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ChinaNet Online Holdings Reports Second Quarter 2011 Earnings
- Q2 gross margin expanded by 1,145 basis points year-over-year to 62.2%
- Signed 86 new customers to Liansuo.com in Q2 2011
-
$4.1 million operating cash flows in first six months of 2011
Summary Financials
| Second Quarter 2011 Results (USD) (unaudited) | |||
| Q2 2011 | Q2 2010 | CHANGE | |
| Sales | $9.1 million | $12.0 million | -25% |
| Gross Profit | $5.6 million | $6.1 million | -8% |
| Gross Margin | 62.2% | 50.7% | +23% |
| Net Income Attributable to Common Shareholders | $2.8 million | $4.0 million | -29% |
| EPS (Diluted) | $0.15 | $0.20 | -26% |
Second Quarter 2011 Financial Results
"The significant slowdown in the SME market overshadowed the underlying progress we continue make in our strategic vision," began Mr.
Revenues for the second quarter of 2011 decreased 25% to
Second Quarter 2011 Revenue Breakdown By Business Unit (USD in thousands) (unaudited)
| Q2 2011 | % | Q2 2010 | % | % Change | |
| Internet Advertisement | $6,457 | 71% | $7,887 | 66% | -18% |
| TV Advertisement | $2,059 | 23% | $4,021 | 33% | -49% |
| Bank Kiosk | $138 | 1% | $132 | 1% | +5% |
| Brand Mgmt. & Sales Channel Expansion | $427 | 5% | -- | -- | -- |
Total cost of sales for the second quarter of 2011 was
Operating expenses for the three months ended
Operating income for the second quarter of 2011 decreased by 19% over the prior year to
Net income attributable to common shareholders for the second quarter was
| Six Months 2011 Results (USD) (unaudited) | |||
| 1H 2011 | 1H 2010 | CHANGE | |
| Sales | $16.1 million | $22.3 million | -28% |
| Gross Profit | $10.6 million | $9.6 million | +11% |
| Gross Margin | 66.1% | 43.1% | +53% |
| Net Income Attributable to Common Shareholders | $5.5 million | $7.6 million | -28% |
| Adjusted Net Income Attributable to Common Shareholders(1) | $5.3 million | $5.7 million | -8% |
| EPS (Diluted) | $0.28 | $0.38 | -26% |
| Adjusted EPS (Diluted)(1) | $0.27 | $0.29 | -7% |
| (1) Non-GAAP net income and EPS excludes $0.2 million non-cash gain on deconsolidation of a subsidiary and $1.9 million non-cash gain related to changes in fair value of warrants for the six month periods ended June 30, 2011 and 2010, respectively. | |||
Revenues for the first half of 2011 decreased 28% to
1H 2011 Revenue Breakdown By Business Unit (USD in thousands) (unaudited)
| 1H 2011 | % | 1H 2010 | % | % Change | |
| Internet Advertisement | $12,541 | 78% | $12,580 | 57% | -- |
| TV Advertisement | $2,777 | 17% | $9,424 | 42% | -71% |
| Bank Kiosk | $275 | 2% | $263 | 1% | +5% |
| Brand Mgmt. & Sales Channel Expansion | $500 | 3% | -- | -- | -- |
Total cost of sales for the first half of 2011 was
Operating expenses for the six months ended
Operating income for the first half of 2011 increased by 1% over the prior year to
GAAP net income attributable to common shareholders for the first half of 2011 was
Balance Sheet and
The Company had
Guidance for 2011
Due to uncertainties surrounding the economic environment and monetary policies in
Business Updates
ChinaNet is focused on strategically expanding its growing internet advertising and marketing services business. Currently, 28.com, which connects SME franchisors with new franchisees, generates the majority of revenues.
