ChinaNet-Online Holdings, Inc. (Nasdaq:CNET) ("ChinaNet" or the
"Company"), an integrated online advertising, precision marketing,
data-analysis and management services platform, today announced its
unaudited financial results for the second quarter and first half
year of 2018.
Second Quarter 2018
Highlights
- Total revenues increased by 114.5% to $22.5 million from $10.5
million in the corresponding period of 2017.
- Revenues from search engine marketing and data service
increased by 142.1% to $19.4 million from $8.0 million in the
corresponding period of 2017.
First half Year 2018
Highlights
- Total revenues increased by 73.3% to $30.8 million from $17.8
million in the same period of 2017.
- Revenues from search engine marketing and data service
increased by 99.0% to $25.8 from $13.0 million in the same period
of 2017.
Mr. Handong Cheng, Chairman, President and Chief
Executive Officer of CNET, stated, “We continued to grow our
existing search engine marketing and data service business while
developing a new growth engine in blockchain. During the quarter,
we initially launched the beta, and later the official version of
BO!News, the first blockchain-powered mobile application to improve
the efficiency and transparency of marketing and advertising
activities. We also formed Business Opportunity Social Ecosystem
(BOSE), a blockchain-based transaction system to improve
distribution fairness, enhance transaction credibility, and
increase monetization opportunities for the marketing and
advertising business community. Going forward, we will remain
committed to introducing and integrating additional blockchain
applications into our ecosystem, pave our path back to profitable
growth, and solidify our leadership position in China’s rapidly
expanding blockchain industry.”
Mr. George Chu, Chief Operating Officer of CNET,
stated, “In the second quarter of 2018, we continued our strong
topline growth momentum and achieved a 114.5% year-over-year growth
in total revenues. At the same time, we continued to execute our
cost control initiatives. As a result, our sales and marketing,
general and administrative, and research and development expenses
as a percentage of total revenues decreased by 661 basis points
(bps), 288 bps, and 184 bps, respectively, compared to the prior
year period. As we sustain the growth trajectory of our search
engine marketing and data service business, we will also increase
our investments in the future development of blockchain
applications.”
Second Quarter 2018 Financial
Results
TOTAL REVENUES Total revenues
increased by 114.5% to $22.5 million in the second quarter of 2018
from $10.5 million in the corresponding period of 2017, primarily
driven by the increase in search engine marketing and data service
revenue.
Search engine marketing and data service revenue
for the second quarter of 2018 increased by 142.1% to $19.4 million
from $8.0 million in the corresponding period of 2017. The growth
was primarily attributable to the rapid expansion of the Company’s
search engine marketing client base as enterprises in China
continued to migrate from other advertising and marketing channels
to search engine marketing for its more direct results and higher
return on investments.
COST OF REVENUES AND GROSS
PROFIT Cost of revenues was $21.6 million in the second
quarter of 2018, compared to $8.8 million in the corresponding
period of 2017. The growth was primarily attributable to a
significant increase in revenue contributions from search engine
marketing and data service in the second quarter of 2018, which
have higher resource costs as the Company has obtained marketing
access to the most popular search engines, internet portals and
mobile portals in China.
Gross profit in the second quarter of 2018, as a
result of increased cost of revenues, was $1.0 million, compared to
$1.7 million in the corresponding period of 2017.
OPERATING LOSSOperating
expenses in the second quarter of 2018 were $9.3 million, compared
to $2.1 million in the corresponding period of 2017. As a
percentage of total revenues, operating expenses increased to 41.2%
from 20.2% in the corresponding period of 2017, mostly due to
impairment charges related to intangible assets and goodwill.
Excluding impairment charges, the Company’s operating expenses
decreased by 5.8% year over year to $2.0 million.
Sales and marketing expenses in the second
quarter of 2018 decreased by 66.1% to $0.3 million from $0.8
million in the corresponding period of 2017. As a percentage of
total revenues, sales and marketing expenses decreased to 1.2% from
7.9% in the corresponding period of 2017. The decrease was
primarily attributable to the decrease in advertising expenses for
brand development of approximately US$0.69 million.
