SHANGHAI, Sept. 5, 2018 /PRNewswire/ -- Acorn
International, Inc. (NYSE: ATV) ("Acorn" or the "Company"), today
announced its unaudited financial results for the second quarter
and six months ended June 30,
2018.
Second Quarter 2018 Financial and Operational
Highlights
- Net revenues increased 39.4% year-over-year in Q2 2018 to
US$6.3 million
- Gross profit rose 44.5% year-over-year in Q2 2018 to
US$4.5 million
- Gross margin increased to 71.2% in Q2 2018 from 68.7% in Q2
2017
- Loss from continuing operations narrowed to US$0.5 million in Q2 2018 from US$2.5 million in Q2 2017
- Net income was US$23.8 million in
Q2 2018 as compared to a net loss of US$3.4
million in Q2 2017
- Sold approximately US$57.0
million of non-core assets in Q2 2018
- Special one-time cash dividend of US$0.75 per ordinary share, or approximately
US$14.97 per American depositary
share ("ADS"), paid in Q2 2018
- Launched Acorn Fresh business unit to provide safe and healthy
food direct to the Chinese consumer
- Launched Acorn Entertainment business unit which provides
digital PR to western celebrities and brands to enhance their brand
recognition in China
In the second quarter of 2018, Acorn achieved solid top line
growth due to strong sales of its Babaka posture correction
products and Youngleda at-home medical devices via its e-commerce
channel. The Company recorded another quarter of improving margins
and narrowed its loss from continuing operations to US$0.5 million, approaching breakeven. After
successfully completing the sale of non-core assets in May, the
Company distributed a special one-time dividend in an aggregate
amount of US$40.0 million to its
shareholders in June. The Company closed the quarter with a cash
position of US$19.5 million, as
compared to US$21.1 million at
December 31, 2017.
Thus far in 2018, Acorn announced the launch of two new business
units: Acorn Fresh, which brings the world's best fresh and safe
food directly to the Chinese consumer, as well as Acorn
Entertainment, which provides digital PR to western celebrities and
brands to enhance their brand value in China. The Company continually evaluates new
business opportunities.
The Company will continue to emphasize the e-commerce channel
and is focused on leveraging its 20 years of expertise as a leading
direct marketing, infomercial company in China. The Company continually evaluates new
platforms with positive ROI conversion, including China's major e-commerce platforms as well as
other niche digital platforms.
Financial Results for the Second Quarter of 2018:
Total net revenues were US$6.3
million in the second quarter of 2018, up 39.4% from
US$4.5 million in the second quarter
of 2017, primarily due to an increase in e-commerce sales of
posture correction products as well as other products.
Cost of sales in the second quarter of 2018 was US$1.8 million, up 28.2% from US$1.4 million in the second quarter of 2017. The
increase was attributable to the increased sales volume and net
revenues.
Gross profit in the second quarter of 2018 was US$4.5 million, up 44.5% from US$3.1 million in the second quarter of 2017.
Gross margin was 71.2% in the second quarter of 2018, up from 68.7%
in the second quarter of 2017. The increase in gross margin was due
to a larger proportion of higher margin products in the product
mix. The Company anticipates gross margins may decline from current
levels in the near and medium term as the Company expands its
distribution platforms to incorporate additional Chinese e-commerce
companies into its e-commerce channel.
Total operating expenses in the second quarter of 2018 were
US$5.0 million, down 10.3% from
US$5.5 million in the second quarter
of 2017. The decrease was primarily due to a decline in general and
administrative expenses due to lower professional fees and labor
costs, which was partially offset by higher selling and marketing
expenses to support e-commerce sales. Operating expenses included
non-cash, share-based compensation of US$108,645 in the second quarter of 2018. There
was no share-based compensation in the second quarter of 2017.
Loss from continuing operations was US$0.5 million in the second quarter of 2018, as
compared to loss from continuing operations of US$2.4 million in the second quarter of
2017.
