ChinaNet Online Holdings Reports First Quarter 2016 Financial Results

BEIJING, May 17, 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, business strategies and marketing solutions for small and medium-sized enterprises (SMEs) by utilizing data analysis and cloud computing technologies in the People's Republic of China, today announced financial results for the first fiscal quarter of 2016.

First Quarter 2016 Financial Highlights

• Gross profit of $1.6 million generated in the first fiscal quarter of 2016, an 87.4% increase from $0.86 million generated in the same period a year ago
• Consolidated gross margin increased to 31.7%, compared to 15% in the same period a year ago, a 112% increase YOY
• Internet advertising and data service gross margin improved to 43%, compared to 27% in the same period a year ago
• $0.44 million cash inflow generated from operating activities, compared to $2.33 million cash outflow in the same period a year ago

First Quarter 2016 Financial Results

Chairman and CEO of ChinaNet, Mr. Handong Cheng commented, "The Company has been increasingly focusing on integrating and restructuring its business since 2014. We gradually reduced low-margin television advertising business and put a lot of research and development resources into upgrading the data service system. Our gross margin has increased significantly since the fourth quarter last year. Our gross profit increased by 87.4% during the first quarter of 2016, which quarter is traditionally our weakest season during the year. Meanwhile, we have successfully developed our Business Intelligent Marketing Data Services System--CloudX, which will be officially launched in the second quarter of this year."

Revenues for the three months ended March 31, 2016 were $5.1 million compared to $5.7 million for the three months ended March 31, 2015, representing an 11.6% decrease. During the first quarter, revenues from improving internet advertisement and data services, which increased 48.2% from $2.5 million in the first quarter of 2015 to $3.6 million in the first quarter of 2016, helped to partially offset declines in the search engine marketing service. ChinaNet continues to focus on integrating and upgrading its internet advertising and data service to SME clients and investing in developing new service modules for clients, and believes that the launch of new services in future will help to increase market penetration and recurring revenues.

Gross profit for the three months ended March 31, 2016 was $1.6 million compared to $0.9 million for the same period in 2015. Gross margin was 31.7%, up from 15.0% in the first quarter of 2015, primarily due to the improvement in gross margin of the internet advertisement and data service, which increased to 43% for the first quarter of 2016 from 27% for the first quarter of 2015, and decrease in lower margin revenues from the search engine marketing service.  The improvement in gross margin of the internet advertising and data service was primarily due to optimizing and upgrading of the Company's online promotion analysis and cost control system, which improved the promotion accuracy, Ad. effect conversion rate and promotion cost control.

The Company incurred an operating loss of $1.4 million for the three months ended March 31, 2016 compared to an operating loss of $2.1 million in the same period a year ago.

Net loss attributable to ChinaNet for the three months ended March 31, 2016 was $1.4 million and loss per share was $0.05, compared to a net loss of $1.8 million and loss per share of $0.07 in the first quarter of 2015.

Balance Sheet and Cash Flow

The Company had $3.7 million in cash and cash equivalents as of March 31, 2016, compared to $5.5 million as of December 31, 2015, working capital of $11.3 million, compared to $13.7 million as of December 31, 2015, and a current ratio of 2.5 to 1, compared to 2.9 to 1 as of December 31, 2015. Total stockholders' equity of ChinaNet was $26.6 million at March 31, 2016 compared to $27.3 million at December 31, 2015.

The Company had a $0.4 million of cash inflows from operations in the three months ended March 31, 2016 compared to a $2.3 million of cash outflows in the first three months of 2015.

Business Updates

In May, ChinaNet reported its self-developed Business Intelligent Marketing Data Services System, CloudX, was installed and tested at 13 food and beverage stores for field testing during the Beijing Sakura Festival (the "Festival") in April with improvements in weekly sales of up to six times average. The new CloudX system, set to launch officially in late May, collects and analyzes product sale numbers from stores and is analyzed by ChinaNet for suggested adjustments to product stock and inventory to improve customer sales. By utilizing CloudX in stores, ChinaNet can provide owners with sales analysis reports, including each single item's sales amount and period of time. The system was judged highly by store owners during the Festival. With these results, and after debugging and optimizing, CloudX will be officially launched at the end of May, adding to ChinaNet's growing ecosystem of SME products and services.

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.

Contact:



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Ted Haberfield, President

Direct: +1-760-755-2716

Email:  thaberfield@mzgroup.us

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