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Mon, August 17, 2009 ChinaNet: ChinaNet Online Holdings, Inc. Reports Record Results for Second Quarter 2009
BEIJING--(Marketwire - August 17, 2009) - ChinaNet Online Holdings, Inc. ("ChinaNet") (
Second quarter and year-to-date 2009 highlights (all comparisons are year-over-year):
-- Revenues increased 79 percent to $9.4 million in the second quarter 2009 -- Net income increased 76.4 percent to $1.3 million -- Second quarter 2009 diluted earnings per share increased 80 percent to $0.09 -- Six-month 2009 revenues increased 186.1 percent to $19.2 million -- Net income increased 453 percent to $2.6 million for the six months ended June 30, 2009 -- Six-month 2009 diluted earnings per share increased 533 percent to $0.19 -- Gross margins improved 970 basis points to 40.2 percent for the second quarter 2009 -- YTD cash flow from operations increased 428.5 percent to $2.7 million
SUMMARY FINANCIALS
Second Quarter 2009 Results Q2 2009 Q2 2008 CHANGE ------------- ------------- ------------ Net Sales $ 9.4 million $ 5.2 million +79.0% ------------- ------------- ------------ Gross Profit $ 3.8 million $ 1.6 million +135.9% ------------- ------------- ------------ Net Income $ 1.3 million $ 0.7 million +73.1% ------------- ------------- ------------ EPS (Fully Diluted) $ 0.09 $ 0.05 +80.0% ------------- ------------- ------------ Six Month 2009 Results 1H 2009 1H 2008 CHANGE -------------- -------------- ------------- Net Sales $ 19.2 million $ 6.7 million +186.1% -------------- -------------- ------------- Gross Profit $ 7.3 million $ 1.7 million +325.0% -------------- -------------- ------------- Net Income $ 2.6 million $ 0.5 million +453.3% -------------- -------------- ------------- EPS (Fully Diluted) $ 0.19 $ 0.03 +533.3% -------------- -------------- -------------
Second Quarter 2009 Financial Results
Revenues for the second quarter of 2009 increased 79 percent to approximately $9.4 million compared to $5.2 million for the second quarter of 2008. The increase resulted from significant increases in Internet advertising and TV advertising. For the second quarter of 2009 Internet advertising comprised approximately 44.6 percent of total revenues, an increase of 45.7 percent year-over-year to $4.2 million. Growth was the result our successful brand building efforts for the [ www.28.com ] website which offers customers a comprehensive suite of client service technologies, assisted by the efforts of a more experienced sales team. During the second quarter of 2009 revenues generated by TV advertising increased 177.1 percent year-over-year to approximately $4.7 million or 50.6 percent of total revenues. As of June 30, 2009, the number of active customers for the Company's Internet advertising business was 650 and the number of customers being serviced by its TV advertising business was 275. Approximately 75 customers were being serviced by both platforms.
Cost of sales for the three months ended June 30, 2009 was approximately $5.6 million or 59.8 percent of revenues as compared to $3.6 million or 69.5 percent of revenues for the three months ended June 30, 2008. The costs associated with the Company's advertising services include costs for purchasing resources from other well-known portal websites in China for Internet advertising and purchasing TV advertisement time from about ten different provincial TV stations. Overall, the 55.5 percent increase in cost of sales was less than the corresponding rise in revenues for the second quarter of 2009.
For the second quarter of 2009 the gross profit was $3.8 million, representing gross margins of 40.2 percent, compared to the second quarter of 2008 with $1.6 million in gross profit and a gross margin of 30.5 percent. Gross profit grew by 135.9 percent on a year-over-year basis. The increase in gross profit was a result of increased revenues and leverage in the business model.
Operating expenses for the three months ended June 30, 2009 were approximately $1.9 million, up 195.6 percent from $0.6 million in the same period of 2008. Selling expenses for the period increased to approximately $1.2 million from $0.4 million in the second quarter of 2008 primarily as a result of brand development expenses for [ www.28.com ], increased payrolls for staff incentives and an expanded sales force, and increased marketing expenses. General and administrative expenses were $0.6 million and $0.2 million in the second quarter 2009 and 2008, respectively, with the increase primarily due to non-recurring expenses associated with the US public company listing and non-cash equity compensation for services.
Operating income for the second quarter of 2009 totaled approximately $1.9 million, a 95.8 percent increase from the $1.0 million reported for the second quarter of 2008. Operating margins were 20.0 percent and 18.2 percent for the second quarter of 2009 and 2008, respectively.
