Market Overview

ChinaNet Online Holdings Reports Second Quarter 2017 Financial Results

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  • Revenues of $10.5 million in the second quarter of 2017, up 24.5% from prior year's $8.4 million
  • Search engine marketing and data service revenue increased 188.9% to $8.0 million for the second quarter
  • Operating results showed a 57.3% improvement with an operating loss of $0.4 million in the second quarter of 2017, compared to the prior year's loss of $1.0 million
  • Operating results for the six months ended June 30, 2017 improved 38.6% with an operating loss of $1.5 million compared to the prior year's loss of $2.4 million

BEIJING, Aug. 15, 2017 (GLOBE NEWSWIRE) -- ChinaNet Online Holdings, Inc. (NASDAQ:CNET) ("ChinaNet" or the "Company"), an integrated online advertising, precision marketing and data-analysis and management services platform, announced today financial results for the second quarter of 2017.

Summary Financials

Second Quarter 2017 Financial Results (USD) (Unaudited)
  2017 2016 CHANGE
Sales $10.5 million   $8.4million   +24.5 %
Gross Profit $1.7 million   $2.5 million   -31.9 %
Gross Margin 16.2%   29.6%   -45.3 %
Net Loss Attributable to ChinaNet ($0.8) million   ($1.3) million   38.4 %
EPS from continuing operations* (Basic & Diluted)  ($0.07)   ($0.11)   36.4 %

*Per share amount for the three months ended June, 2016 has been retroactively restated to reflect the Company's 1 for 2.5 reverse stock split, which was effective on August 19, 2016.

For the three months ended June 30, 2017, total revenues increased to $10.5 million from $8.4 million in the prior year, primarily due to the increase from search engine marketing and data service revenue during the quarter.

During the quarter, revenues from internet advertising and data services was $2.5 million, which decreased 56.7% from $5.7 million in the second quarter of 2016. 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. The decline was offset by an increase in search engine marketing and data service revenue of 188.9% from $2.8 million in the second quarter of 2016 to $8.0 million in the second quarter of 2017. This increase was supported by the CloudX system, which drove more precision marketing and ROI for clients.

Gross profit for the quarter ended June 30, 2017 was $1.7 million, compared to $2.5 million in the second quarter of 2016, a decrease of 31.9%. Gross margin was 16.2%, down from 29.6% in 2016, primarily due to the increase in relative lower margin revenues from search engine marketing and data service during the quarter. Internet advertising and data service gross margin remained 43% in the second quarter of 2017 as in 2016.

Operating expenses decreased by 39.1% to $2.1 million for the three months ended June 30, 2017. Sales and marketing expenses decreased by 22.4% to $0.8 million. General and administrative expenses decreased by 45.9% to $1.0 million. Loss from operations was $0.4 million in the second quarter of 2017, an improvement of 57.3% compared to a loss of $1.0 million in the second quarter of 2016.

Net loss attributable to ChinaNet for the three months ended June 30, 2017 was $0.8 million and loss per share from continuing operations was $0.07, compared to a net loss of $1.3 million and loss per share from continuing operations of $0.11 in the second quarter of 2016. The weighted average diluted shares outstanding for the three months ended June 30, 2017 was 12.0 million shares versus 11.4 million for the three months ended June 30, 2016.

First Half 2017 Financial Results (USD) (Unaudited)
  2017 2016 CHANGE
Sales $17.8 million   $13.5 million   +31.6 %
Gross Profit $3.0 million   $4.1 million   -27.5 %
Gross Margin 16.7%   30.4%   -44.9 %
Net Loss Attributable to ChinaNet ($1.9) million   ($2.7) million   30.3 %
EPS from continuing operations* (Basic & Diluted) ($0.16)   ($0.23)   30.4 %

*Per share amount for the six months ended June, 2016 has been retroactively restated to reflect the Company's 1 for 2.5 reverse stock split, which was effective on August 19, 2016.

Revenues for the six months ended June 30, 2017 were $17.8 million, an increase of 31.6% from $13.5 million for the same period a year ago, which was primarily an increase in search engine marketing and data service revenue.

Gross profit was $3.0 million, a decrease of 27.5% for the first six months of 2017, and gross profit margin of 16.7%, compared to 30.4% in 2016. Operating expenses decreased by 31.6% to $4.4 million compared to $6.5 million for the first six months of 2016. The Company reported an operating loss of $1.5 million in the first half of 2017 compared to an operating loss of $2.4 million in the first half of 2016.

Net loss attributable to ChinaNet common shareholders and net loss per share was $1.9 million and $0.16 for the six months ended June 30, 2017.

