Projects $30
Million Revenue and $1.2
Million Net Income for Full Year 2013
Management to Host Earnings Conference Call on
Wednesday, November 20th 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 third quarter of 2013.
Summary
Financials |
|
Third Quarter 2013
Results (USD) (Unaudited) |
|
Q3 2013 |
Q3 2012 |
CHANGE |
Sales |
$7.5 million |
$10.3 million |
-27% |
Gross Profit |
$4.1 million |
$4.1 million |
-- |
Gross Margin |
55.0% |
40.1% |
+37% |
Net Income Attributable to Common
Stockholders |
$1.2 million |
$1.2 million |
-5% |
EPS (Diluted) |
$0.05 |
$0.05 |
-- |
Third quarter 2013 Financial Results
Revenues for the three months ended September 30, 2013 were $7.5
million compared to $10.3 million for the three months ended
September 30, 2012, representing a 27% decrease. Low margin TV
advertising fell by $2.7 million, or 83%, accounting for the
majority of the year-over-year revenue decline. Internet
advertising revenues increased by 7% to $6.1 million.
Mr. George Chu, Chief Operating Officer of the Company stated,
"We generated solid growth in our operating cash flows so far this
year. While our customers remain cautious with their spending, we
were able to increase our internet advertising revenues 7% in the
third quarter. We continue to invest in new services and
technologies that will further improve our competitive
position."
Third quarter 2013
Revenue Breakdown by Business Unit (USD in thousands) |
|
Q3 2013 |
% |
Q3 2012 |
% |
% Change |
Internet Advertisement |
$6,071 |
80% |
$5,650 |
55% |
+7% |
TV Advertisement |
$560 |
8% |
$3,238 |
32% |
-83% |
Bank Kiosk |
$71 |
1% |
$72 |
1% |
-- |
Brand Mgmt. & Sales Channel Building |
$779 |
10% |
$1,327 |
13% |
-41% |
Revenue from internet advertisements for the three months ended
September 30, 2013 increased by 7% to $6.1 million compared to the
same period a year ago. TV advertising revenues fell to $0.6
million in the third quarter of 2013 from $3.3 million in the same
period in 2012 as the Company had significantly higher TV
advertising activity in the third quarter of 2012 related to the
launch of its entrepreneurial reality show and the promotion of its
entrepreneurial website, 28.com and Chuangye.com. Brand management
and sales channel building revenues fell by approximately $0.5
million as a result of lower spending by customers in reaction to
the slowing Chinese economy.
Gross profit for the three months ended September 30, 2013 was
$4.1 million, essentially unchanged from the third quarter of 2012.
Gross margin was 55%, up significantly from 40.1% in the third
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 September 30, 2013
were approximately $2.7 million, up 21% compared to $2.3 million in
the same period in 2012. The Company increased research and
development expenses by 62% to support new product investments.
Selling expenses fell by 4% to $0.6 million in the third quarter of
2013.
The Company recorded $1.4 million of operating income in the
three months ended September 30, 2013 compared to $1.9 million in
the same period one year ago.
Net income attributable to common stockholders for the three
months ended September 30, 2013 was $1.2 million and earnings per
share was $0.05 for the third quarter of 2013 and 2012.
|
First Nine months
2013 Results (USD) (Unaudited) |
|
YTD 2013 |
YTD 2012 |
CHANGE |
Sales |
$23.4 million |
$38.3 million |
-39% |
Gross Profit |
$10.3 million |
$10.3 million |
-- |
Gross Margin |
44.0% |
26.8% |
+64% |
Net Income/(Loss) Attributable to
Common Stockholders |
$1.6 million |
$1.7 million |
-7% |
EPS (Diluted) |
$0.07 |
$0.08 |
-13% |
Revenue for the nine months ended September 30, 2013 was $23.4
million compared to $38.3 million in the corresponding period a
year ago. Internet advertising, TV advertising, and brand
management and sales channel building revenues were $15.3 million,
$5.7 million, and $2.2 million in the first nine months of 2013,
respectively.