To further streamline its internal operations and roll-out of new services, the Company reorganized into four fully integrated advertising, marketing and management services platforms which cover the sales channel expansion process and include: Social Networking Services (SNS) Information, Advertising and Marketing (A&M),
On
BMSCB continued to gain momentum in the second quarter where ChinaNet has serviced 46 customers to date with current average revenue of
ChinaNet was selected as a top 100 Small and Medium-sized High-Tech Enterprise in the
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=3088.
About
The Company, a parent company of
Safe Harbor
This release contains certain "forward-looking statements" relating to the business of
About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: adjusted net income and adjusted EPS (basic and diluted). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our "recurring core business operating results." We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.
| Six months ended June 30, | ||||
| 2011 | 2010 | |||
| GAAP | NON GAAP | GAAP | NON GAAP | |
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Income from operations | $ 6,426 | $ 6,426 | $ 6,342 | $ 6,342 |
| Other income (expenses): | ||||
| Changes in fair value of warrants | -- | -- | 1,861 | -- |
| Share of losses in equity investment affiliates | (105) | (105) | -- | -- |
| Gain on deconsolidation of subsidiary | 230 | -- | -- | -- |
| Interest income | 4 | 4 | 4 | 4 |
| Other income (other expenses) | 5 | 5 | 3 | 3 |
| 134 | (96) | 1,868 | 7 | |
| Income before income tax expense | 6,560 | 8,210 | ||
| Adjusted income before income tax expense | 6,330 | 6,349 | ||
| Income tax expense | 751 | 751 | 279 | 279 |
| Net income | 5,809 | 7,931 | ||
| Adjusted net income | 5,579 | 6,070 | ||
| Net (income)/ loss attributable to noncontrolling interest | (3) | (3) | 77 | 77 |
| Net income attributable to ChinaNet Online Holdings, Inc. | $ 5,806 | $ 8,008 | ||
| Adjusted net income attributable to ChinaNet Online Holdings, Inc. | $ 5,576 | $ 6,147 | ||
| Dividend for series A convertible preferred stock | (322) | (322) | (422) | (422) |
| Net income attributable to common shareholders of ChinaNet Online Holdings, Inc. | $ 5,484 | $ 7,586 | ||
| Adjusted net income attributable to common shareholders of ChinaNet Online Holdings, Inc. | $ 5,254 | $ 5,725 | ||
| Earnings per common share-Basic | $ 0.32 | $ 0.46 | ||
| Adjusted earnings per common share-Basic | $ 0.30 | $ 0.35 | ||
| Earnings per common share-Diluted | $ 0.28 | $ 0.38 | ||
| Adjusted earnings per common share-Diluted | $ 0.27 | $ 0.29 | ||
| Weighted average number of common shares outstanding: | ||||
| Basic | 17,387,336 | 17,387,336 | 16,542,966 | 16,542,966 |
| Diluted | 20,410,724 | 20,410,724 | 20,900,374 | 20,900,374 |
— FINANCIAL TABLES —
| CHINANET ONLINE HOLDINGS, INC. | ||
| CONSOLIDATED BALANCE SHEETS | ||
|
|
June 30, 2011 |
December 31, 2010 |
| (US $) | (US $) | |
| (Unaudited) | ||
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 16,447 | $ 15,590 |
| Restricted cash | 189 | -- |
| Accounts receivable | 6,685 | 4,319 |
| Other receivables | 6,645 | 7,811 |
| Prepayment and deposit to suppliers | 3,596 | 3,325 |
| Due from equity investment affiliates | 42 | -- |
| Due from related parties | 451 | 185 |
| Deposit for acquisitions | -- | 1,512 |
| Other current assets | 34 | 31 |
| Total current assets | 34,089 | 32,773 |
