross profit for the three months ended September 30,
2015 was $1.5 million compared to $2.1
million for the same period in 2014. Gross margin was 17.3%,
up slightly from 17.2% in the third quarter of 2014.
Operating expenses increased to $4.1 million compared
to $3.5 million for the third fiscal quarter of 2014
excluding a $0.3 million gain related to disposal of a former
consolidated VIE during the period.
The Company incurred an operating loss of $2.7
million for the three months ended September 30,
2015 compared to an operating loss of $1.2
million in the same period a year ago.
Net loss attributable to ChinaNet for the three months
ended September 30, 2015 was $2.1 million and
loss per share was $0.08, compared to a net loss of $0.9
million and loss per share of $0.04 in the third
quarter of 2014. Excluding the share-based compensation expense as
discussed above, the Non-GAAP adjusted net loss attributable
to ChinaNet common stockholders and net loss per share
were $1.5 million and $0.06, respectively.
First Nine Months 2015 Financial Results
Revenues for the nine months ended September 30,
2015 were $24.0 million, a decrease of 13.0%
from $27.6 million for the same period a year ago.
Increased revenues from internet advertisement and search engine
marketing services offset declines in sales from TV advertising and
brand management and sales channel building.
Gross profit and gross profit margin was $4.7
million and 19.4%, respectively, for the first nine months of
2015. Operating expenses increased to $10.8
million compared to $8.5 million for the first nine
months of 2014 excluding a $0.3 million gain related to disposal of
a former consolidated VIE during the period. The Company reported
an operating loss of $6.1 million in the first nine
months of 2015.
Net loss attributable to ChinaNet common stockholders
and net loss per share was $5.1
million and $0.19 for the nine months
ended September 30, 2015. The weighted average diluted shares
outstanding were 26.7 million shares. Excluding the share-based
compensation expense as discussed above of $1.4 million, the
Non-GAAP adjusted net loss attributable
to ChinaNet common stockholders and net loss per share
were $3.7 million and $0.14, respectively.
Balance Sheet and Cash Flow
The Company had $1.9 million in cash and cash
equivalents as of September 30, 2015, compared to $5.0
million as of December 31, 2014, working capital of $13.9
million, compared to $17.3 million as of December
31, 2014, and a current ratio of 2.6 to 1, compared to 2.7 to 1 as
of December 31, 2014. Total stockholders' equity
of ChinaNet was $31.6 million at September
30, 2015 compared to $36.2 million at December
31, 2014.
The Company had a $1.3 million of cash inflows from
operations in the nine months ended September 30,
2015 compared to a $1.0 million of cash outflows in
the first nine months of 2014.
Business Updates
ChinaNet exhibited three business services including "Business
direct 3.0," "The Good business of China," and www.liansuo.com at
the 93rd China Food & Drink Autumn Fair, one of the most
reputable and influential food & drink industry fairs, held in
Nanjing city, China from October 29th to 31st, 2015. The China Food
& Drink Autumn Fair attracted more than 3,000 food, drink, and
catering providers and suppliers from over 30 countries around the
world and 100,000 professional visitors. The average gross
merchandise volume (GMV) at past fairs has been approximately 20
billion RMB, making this fair one of the most influential in the
Chinese food & drink industry.
In September, ChinaNet signed a strategic partnership agreement
with Korean based Genesis BBQ Global Co., Ltd. to help expand its
"BBQ Chicken" restaurant chain in China. BBQ Chicken, founded in
1995, is a well-known franchise restaurant chain in Korea for fried
chicken, and "Best of the Best Quality (BBQ)". Today, the company
has locations in 59 countries with more than 7,000 outlets in the
regions of Asia Pacific, the Middle East, Africa, North America,
South America and Europe. BBQ Chicken plans to open over 500 of its
restaurants in China in 2015. Genesis BBQ Chicken and ChinaNet
signed a partnership agreement to expand the Chinese market, create
a one-stop purchasing service platform and plan an active online to
offline marketing program that includes traditional and online
digital advertising, trade shows and referrals. In the next six
years, ChinaNet plans to help Genesis BBQ Chicken open 10,000
franchisees in a mix of restaurants and stall shops in 3rd to 5th
tier cities across China. Upon the success of opening 10,000
franchisees, franchise fees and revenues will be shared.
