SHANGHAI, Dec. 4, 2018 /PRNewswire/ -- Acorn
International, Inc. (NYSE: ATV) ("Acorn" or the "Company"), today
announced its unaudited financial results for the third quarter and
nine months ended September 30,
2018.
Third Quarter 2018 Financial and Recent Operational
Highlights
- Net revenues increased 38.1% year-over-year in Q3 2018 to
US$8.3 million
- Gross profit rose 39.6% year-over-year in Q3 2018 to
US$6.1 million
- Gross margin increased to 73.2% in Q3 2018 from 72.4% in Q3
2017
- Income from continuing operations was US$1.5 million in Q3 2018 compared to a loss from
continuing operations of US$0.2
million in Q3 2017
- Net income was US$3.8 million in
Q3 2018 as compared to net income of US$2.3
million in Q3 2017
- Our business Acorn Entertainment expanded its client roster to
include US sports, film, television, and music celebrity talent as
well as brands looking to expand their presence in China
- Recorded Singles' Day Sales of RMB 13.6
million, up from RMB 7.8
million in 2017
- Signed cooperation agreement with influential media powerhouse
Shanghai Media Group through one of its key content subsidiaries,
Dragon Entertainment Group, to provide cross-border resources to
support Acorn's influencer management business
- Acorn currently expects it will reach positive income from
continuing operations (operational break-even) for the year 2018
for the first time in recent history
Revenue growth of 38.1% and significant operating leverage
resulted in profitability at the operating level for the first time
in recent history, with Acorn recording income from continuing
operations of US$1.5 million, despite
US$0.7 million of non-recurring
expenses during the quarter.
During the third quarter, profitable growth in certain of the
Company's legacy businesses, especially the Babaka brand, remained
strong and continued into the fourth quarter as evidenced by the
dramatic increase in Singles' Day sales in 2018 from 2017.
Sales of Acorn Fresh, an e-commerce business within Acorn that
sells high-quality frozen seafood directly to Chinese consumers,
have been ramping, driven by, among other things, live streaming
content supported by Acorn Streaming and Acorn Entertainment.
Acorn is also hopeful that its recently signed cooperation
agreement with influential media powerhouse Shanghai Media Group
will allow for additional opportunities for its celebrity clientele
and live streaming content to reach Chinese audiences. Acorn
expects this focus on new media in China, along with further expansion on
additional e-commerce B2C platforms to continue to drive e-commerce
sales in the future.
The Company will continue to emphasize the e-commerce channel
and is focused on leveraging its 20 years of expertise as a leading
marketing and branding company in China. The Company continually evaluates new
platforms with positive ROI conversion, including China's major e-commerce platforms as well as
other niche digital platforms.
Financial Results for the Third Quarter of 2018:
Total net revenues were US$8.3
million in the third quarter of 2018, up 38.1% from
US$6.0 million in the third quarter
of 2017, primarily due to an increase in e-commerce sales of Babaka
branded products as well as other products.
Cost of sales in the third quarter of 2018 was US$2.2 million, up 34.1% from US$1.7 million in the third quarter of 2017. The
increase was attributable to the increased sales volume and net
revenues.
Gross profit in the third quarter of 2018 was US$6.1 million, up 39.6% from US$4.4 million in the third quarter of 2017.
Gross margin was 73.2% in the third quarter of 2018, up from 72.4%
in the third quarter of 2017. The slight increase in gross margin
was due to a larger proportion of higher margin products in the
product mix. The Company anticipates gross margins may decline from
current levels in the near and medium term as the Company expands
into lower margin e-commerce platforms, among other reasons.
Total operating expenses in the third quarter of 2018 were
US$4.6 million, down slightly from
operating expenses in the third quarter of 2017, due primarily to
lower general and administrative expenses, driven partially by the
net impact of one-time fees in both the third quarter of 2018 and
the third quarter of 2017. The foregoing factor was partially
offset by (i) an increase in selling and marketing expenses to
support e-commerce sales and (ii) a decrease in other operating
income due primarily to a loss of rental income following the sale
of Bright Rainbow Investments Limited, a Hong Kong subsidiary that held certain fixed
assets that generated rental income, partially offset by loan
interest income and net revenue from Acorn Entertainment.