General and administrative expenses in the
second quarter of 2018 increased by 49.0% to $1.5 million from $1.0
million in the corresponding period of 2017. The growth in general
and administrative expenses was primarily due to an increase in
allowance for doubtful accounts of approximately US$0.31 million.
As a percentage of total revenues, general and administrative
expenses decreased to 6.6% from 9.4% in the corresponding period of
2017.
Research and development expenses in the second
quarter of 2018 decreased by 21.3% to $0.2 million from $0.3
million in the corresponding period of 2017. As a percentage of
total revenues, research and development expenses decreased to 1.1%
from 2.9% in the corresponding period of 2017. The decrease was due
to the talent improvement in the Company’s research and development
department.
In the second quarter of 2018, the Company
incurred $1.9 million of impairment of intangible assets, and $5.4
million of impairment of goodwill.
Operating loss in the second quarter of 2018 was
$8.3 million, compared to $0.4 million in the corresponding period
of 2017.
NET LOSSNet loss attributable
to ChinaNet Online Holdings, Inc. was $9.5 million in the second
quarter of 2018, compared to $0.8 million in the corresponding
period of 2017.
BALANCE SHEETAs of June 30,
2018, the Company had cash and cash equivalents of $5.1 million, an
increase of 72.3% from $3.0 million as of December 31, 2017.
Advances from customers was $1.4 million as of June 30, 2018,
compared to $3.6 million as of December 31, 2017 due to the
promotion campaigns that the Company executed in 2017.
First Half Year 2018 Financial
ResultsFor the first half year of 2018, total revenues
increased by 73.3% to $30.8 million from $17.8 million in the same
period of 2017, primarily driven by a 99.0% year-over-year increase
in search engine marketing and data services.
Gross profit for the first half year of 2018 was
$1.6 million, compared to $3.0 million in the same period of 2017.
The decrease was primarily due to an increased revenue contribution
from search engine marketing and data service in the first half
year of 2018, which has a relatively lower profit margin, as well
as a decrease in gross margin of the internet advertising and data
service.
Operating expenses for the first half year of
2018 increased to $11.4 million from $4.4 million in the same
period of 2017. The increase was primarily due to a $1.9 million
impairment of intangible assets and a $5.4 million impairment of
goodwill that the Company incurred in the first half year of 2018.
As a percentage of total revenues, operating expenses for the first
half year of 2018 were 37.1%, compared to 25.0% in the same period
of 2017.
Sales and marketing expenses for the first half
year of 2018 decreased by 49.1% to $0.8 million from $1.7 million
in the same period of 2017. General and administrative expenses for
the first half year of 2018 increased by 37.6% to $2.9 million from
$2.1 million in the same period of 2017 mainly attributable to the
net effect of an increase in allowance for doubtful accounts of
approximately US$0.82 million. Research and development expenses
for the first half year of 2018 decreased by 38.1% to $0.4 million
from $0.7 million in the same period of 2017.
Net loss attributable to ChinaNet Online
Holdings, Inc. for the first half year of 2018 was $10.1 million,
compared to $1.9 million in the same period of 2017.
Recent DevelopmentsOn June 4,
2018, the Company launched its beta version of BO!News, the first
blockchain-powered mobile application that aims to improve the
efficiency and transparency of marketing activities. On June 19,
2018, the Company announced the formation of its closed-loop
Business Opportunity Social Ecosystem (BOSE), a network that
integrates the Company’s existing marketing and advertising
infrastructures with its blockchain-powered applications to create
a secure and transparent transaction environment for its business
community. On July 18, 2018, the Company launched its official
version of BO!News with enhanced features and functionalities.
About ChinaNet Online Holdings,
Inc.ChinaNet Online Holdings, Inc., a parent company of
ChinaNet Online Media Group Ltd., incorporated in the BVI
(ChinaNet), is an integrated online advertising, precision
marketing and data-analysis and management services platform.