Other income was US$27.7 million
in the second quarter of 2018, primarily due to a gain on the sale
of non-core assets, as compared to other expense of US$0.2 million in the second quarter of 2017.
Net income from continuing operations was US$25.1 million in the second quarter of 2018,
compared to a net loss from continuing operations of US$2.3 million in the second quarter of
2017.
Net loss from discontinued operations (Refer to "Discontinued
Operations" discussion below) was US$1.3
million in the second quarter of 2018, compared to
US$1.1 million in the second quarter
of 2017.
Net income attributable to Acorn was US$23.8 million in the second quarter of 2018 as
compared to a net loss attributable to Acorn of US$3.4 million in the second quarter of
2017. Net income for the second quarter of 2018 includes the
one-time gain of $27.7 million from
the sale of non-core assets.
As of June 30, 2018, after payment
of a special cash dividend of approximately US$40 million, Acorn's cash and cash equivalents,
with restricted cash, totaled US$19.5
million. Cash and equivalents, with restricted cash, totaled
US$21.1 million as of December 31, 2017.
At June 30, 2018, the Company
owned 32,723,600 shares of Yimeng Software Technology Co., Ltd.
("Yimeng"), a publicly traded company in China valued at approximately US$43.9 million based on the stock price at
December 31, 2017. The Company may
sell shares of Yimeng from time to time based on market factors and
its other investment and capital requirements.
During the first half of 2018, the Company repurchased 1,860
ADSs at an average price US$20.44 per
ADS under its share repurchase program, which was approved by the
Board of Directors on December 8,
2017.
First Half 2018 Financial Results
Total net revenues were US$11.7
million in the first half of 2018, up 27.4% from
US$9.2 million in the first half of
2017, primarily due to an increase in e-commerce sales of posture
correction as well as other products.
Cost of sales in the first half of 2018 was US$3.4 million, up 19.6% from US$2.9 million in the first half of 2017.
Gross profit in the first half of 2018 was US$8.3 million, up 31.0% from US$6.3 million in the first half of 2017. Gross
margin was 70.6% in the first half of 2018, up from 68.7% in the
first half of 2017. The increase in gross margin was due to a
larger proportion of higher margin products in the product mix. The
Company anticipates gross margins may decline from current levels
in the near and medium term as the Company expands its distribution
platforms to incorporate additional Chinese e-commerce platforms
into its e-commerce channel. Total operating expenses in the first
half of 2018 were US$8.9 million,
down 3.2% from operating expenses of US$9.2
million in the first half of 2017, primarily due to lower
general and administrative expenses and an increase in other
income, which was partially offset by an increase in selling and
marketing expenses to support e-commerce sales. Operating expenses
for 2018 included non-cash, share-based compensation of
US$375,963. There was no share-based
compensation in the first half of 2017.
Loss from continuing operations was US$0.6 million in the first half of 2018, as
compared to a loss from continuing operations of US$2.9 million in the first half of
2017.
Other income was US$27.9 million
in the first half of 2018, primarily due to a gain on the sale of
non-core assets, as compared to other income of US$8.9 million in the first half of 2017, which
as primarily due to dividends received and gains from sales of
Yimeng.
Net income from continuing operations was US$25.1 million in the first half of 2018,
compared to net income from continuing operations of US$4.3 million in the first half of 2017.
Net loss from discontinued operations (Refer to "Discontinued
Operations" discussion below) was US$1.6
million in the first half of 2018, compared to US$1.7 million in the first half of 2017.
Net income attributable to Acorn was US$23.5 million in the first half of 2018 as
compared to net income attributable to Acorn of US$2.6 million in the first half of 2017.
Net income for the first half of 2018 includes the one-time gain of
$27.7 million from the sale of
non-core assets in the second quarter.