Balance Sheet and Cash Flow

The Company had $1.8 million in cash and cash equivalents as of June 30, 2017, compared to $3.0 million as of December 31, 2016, working capital of $6.3 million compared to $6.9 million as of December 31, 2016, and a current ratio of 1.7 to 1, compared 1.9 to 1 as of December 31, 2016. Total shareholders' equity of ChinaNet was $21.2 million at June 30, 2017 compared to $22.2 million at December 31, 2016.

The Company generated approximately $1.3 million of cash outflows from operations for the six months ended June 30, 2017 compared to a $0.3 million of cash inflows for the six months ended June 30, 2016.

Business Updates

In January 2017, ChinaNet announced the launch of its updated comprehensive website www.chinanet-online.com, reflecting ongoing efforts to provide up-to-date information for customers, investors and shareholders. The new ChinaNet website has been redesigned to be more dynamic, user-friendly and content rich. The website allows visitors to efficiently access information needed regarding ChinaNet's profile and history, products and services, and investor relations content including press releases and SEC reporting. The website now also includes enhanced video, including a compressive overview of the Company's business which can be viewed directly at: http://www.chinanet-online.com/english_index.html 

Conference Call Details
Date: Wednesday, August 16, 2017
Time: 8:30 a.m. EDT
Toll-free dial-in number: 1-800-263-8506
International dial-in number: 1-719-457-2642
Conference ID: 3341576
Webcast: http://public.viavid.com/index.php?id=125967

A replay of the conference call will be available after 11:30 a.m. Eastern time through September 16, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 3341576

About ChinaNet Online Holdings, Inc.

ChinaNet Online Holdings, a parent company of ChinaNet Online Media Group Ltd., incorporated in the BVI (ChinaNet), is an integrated online advertising, precision marketing and data-analysis and management services platform. ChinaNet provides prescriptive analysis for its clients to improve business outcomes and to create more efficient enterprises. The Company leverages an optimization framework, provided by its comprehensive data-analysis infrastructure, to blend data, mathematical, and computational sciences into an outcome management platform for which it monetizes on a per client basis. ChinaNet uniquely optimizes and prescribes its clients decision making processes based on its proprietary ecosystem. For more information, visit 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)
         
    June 30,    December 31, 
    2017
   2016
    (US $)   (US $)
    (Unaudited)    
Assets        
Current assets:        
Cash and cash equivalents   $ 1,816     $ 3,035  
Term deposit     3,129       3,056  
Accounts receivable, net     5,091       3,322  
Prepayment and deposit to suppliers     4,693       4,754  
Due from related parties, net     229       213  
Other current assets     183       95  
Total current assets     15,141       14,475  
         
Long-term investments     1,373       1,340  
Property and equipment, net     382       471  
Intangible assets, net     6,823       7,264  
Goodwill     5,090       4,970  
Deferred tax assets     1,444       1,522  
Total Assets   $ 30,253     $ 30,042  
         
Liabilities and Equity        
Current liabilities:        
Short-term bank loan    $ 738     $ 721  
Accounts payable      130       102  
Advances from customers      2,519       1,420  
Accrued payroll and other accruals      467       685  
Due to new investors related to terminated security purchase agreements     905       884  
Payable for purchasing of software technology      421       411  
Taxes payable      3,019       2,910  
Other payables      675       487  
Total current liabilities     8,874       7,620  
         
Long-term liabilities:        
Long-term borrowing from a director     129       126  
Total Liabilities     9,003       7,746  
         
Equity:        
ChinaNet Online Holdings, Inc.'s stockholders' equity        
Common stock (US$0.001 par value; authorized 50,000,000 shares; issued and outstanding 12,265,542 shares and 12,158,542 shares at June 30, 2017 and December 31, 2016, respectively)     12       12  
Additional paid-in capital     29,633       29,285  
Statutory reserves     2,607       2,607  
Accumulated deficit     (12,238 )     (10,362 )
Accumulated other comprehensive income     1,167       700  
Total ChinaNet Online Holdings, Inc.'s stockholders' equity     21,181       22,242  
         
Noncontrolling interests     69       54  
Total equity     21,250       22,296  
         
Total Liabilities and Equity   $ 30,253     $ 30,042  
 

 

CHINANET ONLINE HOLDINGS, INC.    
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS    
(In thousands, except for number of shares and per share data)    
                     
    Six Months Ended
June 30,
  Three Months Ended
June 30,
   
      2017       2016       2017       2016      
    (US $)   (US $)   (US $)   (US $)    
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
Revenues                    
From unrelated parties   $ 17,662     $ 13,276     $ 10,417     $ 8,264      
From related parties     102       220       83       172      
Total revenues     17,764       13,496       10,500       8,436      
Cost of revenues     14,792       9,395       8,800       5,939      
Gross profit     2,972       4,101       1,700       2,497      
                     
