ChinaNet Online Holdings Reports Second Quarter 2013 Financial Results Projects $36 million Revenue and $1.2 million Net Income for Full Year 2013 Management to host earnings conference call on Monday, August 19^th at 8:30 a.m. ET BEIJING, Aug. 15, 2013 (GLOBE NEWSWIRE) -- 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 $0.4 million $0.9 million -52% Stockholders 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 $0.5 million $0.5 million -12% Stockholders 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 4^th to June 6^th, 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 25^th to July 28^th, 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, December 31, 2012 2013 (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 851 959 affiliates 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 22 22 30, 2013 and December 31, 2012) 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 45,525 44,224 stockholders' equity 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 3,146 3,060 1,744 1,817 administrative expenses Research and development 912 756 463 425 expenses 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 798 1,063 824 925 investments and noncontrolling interests Income tax benefit / (268) (14) (354) 222 (expense) Income before equity method investments and 530 1,049 470 1,147 noncontrolling interests Share of losses in equity investment (125) (297) (54) (104) affiliates Net income 405 752 416 1,043 Net loss / (income) attributable to 59 (223) 18 (148) noncontrolling interests Net income attributable to ChinaNet Online 464 529 434 895 Holdings, Inc. Net income 405 752 416 1,043 Foreign currency 828 298 613 35 translation gain Comprehensive Income $1,233 $1,050 $1,029 $1,078 Comprehensive loss / (income) attributable to 47 (266) 9 (154) noncontrolling interests Comprehensive income attributable to ChinaNet $1,280 $784 $1,038 $924 Online Holdings, Inc. 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 -- 316 affiliate Short-term loan repaid to an equity investment -- (538) affiliate Net cash used in financing activities -- (227) Effect of exchange rate fluctuation on cash and cash 69 61 equivalents 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: firstname.lastname@example.org Web: www.mzgroup.us
ChinaNet Online Holdings Reports Second Quarter 2013 Financial Results
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