For the second quarter of 2009, net income was approximately $1.3 million, a 73.1 percent increase, compared to approximately $0.7 million for the second quarter of 2008. Diluted earnings per share were $0.09 compared to $0.05 for the second quarter of 2009 and 2008, respectively, based on 13.9 million and 13.8 million shares, respectively. The Company had an effective tax rate of 30.4 percent and 21.4 percent for the second quarters of 2009 and 2008, respectively.
"We are very pleased to report strong revenue and net income growth in the second quarter and year-to-date. While operating margins were modestly impacted by non-recurring and non-cash expenses we were able to show the inherent operating leverage in our business model and are enthusiastic about the recent reverse merger with Emazing Interactive, Inc., a US public company," commented Mr. Handong Cheng, Chairman and CEO of the Company. "We continue to see strong growth in both our Internet and TV advertising business, which was driven by both existing and new customers. With the Chinese government's strong support for developing small and medium companies, we believe ChinaNet's advertising platform is well positioned to capitalize on this large growth opportunity with enhanced profitability."
Six Month Results
For the six months ended June 30, 2009, revenues increased approximately 186.1 percent to $19.2 million compared to the same period in 2008. Gross profit was $7.3 million for the first six months of 2009, representing an increase of 324.0 percent from the first six months of 2008. Gross margins were 38.0 percent for the first six months of 2009 compared to 25.6 percent for the same year ago period.
Income from operations was $3.5 million for the first six months of 2009, representing an increase of 395 percent over the first six months of 2008. Operating margins were 18.4 percent for the first six months of 2009 compared to 10.6 percent for the first six months of 2008. The Company incurred cash expenses, in addition to non-cash equity compensation expenses, related to going public. Net income was $2.6 million for the six months ended June 30, 2009, an increase of approximately 453 percent from $0.5 million in the same period in 2008. Fully diluted earnings per share were $0.19 compared to $0.03 for the first six months of 2009 and 2008 respectively, based on 13.8 million and 13.8 million shares, respectively.
"The management team has also been focused on the roll-out of our bank kiosk advertising platform through an exclusive arrangement with the China Construction Bank," Mr. Chen continued. "To date, we have deployed 200 kiosks which provide online access for customers while displaying advertising for both PRC and global based companies alike. Our first large customer is Hengan Standard Life, an insurance company, and we are actively in discussions with several of the largest insurers in China, as well as Toyota, Nissan, and the big three Chinese telecommunications providers. We are pursuing a roll-out of more than 3,000 kiosks in banks located throughout Guandong, Hu Bei, Shanghi and Si Chuan provinces. We estimate a payback of less than one year for all equipment deployed with higher margins and recurring advertising revenue."
Balance Sheet and Cash Flow
The Company had a current ratio of 2.3 to 1 and $3.5 million in cash and equivalents on June 30, 2009. Accounts receivables were $2.1 million on June 30, 2009, compared to $1.0 million on December 31, 2008. The Company's receivables were owed by approximately 230 customers. Since the end of the quarter we have collected at least half of this balance. For the first six months of 2009, the Company generated $2.7 million in cash from operations versus $0.5 million for the same period in 2008, with the variance principally coming from the increase in net income and prudent asset management.
About ChinaNet Online Holdings, Inc.
The Company, a parent company of ChinaNet Online Media Group Ltd., ("China Net" or "Zhong Wang Zai Xian"), is a leading full-service media development, advertising and communications company for small and medium companies (SME) in China. The Company provides Internet advertising and other services for Chinese SMEs via its portal website 28.com, TV commercials and program production via the China-Net TV, and in-house LCD advertising on banking kiosks targeting Chinese banking patrons.