ChinaNet received several prestigious awards during the quarter,
including four awards in the Chinese Entrepreneurial SME Business
Development Marketing category at the 2015 Chinese e-Commerce
Industry Gateway Conference held in Beijing on September 8th, 2015.
The conference, organized by the China Electronic Commerce
Association (CECA) achieved record attendance. Hundreds of
well-known leading Chinese Internet companies and media attended
the conference including Baidu, Sohu, LEJU, Meituan (meituan.com),
58.com, Jingdong (jd.com), Tencent, eLong, Ganji (ganji.com) and
Xiaomi (xiaomi.com) and others. ChinaNet won awards in the category
of Chinese Entrepreneurial SME Business Development Marketing for
"Best Company", "Most Powerful Portal", "Most Expandable Portal",
and "Best Potential for Future Development". The four awards were
based in part on ChinaNet's ability to provide exceptional service
and a wide range of online-to-offline (O2O) sales channel expansion
technology solutions for SMEs.
The Company also received an award at the 'Top-ranked Service
Provider for SMEs' conference organized by the China Center for
Promotion of SME Development of Ministry, Industry and Information
Technology of the People's Republic of China in Suzhou, China.
ChinaNet and 55 other leading companies including Postal Savings
Bank of China, SAP, China Telecom and Ping'an Bank, were ranked
'Top-rank Service Provider' for SMEs for their dedication and
efforts in promoting SMEs with sales expansion and data analysis to
help gain competitive advantages.
Conference Call
Management will host a conference call with investors
at 8:30 am ET on Wednesday, November 18, 2015.
Date: |
Wednesday, November 18, 2015 |
Time: |
8:30 a.m. Eastern Time |
Conference Line (U.S.): |
1-877-419-6591 |
International Dial-In: |
1-719-325-4749 |
Conference ID: |
6530485 |
Webcast: |
http://public.viavid.com/index.php?id=117339 |
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 replay of the call will be available from 11:30 am
ET on November 18, 2015 to 11:59 pm
ET on December 18, 2015. To access the replay, please
dial 1-877-870-5176 from the U.S. and 1-858-384-5517 from outside
the U.S. The PIN is 6530485.
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,
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. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In thousands, except for
number of shares and per share data) |
|
|
|
|
|
|
|
September 30, 2015 |
December 31,
2014 |
|
(US $) |
(US $) |
|
(Unaudited) |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash
equivalents |
$1,941 |
$5,037 |
Term deposit |
3,333 |
3,465 |
Accounts receivable, net |
4,084 |
2,407 |
Other receivables, net |
6,819 |
8,392 |
Prepayment and deposit to
suppliers |
5,747 |
8,092 |
Due from related
parties |
80 |
51 |
Other current assets |
89 |
61 |
Deferred tax
assets-current |
306 |
176 |
Total current
assets |
22,399 |
27,681 |
|
|
|
Long-term investments |
1,052 |
909 |
Property and equipment,
net |
957 |
943 |
Intangible assets, net |
7,855 |
9,238 |
Deposit and prepayment for
purchasing of software technology |
1,046 |
850 |
Goodwill |
6,514 |
6,772 |
Deferred tax assets-non
current |
1,452 |
1,037 |
Total Assets |
$41,275 |
$47,430 |
|
|
|
Liabilities and Equity |
|
|
