April 14, 2016

ChinaNet Online Holdings Reports Fiscal Year 2015 Financial Results

  • 2015 total revenues decreased by 15% YOY to $32.3 million
  • 2015 Gross margin increased to 23.6%, a 42.2% increase YOY
  • 2015 internet advertisement revenues increased to $19.6 million, a 11% increase YOY
  • Full year net loss attributable to ChinaNet decreased by $4.6 million YOY to $9.1 million

BEIJING, April 15, 2016 (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, announced today financial results for the fiscal year 2015.

Summary Financials

Fiscal Year 2015 Results (USD)
 FY 2015FY 2014CHANGE
Sales$32.3 million $38.0 million -15.0%
Gross Profit$7.6 million$6.3 million 20.9%
Gross Margin 23.6% 16.6% 42.2%
Net Loss Attributable to ChinaNet($9.1) million($13.7) million--
EPS from continued operations (Diluted)($0.29)($0.55) --
EPS from discontinued operations (Diluted)($0.05)($0.07)--
        

Excluding revenue generated from discontinued operation for the years ended December 31, 2015 and 2014, total revenues decreased to $32.3 million for the year ended December 31, 2015 from $38.0 million in the prior year, primarily due to the decrease in TV advertising revenue during the year.

Previously, ChinaNet had four reportable operating segments, which included Internet Advertisement, TV Advertisement, Bank Kiosk, and Brand Management & Sales Channel Building. ChinaNet exited the Bank Kiosk and Brand Management & Sale Channel Building segments in order to concentrate all resources on its core business, which is internet advertising and online to offline (O2O) sales channel expansion, precision marketing and the related data services. The Brand Management & Sales Channel Building segment qualifies for presentation as a discontinued operation, which results of operations was presented as loss from discontinued operations as a separate component in the statements of operations and comprehensive loss for the years ended December 31, 2015 and 2014, respectively. Since the revenue generated from the Bank Kiosk segment was immaterial, the Company combined the performance of its Bank Kiosk segment with the TV Advertising segment for the years ended December 31, 2015 and 2014 as presented below.

 
Fiscal Year 2015 Revenue Breakdown by Business Unit (USD in thousands)
 
 FY 2015%FY 2014%% Change
Internet Advertisement$19,569  61%   $17,597  46 % +11%
Technical Services$363  1% $725   2% -50%
Search Engine Marketing Service$11,083  34% $12,939  34%  -14%
Internet Advertising & Related Services      $31,015  96% $31,261  82% -1%
TV and Bank Kiosk Advertising$1,250  4% $6,705  18% -81%
                 

Gross profit and gross margin for the fiscal year ended December 31, 2015 were $7.6 million and 24% compared to $6.3 million and 17%, respectively, for the fiscal year ended December 31, 2014. The increase was a direct result of the increase in the overall gross margin rate of the internet advertising segment to 24% for the year ended December 31, 2015, compared to 18% for the same period last year.

Operating expenses decreased by 12% to $16.9 million for the fiscal year ended December 31, 2015. Sales and marketing expenses decreased by 34% to $4.6 million. General and administrative expenses increased by 30% to $7.5 million. Impairment on fixed assets, intangible assets and goodwill for continued operations decreased by 56% from $4.2 million to $1.8 million. Loss from operations was $9.3 million in 2015, compared to $13.0 million in 2014.

Net loss attributable to ChinaNet common stockholders and net loss per share from continued operations and discontinued operations were $9.1 million, $0.29 per common share and $0.05 per common share for the fiscal year ended December 31, 2015. The weighted average diluted shares outstanding was 26.8 million shares in 2015 versus 22.4 million in 2014.

Balance Sheet and Cash Flow

The Company had $5.5 million in cash and cash equivalents as of December 31, 2015, compared to $5.0 million as of December 31, 2014, working capital of $13.7 million, compared to $17.3 million as of December 31, 2014, and a current ratio of 2.9 to 1, compared to 2.7 to 1 as of December 31, 2014. Total shareholders' equity of ChinaNet was $27.3 million at December 31, 2015 compared to $36.2 million at December 31, 2014.

The Company generated approximately $5.7 million of cash flows from operations for the year ended December 31, 2015 compared to a $2.0 million of cash flows for the year ended December 31, 2014.