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. (UNAUDITED) CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXPECT PER SHARE) June 30, December 31, 2009 2008 ------------ ------------ (US $) (US $) Assets (Unaudited) (Audited) Current assets: Cash and cash equivalents $ 3,502 $ 2,679 Accounts receivable 2,124 978 Other receivables 324 - Prepayment and deposit to suppliers 3,347 4,072 Due from related parties 129 109 Due from directors 81 - Due from Control Group 248 243 Inventories 2 1 Other current assets 22 46 ------------ ------------ Total current assets 9,779 8,128 Property and equipment, net 658 678 Other long-term assets 44 7 ------------ ------------ $ 10,481 $ 8,813 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 160 $ 37 Advances from customers 580 608 Other payables 166 1,333 Accrued Payroll and other accruals 189 66 Due to related parties 72 346 Due to Control Group 1,187 1,149 Due to director - 10 Taxes payable 2,169 1,746 ------------ ------------ Total current liabilities $ 4,523 $ 5,295 Long-term borrowing from director 128 128 Stockholders' equity: Common stock ($0.001 par value; authorized- 50,000,000 shares; issued and outstanding- 15,774,300 shares and 13,790,800 shares at June 30, 2009 and December 31, 2008 respectively) 16 14 Additional paid-in capital 447 599 Appropriated retained earnings 304 304 Unappropriated retained earnings 4,954 2,370 Accumulated other comprehensive income 109 103 ------------ ------------ Total stockholders' equity $ 5,830 $ 3,390 ------------ ------------ $ 10,481 $ 8,813 ============ ============ CHINANET ONLINE HOLDINGS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (THOUSANDS EXPECT PER SHARE DATA) For the six months For the three months ended June 30, ended June 30, ------------------------- ------------------------- 2009 2008 2009 2008 ------------ ----------- ------------ ----------- (US $) (US $) (US $) (US $) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Sales $ 19,178 $ 6,703 $ 9,381 $ 5,241 Cost of sales 11,889 4,988 5,611 3,643 ------------ ----------- ------------ ----------- Gross margin 7,289 1,715 3,770 1,598 Operating expenses Selling expenses 2,629 582 1,166 388 General and administrative expenses 916 356 568 220 Research and development expenses 214 64 164 34 ------------ ----------- ------------ ----------- 3,759 1,002 1,898 642 ------------ ----------- ------------ ----------- Income from operations 3,530 713 1,872 956 Other income (expenses): Interest income 5 2 2 1 Other income 6 - 2 - Other expenses - (15) - (15) ------------ ----------- ------------ ----------- 11 (13) 4 (14) ------------ ----------- ------------ ----------- Income before income tax expense 3,541 700 1,876 942 Income tax expense 957 233 571 202 ------------ ----------- ------------ ----------- Net income 2,584 467 1,305 740 Other comprehensive income Foreign currency translation gain 6 40 - 14 ------------ ----------- ------------ ----------- Comprehensive income 2,590 507 1,305 754 ============ =========== ============ =========== Earnings (loss) per share Earnings per common stock Basic and diluted $ 0.19 $ 0.03 $ 0.09 $ 0.05 ============ =========== ============ =========== Weighted average number of common shares outstanding: Basic and diluted shares 13,845,593 13,790,800 13,899,784 13,790,800 ============ =========== ============ =========== CHINANET ONLINE HOLDINGS, INC. UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) For the six months ended June 30, 2009 2008 ----------- ----------- (US $) (US $) (Unaudited) (Unaudited) Cash flows from operating activities Net income $ 2,584 $ 467 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Depreciation and Amortization 85 22 Share-based compensation expenses 150 - Changes in operating assets and liabilities Accounts receivable (1,145) (1,122) Other receivables (89) 197 Prepayment and deposit to suppliers 731 (172) Due from related parties (22) (161) Due from/due to Control Group 32 372 Other current assets 22 (87) Accounts payable 123 146 Advances from customers (29) 386 Accrued payroll and other accruals 123 10 Due to related parties (274) 325 Taxes payable 420 130 ----------- ----------- Net cash provided by operating activities 2,711 513 ----------- ----------- Cash flows from investing activities Purchases of vehicles and office equipment (64) (26) Purchases of Intangible and other long-term assets (37) - ----------- ----------- Net cash used in investing activities (101) (26) ----------- ----------- Cash flows from financing activities Increase of long-term borrowing from director - 124 Increase of short-term loan to third parties (235) - Increase/(decrease) in due to director (90) 269 Increase/(decrease) in other payables (1,169) 964 Cancellation and retirement of common stock (300) - ----------- ----------- Net cash provided by (used in) financing activities (1,794) 1,357 ----------- ----------- Effect of exchange rate fluctuation on cash and cash equivalents 7 73 ----------- ----------- Net increase in cash and cash equivalents 823 1,917 Cash and cash equivalents at beginning of year 2,679 317 ----------- ----------- Cash and cash equivalents at end of year $ 3,502 $ 2,234 =========== =========== Supplemental disclosure of cash flow information Interest paid $ - $ - =========== =========== Income taxes paid $ 831 $ 68 =========== ===========