Discontinued Operations
In 2017, Acorn reached an agreement to sell a majority stake in
its HJX electronic learning products business ("HJX Business") to a
third-party investor and operator, allowing the Company to focus on
businesses and brands with higher profit margins, and on achieving
profitable growth of new, potentially high margin businesses. Acorn
retained a 37.5% stake in a joint venture established with this
third party. As a result of this transaction, the Company is
required by applicable accounting rules to treat the HJX Business
as discontinued operations in the consolidated statements of
operations for all periods presented.
Conference Call
The Company will host a conference call at 8:30 a.m.
ET (5:30 a.m.
PT), September 5, 2018 to discuss financial
results. Dial-in details for the earnings conference call are as
follows:
US/Canada:
|
+1-888‑254-3590
|
International:
|
+1-323-994-2093
|
Please dial in 10 minutes before the call is scheduled to begin
and provide the passcode 9314320 to join the call. A replay will be
available approximately two hours following the conclusion of the
conference call through September 12,
2018 and can be accessed by dialing (866) 375-1919, or (719)
457-0820, passcode 9314320. An archived audio file of the
call will be available on the Company's website
http://www.acorninternationalir.com/home/news-and-events/webcasts-and-presentations/.
About Acorn International, Inc.
Previously the leading TV infomercial company in China, Acorn International today leverages its
twenty-year TV direct marketing history to monetize brand IP,
content creation and distribution, and product sales, through
digital media in China. At Acorn today, three divisions
support its growth: 1) Product Division, 2) Content Division, and
3) Influencer Management Division.
In the Product Division, Acorn sells product primarily
through e-commerce channels in China, as well as through offline distribution
and outbound marketing. In the Content Division, Acorn monetizes
content. Specifically, in the Content Division, Acorn has
redirected its direct marketing know-how to digital media in
China, launching Acorn Streaming,
which is primarily focused on live streaming and pre-recorded video
content creation and distribution. In the Influencer Management
Division, Acorn brings, through the creation of digital social
content, the best U.S. celebrity talent and brands to China, representing their in-country digital
presence. For more information
visit www.acorninternationalir.com.
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995
This press release contains forward-looking statements. These
statements constitute "forward-looking" statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be
identified by terminology such as "anticipates," "believes,"
"estimates," "strives," "expects," "future," "going forward,"
"intends," "outlook," "plans," "target," "will," and similar
statements and include statements with respect to the Company's
ability to maintain healthy margins, manage expenses and generate
additional cash flow, the Company's ability to achieve its
medium-term goal of reaching operating profitability in order to
position the business for long term sustainable success,
anticipated trends in gross margin, efforts to implement its
proposed business plans, including tapping into new media with
positive ROI conversion, and reduction of operating expenses may
not succeed as anticipated or at all. Such statements are based on
management's current expectations and current market and operating
conditions, and relate to events that involve known or unknown
risks, uncertainties, and other factors, all of which are difficult
to predict and many of which are beyond the Company's control,
which may cause the Company's actual results, performance, or
achievements to differ materially from those in these preliminary
financial results and the forward-looking statements. Further
information regarding these and other risks, uncertainties, or
factors is included in the Company's filings with the U.S.
Securities and Exchange Commission. The Company does not undertake
any obligation to update any forward-looking statement as a result
of new information, future events, or otherwise, except as required
by law.
Other factors that could cause forward-looking statements to
differ materially from actual future events or results include
risks and uncertainties related to: the Company's ability to
successfully improve or introduce new products and services,
including to offset declines in sales of existing products and
services; the Company's ability to stay abreast of consumer market
trends and maintain the Company's reputation and consumer
confidence; the Company's ability to execute and maintain a
successful market strategy; potential unauthorized use of the
Company's intellectual property; potential disruption of the
Company's manufacturing processes; increasing competition in
China's consumer market; the
Company's U.S. tax status as a passive foreign investment company;
and general economic and business conditions in China. The
financial information contained in this release should be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's 2017 annual report on Form 20-F
filed with SEC on May 15, 2018. For a discussion of other
important factors that could adversely affect the Company's
business, financial condition, results of operations and prospects,
see "Risk Factors" beginning on page 8 of the Company's Form 20-F
for the fiscal year ended December 31, 2017. The Company's
actual results of operations for the second quarter of 2018 are not
necessarily indicative of its operating results for any future
periods. Any projections in this release are based on limited
information currently available to the Company, which is subject to
change. Although such projections and the factors influencing them
will likely change, the Company will not necessarily update the
information. Such information speaks only as of the date of this
release.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is
preliminary and subject to potential adjustments. Adjustments to
the consolidated financial statements may be identified when audit
work has been performed for the Company's year-end audit, which
could result in significant differences from this preliminary
unaudited condensed financial information.