| Investment in and loan to equity investment affiliates | 7,840 | 7,162 |
| Property and equipment, net | 1,945 | 2,010 |
| Intangible assets, net | 1,845 | 51 |
| Prepayment for purchase of intangibles | 1,436 | -- |
| Contingent consideration receivable | 117 | -- |
| Goodwill | 1,931 | -- |
| Total Assets | $ 49,203 | $ 41,996 |
| Liabilities and Equity | ||
| Current liabilities: | ||
| Accounts payable | $ 438 | $ 174 |
| Advances from customers | 673 | 2,120 |
| Other payables | 109 | 10 |
| Accrued payroll and other accruals | 406 | 470 |
| Payable for acquisitions | 727 | -- |
| Due to related parties | 158 | 291 |
| Due to Control Group | -- | 81 |
| Due to director | 413 | 559 |
| Taxes payable | 3,054 | 2,193 |
| Dividend payable | 294 | 255 |
| Total current liabilities | 6,272 | 6,153 |
| Long-term liabilities: | ||
| Deferred tax liability-non current | 448 | -- |
| Long-term borrowing from director | 135 | 132 |
| Total Liabilities | 6,855 | 6,285 |
| Commitments and contingencies | ||
| Equity: | ||
| Series A convertible preferred stock (US$0.001 par value; authorized 8,000,000 shares; issued and outstanding 2,403,289 and 2,877,600 shares at June 30, 2011 and December 31, 2010, respectively; aggregate liquidation preference amount: $6,302 and $7,449, including accrued but unpaid dividends of $294 and $255, at June 30, 2011 and December 31, 2010, respectively) |
2 |
3 |
| Common stock (US$0.001 par value; authorized 50,000,000 shares; issued and outstanding 17,576,631 shares and 17,102,320 shares at June 30, 2011 and December 31, 2010, respectively) | 18 | 17 |
| Additional paid-in capital | 18,724 | 18,614 |
| Statutory reserves | 1,587 | 1,587 |
| Retained earnings | 20,114 | 14,630 |
| Accumulated other comprehensive income | 1,651 | 930 |
| Total ChinaNet Online Holdings, Inc.'s stockholders' equity | 42,096 | 35,781 |
| Noncontrolling interest | 252 | (70) |
| Total equity | 42,348 | 35,711 |
| Total Liabilities and Equity | $ 49,203 | $ 41,996 |
| CHINANET ONLINE HOLDINGS, INC. | ||||
| CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||
|
For the six months ended June 30, |
For the three months ended June 30, |
|||
| 2011 | 2010 | 2011 | 2010 | |
| (US $) | (US $) | (US $) | (US $) | |
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Sales | ||||
| To unrelated parties | $ 15,636 | $ 21,660 | $ 8,814 | $ 11,627 |
| To related parties | 457 | 607 | 267 | 413 |
| 16,093 | 22,267 | 9,081 | 12,040 | |
| Cost of sales | ||||
| From unrelated parties | 4,690 | 12,663 | 2,831 | 5,936 |
| From related party | 768 | -- | 606 | -- |
| 5,458 | 12,663 | 3,437 | 5,936 | |
| Gross margin | 10,635 | 9,604 | 5,644 | 6,104 |
| Operating expenses | ||||
| Selling expenses | 1,620 | 1,337 | 908 | 911 |
| General and administrative expenses | 1,865 | 1,595 | 975 | 801 |
| Research and development expenses | 724 | 330 | 372 | 196 |
| 4,209 | 3,262 | 2,255 | 1,908 | |
| Income from operations | 6,426 | 6,342 | 3,389 | 4,196 |
| Other income (expenses): | ||||
| Changes in fair value of warrants | -- | 1,861 | -- | -- |
| Interest income | 4 | 4 | 3 | 2 |
| Share of losses in equity investment affiliates | (105) | -- | (59) | -- |
| Gain on deconsolidation of subsidiary | 230 | -- | -- | -- |
| Other income (expenses) | 5 | 3 | (1) | 3 |
| 134 | 1,868 | (57) | 5 | |
| Income before income tax expense and noncontrolling interest | 6,560 | 8,210 |
3,332 |
4,201 |
| Income tax expense | 751 | 279 | 319 | 65 |
