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ChinaNet Online Holdings Reports Fourth Quarter and Full Year 2011 Earnings
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$28.7 million FY 2011 revenues slightly exceeded revised guidance of$26.5 to $28.5 million - Initiated BMSCB services with a total of 63 customers
BEIJING,
Summary Financials
| Fourth Quarter 2011 Results (USD) (Unaudited) | |||
| Q4 2011 | Q4 2010 | CHANGE | |
| Sales |
|
|
-40% |
| Gross Profit |
|
|
-58% |
| Gross Margin | 49.0% | 69.5% | -29% |
| Net Income Attributable to Common Stockholders |
- |
|
-187% |
| Adjusted Net Income Attributable to Common Stockholders |
- |
|
-139% |
| EPS (Diluted) |
- |
|
-184% |
| Adjusted EPS (Diluted) |
- |
|
-138% |
|
(1) Non-GAAP adjusted net income attributable to common shareholders and EPS excludes: (1) a |
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Fourth Quarter 2011 Financial Results
Revenues for the fourth quarter of 2011 decreased by 40% to
"Our results during the year were significantly affected by the overall downturn in the SME sector," explained Mr.
Total cost of sales for the fourth quarter of 2011 was
Operating expenses for the three months ended
The Company had an operating loss of
GAAP net loss attributable to common stockholders for the fourth quarter of 2011 was
| Full Year 2011 Results (USD) | |||
| FY 2011 | FY 2010 | CHANGE | |
| Sales |
|
|
-31% |
| Gross Profit |
|
|
-26% |
| Gross Margin | 58.1% | 54.4% | +7% |
| Net Income Attributable to Common Stockholders |
|
|
-84% |
| Adjusted Net Income Attributable to Common Stockholders |
|
|
-67% |
| EPS (Diluted) |
|
|
-82% |
| Adjusted EPS (Diluted) |
|
|
-66% |
|
(1) Non-GAAP adjusted net income attributable to common shareholders and EPS excludes: (1) a |
|||
|
(2) Non-GAAP adjusted net income attributable to common shareholders and EPS excludes a |
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Revenues for the year ended
FY 2011 Revenue Breakdown by Business Unit (USD in thousands)
| FY 2011 | % | FY 2010 | % | % Change | |
| Internet Advertisement |
|
70% |
|
69% | -30% |
| TV Advertisement |
|
22% |
|
30% | -48% |
| Bank Kiosk |
|
2% |
|
1% | -8% |
| Brand Mgmt. & Sales Channel Expansion |
|
6% | -- | -- | -- |
Total cost of sales for the year ended
Operating expenses for the year ended
Operating income for the year ended
GAAP net income attributable to common stockholders for the year ended
Balance Sheet and
The Company had
The Company had cash outflow from operations of
Business Updates
Due to restrictive bank lending and monetary policies impacting available credit for new and existing SME's in
-
Launching an English-language, full-service portal dedicated to serving U.S. and international franchises looking to expand into
China : www.expand2china.com. ChinaNet will leverage its strong relationships with thousands of SMEs, entrepreneurs, and regulators and industry-leading technology tools and services to help international franchises expand intoChina . Since its initial debut in September in West Coast Franchise Expo inLos Angeles, CA , ChinaNet has engaged in preliminary discussions with five prospective clients in the U.S. -
Signing 15 clients for the Company's sales channel promotion and sales channel building services, approximately one year after its initial expansion into
Taiwan . The Company continues to allocate additional sales and marketing resources to further penetrate this high-growth market. -
Leveraging the Company's existing portfolio of technologies and services through its management tool platform, Flying Cloud (www.feitengyun.com), to accelerate the adoption of cloud-computing based services among franchisees and franchisors. The website, launched at the end of 2011, currently has 60 SMEs on beta trials. Additional features are being developed and a commercial launch is scheduled to occur by the end of
May 2012 . - Launching a reality show for entrepreneurs. Based on the same premise as the hit TV game show "Shark Tank" in the U.S., each episode of this show will feature eight prominent or rising enterprises, such as Peak, Fornet and Rongchan, who will evaluate the potential success of 5 finalist entrepreneurs who will be selected from an initial group of hundreds of entrepreneurs. The winner will receive sponsorship from the participating enterprises to start and operate his/her own business.