Current liabilities: |
|
|
Short-term bank loan * |
$ -- |
$817 |
Accounts payable * |
701 |
782 |
Advances from customers * |
2,200 |
832 |
Accrued payroll and other
accruals * |
650 |
585 |
Due to noncontrolling interest
of VIE * |
227 |
638 |
Payable for purchasing of
software technology * |
-- |
2,826 |
Guarantee payment and
prepayment from new investors |
963 |
-- |
Taxes payable * |
3,181 |
3,332 |
Other payables * |
563 |
602 |
Total current
liabilities |
8,485 |
10,414 |
|
|
|
Long-term liabilities: |
|
|
Deferred tax liability-non
current * |
816 |
964 |
Long-term borrowing from
director |
138 |
143 |
Total Liabilities |
9,439 |
11,521 |
|
|
|
Commitments and
contingencies |
407 |
-- |
|
|
|
Equity: |
|
|
ChinaNet Online Holdings,
Inc.'s stockholders' equity |
|
|
Common stock (US$0.001 par
value; authorized 50,000,000 shares; issued and outstanding
29,580,130 shares and 29,030,130 shares at September 30, 2015 and
December 31, 2014, respectively) |
30 |
29 |
|
|
|
Additional paid-in capital |
26,339 |
24,703 |
Statutory reserves |
2,607 |
2,607 |
Retained earnings |
144 |
5,222 |
Accumulated other comprehensive
income |
2,492 |
3,625 |
Total ChinaNet Online Holdings,
Inc.'s stockholders' equity |
31,612 |
36,186 |
|
|
|
Noncontrolling interests |
(183) |
(277) |
Total equity |
31,429 |
35,909 |
|
|
|
Total Liabilities and
Equity |
$41,275 |
$47,430 |
|
CHINANET ONLINE HOLDINGS,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
(In thousands, except for
number of shares and per share data) |
|
|
|
|
|
|
Nine Months
Ended |
Three Months
Ended |
|
September 30, |
September 30, |
|
2015 |
2014 |
2015 |
2014 |
|
(US $) |
(US $) |
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
Sales |
|
|
|
|
From unrelated
parties |
$23,325 |
$27,371 |
$8,323 |
$12,010 |
From related parties |
687 |
240 |
219 |
57 |
Total sales |
24,012 |
27,611 |
8,542 |
12,067 |
Cost of sales |
19,357 |
22,483 |
7,066 |
9,996 |
Gross profit |
4,655 |
5,128 |
1,476 |
2,071 |
|
|
|
|
|
Operating expenses |
|
|
|
|
Sales and marketing
expenses |
3,459 |
4,092 |
1,209 |
1,997 |
General and administrative
expenses |
5,637 |
3,023 |
2,330 |
1,014 |
Research and development
expenses |
1,658 |
1,417 |
595 |
525 |
Gain on disposal of VIE |
-- |
(266) |
-- |
(266) |
Total operating expenses |
10,754 |
8,266 |
4,134 |
3,270 |
|
|
|
|
|
Loss from operations |
(6,099) |
(3,138) |
(2,658) |
(1,199) |
|
|
|
|
|
Other income (expenses) |
|
|
|
|
Interest income |
91 |
91 |
28 |
31 |
Interest expense |
(46) |
(38) |
(12) |
(6) |
Other income/(expenses) |
26 |
(12) |
(5) |
(9) |
Total other income |
71 |
41 |
11 |
16 |
|
|
|
|
|
Loss before income tax expense,
equity method investments and noncontrolling
interests |
(6,028) |
(3,097) |
(2,647) |
(1,183) |
Income tax benefit |
720 |
39 |
396 |
159 |
|
|
|
|
|
Loss before equity method investments
and noncontrolling interests |
(5,308) |
(3,058) |
(2,251) |
(1,024) |
|
|
|
|
|
Share of (losses)/income in
equity investment affiliates |
(2) |
49 |
(4) |
107 |
Net loss |
(5,310) |
(3,009) |
(2,255) |
(917) |
Net loss attributable to
noncontrolling interests |
232 |
103 |
174 |
10 |
|
|
|
|
|
Net loss attributable to ChinaNet
Online Holdings, Inc. |
$(5,078) |
$(2,906) |
$(2,081) |
$(907) |
|
|
|
|
|
Net loss |
(5,310) |