| Net income | 5,809 | 7,931 | 3,013 | 4,136 |
| Net (income) / loss attributable to noncontrolling interest |
(3) |
77 |
(19) |
77 |
| Net income attributable to ChinaNet Online Holdings, Inc. | 5,806 | 8,008 | 2,994 | 4,213 |
| Dividend of Series A convertible preferred stock | (322) | (422) | (153) | (193) |
| Net income attributable to common stockholders of ChinaNet Online Holdings, Inc. |
$ 5,484 |
$ 7,586 |
$ 2,841 |
$ 4,020 |
| Earnings per share | ||||
| Earnings per common share | ||||
| Basic | $ 0.32 | $ 0.46 | $ 0.16 | $ 0.24 |
| Diluted | $ 0.28 | $ 0.38 | $ 0.15 | $ 0.20 |
| Weighted average number of common shares outstanding: | ||||
| Basic | 17,387,336 | 16,542,966 | 17,528,785 | 16,848,023 |
| Diluted | 20,410,724 | 20,900,374 | 20,005,962 | 20,742,817 |
| CHINANET ONLINE HOLDINGS, INC. | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| Six months ended June 30, | ||
| 2011 | 2010 | |
| (US $) | (US $) | |
| (Unaudited) | (Unaudited) | |
| Cash flows from operating activities | ||
| Net income | $ 5,809 | $ 7,931 |
| Adjustments to reconcile net income to net cash provided by operating activities | ||
| Depreciation and amortization | 470 | 163 |
| Share-based compensation expenses | 172 | 121 |
| Changes in fair value of warrants | -- | (1,861) |
| Share of (earnings) losses in equity investment affiliates | 105 | -- |
| Gain on deconsolidation of subsidiary | (230) | -- |
| Gain on disposal of property and equipment | (3) | -- |
| Deferred taxes | (46) | -- |
| Changes in operating assets and liabilities | ||
| Accounts receivable | (2,171) | (1,559) |
| Other receivables | 1,320 | 2,110 |
| Prepayment and deposit to suppliers | (309) | (1,343) |
| Due from related parties | (258) | 228 |
| Other current assets | (2) | (238) |
| Accounts payable | 258 | 38 |
| Advances from customers | (1,477) | 31 |
| Accrued payroll and other accruals | (50) | 95 |
| Due to Control Group | (81) | (4) |
| Due to director | (147) | 162 |
| Due to related parties | (137) | (24) |
| Other payables | 77 | (6) |
| Taxes payable | 797 | 339 |
| Net cash provided by operating activities | 4,097 | 6,183 |
| Cash flows from investing activities | ||
| Purchases of property and equipment | (152) | (110) |
| Purchase of intangible assets | (11) | (4) |
| Prepayment for purchase of intangibles | (1,418) | -- |
| Restricted cash for incorporation of subsidiaries | (186) | -- |
| Cash from acquisition of subsidiaries | 24 | -- |
| Cash effect on deconsolidation of a subsidiary | (182) | -- |
| Payment for acquisition of subsidiaries | (1,451) | -- |
| Net cash used in investing activities | (3,376) | (114) |
| Cash flows from financing activities | ||
| Cash investment contributed by noncontrolling interest | 224 | 143 |
| Dividend paid to Series A convertible preferred stockholders | (283) | (284) |
| Increase of short-term loan to third parties | -- | (2,034) |
| Net cash used in financing activities | (59) | (2,175) |
| Effect of exchange rate fluctuation on cash and cash equivalents | 195 | 37 |
| Net increase (decrease) in cash and cash equivalents | 857 | 3,931 |
| Cash and cash equivalents at beginning of the period | 15,590 | 13,917 |
| Cash and cash equivalents at end of the period | $ 16,447 | $ 17,848 |
CONTACT: MZ-HCI
Ted Haberfield , President
Direct: +1-760-755-2716
Email: thaberfield@hcinternational.net
Source: News Provided by Acquire Media
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