ChinaNet provides prescriptive analysis for its clients to improve
business outcomes and to create more efficient enterprises. The
Company leverages an optimization framework, provided by its
comprehensive data-analysis infrastructure, to blend data,
mathematical, and computational sciences into an outcome management
platform for which it monetizes on a per client basis. ChinaNet
uniquely optimizes and prescribes its clients decision making
processes based on its proprietary ecosystem. For more information,
visit www.chinanet-online.com.
Safe Harbor StatementThis
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.
Investor Relations ContactICR,
Inc.Jack WangTel: +1-646-308-1635Email: CNET@icrinc.com
CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS (In thousands, except for number of shares
and per share data)
|
|
Six Months Ended June 30, |
|
Three Months Ended June 30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
(US $) |
|
(US $) |
|
(US $) |
|
(US $) |
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
Revenues |
|
|
|
|
|
|
|
|
From unrelated parties |
|
$ |
30,780 |
|
|
$ |
17,662 |
|
|
$ |
22,520 |
|
|
$ |
10,417 |
|
From related parties |
|
|
- |
|
|
|
102 |
|
|
|
- |
|
|
|
83 |
|
Total revenues |
|
|
30,780 |
|
|
|
17,764 |
|
|
|
22,520 |
|
|
|
10,500 |
|
Cost of revenues |
|
|
29,211 |
|
|
|
14,792 |
|
|
|
21,552 |
|
|
|
8,800 |
|
Gross profit |
|
|
1,569 |
|
|
|
2,972 |
|
|
|
968 |
|
|
|
1,700 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Sales and marketing expenses |
|
|
844 |
|
|
|
1,659 |
|
|
|
280 |
|
|
|
825 |
|
General and administrative expenses |
|
|
2,867 |
|
|
|
2,084 |
|
|
|
1,478 |
|
|
|
992 |
|
Research and development expenses |
|
|
433 |
|
|
|
700 |
|
|
|
240 |
|
|
|
305 |
|
Impairment on intangible assets |
|
|
1,878 |
|
|
|
- |
|
|
|
1,878 |
|
|
|
- |
|
Impairment on goodwill |
|
|
5,412 |
|
|
|
- |
|
|
|
5,412 |
|
|
|
- |
|
Total
operating expenses |
|
|
11,434 |
|
|
|
4,443 |
|
|
|
9,288 |
|
|
|
2,122 |
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
|
(9,865 |
) |
|
|
(1,471 |
) |
|
|
(8,320 |
) |
|
|
(422 |
) |
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
|
|
Impairment on long-term investments |
|
|
(471 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Interest expense, net |
|
|
(19 |
) |
|
|
(36 |
) |
|
|
(9 |
) |
|
|
(19 |
) |
Other expenses |
|
|
(28 |
) |
|
|
(206 |
) |
|
|
(6 |
) |
|
|
(203 |
) |
Change in fair value of warrant liabilities |
|
|
948 |
|
|
|
- |
|
|
|
(526 |
) |
|
|
- |
|
Total
other income/(expenses) |
|
|
430 |
|
|
|
(242 |
) |
|
|
(541 |
) |
|
|
(222 |
) |
|
|
|
|
|
|
|
|
|
Loss before
income tax expense and noncontrolling interests |
|
|
(9,435 |
) |
|
|
(1,713 |
) |
|
|
(8,861 |
) |
|
|
(644 |
) |
Income tax expense |
|
|
(689 |
) |
|
|
(113 |
) |
|
|
(693 |
) |
|
|
(113 |
) |
Net
loss |
|
|
(10,124 |
) |
|
|
(1,826 |
) |
|
|
(9,554 |
) |
|
|
(757 |
) |
Net
loss/(income) attributable to noncontrolling interests |
|
|
55 |
|
|
|
(50 |
) |
|
|
50 |
|
|
|
(32 |
) |
Net loss
attributable to ChinaNet Online Holdings, Inc. |
|
$ |
(10,069 |
) |
|
$ |
(1,876 |
) |
|
$ |
(9,504 |
) |
|
$ |
(789 |
