Projects $36
million Revenue and $1.2
million Net Income for Full Year 2013
Management to host earnings conference call on
Monday, August 19th 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 second quarter of 2013.
Summary Financials
|
Second quarter 2013
Results (USD) (Unaudited) |
|
Q2 2013 |
Q2 2012 |
CHANGE |
Sales |
$8.9 million |
$13.1 million |
-32% |
Gross Profit |
$3.6 million |
$3.8 million |
-4% |
Gross Margin |
40.5% |
28.7% |
+41% |
Net Income Attributable to Common
Stockholders |
$0.4 million |
$0.9 million |
-52% |
EPS (Diluted) |
$0.02 |
$0.04 |
-50% |
Second Quarter 2013 Financial Results
Revenues for the three months ended June 30, 2013 were $8.9
million compared to $13.1 million for the three months ended June
30, 2012, representing a 32% decrease. Low margin TV advertising
fell by $3.6 million, accounting for the majority of the
year-over-year revenue decline.
Mr. George Chu, Chief Operating Officer of the Company stated,
"Despite ongoing challenges in China's economy, we remained
profitable during the first half of 2013. Equally important, we
started to see some gradual improvement in small business activity
toward the end of the quarter as the Chinese government took steps
to reinvigorate the economy. While we are encouraged by the
increase in the number of customers of our internet advertising
segment in the second quarter, which has continued so far in the
third quarter, we are investing judiciously in new services such as
mobile advertising and marketing and Flying Cloud to position
ourselves for a more robust upturn we anticipate occurring in
2014."
Second Quarter 2013 Revenue Breakdown by Business Unit
(USD in thousands)
|
Q2 2013 |
% |
Q2 2012 |
% |
% Change |
Internet Advertisement |
$5,436 |
61% |
$5,358 |
41% |
+1% |
TV Advertisement |
$2,489 |
28% |
$6,144 |
47% |
-59% |
Bank Kiosk |
$71 |
1% |
$71 |
1% |
-- |
Brand Mgmt. & Sales Channel Building |
$896 |
10% |
$1,554 |
12% |
-42% |
Revenue from internet advertisements for the three months ended
June 30, 2013 increased by 1% to $5.4 million compared to the same
period a year ago. Excluding the business tax expenses, which were
included in revenue for the second quarter of 2012, internet
advertising revenues were up 6%, reflecting an increase in the
number of internet advertising customers. TV advertising revenues
fell to $2.5 million in the second quarter of 2013 from $6.1
million as the Company had significantly higher TV advertising
activity in the second quarter of 2012 related to the launch of its
entrepreneurial reality show. Brand management and sales channel
building revenues fell by approximately $0.7 million as a result of
lower spending by customers in reaction to the slowing Chinese
economy.
Gross profit for the three months ended June 30, 2013 was $3.6
million, down 4% from $3.8 million in the same period one year ago.
Gross margin was 40.5%, up significantly from 28.7% in the second
quarter of 2012. Gross margins improved due to increased
contribution from higher margin internet advertising revenues and
an improvement in TV advertising margins.
Operating expenses for the three months ended June 30, 2013 were
approximately $2.8 million, down 5% compared to $3.0 million in the
same period in 2012. The Company increased research and development
expenses by 9% to support new product investments. General and
administrative expenses fell by 4% to $1.7 million in the second
quarter of 2013.
The Company recorded $0.8 million of operating income in the
three months ended June 30, 2013, essentially flat from the same
period one year ago.
Net income attributable to common stockholders for the three
months ended June 30, 2013 was $0.4 million and earnings per share
was $0.02, compared to $0.9 million and $0.04 for the three months
ended June 30, 2012, respectively.
|
First Half 2013
Results (USD) (Unaudited) |
|
1H 2013 |
1H 2012 |
CHANGE |
Sales |
$15.9 million |
$28.1 million |
-43% |
Gross Profit |
$6.2 million |
$6.2 million |
-- |
Gross Margin |
38.8% |
22.0% |
+76% |
Net Income/(Loss) Attributable to
Common Stockholders |
$0.5 million |
$0.5 million |
-12% |
EPS (Diluted) |
$0.02 |
$0.02 |
-- |
Revenue for the six months ended June 30, 2013 was $15.9 million
compared to $28.1 million in the corresponding period a year ago.
Internet advertising, TV advertising, and brand management and
sales channel building revenues were $9.2 million, $5.1 million,
and $1.4 million in the first half of 2013, respectively.
Gross profit and gross margin for the first six months of 2013
were $6.2 million and 38.8% compared to $6.2 million and 22.0%,
respectively, in the same period a year ago.
Operating expenses increased by 4% to $5.4 million in the first
half of 2013. ChinaNet generated $0.7 million in operating income,
down 22% from $0.9 million in the first half of 2012.
Net income attributable to ChinaNet common stockholders and net
income per share were $0.5 million and $0.02 in the first half of
2013 and 2012, respectively. The weighted average diluted shares
outstanding was essentially flat year-over-year at 22.2 million
shares.