(3,009) |
(2,255) |
(917) |
Foreign currency translation (loss)/gain |
(1,127) |
(271) |
(1,150) |
10 |
Comprehensive Loss |
$(6,437) |
$(3,280) |
$(3,405) |
$(907) |
|
|
|
|
|
Comprehensive loss attributable to
noncontrolling interests |
226 |
102 |
168 |
10 |
|
|
|
|
|
Comprehensive loss attributable to ChinaNet
Online Holdings, Inc. |
$(6,211) |
$(3,178) |
$(3,237) |
$(897) |
Loss per share |
|
|
|
|
Loss per common share |
|
|
|
|
Basic and diluted |
$(0.19) |
$(0.13) |
$(0.08) |
$(0.04) |
|
|
|
|
|
Weighted average number of common shares
outstanding: |
|
|
|
|
Basic and diluted |
26,687,639 |
22,385,478 |
26,913,463 |
22,403,062 |
|
CHINANET ONLINE HOLDINGS,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In thousands) |
|
|
|
|
Nine Months Ended
September 30, |
|
2015 |
2014 |
|
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
Cash flows from operating
activities |
|
|
Net loss |
$(5,310) |
$(3,009) |
Adjustments to reconcile net loss to
net cash provided by/(used in) operating activities |
|
|
Depreciation and
amortization |
1,321 |
1,079 |
Share-based compensation
expenses |
1,637 |
25 |
Provision for/(reverse of)
allowances for doubtful accounts |
106 |
(120) |
Disposal of other long-term
assets |
63 |
-- |
Share of losses/(income) in
equity investment affiliates |
2 |
(49) |
Gain on disposal of VIE |
-- |
(266) |
Deferred taxes |
(723) |
(419) |
Changes in operating assets and
liabilities |
|
|
Accounts receivable |
(1,766) |
4,095 |
Other receivables |
1,908 |
1,842 |
Prepayment and deposit to
suppliers |
2,099 |
(5,246) |
Due from related
parties |
(33) |
395 |
Other current assets |
(32) |
(57) |
Accounts payable |
(53) |
45 |
Advances from
customers |
1,439 |
458 |
Accrued payroll and other
accruals |
81 |
(192) |
Other payables |
140 |
347 |
Taxes payable |
(25) |
114 |
Commitment and
contingencies |
419 |
-- |
Net cash provided by/(used in)
operating activities |
1,273 |
(958) |
|
|
|
Cash flows from investing
activities |
|
|
Purchases of vehicles and
office equipment |
(310) |
(242) |
Payment for purchasing of
software technologies |
(3,878) |
(845) |
Repayment of short-term loan
from unrelated entities |
-- |
670 |
Cash effect on deconsolidation
of VIE |
-- |
(358) |
Long-term investment in
cost/equity method investees |
(185) |
-- |
Net cash used in investing
activities |
(4,373) |
(775) |
|
|
|
Cash flows from financing
activities |
|
|
Repayment of short-term bank
loan |
(810) |
(813) |
Proceeds from short-term bank
loan |
-- |
813 |
Short-term loan from
noncontrolling interest of VIE |
-- |
716 |
Repayment of short-term
loan to noncontrolling interest of VIE |
(81) |
(16) |
Repayment to former
VIE |
-- |
(488) |
Guarantee payment and
prepayment from new investors |
993 |
-- |
Net cash provided by financing
activities |
102 |
212 |
|
|
|
Effect of exchange rate fluctuation on cash
and cash equivalents |
(98) |
(23) |
|
|
|
Net decrease in cash and cash
equivalents |
(3,096) |
(1,544) |
|
|
|
Cash and cash equivalents at beginning
of the period |
5,037 |
3,442 |
Cash and cash equivalents at end of the
period |
$1,941 |
$1,898 |
CONTACT: MZ North America
Ted Haberfield, President
Direct: +1-760-755-2716
Email: thaberfield@mzgroup.us
Web: www.mzgroup.us
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