) |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(10,124 |
) |
|
$ |
(1,826 |
) |
|
$ |
(9,554 |
) |
|
$ |
(757 |
) |
Foreign currency
translation gain/(loss) |
|
|
194 |
|
|
|
432 |
|
|
|
(280 |
) |
|
|
326 |
|
Comprehensive loss |
|
$ |
(9,930 |
) |
|
$ |
(1,394 |
) |
|
$ |
(9,834 |
) |
|
$ |
(431 |
) |
Comprehensive
loss/(income) attributable to noncontrolling interests |
|
|
49 |
|
|
|
(15 |
) |
|
|
52 |
|
|
|
(34 |
) |
Comprehensive
loss attributable to ChinaNet Online Holdings, Inc. |
|
$ |
(9,881 |
) |
|
$ |
(1,409 |
) |
|
$ |
(9,782 |
) |
|
$ |
(465 |
) |
|
|
|
|
|
|
|
|
|
Loss per
share |
|
|
|
|
|
|
|
|
Loss per common
share |
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.64 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.60 |
) |
|
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding: |
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
15,676,249 |
|
|
|
11,990,950 |
|
|
|
15,866,305 |
|
|
|
11,999,304 |
|
CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (In thousands, except
for number of shares and per share data)
|
|
|
June 30, 2018 |
|
December 31, 2017 |
|
|
|
(US $) |
|
(US $) |
|
|
|
(Unaudited) |
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and
cash equivalents |
|
|
$ |
5,086 |
|
|
$ |
2,952 |
|
Accounts
receivable, net |
|
|
|
6,600 |
|
|
|
7,215 |
|
Other
receivables, net |
|
|
|
165 |
|
|
|
2,646 |
|
Prepayment and deposit to suppliers |
|
|
|
2,579 |
|
|
|
4,073 |
|
Due from
related parties, net |
|
|
|
- |
|
|
|
14 |
|
Total current assets |
|
|
|
14,430 |
|
|
|
16,900 |
|
|
|
|
|
|
|
Long-term
investments |
|
|
|
453 |
|
|
|
918 |
|
Property and equipment,
net |
|
|
|
213 |
|
|
|
299 |
|
Intangible assets,
net |
|
|
|
1,628 |
|
|
|
3,808 |
|
Prepayment for
blockchain and other software applications development |
|
|
|
3,738 |
|
|
|
- |
|
Goodwill |
|
|
|
- |
|
|
|
5,277 |
|
Deferred tax assets,
net |
|
|
|
677 |
|
|
|
1,358 |
|
Total Assets |
|
|
$ |
21,139 |
|
|
$ |
28,560 |
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Short-term bank loan |
|
|
$ |
756 |
|
|
$ |
765 |
|
Accounts
payable |
|
|
|
1,465 |
|
|
|
2,851 |
|
Advances
from customers |
|
|
|
1,399 |
|
|
|
3,559 |
|
Accrued
payroll and other accruals |
|
|
|
401 |
|
|
|
559 |
|
Payable
for acquisition of noncontrolling interest |
|
|
|
756 |
|
|
|
- |
|
Due to
investors related to terminated security purchase agreements |
|
|
|
- |
|
|
|
938 |
|
Payable
for purchasing of software technology |
|
|
|
- |
|
|
|
436 |
|
Taxes
payable |
|
|
|
3,054 |
|
|
|
3,168 |
|
Other
payables |
|
|
|
145 |
|
|
|
687 |
|
Total current liabilities |
|
|
|
7,976 |
|
|
|
12,963 |
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
Long-term borrowing from a director |
|
|
|
132 |
|
|
|
134 |
|
Warrant liabilities |
|
|
|
1,327 |
|
|
|
- |
|
Total Liabilities |
|
|
|
9,435 |
|
|
|
13,097 |
|
|
|
|
|
|
|
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 16,132,543 shares and 13,982,542 shares at June 30,
2018 and December 31, 2017, respectively) |
|
|
|
16 |
|
|
|
14 |
|
Additional paid-in capital |
|
|
|
37,853 |
|
|
|
31,554 |
|
Statutory reserves |
|
|
|
2,607 |
|
|
|
2,607 |
|
Accumulated deficit |