Operating expenses                    
Sales and marketing expenses     1,659       1,943       825       1,063      
General and administrative expenses     2,084       3,538       992       1,832      
Research and development expenses     700       1,016       305       590      
Total operating expenses     4,443       6,497       2,122       3,485      
                     
Loss from operations       (1,471 )       (2,396 )       (422 )       (988 )    
                     
Other income (expenses)                    
Interest income     37       53       18       26      
Interest expense     (73 )     -       (37 )     -      
Other expenses     (206 )     (13 )     (203 )     (1 )    
Total other (expenses)/income     (242 )     40       (222 )     25      
                     
Loss before income tax expense, noncontrolling interests and discontinued operation       (1,713 )      (2,356 )       (644 )     (963 )    
Income tax expense     (113 )     (152 )     (113 )     (180 )    
Loss from continuing operations       (1,826 )       (2,508 )       (757 )       (1,143 )    
Loss from and on disposal of discontinued operation, net of income tax      -          (60 )      -          (14 )    
Net loss       (1,826 )       (2,568 )       (757 )       (1,157 )    
Net income attributable to noncontrolling interests from continuing operations     (50 )     (123 )     (32 )     (123 )    
Net loss attributable to ChinaNet Online Holdings, Inc.   $    (1,876 )   $    (2,691 )   $    (789 )   $    (1,280 )    
                     
Net loss   $ (1,826 )   $ (2,568 )   $ (757 )   $ (1,157 )    
Foreign currency translation gain/(loss)     432       (478 )     326       (590 )    
Comprehensive loss   $    (1,394 )   $    (3,046 )   $    (431 )   $    (1,747 )    
Comprehensive income attributable to noncontrolling interests     (15 )     (94 )     (34 )     (111 )    
Comprehensive loss attributable to ChinaNet Online Holdings, Inc.   $    (1,409 )   $    (3,140 )   $    (465 )   $    (1,858 )    
                     
Loss per share                    
Loss from continuing operations per common share                    
Basic and diluted   $ (0.16 )   $ (0.23 )   $ (0.07 )   $ (0.11 )    
Loss from discontinued operations per common share                    
Basic and diluted   $ -     $ (0.01 )   $ -     $ -      
                     
Weighted average number of common shares outstanding:                    
Basic and diluted     11,990,950       11,350,971       11,999,304       11,358,971      
                     
** Weighted average number of shares outstanding and per share amounts for the six and three months ended June 30, 2016 have been retroactively restated to reflect the Company's 1 for 2.5 reverse stock split, which was effective on August 19, 2016.

 

CHINANET ONLINE HOLDINGS, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(In thousands) 
         
    Six Months Ended June 30,
      2017       2016  
    (US $)   (US $)
    (Unaudited)   (Unaudited)
Cash flows from operating activities        
Net loss   $   (1,826 )   $   (2,568 )
Adjustments to reconcile net loss to net cash (used in)/provided by operating activities        
Depreciation and amortization       707         760  
Share-based compensation expenses        348         1,135  
Loss on disposal of fixed assets      -          21  
Reverse of allowances for doubtful accounts       (29 )      -   
Loss on deconsolidation of VIEs      -          9  
Deferred taxes       113         152  
Changes in operating assets and liabilities        
Accounts receivable       (1,666 )       (771 )
Other receivables       (19 )       1,325  
Prepayment and deposit to suppliers       173         612  
Due from related parties       (10 )       (25 )
Other current assets       (37 )       1  
Accounts payable       24         (154 )
Advances from customers       1,050         (388 )
Accrued payroll and other accruals       (225 )       (89 )
Other payables       86         296  
Taxes payable       38         86  
Commitment and contingencies      -          (129 )
Net cash (used in)/provided by operating activities       (1,273 )       273  
         
Cash flows from investing activities        
Payment for office equipment and leasehold improvement       (2 )       (148 )
Long-term investment in and advance to cost/equity method investees      -          (754 )
Payment for purchasing of software technology      -          (1,991 )
Proceeds from disposal of VIEs      -          28  
Cash effect on deconsolidation of VIEs      -          (18 )
Net cash used in investing activities       (2 )       (2,883 )
         
Cash flows from financing activities        
         
Net cash provided by/(used in) financing activities      -         -   
         
Changes in cash and cash equivalents included in assets classified as held for sale      -          55  
         
Effect of exchange rate fluctuation on cash and cash equivalents       56         (72 )
         
Net decrease in cash and cash equivalents       (1,219 )       (2,627 )
         
Cash and cash equivalents at beginning of the period       3,035         5,503  
Cash and cash equivalents at end of the period   $    1,816     $    2,876  
         


Contact:

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

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