Gross profit and gross margin for the first nine months of 2013
were $10.3 million and 44% compared to $10.3 million and 26.8%,
respectively, in the same period a year ago.
Operating expenses increased by 10% to $8.2 million in the first
nine months of 2013. ChinaNet generated $2.1 million in operating
income, down 25% from $2.8 million in the first nine months of
2012.
Net income attributable to ChinaNet common stockholders and net
income per share were $1.6 million and $0.07 in the first nine
months of 2013. The weighted average diluted shares outstanding was
essentially flat year-over-year at 22.3 million shares.
Balance Sheet and Cash Flow
The Company had $4.9 million in cash and cash equivalents as of
September 30, 2013, compared to $5.5 million as of December 31,
2012, working capital of $24.6 million, compared to $25.2 million
as of December 31, 2012, and a current ratio of 3.0 to 1, compared
3.5 to 1 as of December 31, 2012. Total shareholders' equity of
ChinaNet was $46.8 million at September 30, 2013 compared to $44.2
million at December 31, 2012.
The Company generated approximately $2.8 million of cash flows
from operations in the first nine months of 2013 compared to a $2.5
million of cash inflows for the first nine months of 2012.
Guidance for 2013
The Company provides the following guidance for fiscal year
2013.
Revenues: $30 million Net Income: $1.2 million
Business Updates
ChinaNet hosted its 10-year Anniversary and Customer
Sharing Conference ("the Conference") in Zhengjie Palace
Hot Spring Hotel in Beijing, China from August
17th to 18th, 2013. The Company secured over $1
million of new contract signings during the 2-day conference.
At the Conference, the Company celebrated its achievements over the
past decade and introduced the latest services, including "366
value added service platform", to its customers. Over 250
guests and employees participated in the Conference. Executives
from ChinaNet's close business partners, such as Baidu,
Qihu (360), China Business Journal, Source for Enterprise
Group, Skylife Group, and Guangfa Technology Co.,
Ltd also attended the event.
ChinaNet launched a fall promotional campaign in October 2013 to
help entrepreneurs and franchisees securing funding and services
for their businesses. The three month campaign attracted hundreds
of clients and funders.
The Company continued to establish closer ties with local
communities and businesses through various initiatives. In October
2013, ChinaNet began a marketing awareness campaign to help promote
Joy Paradise, one of the largest retail shopping centers under
construction in Hebei Province. The new state-of-the-art complex
will house close to 300 retail and entertainment shops and
restaurants – all prospective clients of ChinaNet - when it opens
in August 2014. Separately, Company executives met with local
government officials from Quanzhou to discuss various cultural and
creative projects that could help promote local businesses in
Fujian Province.
In early November 2013, ChinaNet's subsidiary Liansuo.com signed
an agreement with Beijing Origus Food Co. Ltd. ("Origus") to help
them expand their franchise in China and internationally. Origus, a
pioneer of the pizza buffet concept in China, has hundreds of
locations in more than 20 provinces. Liansuo.com will help Origus
promote their brand and attract potential franchise partners.
ChinaNet participated in the inaugural China Franchise
Exhibition to be held at the Chengdu Century International
Convention Center, located in Chengdu, China from November 14th to
16th, 2013. ChinaNet representatives will network with franchise
owners and local government representatives to discuss Liansuo.com
and other ChinaNet products and services.
Conference Call
Date: Wednesday, November 20, 2013 Time: 8:30 a.m. Eastern Time
Conference Line (U.S.): 1-877-941-4774 International Dial-In:
1-480-629-9760 Conference ID: 4651460 Webcast:
http://public.viavid.com/index.php?id=106961
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 11:59 pm Eastern
Time on November 27, 2013. 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 4651460.