Within general and administrative expenses, the Company incurred a
one-time tax consultancy fee of US$0.7
million during the third quarter of 2018 and achieved a tax
asset of US$9.0 million and a cash
tax refund of US$1.1 million.
Operating expenses for the third quarter of 2018 did not include
any non-cash, share-based compensation, as compared to US$25,000 in share-based compensation in the
third quarter of 2017.
Income from continuing operations was US$1.5 million in the third quarter of 2018, as
compared to a loss from continuing operations of US$0.2 million in the third quarter of 2017.
Other income was US$2.4 million in
the third quarter of 2018, primarily due to income associated with
the sale of non-core assets, as compared to other income of
US$2.7 million in the third quarter
of 2017, which was primarily due to dividends received from Yimeng
shares.
Net income from continuing operations was US$3.6 million in the third quarter of 2018,
compared to net income from continuing operations of US$2.8 million in the third quarter of 2017.
Net income from discontinued operations, which reflects the sale
of a majority stake in the Company's HJX electronic learning
products business to a third-party investor and operator in 2017,
(Refer to "Discontinued Operations" discussion below) was
US$0.2 million in the third quarter
of 2018, compared to a net loss from discontinued operations of
US$0.5 million in the third quarter
of 2017.
Net income attributable to Acorn was US$3.8 million in the third quarter of 2018 as
compared to net income attributable to Acorn of US$2.3 million in the third quarter of
2017.
As of September 30, 2018, Acorn's
cash and cash equivalents, with restricted cash, totaled
US$15.7 million. Cash and
equivalents, with restricted cash, totaled US$21.1 million as of December 31, 2017.
At September 30, 2018, the Company
owned 32,723,600 shares of Yimeng Software Technology Co., Ltd.
("Yimeng"), a publicly traded company in China, which shares were valued at
approximately US$42.2 million based
on the valuation at December 31,
2017. The Company may sell shares of Yimeng from time to
time based on market factors and its other investment and capital
requirements.
During the third quarter of 2018, the Company repurchased 65,067
ADSs at an average price US$19.96 per
ADS under its share repurchase program, which was approved by the
Board of Directors on December 8,
2017.
Nine Month 2018 Financial Results
Total net revenues were US$20.0
million in the first nine months of 2018, up 31.6% from
US$15.2 million in the first nine
months of 2017, primarily due to an increase in e-commerce sales of
Babaka branded products as well as other products.
Cost of sales in the first nine months of 2018 was US$5.7 million, up 24.9% from US$4.5 million in the first nine months of
2017.
Gross profit in the first nine months of 2018 was US$14.4 million, up 34.5% from US$10.7 million in the first nine months of 2017.
Gross margin was 71.7% in the first nine months of 2018, up from
70.2% in the first nine months of 2017. The slight increase in
gross margin was due to a larger proportion of higher margin
products in the product mix. The Company anticipates gross margins
may decline from current levels in the near and medium term as the
Company expands into lower margin e-commerce platforms, among other
reasons.
Total operating expenses in the first nine months of 2018 were
US$13.3 million, down 3.6% from
operating expenses of US$13.8 million
in the first nine months of 2017, due primarily to (i) lower
general and administrative expenses, driven partially by the net
impact of one-time fees in both the first nine months of 2018 and
the first nine months of 2017, and (ii) an increase in other
operating income due primarily to loan interest income and net
revenue from Acorn Entertainment, partially offset by a loss of
rental income following the sale of Bright Rainbow Investments
Limited, a Hong Kong subsidiary
that held certain fixed assets that generated rental income. The
foregoing factors were partially offset by an increase in selling
and marketing expenses to support e-commerce sales. Within general
and administrative expenses, the Company incurred a one-time tax
consultancy fee of US$0.7 million
during the first nine months of 2018 and achieved a tax asset of
US$9.0 million and a cash tax refund
of US$1.1 million. Operating expenses
for 2018 included non-cash, share-based compensation of
US$375,963, as compared to
US$25,000 in share-based compensation
in the first nine months of 2017.
Income from continuing operations was US$1.0 million in the first nine months of 2018,
as compared to a loss from continuing operations of US$3.1 million in the first nine months of
2017.
Other income was US$30.1 million
in the first nine months of 2018, primarily due to a gain on the
sale of non-core assets, as compared to other income of
US$11.6 million in the first nine
months of 2017, which was primarily due to dividends received
and gains from sales of Yimeng shares.