Business Updates

ChinaNet has been increasingly focused on integrating small and medium business data and related data analysis services over the last several years. As this project nears completion, this updated business data service will soon serve the Company's customers with a more convenient and intelligent offering. SMEs will now be able to utilize ChinaNet for their entire business by utilizing all its available internet and mobile tools in one platform, enhancing customer loyalty and sales conversion rates in a convenient and cost-efficient manner. The service will include, but is not limited to, outputting coupons, cash vouchers, and other value-added offerings in the Company's customized mobile application.

As a result, ChinaNet will now be able to expand the Company's business coverage to not only SMEs, but to their respective individual customers and their customers' customers, by incorporating big data analysis and cloud computing technologies.

ChinaNet expects to officially and incrementally launch this business intelligence and data service to its SME clients in the first half of 2016. Revenue is expected to be recognized by deposits, monthly fees and annual fees. As the Company continues to evolve and improve its product and service offerings in response to market demand and new technology, management believes the financial results from the service will improve overall revenues and bottom line performance for ChinaNet as it matures throughout 2016 and beyond.

About ChinaNet Online Holdings, Inc.

The Company, a parent company of ChinaNet Online Media Group Ltd., incorporated in the BVI ("ChinaNet"), is a leading digital B2B (business to business) Internet technology company focusing on providing O2O sales channel expansion service for small and medium-sized enterprises (SMEs) and entrepreneurial management and networking service for entrepreneurs in China. The Company, through certain contractual arrangements with operating companies in the PRC, provides Internet advertising and other services for Chinese SMEs via its portal websites, 28.com, Liansuo.com and Chuangye.com. 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)
 
   As of December 31,
    2015    2014 
    (US $)   (US $) 
Assets      
Current assets:      
Cash and cash equivalents  $  5,503  $  5,037 
Term deposit   3,265    3,465 
Accounts receivable, net   2,549   2,407 
Other receivables, net   1,910   8,392 
Prepayment and deposit to suppliers   5,843   8,092 
Due from related parties   41   51 
Other current assets   45   61 
Deferred tax assets-current    -   176 
Assets classified as held for sale   1,882   - 
Total current assets   21,038   27,681 
       
Long-term investments   1,133   909 
Property and equipment, net   681    943 
Intangible assets, net   5,638   9,238 
Deposit and prepayment for purchasing of software technology   1,024   850 
Goodwill   4,396   6,772 
Deferred tax assets-non current   1,550   1,037 
Total Assets   35,460   47,430 
       
Liabilities and Equity      
Current liabilities:      
Short-term bank loan *  $  -   $  817 
Accounts payable *   95   782 
Advances from customers *   1,313   832 
Accrued payroll and other accruals *   685   585 
Due to noncontrolling interest of VIE *   -   638 
Payable for purchasing of software technology *   -    2,826 
Guarantee payment and prepayment from new investors   944   - 
Taxes payable *   3,186   3,332 
Other payables *   234   602 
Liabilities classified as held for sale *   913   - 
Total current liabilities   7,370    10,414 
       
Long-term liabilities:      
Deferred tax liability-non current *   118    964 
Long-term borrowing from a director   135   143 
Total Liabilities   7,623   11,521 
       
Commitments and contingencies    129   - 
       
Equity:      
ChinaNet Online Holdings, Inc.'s stockholders' equity      
Common stock (US$0.001 par value; authorized 50,000,000 shares; issued and outstanding 29,640,130 shares
  and 29,030,130 shares at December 31, 2015 and 2014, respectively)
    30    29 
Additional paid-in capital   26,510   24,703 
Statutory reserves   2,607   2,607 
Retained (deficit)/earnings   (3,870)  5,222 
Accumulated other comprehensive income   2,056   3,625 
Total ChinaNet Online Holdings, Inc.'s stockholders' equity   27,333   36,186 
        
Noncontrolling interests   375   (277)
Total equity   27,708   35,909 
       
Total Liabilities and Equity  $ 35,460   $ 47,430 
          


 
CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except for number of shares and per share data)
 
  Year Ended December 31,
   2015   2014 
  (US $) (US $)
     
Revenues    
  From unrelated parties $31,522  $37,613 
  From related parties  743   353 
Total revenues  32,265   37,966 
Cost of revenues  24,655   31,671 
Gross profit  7,610   6,295 
     
Operating expenses    
  Sales and marketing expenses  4,586   6,916 
  General and administrative expenses  7,498   5,780 
  Research and development expenses  2,164   2,660 
  Gain on deconsolidation of VIEs  (20)  (266)
  Impairment on equity method investments   874   - 
  Goodwill impairment and impairment on fixed assets and intangible assets  1,824   4,193 
Total operating expenses  16,926   19,283 
     