Balance Sheet and Cash Flow
The Company had $3.4 million in cash and cash equivalents as of
June 30, 2013, compared to $5.5 million as of December 31, 2012,
working capital of $25.7 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 $45.5 million at June 30, 2013 compared to $44.2 million at
December 31, 2012.
The Company had slight cash outflows from operations for the
first six months of 2013 compared to a $1.1 million of cash inflows
for the first six months of 2012.
Guidance for 2013
The Company provides the following guidance for fiscal year
2013.
Revenues: $36 million |
Net Income: $1.2 million |
Business Updates
ChinaNet participated in the 2013 Omni-Channel Retailing
Conference, one of the premier retail industry events in Hong Kong,
from June 4th to June 6th, 2013. The Company's Chief Operating
Officer George Chu was a guest on the Senior Executives' Panel,
discussing the future of online and mobile retailing.
The Company entered into a partnership agreement with China
Business Journal on July 16, 2013 to launch a contest to identify
and launch businesses with good growth potential. China Business
Journal, a leading print publication with over 920,000 weekly
subscribers and over 3 million online readers, will partner with
ChinaNet, a leading online marketing and branding services company,
to help drive innovation in China's burgeoning small business
community.
Wahaha Commercial Co., Ltd. ("Wahaha"), a real estate
development company with plans to expand throughout key areas in
China via shopping malls, supermarkets and hypermarket chains,
brand discount stores, kids and convenience stores, engaged
ChinaNet to help organize and host a franchise-related conference
to help promote Wahaha's expansion plans. The conference, held from
July 25th to July 28th, 2013 in Hangzhou, was attended by over
2,500 participants, including key political, business and community
leaders and entrepreneurs.
Conference Call
Date: Monday, August 19, 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: 10032880 |
Webcast:
http://webcast.mzvaluemonitor.com/Cover.aspx?PlatformId=1565 |
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 August 26, 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 10032880.
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 services for
small and medium-sized enterprises and entrepreneurial management
and networking services 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) |
|
|
June 30,
2013 |
December 31,
2012 |
|
(US $) |
(US $) |
|
(Unaudited) |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 3,392 |
$ 5,483 |
Term deposit |
3,426 |
3,357 |
Accounts receivable, net |
10,460 |
8,486 |
Other receivables, net |
3,080 |
3,103 |
Prepayment and deposit to suppliers |
14,636 |
14,596 |
Due from related parties |
375 |
210 |
Other current assets |
104 |
136 |
Deferred tax assets-current |
23 |
50 |
Total current
assets |
35,496 |
35,421 |
|
|
|
Investment in and advance to equity
investment affiliates |
851 |
959 |
Property and equipment, net |
1,417 |
1,636 |
Intangible assets, net |
6,782 |
7,167 |
Deposit for purchasing of software
technology |
808 |
-- |
Goodwill |
11,312 |
11,083 |
Deferred tax assets-non current |
1,023 |
652 |
Total Assets |
$ 57,689 |
$ 56,918 |
|
|
|
Liabilities and Equity |
|
|
Current liabilities: |
|
|
Accounts payable * |
$ 257 |
$ 110 |
Advances from customers * |
810 |
1,065 |
Accrued payroll and other accruals * |
947 |
904 |
Payable for acquisition * |
-- |
1,266 |
Taxes payable * |
7,564 |
6,683 |
Other payables * |
259 |
217 |
Total current
liabilities |
9,837 |
10,245 |
|
|
|
Long-term
liabilities: |
|
|
Deferred tax liability-non current * |
1,612 |
1,689 |
Long-term borrowing from director |
141 |
139 |
Total Liabilities |
11,590 |
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 22,226,540
shares and 22,186,540 shares at June 30, 2013 and December 31,
2012) |
22 |
22 |
Additional paid-in capital |
20,029 |
20,008 |
Statutory reserves |
2,296 |
2,296 |
Retained earnings |
19,969 |
19,505 |
Accumulated other comprehensive
income |
3,209 |
2,393 |
Total ChinaNet Online Holdings, Inc.'s
stockholders' equity |
45,525 |
44,224 |
|
|
|
Noncontrolling interests |
574 |
621 |
Total equity |
46,099 |
44,845 |
Total Liabilities and
Equity |
$ 57,689 |
$ 56,918 |
|
|
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME |
(In thousands, except for
number of shares and per share data) |
|
|
Six Months Ended
June 30, |