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) |
|
|
|
|
September 30, |
December 31, |
|
2013 |
2012 |
|
(US $) |
(US $) |
|
(Unaudited) |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$4,933 |
$5,483 |
Term deposit |
3,446 |
3,357 |
Accounts receivable, net |
10,772 |
8,486 |
Other receivables, net |
2,285 |
3,103 |
Prepayment and deposit to suppliers |
15,115 |
14,596 |
Due from related parties |
443 |
210 |
Other current assets |
47 |
136 |
Deferred tax assets-current |
35 |
50 |
Total current
assets |
37,076 |
35,421 |
Investment in and advance to equity
investment affiliates |
845 |
959 |
Property and equipment, net |
1,280 |
1,636 |
Intangible assets, net |
6,559 |
7,167 |
Deposit for purchasing of software
technology |
2,438 |
-- |
Goodwill |
11,380 |
11,083 |
Deferred tax assets-non current |
1,220 |
652 |
Total Assets |
$60,798 |
$56,918 |
Liabilities and Equity |
|
|
Current liabilities: |
|
|
Short-term bank loan |
$813 |
$ -- |
Accounts payable |
402 |
110 |
Advances from customers |
1,485 |
1,065 |
Accrued payroll and other accruals |
833 |
904 |
Payable for acquisition |
488 |
1,266 |
Taxes payable |
8,190 |
6,683 |
Other payables |
263 |
217 |
Total current
liabilities |
12,474 |
10,245 |
Long-term liabilities: |
|
|
Deferred tax liability-non current |
1,566 |
1,689 |
Long-term borrowing from director |
142 |
139 |
Total Liabilities |
14,182 |
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 22,376,540
shares and 22,186,540 shares at September 30, 2013 and December 31,
2012, respectively) |
|
|
|
|
|
|
22 |
22 |
Additional paid-in capital |
19,860 |
20,008 |
Statutory reserves |
2,296 |
2,296 |
Retained earnings |
21,128 |
19,505 |
Accumulated other comprehensive
income |
3,462 |
2,393 |
Total ChinaNet Online Holdings, Inc.'s
stockholders' equity |
46,768 |
44,224 |
Noncontrolling interests |
(152) |
621 |
Total equity |
46,616 |
44,845 |
|
|
|
Total Liabilities and
Equity |
$60,798 |
$56,918 |
|
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME |
(In thousands, except for
number of shares and per share data) |
|
|
|
|
|
|
Nine Months Ended
September 30, |
Three Months
Ended September 30, |
|
2013 |
2012 |
2013 |
2012 |
|
(US $) |
(US $) |
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
Sales |
|
|
|
|
From unrelated parties |
$23,108 |
$38,232 |
$7,341 |
$10,236 |
From related parties |
314 |
117 |
140 |
51 |
|
23,422 |
38,349 |
7,481 |
10,287 |
Cost of sales |
13,123 |
28,065 |
3,366 |
6,163 |
Gross margin |
10,299 |
10,284 |
4,115 |
4,124 |
Operating expenses |
|
|
|
|
Selling expenses |
2,007 |
2,042 |
617 |
640 |
General and administrative expenses |
4,690 |
4,320 |
1,544 |
1,260 |
Research and development expenses |
1,490 |
1,112 |
578 |
356 |
|
8,187 |
7,474 |
2,739 |
2,256 |
Income from operations |
2,112 |
2,810 |
1,376 |
1,868 |
|
|
|
|
|
Other income (expenses) |
|
|
|
|
Interest income |
94 |
123 |
30 |
2 |
Interest expense |
(10) |
-- |
(10) |
-- |
Other expenses |
(12) |
(148) |
(10) |
(148) |
|
72 |
(25) |
10 |
(146) |
|
|
|
|
|
Income before income tax expense,
equity method investments and noncontrolling
interests |
2,184 |
2,785 |
1,386 |
1,722 |
Income tax expense |
(469) |
(196) |
(201) |
(182) |
Income before equity method
investments and noncontrolling interests |
1,715 |
2,589 |
1,185 |
1,540 |
Share of losses in equity investment
affiliates |
(170) |
(394) |
(45) |
(97) |
Net income |
1,545 |
2,195 |
1,140 |
1,443 |
Net loss / (income) attributable to