-
Opening ChinaNet's first franchise expo centre in
Beijing for small to medium sized business owners to showcase their franchise ideas to prospective business partners. The center, which is approximately 17,000 square feet, opened at the end of 2011 and provides shared space for franchise owners to conduct exhibitions, training, meetings and other business activities in a professional setting in exchange for a monthly fee. Management expects to attract new franchisees and entrepreneurs for its online marketing and brand management services over time while generating incremental fees from monthly service fees.
Conference Call
The conference call will take place at
A playback will be available through
This call is being webcast by MZ Technologies and can be accessed by clicking on the following link: http://webcast.mz-ir.com/publico.aspx?codplataforma=3683.
About
The Company, a parent company of
About Non-GAAP Financial Measures
To supplement the audited consolidated statement of income and comprehensive income presented in accordance with GAAP, we are also providing non-GAAP measures of income from operations, income before income tax expenses, net income, net income attributable to us, net income attributable to our common stockholders and basic and diluted earnings per share for the year ended
The following table presents reconciliations of our non-GAAP financial measures to the audited consolidated statements of income and comprehensive income for the years ended
|
Year Ended |
||||
| 2011 | 2010 | |||
| GAAP | NON GAAP | GAAP | NONGAAP | |
| US$ | US$ | US$ | US$ | |
| Gross Profit | $ 16,704 | $ 16,704 | $ 22,617 | $ 22,617 |
| Operating expenses | ||||
| Selling expenses | 3,506 | 2,827 | 3,403 | 3,403 |
| General and administrative expenses | 7,904 | 6,647 | 3,460 | 3,460 |
| Research and development expenses | 2,132 | 1,461 | 907 | 907 |
| 13,542 | 7,770 | 7,770 | ||
| 10,935 | ||||
| Income from operations | $ 3,162 | $ 14,847 | 14,847 | |
| Adjusted income from operations | $ 5,769 | |||
| Other income (expenses): | ||||
| Changes in fair value of warrants | -- | -- | 1,861 | -- |
| Changes in fair value of contingent consideration receivables |
(70) |
-- |
-- |
-- |
| Interest income | 13 | 13 | 13 | 13 |
| Gain on deconsolidation of subsidiaries | 925 | -- | -- | -- |
| Other income | 5 | 5 | 6 | 6 |
| 873 | 1,880 | |||
| 18 | 19 | |||
| Income before income tax expense, equity method investments and noncontrolling interests |
4,035 |
16,727 |
|
|
| Adjusted income before income tax expense, equity method investments and noncontrolling interests |
5,787 |
14,866 |
||
| Income tax expense | 1,035 | 827 | 352 | 352 |
| Income before equity method investments and noncontrolling interests |
3,000 |
|
16,375 |
|
| Adjusted income before equity method investments and noncontrolling interests |
4,960 |
14,514 |
||
| Share of losses in equity investment affiliates | (219) | (219) | -- | -- |
| Net income | 2,781 | 16,375 | ||
| Adjusted net income | 4,741 | 14,514 | ||
| Net loss attributable to noncontrolling interest | 214 | 214 | 214 | 214 |
|
Net income attributable to |
2,995 |
16,589 |
||
|
Adjusted net income attributable to |
4,955 | 14,728 | ||
| Dividend for series A convertible preferred stock | (407) | (407) | (794) | (794) |
|
Net income attributable to common shareholders of |
$ 2,588 |
$ 15,795 |
||
|
Adjusted net income attributable to common shareholders of |
$ 4,548 |
$ 13,934 |
||
|
Earnings per common share- |
$ 0.14 | $ 0.94 | ||
|
Adjusted earnings per common share- |
$ 0.25 | $ 0.83 | ||
| $ 0.14 | ||||
| Earnings per common share-Diluted | $ 0.79 | |||
| Adjusted earnings per common share-Diluted | $ 0.24 | $ 0.70 | ||