Three Months
Ended June 30, |
|
2013 |
2012 |
2013 |
2012 |
|
(US $) |
(US $) |
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
Sales |
|
|
|
|
From unrelated parties |
$ 15,767 |
$ 27,996 |
$ 8,777 |
$ 13,076 |
From related parties |
174 |
66 |
115 |
51 |
|
15,941 |
28,062 |
8,892 |
13,127 |
|
|
|
|
|
Cost of sales |
9,757 |
21,902 |
5,290 |
9,364 |
Gross margin |
6,184 |
6,160 |
3,602 |
3,763 |
|
|
|
|
|
Operating expenses |
|
|
|
|
Selling expenses |
1,390 |
1,402 |
602 |
713 |
General and administrative expenses |
3,146 |
3,060 |
1,744 |
1,817 |
Research and development expenses |
912 |
756 |
463 |
425 |
|
5,448 |
5,218 |
2,809 |
2,955 |
|
|
|
|
|
Income from operations |
736 |
942 |
793 |
808 |
|
|
|
|
|
Other income (expenses) |
|
|
|
|
Interest income |
64 |
121 |
32 |
116 |
Other (expenses)/income |
(2) |
-- |
(1) |
1 |
|
62 |
121 |
31 |
117 |
|
|
|
|
|
Income before income tax expense,
equity method investments and noncontrolling
interests |
798 |
1,063 |
824 |
925 |
Income tax benefit / (expense) |
(268) |
(14) |
(354) |
222 |
Income before equity method
investments and noncontrolling interests |
530 |
1,049 |
470 |
1,147 |
Share of losses in equity investment
affiliates |
(125) |
(297) |
(54) |
(104) |
Net income |
405 |
752 |
416 |
1,043 |
Net loss / (income) attributable to
noncontrolling interests |
59 |
(223) |
18 |
(148) |
Net income attributable to ChinaNet
Online Holdings, Inc. |
464 |
529 |
434 |
895 |
|
|
|
|
|
Net income |
405 |
752 |
416 |
1,043 |
Foreign currency translation gain |
828 |
298 |
613 |
35 |
Comprehensive Income |
$ 1,233 |
$ 1,050 |
$ 1,029 |
$ 1,078 |
Comprehensive loss / (income)
attributable to noncontrolling interests |
47 |
(266) |
9 |
(154) |
Comprehensive income attributable to
ChinaNet Online Holdings, Inc. |
$ 1,280 |
$ 784 |
$ 1,038 |
$ 924 |
|
|
|
|
|
Earnings per share |
|
|
|
|
Earnings per common share |
|
|
|
|
Basic |
$ 0.02 |
$ 0.02 |
$ 0.02 |
$ 0.04 |
Diluted |
$ 0.02 |
$ 0.02 |
$ 0.02 |
$ 0.04 |
|
|
|
|
|
Weighted average number of common
shares outstanding: |
|
|
|
|
Basic |
22,193,391 |
22,184,562 |
22,200,166 |
22,186,540 |
Diluted |
22,193,391 |
22,184,562 |
22,200,166 |
22,186,540 |
|
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED STATEMENTS
OF CASH FLOWS |
(In thousands) |
|
|
Six
Months Ended June 30, |
|
2013 |
2012 |
|
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
Cash flows from operating
activities |
|
|
Net income |
$ 405 |
$ 752 |
Adjustments to reconcile net
income to net cash (used
in) / provided
by operating activities |
|
|
Depreciation and amortization |
840 |
818 |
Share-based compensation expenses |
21 |
27 |
Allowances for doubtful debts |
787 |
561 |
Share of losses in equity investment
affiliates |
125 |
297 |
Deferred taxes |
(437) |
(558) |
Changes in operating assets and
liabilities |
|
|
Accounts receivable |
(1,781) |
(5,346) |
Other receivables |
(701) |
226 |
Prepayment and deposit to suppliers |
258 |
1,983 |
Due from related parties |
(160) |
43 |
Other current assets |
32 |
26 |
Accounts payable |
142 |
109 |
Advances from customers |
(274) |
1,070 |
Accrued payroll and other accruals |
32 |
418 |
Due to related parties |
-- |
(162) |
Other payables |
(45) |
45 |
Taxes payable |
736 |
783 |
Net cash (used
in) provided by operating activities |
(20) |
1,092 |
|
|
|
Cash flows from investing
activities |
|
|
Purchases of vehicles and office
equipment |
(60) |
(46) |
Deposit for purchasing of software
technology |
(800) |
-- |
Project development deposit to a third
party |
-- |
(2,450) |
Payment for acquisition of VIEs |
(1,280) |
(553) |
Net cash
used in
investing activities |
(2,140) |
(3,049) |
|
|
|
Cash flows from financing
activities |
|
|
Dividend paid to convertible preferred
stockholders |
-- |
(5) |
Short-term loan borrowed from an equity
investment affiliate |
-- |
316 |
Short-term loan repaid to an equity
investment affiliate |
-- |
(538) |
Net cash used
in financing activities |
-- |
(227) |
|
|
|
Effect of exchange rate fluctuation on cash
and cash equivalents |
69 |
61 |
|
|
|
Net decrease in cash and cash
equivalents |
(2,091) |
(2,123) |
|
|
|
Cash and cash equivalents at beginning of
the period |
5,483 |
10,695 |
Cash and cash equivalents at end of the
period |
$
3,392 |
$
8,572 |
CONTACT: MZ North America
Ted Haberfield, President
Direct: +1-760-755-2716
Email: thaberfield@mzgroup.us
Web: www.mzgroup.us
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