noncontrolling interests |
78 |
(446) |
19 |
(223) |
Net income attributable to ChinaNet
Online Holdings, Inc. |
$1,623 |
$1,749 |
$1,159 |
$1,220 |
|
|
|
|
|
Net income |
1,545 |
2,195 |
1,140 |
1,443 |
Foreign currency translation gain |
1,076 |
159 |
248 |
(139) |
Comprehensive Income |
$2,621 |
$2,354 |
$1,388 |
$1,304 |
Comprehensive loss/ (income) attributable to
noncontrolling interests |
71 |
(450) |
24 |
(184) |
Comprehensive income attributable to ChinaNet
Online Holdings, Inc. |
$2,692 |
$1,904 |
$1,412 |
$1,120 |
|
|
|
|
|
Earnings per share |
|
|
|
|
Earnings per common share |
|
|
|
|
Basic |
$0.07 |
$0.08 |
$0.05 |
$0.05 |
Diluted |
$0.07 |
$0.08 |
$0.05 |
$0.05 |
Weighted average number of common
shares outstanding: |
|
|
|
|
Basic |
22,253,463 |
22,185,226 |
22,371,649 |
22,186,540 |
Diluted |
22,253,463 |
22,185,226 |
22,371,649 |
22,186,540 |
|
CHINANET ONLINE
HOLDINGS, INC. |
CONSOLIDATED STATEMENTS
OF CASH FLOWS |
(In thousands) |
|
|
|
|
Nine Months Ended
September 30, |
|
2013 |
2012 |
|
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
Cash flows from operating
activities |
|
|
Net income |
$1,545 |
$2,195 |
Adjustments to reconcile net income
to net cash provided by operating activities |
|
|
Depreciation and amortization |
1,252 |
1,223 |
Share-based compensation
expenses |
114 |
38 |
Allowances for doubtful debts |
1,024 |
561 |
Share of losses in equity investment
affiliates |
170 |
394 |
Loss on disposal of property and
equipment |
-- |
2 |
Deferred taxes |
(696) |
(749) |
Changes in operating assets and
liabilities |
|
|
Accounts receivable |
(2,269) |
(5,712) |
Other receivables |
101 |
198 |
Prepayment and deposit to suppliers |
(127) |
3,401 |
Due from related parties |
(225) |
4 |
Other current assets |
89 |
34 |
Accounts payable |
284 |
(172) |
Advances from customers |
388 |
111 |
Accrued payroll and other accruals |
(84) |
(134) |
Due to related parties |
-- |
(162) |
Other payables |
(67) |
25 |
Taxes payable |
1,313 |
1,210 |
Net cash provided by operating
activities |
2,812 |
2,467 |
|
|
|
Cash flows from investing
activities |
|
|
Purchases of vehicles and office
equipment |
(65) |
(185) |
Deposit for purchasing of software
technology |
(2,411) |
-- |
Long-term investment in and advance to
equity investment affiliates |
(32) |
-- |
Project development deposit to a third
party |
-- |
(2,450) |
Cash effect on deconsolidation of
VIEs |
-- |
(15) |
Payment for acquisition of VIEs |
(1,768) |
(1,817) |
Net cash used in investing
activities |
(4,276) |
(4,467) |
|
|
|
Cash flows from financing
activities |
|
|
Proceeds from short-term bank loan |
804 |
-- |
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 |
-- |
(537) |
Net cash provided by (used in)
financing activities |
804 |
(226) |
|
|
|
Effect of exchange rate fluctuation on cash
and cash equivalents |
110 |
44 |
|
|
|
Net decrease in cash and cash
equivalents |
(550) |
(2,182) |
|
|
|
Cash and cash equivalents at beginning of
the period |
5,483 |
10,695 |
Cash and cash equivalents at end of the
period |
$4,933 |
$8,513 |
|
|
|
Supplemental disclosure of cash flow
information |
|
|
|
|
|
Income taxes paid |
$39 |
$74 |
|
|
|
Non-cash transactions: |
|
|
Restricted stock and options granted for
future service |
$11 |
$53 |
CONTACT: MZ North America
Ted Haberfield, President
Direct: +1-760-755-2716
Email: thaberfield@mzgroup.us
Web: www.mzgroup.us
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