ChinaNet Online Holdings Reports Third Quarter 2013 Financial Results Projects $30 Million Revenue and $1.2 Million Net Income for Full Year 2013 Management to Host Earnings Conference Call on Wednesday, November 20^th at 8:30 a.m. ET BEIJING, Nov. 19, 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 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 $1.2 million $1.2 million -5% Stockholders 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 $1.6 million $1.7 million -7% Stockholders 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-yearAnniversary and Customer Sharing Conference("the Conference") inZhengjie Palace Hot Spring HotelinBeijing, Chinafrom August 17thto 18th, 2013. The Company secured over$1 millionof 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 fromChinaNet'sclose business partners, such as Baidu, Qihu (360),China Business Journal, Source for Enterprise Group,Skylife Group, andGuangfa Technology Co., Ltdalso 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 845 959 affiliates 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 46,768 44,224 stockholders' equity 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 Three Months Ended 30, 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 4,690 4,320 1,544 1,260 expenses Research and development 1,490 1,112 578 356 expenses 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 2,184 2,785 1,386 1,722 investments and noncontrolling interests Income tax expense (469) (196) (201) (182) Income before equity method investments and 1,715 2,589 1,185 1,540 noncontrolling interests Share of losses in equity (170) (394) (45) (97) investment affiliates Net income 1,545 2,195 1,140 1,443 Net loss / (income) attributable to 78 (446) 19 (223) noncontrolling interests Net income attributable to ChinaNet Online Holdings, $1,623 $1,749 $1,159 $1,220 Inc. Net income 1,545 2,195 1,140 1,443 Foreign currency 1,076 159 248 (139) translation gain Comprehensive Income $2,621 $2,354 $1,388 $1,304 Comprehensive loss/ (income) attributable to 71 (450) 24 (184) noncontrolling interests Comprehensive income attributable to ChinaNet $2,692 $1,904 $1,412 $1,120 Online Holdings, Inc. 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 170 394 affiliates 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 (32) -- investment affiliates 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 -- (5) stockholders Short-term loan borrowed from an equity -- 316 investment affiliate Short-term loan repaid to an equity investment -- (537) affiliate Net cash provided by (used in) financing 804 (226) activities Effect of exchange rate fluctuation on cash 110 44 and cash equivalents Net decrease in cash and cash equivalents (550) (2,182) Cash and cash equivalents at beginning of the 5,483 10,695 period 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 $11 $53 future service CONTACT: MZ North America Ted Haberfield, President Direct: +1-760-755-2716 Email: email@example.com Web: www.mzgroup.us
ChinaNet Online Holdings Reports Third Quarter 2013 Financial Results
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