Net income from continuing operations was US$28.7 million in the first nine months of 2018,
compared to net income from continuing operations of US$7.1 million in the first nine months of
2017.
Net loss from discontinued operations, which reflects the sale
of a majority stake in the Company's HJX electronic learning
products business to a third-party investor and operator in 2017,
(Refer to "Discontinued Operations" discussion below) was
US$1.4 million in the first nine
months of 2018, compared to net loss from discontinued operations
of US$2.2 million in the first nine
months of 2017.
Net income attributable to Acorn was US$27.3 million in the first nine months of 2018
as compared to net income attributable to Acorn of US$4.9 million in the first nine months of
2017. Net income for the first nine months of 2018 includes
the one-time gain of US$30.1 million
from the sale of non-core assets while net income for the first
nine months of 2017 includes the one-time gain of US$11.8 million due to dividends received
and gains from sales of Yimeng shares.
Discontinued Operations
In 2017, Acorn reached an agreement to sell a majority stake in
its HJX electronic learning products business ("HJX Business") to a
third-party investor and operator, allowing the Company to focus on
businesses and brands with higher profit margins, and on achieving
profitable growth of new, potentially high margin businesses. Acorn
maintains a 37.5% stake in a joint venture established with this
third party. As a result of this transaction, the Company shall be
required by applicable accounting rules to treat the historical
operations of the wholly owned HJX Business as discontinued
operations and the minority stake in the HJX Business as equity in
losses of affiliates in the consolidated statements of operations
for all periods presented, subject to the consolidation of the HJX
Business into the joint venture entity.
Conference Call
The Company will host a conference call at 8:30 a.m.
ET on December 4, 2018 to discuss financial results.
Dial-in details for the earnings conference call are as
follows:
US/Canada:
|
877-260-1479
|
International:
|
+1
334-323-0522
|
Please dial in 10 minutes before the call is scheduled to begin
and provide the passcode 3846860 to join the call. A replay will be
available approximately two hours following the conclusion of the
conference call through December 11,
2018 and can be accessed by dialing (888) 203-1112, or (719)
457-0820, passcode 3846860. An archived audio file of the
call will be available on the Company's website http://www.acorninternationalir.com/news-and-events/webcasts-and-presentations/.
About Acorn International, Inc.
Acorn International is a leading marketing and branding company
in China, leveraging a twenty-year
direct marketing history to monetize: brand IP; content creation
and distribution; and product sales; through digital media in
China. Previously the leading TV
infomercial company in China,
Acorn today focuses on e-commerce and digital media through three
divisions: 1) Product Division, 2) Content Division, and 3)
Influencer Management Division
For more information, please visit:
http://www.acorninternationalir.com
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995
This press release contains forward-looking statements. These
statements constitute "forward-looking" statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be
identified by terminology such as "anticipates," "believes,"
"estimates," "strives," "expects," "future," "going forward,"
"intends," "outlook," "plans," "target," "will," and similar
statements and include statements with respect to the Company's
belief it will reach positive income from continuing operations
(operational break-even) for the year 2018, the hope that its
recently signed cooperation agreement with Shanghai Media Group
will allow for additional opportunities for its celebrity clientele
and live streaming content to reach Chinese audiences, the
Company's ability to maintain healthy margins, manage expenses and
generate additional cash flow, the expectation that the Company's
focus on new media in China, along
with further expansion on additional e-commerce B2C platforms, will
continue to drive e-commerce sales in the future anticipated trends
in gross margin, including the Company's expectation that gross
margins may decline from current levels in the near and medium term
as it expands into lower margin e-commerce platforms, efforts to
implement its proposed business plans, including tapping into new
media with positive ROI conversion, and reduction of operating
expenses may not succeed as anticipated or at all. Such statements
are based on management's current expectations and current market
and operating conditions, and relate to events that involve known
or unknown risks, uncertainties, and other factors, all of which
are difficult to predict and many of which are beyond the Company's
control, which may cause the Company's actual results, performance,
or achievements to differ materially from those in these
preliminary financial results and the forward-looking statements.
Further information regarding these and other risks, uncertainties,
or factors is included in the Company's filings with the U.S.
Securities and Exchange Commission. The Company does not undertake
any obligation to update any forward-looking statement as a result
of new information, future events, or otherwise, except as required
by law.