|
|
|
(30,556 |
) |
|
|
(20,487 |
) |
Accumulated other comprehensive income |
|
|
|
1,786 |
|
|
|
1,598 |
|
Total
ChinaNet Online Holdings, Inc.’s stockholders’ equity |
|
|
|
11,706 |
|
|
|
15,286 |
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
|
(2 |
) |
|
|
177 |
|
Total equity |
|
|
|
11,704 |
|
|
|
15,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
|
$ |
21,139 |
|
|
$ |
28,560 |
|
CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands)
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
(US $) |
|
(US $) |
|
|
(Unaudited) |
|
(Unaudited) |
Cash flows from operating activities |
|
|
|
|
Net loss |
|
$ |
(10,124 |
) |
|
$ |
(1,826 |
) |
Adjustments to
reconcile net loss to net cash
used in operating activities |
|
|
|
|
Depreciation and amortization |
|
|
427 |
|
|
|
707 |
|
Share-based compensation expenses |
|
|
151 |
|
|
|
348 |
|
Provision
for allowances for doubtful accounts |
|
|
794 |
|
|
|
(29 |
) |
Impairment on long-term investments |
|
|
471 |
|
|
|
- |
|
Impairment on intangible assets |
|
|
1,878 |
|
|
|
- |
|
Impairment on goodwill |
|
|
5,412 |
|
|
|
- |
|
Change in
fair value of warrant liabilities |
|
|
(948 |
) |
|
|
- |
|
Deferred
taxes |
|
|
689 |
|
|
|
113 |
|
Changes in
operating assets and liabilities |
|
|
|
|
Accounts
receivable |
|
|
(257 |
) |
|
|
(1,666 |
) |
Other
receivables |
|
|
(16 |
) |
|
|
(19 |
) |
Prepayment and deposit to suppliers |
|
|
1,504 |
|
|
|
136 |
|
Due from
related parties |
|
|
23 |
|
|
|
(10 |
) |
Accounts
payable |
|
|
(1,402 |
) |
|
|
24 |
|
Advances
from customers |
|
|
(2,197 |
) |
|
|
1,050 |
|
Accrued
payroll and other accruals |
|
|
(154 |
) |
|
|
(225 |
) |
Other
payables |
|
|
(495 |
) |
|
|
86 |
|
Taxes
payable |
|
|
(77 |
) |
|
|
38 |
|
Net cash used in
operating activities |
|
|
(4,321 |
) |
|
|
(1,273 |
) |
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchase
of office equipment |
|
|
(6 |
) |
|
|
(2 |
) |
Short-term loan to unrelated parties |
|
|
(2,111 |
) |
|
|
- |
|
Repayment
of short-term loan from unrelated parties |
|
|
4,668 |
|
|
|
- |
|
Payment
for acquisition of noncontrolling interest |
|
|
(1,177 |
) |
|
|
- |
|
Prepayment for blockchain and other software applications
development |
|
|
(3,752 |
) |
|
|
- |
|
Purchase
of software technology |
|
|
(447 |
) |
|
|
- |
|
Net cash used in
investing activities |
|
|
(2,825 |
) |
|
|
(2 |
) |
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
Proceeds from issuance of common stock and warrant (net
of cash issuance cost of US$809) |
|
|
10,263 |
|
|
|
- |
|
Repayment to investors related to terminated security
purchase agreements |
|
|
(957 |
) |
|
|
- |
|
Net cash provided by
financing activities |
|
|
9,306 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuation on cash and cash
equivalents |
|
|
(26 |
) |
|
|
56 |
|
|
|
|
|
|
Net increase/(decrease) in cash and cash
equivalents |
|
|
2,134 |
|
|
|
(1,219 |
) |
|
|
|
|
|
Cash and cash equivalents at beginning of the
period |
|
|
2,952 |
|
|
|
3,035 |
|
Cash and cash equivalents at end of the
period |
|
$ |
5,086 |
|
|
$ |
1,816 |
|
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