| Weighted average number of common shares outstanding: | ||||
|
|
18,545,609 | 18,545,609 | 16,778,176 | 16,778,176 |
| Diluted | 18,759,240(1) | 20,384,766(2) | 20,896,061 | 20,896,061 |
|
(1) For the year ended |
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|
(2) For the year ended |
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Safe Harbor
This release contains certain "forward-looking statements" relating to the business of
|
|
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| CONSOLIDATED BALANCE SHEETS | ||
| (In thousands) | ||
|
|
|
|
| 2011 | 2010 | |
| (US $'000) | (US $'000) | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 10,695 | $ 15,590 |
| Accounts receivable, net | 4,444 | 4,319 |
| Other receivables | 3,631 | 7,811 |
| Prepayment and deposits to suppliers | 15,360 | 3,325 |
| Due from related parties | 324 | 185 |
| Deposit for acquisitions | -- | 1,512 |
| Contingent consideration receivables | 159 | -- |
| Other current assets | 129 | 31 |
| Total current assets | 34,742 | 32,773 |
| Investment in and advance to equity investment affiliates | 1,396 | 7,162 |
| Property and equipment, net | 1,902 | 2,010 |
| Intangible assets, net | 8,151 | 51 |
| Goodwill | 10,999 | -- |
| Deferred tax assets-non current | 92 | -- |
| $ 57,282 | $ 41,996 | |
| Liabilities and Stockholders' Equity | ||
| Current liabilities: | ||
| Accounts payable | $ 268 | $ 174 |
| Advances from customers | 724 | 2,120 |
| Accrued payroll and other accruals | 616 | 470 |
| Due to equity investment affiliate | 220 | -- |
| Due to related parties | 161 | 291 |
|
Due to |
-- | 81 |
| Due to director | -- | 559 |
| Payable for acquisition | 550 | -- |
| Taxes payable | 5,040 | 2,193 |
| Other payables | 114 | 10 |
| Dividends payable | 5 | 255 |
| Total current liabilities | 7,698 | 6,153 |
| Deferred tax liability-non current | 1,893 | -- |
| Long-term borrowing from director | 137 | 132 |
| 9,728 | 6,285 | |
| Commitments and contingencies | ||
| Stockholders' equity: | ||
|
Series A convertible preferred stock ( |
-- | 3 |
|
Common stock ( |
22 | 17 |
| Additional paid-in capital | 20,747 | 18,614 |
| Statutory reserves | 2,117 | 1,587 |
| Retained earnings | 16,688 | 14,630 |
| Accumulated other comprehensive income | 2,132 | 930 |
|
|
41,706 | 35,781 |
| Noncontrolling interest | 5,848 | (70) |
| Total stockholders' equity | 47,554 | 35,711 |
| $ 57,282 | $ 41,996 | |
|
|
||
| CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||
| (In thousands, except for number of shares and per share data) | ||
|
Years Ended |
||
| 2011 | 2010 | |
| (US $'000) | (US $'000) | |
| Sales | ||
| To unrelated parties | $ 28,105 | $ 40,423 |
| To related parties | 626 | 1,164 |
| 28,731 | 41,587 | |
| Cost of sales | 12,027 | 18,970 |
| Gross margin | 16,704 | 22,617 |
| Operating expenses | ||
| Selling expenses | 3,506 | 3,403 |
| General and administrative expenses | 7,904 | 3,460 |
| Research and development expenses | 2,132 | 907 |
| 13,542 | 7,770 | |
| Income from operations | 3,162 | 14,847 |
| Other income (expense): | ||
| Changes in fair value of warrants | -- | 1,861 |
| Changes in fair value of contingent consideration receivables | (70) | -- |
| Interest income | 13 | 13 |
| Gain on deconsolidation of subsidiaries | 925 | -- |
| Other income | 5 | 6 |
| 873 | 1,880 | |
| Income before income tax expense, equity method investments and noncontrolling interests | 4,035 | 16,727 |
| Income tax expense | 1,035 | 352 |
| Income before equity method investments and noncontrolling interests | 3,000 | 16,375 |
| Share of losses in equity investment affiliates | (219) | -- |
| Net income | 2,781 | 16,375 |