Contact:
|
|
Acorn International,
Inc.
|
Compass Investor
Relations
|
Mr. Martin
Key
|
Ms. Elaine Ketchmere,
CFA
|
Phone +
86-21-5151-8888
|
Phone:
+1-310-528-3031
|
Email:
ir@chinadrtv.com
|
Email:
Eketchmere@compass-ir.com
|
www.chinadrtv.com
|
www.compassinvestorrelations.com
|
Acorn
International Inc.
|
Unaudited
Consolidated Statement of Operations
|
(in US
dollars)
|
|
|
For the
three months ended
|
|
For the six
months ended
|
|
June 30,
2017
|
June 30,
2018
|
|
June 30,
2017
|
June 30,
2018
|
Net
revenues
|
|
|
|
|
|
Direct
sales
|
$
4,210,720
|
$
5,264,896
|
|
$
8,411,702
|
$
9,875,535
|
Distribution
sales
|
291,831
|
1,009,624
|
|
776,229
|
1,830,649
|
Total net
revenues
|
4,502,551
|
6,274,520
|
|
9,187,931
|
11,706,184
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
|
|
|
Direct
sales
|
(1,240,471)
|
(1,469,737)
|
|
(2,527,361)
|
(2,791,548)
|
Distribution
sales
|
(170,860)
|
(339,001)
|
|
(351,193)
|
(652,186)
|
Total cost of
revenues
|
(1,411,331)
|
(1,808,738)
|
|
(2,878,554)
|
(3,443,734)
|
|
|
|
|
|
|
Gross
profit
|
|
|
|
|
|
Direct
sales
|
2,970,249
|
3,795,158
|
|
5,884,341
|
7,083,985
|
Distribution
sales
|
120,971
|
670,623
|
|
425,036
|
1,178,463
|
Total gross
profit
|
3,091,220
|
4,465,781
|
|
6,309,377
|
8,262,448
|
|
|
|
|
|
|
Operating (expenses)
income
|
|
|
|
|
|
Other selling and
marketing expenses
|
(2,109,638)
|
(2,634,333)
|
|
(4,275,787)
|
(5,018,924)
|
General and
administrative expenses
|
(3,653,020)
|
(2,670,526)
|
|
(5,450,355)
|
(5,027,621)
|
Other operating
income, net
|
226,064
|
339,846
|
|
522,242
|
1,135,770
|
Total operating
(expenses) income
|
(5,536,593)
|
(4,965,013)
|
|
(9,203,900)
|
(8,910,775)
|
Income (loss) from
continuing operations
|
(2,445,374)
|
(499,232)
|
|
(2,894,523)
|
(648,327)
|
|
|
|
|
|
|
Interest
income
|
159,234
|
108,811
|
|
262,554
|
276,623
|
Other income
(expenses), net
|
(229,007)
|
27,735,843
|
|
8,924,702
|
27,848,880
|
Income (loss) from
continuing operations before
income taxes and equity in losses of affiliates
|
(2,515,147)
|
27,345,422
|
|
6,292,733
|
27,477,176
|
|
|
|
|
|
|
Income tax -
current
|
177,582
|
(2,254,966)
|
|
(1,949,894)
|
(2,370,651)
|
Income tax -
deferred
|
-
|
(6,751)
|
|
-
|
(6,751)
|
Income (loss) from
continuing operations before
equity in losses of affiliates
|
(2,337,565)
|
25,083,705
|
|
4,342,839
|
25,099,774
|
|
|
|
|
|
|
Discontinued
operations :
|
|
|
|
|
|
Income (loss)
from discontinued operations
|
(1,084,401)
|
(1,331,408)
|
|
(1,731,370)
|
(1,580,036)
|
Income (loss) from
discontinued operations before
equity in losses of affiliates
|
(1,084,401)
|
(1,331,408)
|
|
(1,731,370)
|
(1,580,036)
|
|
|
|
|
|
|
Equity in losses of
affiliates
|
-
|
-
|
|
-
|
-
|
|
|
|
|
|
|
Net income
(loss)
|
$
(3,421,966)
|
$
23,752,297
|
|
$
2,611,469
|
$
23,519,738
|
|
|
|
|
|
|
Net loss (income)
attributable to non-controlling interests
|
(1,234)
|
(1,179)
|
|
(2,256)
|
(2,358)
|
Net income (loss)
attributable to Acorn
International, Inc.
