BEIJING, July 18, 2014 (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 services for small and medium-sized enterprises (SMEs) and entrepreneurial management and networking services for entrepreneurs in the People's Republic of China, today announced financial results and filing of its quarterly report with the Securities and Exchange Commission (the "SEC") for the first fiscal quarter of 2014.
First Quarter 2014 Results (USD) (Unaudited)
Net (Loss)/Income Attributable to ChinaNet
First Quarter 2014 Financial Results
Revenues for the three months ended March 31, 2014 were $5.2 million compared to $7.0 million for the three months ended March 31, 2013, representing a 26% decrease. Low margin TV advertising revenue fell by $1.5 million, or 55%, accounting for the majority of the year-over-year revenue decline.
First Quarter 2014 Revenue Breakdown by Business Unit (USD in thousands)
Brand Mgmt. & Sales Channel Building
Revenue from internet advertisements and the related technical services for the three months ended March 31, 2014 decreased by 6% to $3.6 million compared to the same period a year ago, resulting from a decrease in number of customers during the period as compared to the same period of last year. The decrease in number of customers during the period was primarily due to the internal loophole on technical management incurred in the fourth fiscal quarter of 2013, which adversely affected the confidence of our customers in the effectiveness of our online advertising portals. Management has taken immediate remedial measures to regain and strengthen customer confidence. Management believes that this is an infrequent event in its ordinary course of business and that sales performance will be able to gradually recover in further periods of the year.
TV advertising revenue decreased by 55% to $1.2 million for the three months ended March 31, 2014 from $2.6 million for the same period in 2013. The decrease in TV advertising revenue was primarily due to the adoption of a restrictions notice to TV shopping infomercials broadcasted in provincial satellite television stations, issued by the State Administration of Press, Publication, Radio, Film and Television of the People's Republic of China (the "SARFT") in October 2013, which further restricts the content, air time and duration of these infomercials. In response to these restrictions, management plans to cooperate with the television stations to develop and produce new forms of TV program which will replace TV shopping infomercials to help clients raise their brand and product awareness, and to develop non-TV shopping advertising customers.
Gross profit for the three months ended March 31, 2014 was $1.4 million compared to $2.6 million for the same period in 2013. Gross margin was 26%, down from 37% in the first quarter of 2013. This decrease is a direct result of the decrease in the gross margin of the internet advertising and related technical services segment to 29% from 57% for the same period of last year.
The Company incurred an operating loss of $0.7 million for the three months ended March 31, 2014 compared to an operating loss of $0.1 million in the same period a year ago.
Net loss attributable to ChinaNet for the three months ended March 31, 2014 was $0.7 million and loss per share was $0.03, compared to a net income of $0.03 million in the first quarter of 2013.
Balance Sheet and Cash Flow
The Company had $1.7 million in cash and cash equivalents as of March 31, 2014, compared to $3.4 million as of December 31, 2013, working capital of $22.6 million, compared to $24.0 million as of December 31, 2013, and a current ratio of 3.1 to 1, compared to 3.3 to 1 as of December 31, 2013. Total shareholders' equity of ChinaNet was $44.2 million at March 31, 2014 compared to $45.1 million at December 31, 2013.
The Company had a $1.4 million of cash outflows from operations in the first quarter of 2014 compared to a $0.4 million of cash outflows for the first three months of 2013.
Guidance for 2014
The Company is forecasting revenues of approximately $39 million for the fiscal year 2014.
Liansuo.com, one of ChinaNet's online advertising portals, has successfully signed fifty-five new customers in the second fiscal quarter of 2014 with a strong and active marketing program that includes traditional and online advertising, trade shows and referrals. Liansuo.com provides a full suite of advertising, marketing and brand management services to small and medium sized businesses in China. New clients include Pure Fishing Inc., a leading provider of fishing equipment, and a subsidiary of Jarden Corporation and O.C.T. Mami, a leading retail apparel brand owned by Shanghai Uki Company. Liansuo.com will continue to pursue new clients as well as opportunities to expand services to existing clients.
Executives of ChinaNet participated in international brands curriculum "Systematic Creates Wealth" in Anhui Province, China on June 17th and 18th, 2014 to help train and promote entrepreneurs and franchise owners in the food industry. This activity was jointly organized by the Restaurant Association and "Discover China's Good Projects". The Company created "Discover China's Good Projects" in March 2013 to promote and support new projects and businesses.
ChinaNet filed its quarterly report on Form 10-Q for the quarter ended March 31, 2014 with the SEC on July 17, 2014. ChinaNet expects the filing of the report will enable the Company to regain compliance with NASDAQ's filing requirements set forth in Listing Rules 5250(c)(1).
About ChinaNet Online Holdings, Inc.
The Company, a parent company of ChinaNet Online Media Group Ltd., incorporated in the BVI ("ChinaNet"), is a leading B2B (business to business) Internet technology company focusing on providing O2O (online to offline) 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 and Liansuo.com, TV commercials and program production via China-Net TV, and offline brand management and sales channel building services. Website: http://www.chinanet-online.com.
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.
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CHINANET ONLINE HOLDINGS, INC.
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