| Net loss attributable to noncontrolling interests | 214 | 214 |
|
Net income attributable to |
2,995 | 16,589 |
| Dividend of Series A convertible preferred stock | (407) | (794) |
|
Net income attributable to common shareholders of |
$ 2,588 | $ 15,795 |
| Earnings per share | ||
| Earnings per common share | ||
|
|
$ 0.14 | $ 0.94 |
| Diluted | $ 0.14 | $ 0.79 |
| Weighted average number of common shares outstanding: | ||
|
|
18,545,609 | 16,778,176 |
| Diluted | 18,759,240 | 20,896,061 |
| Comprehensive Income | ||
| Net income | 2,781 | 16,375 |
| Foreign currency translation gain | 1,254 | 813 |
| $ 4,035 | $ 17,188 | |
| Comprehensive Income | ||
| Comprehensive loss attributable to noncontrolling interest | (162) | (214) |
|
Comprehensive income attributable to |
4,197 | 17,402 |
| $ 4,035 | $ 17,188 | |
|
|
||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
|
Years Ended |
||
| 2011 | 2010 | |
| (US $'000) | (US $'000) | |
| Cash flows from operating activities | ||
| Net income | $ 2,781 | $ 16,375 |
| Adjustments to reconcile net income to net cash provided by operating activities | ||
| Depreciation and amortization | 1,012 | 465 |
| Share-based compensation expenses | 2,900 | 337 |
| Changes in fair value of warrants | -- | (1,861) |
| Changes in fair value of contingent consideration receivables | 70 | -- |
| Allowances for doubtful debts | 2,583 | -- |
| Share of losses in equity investment affiliates | 219 | -- |
| Gain on deconsolidation of subsidiaries | (925) | -- |
| Gain on disposal of property and equipment | (3) | -- |
| Deferred taxes | 27 | -- |
| Changes in operating assets and liabilities | ||
| Accounts receivable | (2,100) | (1,013) |
| Other receivables | 5,276 | (4,961) |
| Prepayments and deposits to suppliers | (11,247) | 905 |
| Due from related parties | (130) | 315 |
| Other current assets | (197) | 1 |
| Accounts payable | 27 | (123) |
| Advances from customers | (1,575) | 1,146 |
| Accrued payroll and other accruals | 166 | 271 |
| Due to director | (559) | 559 |
|
Due to |
(82) | (1,073) |
| Due to related parties | (139) | 112 |
| Other payables | 490 | (17) |
| Taxes payable | 803 | 144 |
| Net cash provided by operating activities | (603) | 11,582 |
| Cash flows from investing activities | ||
| Purchases of vehicles and office equipment | (741) | (1,001) |
| Purchases of intangible assets | (1,445) | (60) |
| Cash from acquisition of VIEs | 330 | 148 |
| Cash effect on deconsolidation of VIEs | (1,670) | -- |
| Long-term investment in and advance to equity investment affiliates |
(1,712) |
(6,985) |
| Payment for acquisition of VIEs | (9,731) | (1,475) |
| Disposal of investment in and loan repayment from equity investment affiliate | 8,885 | -- |
| Net cash used in investing activities | (6,084) | (9,373) |
| Cash flows from financing activities | ||
| Cash investment contributed by noncontrolling interest | 378 | 145 |
| Dividend paid to convertible preferred stockholders | (657) | (912) |
| Short-term loan borrowed from equity investment affiliate | 216 | -- |
| Capital contributions received in advance from new shareholders of Zhao Shang Ke Hubei before deconsolidation | 1,545 | -- |
| Net cash provided by financing activities | 1,482 | (767) |
| Effect of exchange rate fluctuation on cash and cash equivalents | 310 | 231 |
| Net increase in cash and cash equivalents | (4,895) | 1,673 |
| Cash and cash equivalents at beginning of year | 15,590 | 13,917 |
| Cash and cash equivalents at end of period | $ 10,695 | $ 15,590 |
CONTACT:Source:Ted Haberfield , PresidentMZ North America , IRMZ Group Direct: +1-760-755-2716 Email: thaberfield@mzgroup.us
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