|
$
(3,420,732)
|
$
23,753,476
|
|
$
2,613,725
|
$
23,522,096
|
Acorn
International, Inc.
|
Consolidated
Balance Sheets
|
(in US
Dollars)
|
|
|
|
|
|
December 31,
2017
|
June 30,
2018
|
|
|
(unaudited)
|
Cash and cash
equivalents
|
$
21,019,834
|
$
19,452,554
|
Restricted
cash
|
78,051
|
77,079
|
Accounts receivable,
net
|
1,442,750
|
1,349,375
|
Inventory
|
1,516,283
|
975,545
|
Other prepaid
expenses and current assets, net
|
4,030,812
|
3,168,928
|
Current portion of
convertible loan
|
3,587,204
|
3,639,462
|
Current
assets
|
31,674,934
|
28,662,943
|
|
|
|
Property and
equipment, net
|
4,037,294
|
3,688,418
|
Held-for-sale
assets
|
17,022,630
|
474,414
|
Available-for-sale
securities
|
44,479,922
|
43,925,990
|
Loan to related
party
|
3,628,415
|
8,467,781
|
Other long-term
assets
|
64,176
|
65,372
|
Total
assets
|
$
100,907,371
|
$
85,284,918
|
|
|
|
|
|
|
Accounts
payable
|
2,100,933
|
2,029,252
|
Dividend
payable
|
-
|
188,061
|
Accrued expenses and
other current liabilities
|
8,643,756
|
7,025,303
|
Income taxes
payable
|
353,635
|
2,328,031
|
Deferred
revenue
|
512,009
|
235,745
|
Current
liabilities
|
11,610,333
|
11,806,392
|
|
|
|
Deferred tax
liability, net
|
1,952,990
|
1,974,734
|
Total
liabilities
|
13,563,323
|
13,781,126
|
|
|
|
Ordinary
shares
|
918,844
|
918,844
|
Additional paid-in
capital
|
161,962,670
|
122,338,614
|
Statutory
reserve
|
8,350,142
|
8,350,141
|
Retained
earnings
|
(118,876,715)
|
(95,354,620)
|
Beginning
balance
|
(126,382,395)
|
(119,108,096)
|
Net income (loss)
attributable to Acorn
|
7,505,680
|
23,753,476
|
Accumulated other
comprehensive income
|
60,968,963
|
61,795,141
|
Treasury stock, at
cost
|
(26,335,296)
|
(26,893,066)
|
Total Acorn
International, Inc. shareholders' equity
|
86,988,608
|
71,155,054
|
|
|
|
Noncontrolling
interests
|
355,440
|
348,738
|
Total
equity
|
87,344,048
|
71,503,792
|
Total liabilities
and equity
|
$
100,907,371
|
$
85,284,918
|
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SOURCE Acorn International, Inc.