BEIJING, Nov. 16 /PRNewswire-Asia-FirstCall/ -- ChinaNet Online
Holdings, Inc. ("ChinaNet," OTC Bulletin Board: CHNT), a leading
full-service media development, advertising and communications
company for small and medium-sized enterprises in the People's
Republic of China ("PRC"), today announced higher revenues, net
income and cash flow for the third quarter 2009. -- Revenues
increased 21.7 percent to $8.1 million in the third quarter 2009 --
Third quarter 2009 adjusted net income increased 19.9 percent to
$1.9 million with adjusted earnings per share of $0.12 -- First
nine months 2009 revenues increased 105.1 percent to $27.3 million
-- First nine months adjusted net income increased 120.1 percent to
$4.5 million -- First nine months 2009 adjusted earnings per share
increased 106.7 percent to $0.31 -- Gross margins improved 581
basis points to 50.4 percent for the third quarter of 2009 -- Cash
flow from operations was $4.7 million for the first nine months of
2009 -- Management to host earnings conference call November 16th
at 11:30 a.m. ET SUMMARY FINANCIALS Third Quarter 2009 Results Q3
2009(*) Q3 2008 CHANGE Sales $8.1 million $6.7 million +21.7% Gross
Profit $4.1 million $3.0 million +37.5% Adjusted Net Income $1.9
million $1.6 million +19.9% GAAP Net Income $0.6 million $1.6
million -59.9% Adjusted EPS (Basic) $0.12 $0.12 -- GAAP EPS (Basic)
($0.33) $0.12 -- (*) Net income of Q3 2009 included a $1.3 million
non-cash charge related to the changes in the value of warrants,
and a $5.9 million non-cash charge related to the beneficial
conversion feature of Series A preferred stock. The First Nine
Months of 2009 Results 2009(*) 2008 CHANGE Sales $27.3 million
$13.3 million +105.1% Gross Profit $11.4 million $4.6 million
+144.8% Adjusted Net Income $4.5 million $2.1 million +120.1% GAAP
Net Income $3.2 million $2.1 million +57.3% Adjusted EPS (Basic)
$0.31 $0.15 +106.7% GAAP EPS (Bacic) ($0.18) $0.15 -- (*) Net
income for the first nine months of 2009 included a $1.3 million
non-cash charge related to the changes in the value of warrants and
a $5.9 million non-cash charge related to the beneficial conversion
feature of Series A preferred stock. Third Quarter 2009 Financial
Results Revenues for the third quarter of 2009 increased 21.7
percent to approximately $8.1 million compared to $6.7 million for
the third quarter of 2008. The increase resulted from a significant
increases in Internet advertising and TV advertising. For the third
quarter of 2009 Internet advertising comprised approximately 58.2
percent of total revenues, an increase of 59.6 percent
year-over-year to $4.7 million. Growth was the result our
successful brand building efforts for the http://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 third quarter of 2009 revenues generated by
TV advertising increased 40.1 percent year-over-year to
approximately $3.1 million or 38.3 percent of total revenues. As of
September 30, 2009, the number of active customers for the
Company's Internet advertising business was 779 and the number of
customers being serviced by its TV advertising business was 344.
Approximately 44% of customers were being serviced by both
platforms. Cost of sales for the three months ended September 30,
2009 was approximately $4.0 million or 49.6 percent of revenues as
compared to $3.7 million or 55.4 percent of revenues for the three
months ended September 30, 2008. The costs associated with the
Company's advertising services include costs for purchasing
resources from other well-known portal websites in the PRC for
Internet advertising and purchasing TV advertisement time from
approximately ten different provincial TV stations. For the third
quarter of 2009 the gross profit was $4.1 million, representing
gross margins of 50.4 percent, compared to the third quarter of
2008 with $3.0 million in gross profit and a gross margin of 44.6
percent. Gross profit grew by 37.5 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 September 30, 2009 were approximately $1.4
million, up 74.4% percent from $0.8 million in the same period of
2008. Selling expenses for the period increased to approximately
$0.6 million from $0.5 million in the third quarter of 2008
primarily as a result of brand development expenses for
http://www.28.com/ , increased payrolls for staff incentives, an
expanded sales force, and increased marketing expenses. General and
administrative expenses were $0.6 million and $0.2 million in the
third 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 third quarter of 2009 totaled
approximately $2.7 million, a 24.3 percent increase from the $2.2
million reported for the third quarter of 2008. Operating margins
were 33.5 percent and 32.8 percent for the third quarter of 2009
and 2008, respectively. GAAP net income for the third quarter was
$0.6 million, representing a decrease of 59.9% as compared to $1.6
million reported in the same period in the prior year. Earnings per
basic share were a negative $0.33 for the third quarter in 2009 as
compared to $0.12 for the third quarter in 2008, which was based on
15.8 million and 13.8 million shares outstanding, respectively. The
Company had an effective tax rate of 26.4 percent and 26.5 percent
for the third quarters of 2009 and 2008, respectively, excluding
the effect of a $1.3 million non-cash charge related to the changes
in fair value of warrants recorded in the third quarter of 2009.