Other factors that could cause forward-looking statements to
differ materially from actual future events or results include
risks and uncertainties related to: the Company's ability to
successfully improve or introduce new products and services,
including to offset declines in sales of existing products and
services; the Company's ability to stay abreast of consumer market
trends and maintain the Company's reputation and consumer
confidence; the Company's ability to execute and maintain a
successful market strategy; potential unauthorized use of the
Company's intellectual property; potential disruption of the
Company's manufacturing processes; increasing competition in
China's consumer market; the
Company's U.S. tax status as a passive foreign investment company;
and general economic and business conditions in China. The
financial information contained in this release should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's 2017 annual report on Form 20-F
filed with SEC on May 15, 2018. For a discussion of other
important factors that could adversely affect the Company's
business, financial condition, results of operations and prospects,
see "Risk Factors" beginning on page 8 of the Company's Form 20-F
for the fiscal year ended December 31, 2017. The Company's
actual results of operations for the second quarter of 2018 are not
necessarily indicative of its operating results for any future
periods. Any projections in this release are based on limited
information currently available to the Company, which is subject to
change. Although such projections and the factors influencing them
will likely change, the Company will not necessarily update the
information. Such information speaks only as of the date of this
release.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is
preliminary and subject to potential adjustments. Adjustments to
the consolidated financial statements may be identified when audit
work has been performed for the Company's year-end audit, which
could result in significant differences from this preliminary
unaudited condensed financial information.
Contact:
|
|
Acorn International,
Inc.
|
Compass
Investor Relations
|
Mr. Martin
Key
|
Ms. Elaine Ketchmere,
CFA
|
Phone
+86-21-5151-8888
|
Phone:
+1-310-528-3031
|
Email:
ir@chinadrtv.com
|
Email: Eketchmere@compass-ir.com
|
www.chinadrtv.com
|
www.compassinvestorrelations.com
|
ACORN
INTERNATIONAL, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In US
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended
September 30
|
|
9 Months Ended
September 30
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
Net
revenues
|
|
|
|
|
|
|
|
Direct
sales
|
5,652,017
|
|
6,991,542
|
|
14,063,719
|
|
16,867,076
|
Distribution
sales
|
386,682
|
|
1,346,782
|
|
1,162,911
|
|
3,177,431
|
Total net
revenues
|
6,038,699
|
|
8,338,324
|
|
15,226,630
|
|
20,044,507
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
|
|
|
|
|
Direct
sales
|
(1,424,077)
|
|
(1,819,041)
|
|
(3,951,438)
|
|
(4,610,589)
|
Distribution
sales
|
(239,725)
|
|
(411,572)
|
|
(590,918)
|
|
(1,063,758)
|
Total cost of
revenues
|
(1,663,802)
|
|
(2,230,613)
|
|
(4,542,356)
|
|
(5,674,347)
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
|
|
|
|
|
Direct
sales
|
4,227,940
|
|
5,172,501
|
|
10,112,281
|
|
12,256,487
|
Distribution
sales
|
146,957
|
|
935,210
|
|
571,993
|
|
2,113,673
|
Total gross
profit
|
4,374,897
|
|
6,107,711
|
|
10,684,274
|
|
14,370,160
|
|
|
|
|
|
|
|
|
Operating (expenses)
income
|
|
|
|
|
|
|
|
Other selling and
marketing expenses
|
(2,542,507)
|
|
(3,183,396)
|
|
(6,818,294)
|
|
(8,202,320)
|
General and
administrative expenses
|
(2,511,256)
|
|
(1,626,865)
|
|
(7,961,611)
|
|
(6,654,485)
|
Other operating
income, net
|
429,747
|
|
250,153
|
|
951,989
|
|
1,532,500
|
Total operating
(expenses) income
|
(4,624,016)
|
|
(4,560,108)
|
|
(13,827,916)
|
|
(13,324,305)
|
Income (loss) from
continuing operations
|
(249,119)
|
|
1,547,603
|
|
(3,143,642)
|
|
1,045,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
Interest
income
|
126,941
|
|
232,614
|
|
389,495
|
|
509,237
|
Other income
(expenses), net
|
2,718,327
|
|
2,355,392
|
|
11,643,029
|
|
30,057,693
|
Income (loss) from
continuing operations
before income taxes and equity in losses of
affiliates
|
2,596,149
|
|
4,135,609
|
|
8,888,882
|
|
31,612,785
|
|
|
|
|
|
|
|
|
Income tax -
current
|
175,609
|
|
(489,436)
|
|
(1,774,285)
|
|
(2,860,087)
|
Income tax -
deferred
|
-
|
|
-
|
|
-
|
|
(6,751)
|
Income (loss) from
continuing operations
before equity in losses of affiliates
|
2,771,758
|
|
3,646,173
|
|
7,114,597
|
|
28,745,947
|
|
|
|
|
|
|
|
|
Discontinued
operations :
|
|
|
|
|
|
|
|
Income (loss)
from discontinued operations
|
(507,873)
|
|
163,513
|
|
(2,239,243)
|
|
(1,416,523)
|
Income (loss) from
discontinued operations
before equity in losses of affiliates
|
(507,873)
|
|
163,513
|
|
(2,239,243)
|
|
(1,416,523)
|
|
|
|
|
|
|
|
|
Equity in losses of
affiliates
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
2,263,885
|
|
3,809,686
|
|
4,875,354
|
|
27,329,424
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to non-controlling interests
|
(1,013)
|
|
(1,196)
|
|
(3,269)
|
|
(3,554)
|
Net income (loss)
attributable to Acorn
International, Inc.