Loss from operations  (9,316)  (12,988)
     
Other income/(expenses)    
  Interest income  117   122 
  Interest expense  (47)  (52)
  Other income/(expenses)  34   (28)
Total other income  104   42 
Loss before income tax benefit, equity method investments, noncontrolling interests and discontinued operation     (9,212)   (12,946)
  Income tax benefit  1,496   478 
Loss before equity method investments, noncontrolling interests and discontinued operation  (7,716)  (12,468)
 Share of (losses)/income in equity investment affiliates  (2)  47 
Loss from continuing operation  (7,718)  (12,421)
Loss from discontinued operation, net of income tax  (1,465)  (1,471)
Net loss  (9,183)  (13,892)
 Net loss attributable to noncontrolling interests from continued operations  91   154 
Net loss attributable to ChinaNet Online Holdings, Inc. $   (9,092) $   (13,738)
         
Net loss $  (9,183) $  (13,892)
Foreign currency translation loss  (1,594)  (64)
Comprehensive Loss $   (10,777) $   (13,956)
Comprehensive loss attributable to noncontrolling interests  116   154 
Comprehensive loss attributable to ChinaNet Online Holdings, Inc. $   (10,661) $   (13,802)
     
Loss per share    
Loss from continued operations per common share    
  Basic and diluted $   (0.29) $   (0.55)
Loss from discontinued operations per common share    
  Basic and diluted $   (0.05) $   (0.07)
     
Weighted average number of common shares outstanding:    
  Basic and diluted  26,765,673   22,414,523 
 

 

 
CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
  Year Ended December 31,
   2015   2014 
  (US $) (US $)
     
Cash flows from operating activities    
Net loss $  (9,183) $  (13,892)
Adjustments to reconcile net loss to net cash provided by operating activities          
Depreciation and amortization  1,768    1,437 
Share-based compensation expenses  2,256   4,840 
Provision for/(reverse of) allowances for doubtful accounts  88   (861)
Share of losses/(income) in equity investment affiliates  2   (47 )
Goodwill impairment and impairment on fixed assets and intangible assets  3,110   5,639 
Impairment on equity method investments  874   - 
Gain on deconsolidation of VIEs  (20)  (266)
Loss on disposal of other long-term assets  63   - 
Deferred taxes  (1,558)  (850)
Changes in operating assets and liabilities    
Accounts receivable  (580)  5,226 
Other receivables  6,369   1,370 
Prepayment and deposit to suppliers  1,476   (1,499)
Due from related parties  7   449 
Other current assets  13   (42)
Accounts payable  (509)  390 
Advances from customers  1,152   (118)
Accrued payroll and other accruals  173   (60)
Other payables  37   318 
Taxes payable  59   (76)
Commitment and contingencies  135   - 
Net cash provided by operating activities  5,732   1,958 
     
Cash flows from investing activities    
Purchases of vehicles and office equipment  (356)  (280)
Payment for purchasing of software technology  (3,880)  (847)
Refund of prepayment for software development contract terminated  772   - 
Repayment of short-term loan from unrelated entities  -   790 
Long-term investment in cost/equity method investees  (1,163)  (18)
Collection of receivable on disposal of VIEs  -   1,604 
Cash effect on deconsolidation of VIEs  -   (358)
Net cash (used in)/provided by investing activities  (4,627)  891 
     
Cash flows from financing activities    
Proceeds from short-term bank loan  -   814 
Repayment of short-term bank loan  (803)   (814)
Short-term loan from noncontrolling interest of VIE  -    717 
Repayment of short-term loan to noncontrolling interest of VIE  (312)  (81)
Repayment to former VIE  -   (1,893)
Guarantee payment and prepayment from new investors  984   - 
Net cash used in financing activities  (131)  (1,257)
     
Cash and cash equivalents included in assets held for sale  (189 )  - 
     
Effect of exchange rate fluctuation on cash and cash equivalents  (319)  3 
     
Net increase in cash and cash equivalents  466   1,595 
     
Cash and cash equivalents at beginning of the year  5,037   3,442 
Cash and cash equivalents at end of the year $   5,503  $   5,037 
         

 

Contact:

MZ North America
Ted Haberfield, President
Direct: +1-760-755-2716
Email:  thaberfield@mzgroup.us
Web:    www.mzgroup.us

Source: ChinaNet Online Holdings, Inc.

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