|
2,264,898
|
|
3,810,882
|
|
4,878,623
|
|
27,332,978
|
ACORN
INTERNATIONAL, INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(In US
dollars)
|
|
|
|
|
|
|
|
2017/12/31
|
|
2018/09/30
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Cash and cash
equivalents
|
|
21,019,834
|
|
15,634,975
|
Restricted
cash
|
|
78,051
|
|
74,137
|
Accounts receivable,
net
|
|
1,442,750
|
|
2,260,648
|
Inventory
|
|
1,516,283
|
|
1,574,915
|
Other prepaid
expenses and current assets, net
|
|
4,030,812
|
|
4,758,259
|
Current portion of
convertible loan
|
|
3,587,204
|
|
3,546,934
|
Current
assets
|
|
31,674,934
|
|
27,849,868
|
|
|
|
|
|
Property and
equipment, net
|
|
4,037,294
|
|
3,444,805
|
Held-for-sale
assets
|
|
17,022,630
|
|
469,805
|
Available-for-sale
securities
|
|
44,479,922
|
|
42,249,202
|
Loan to related
party
|
|
3,628,415
|
|
9,530,969
|
Other long-term
assets
|
|
64,176
|
|
92,893
|
Total
assets
|
|
100,907,371
|
|
83,637,542
|
|
|
|
|
|
Accounts
payable
|
|
2,100,933
|
|
1,916,687
|
Dividend
payable
|
|
|
|
174,658
|
Accrued expenses and
other current liabilities
|
|
8,643,756
|
|
7,528,792
|
Income taxes
payable
|
|
353,635
|
|
732,039
|
Deferred
revenue
|
|
512,009
|
|
200,583
|
Current
liabilities
|
|
11,610,333
|
|
10,552,759
|
|
|
|
|
|
Deferred tax
liability, net
|
|
1,952,990
|
|
1,899,352
|
Total
liabilities
|
|
13,563,323
|
|
12,452,111
|
|
|
|
|
|
Ordinary
shares
|
|
918,844
|
|
918,844
|
Additional paid-in
capital
|
|
161,962,670
|
|
122,338,614
|
Statutory
reserve
|
|
8,350,142
|
|
8,350,142
|
Retained
earnings
|
|
(118,876,715)
|
|
(91,543,737)
|
Beginning
balance
|
|
(126,382,395)
|
|
(95,354,619)
|
Net income (loss)
attributable to Acorn
|
|
7,505,680
|
|
3,810,882
|
Accumulated other
comprehensive income
|
|
60,968,963
|
|
59,279,111
|
Treasury stock, at
cost
|
|
(26,335,296)
|
|
(28,491,779)
|
Total Acorn
International, Inc. shareholders'
equity
|
|
86,988,608
|
|
70,851,195
|
|
|
|
|
|
Noncontrolling
interests
|
|
355,440
|
|
334,236
|
Total
equity
|
|
87,344,048
|
|
71,185,431
|
Total liabilities
and equity
|
|
100,907,371
|
|
83,637,542
|
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SOURCE Acorn International, Inc.