During the third quarter of 2009 the Company incurred a non-cash
charge of $1.3 million for the change in the value of warrants and
a $5.9 million non-cash charge related to the beneficial conversion
feature of Series A preferred stock which was recorded as deemed
dividend, a deduction of retained earnings and a deduction of net
income attributable to common shareholders. Adjusting for non-cash
charges, net income for the third quarter of 2009 was $1.9 million,
with $0.12 in earnings per basic share. "The third quarter
continued our momentum as we executed on our growth plan while
expanding both gross and operating margins," stated 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 over 20% annual
growth projected for the Chinese internet advertising market
through 2010, we believe ChinaNet's "one-stop shop" advertising
platform is well positioned to capitalize on this large growth
opportunity and further increase market share." 2009 Nine Month
Financial Results For the nine months ended September 30, 2009,
revenues increased approximately 105.1 percent to $27.3 million
compared to the same period in 2008. Gross profit was $11.4 million
for the first nine months of 2009, representing an increase of
144.8 percent from the first nine months of 2008. Gross margins
were 41.7 percent for the first nine months of 2009 compared to
34.9 percent for the same year ago period. Income from operations
was $6.3 million for the first nine months of 2009, representing an
increase of 118.2 percent over the first nine months of 2008.
Operating margins were 22.9 percent for the first nine months of
2009 compared to 21.5 percent for the first nine months of 2008.
The Company incurred cash expenses, in addition to non-cash equity
compensation expenses, related to going public. GAAP Net income for
the first nine months of 2009 was $3.2 million for the nine months
ended September 30, 2009, an increase of approximately 57.3 percent
from $2.1 million with corresponding basic earnings per share of
negative $0.18 compared to $0.15 based on 14.5 million and 13.8
million shares, respectively. During the first nine months of 2009
the Company incurred a non-cash charge of $1.3 million for the
change in the value of warrants and a $5.9 million non-cash charge
related to the beneficial conversion feature of Series A preferred
stock which was recorded as deemed dividend, a deduction of
retained earnings and a deduction of net income attributable to
common shareholders, with no associated charge in 2008. Adjusting
for non-cash charges during each respective period, net income was
$4.5 million and $2.1 million, yielding $0.31 and $0.15 in earnings
per basic share. "The management team has been focused on enhancing
our 28.com advertising platform by adding new modules into the
network," Mr. Chen continued. "In August 2009, we launched a new
product entitled "Internet Information Management" (IIM),
intelligence software that is based on our proprietary search
engine optimization technology which helps our clients gain an
early warning in order to identify, and respond to potential
negative exposure on the internet. There are approximately 32
customers since the platform launched 3 months ago, all coming from
the Company's existing customers. We expect that growth from our
IIM product, in addition to our multi-platform advertising network,
will drive further growth during 2010." Balance Sheet and Cash Flow
The Company had a current ratio of 4 to 1 and $13.9 million in cash
and equivalents on September 30, 2009, which includes $9.2 million
in net proceeds from the August 2009 financing. Accounts
receivables were $2.4 million on September 30, 2009, compared to
$1.0 million on December 31, 2008. For the first nine months of
2009, the Company generated $4.7 million in cash from operations
versus $1.3 million for the same period in 2008, with the variance
principally coming from the increase in net income and prudent
asset management. Financial Outlook for 2009 and 2010 Management
reaffirms 2009 guidance and expects to report calendar 2009 sales
of $42.7 million and net income of $8.3 million, representing an
increase of 98.6% and 196.4% compared to 2008 sales and adjusted
net income, respectively. Management reaffirms 2010 guidance and
expects to report calendar 2010 sales of $72.3 million and net
income of $14.1 million. Conference Call The conference call will
take place at 11:30 a.m. EST on Monday, November 16, 2009.
Interested participants should call 1-877-941-8418 when calling
within the United States or 1-480-629-9809 when calling
internationally. A playback will be available through November 23,
2009. To listen, please call 1-800-406-7325 within the United
States or 1-303-590-3030 when calling internationally. Utilize the
pass code 4180080 for the replay. This call is being webcast by
ViaVid Broadcasting and can be accessed by clicking on this link
http://viavid.net/dce.aspx?sid=00006C94 , or visiting ViaVid's
website at http://www.viavid.net/ , where the webcast can be
accessed through November 23, 2009. About ChinaNet Online Holdings,
Inc. The Company, a parent company of ChinaNet Online Media Group
Ltd., incorporated in the BVI ("ChinaNet" or "Zhong Wang Zai
Xian"), is a leading full-service media development, advertising
and communications company for small medium-sized enterprises
("SMEs") in the PRC. The Company, through its certain contractual
arrangements with operating companies in the PRC, provides internet
advertising and other services for Chinese SMEs via its portal
website http://www.28.com/ , TV commercials and program production
via China-Net TV, and in-house LCD advertising on banking kiosks
targeting Chinese banking patrons. Website:
http://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. For further
information, contact: TriPoint Capital Advisors Mark Elenowitz Tel:
+1-917-512-0822 HC International, Inc. Ted Haberfield Tel:
+1-760-755-2716 Email: Web: http://www.hcinternational.net/
CHINANET ONLINE HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (In
thousands, except for number of shares and per share data)
September 30, December 31, 2009 2008 (US $) (US $) (Unaudited)
(Audited) Assets Current assets: Cash and cash equivalents $13,900
$2,679 Accounts receivable 2,426 978 Other receivables 896 --
Prepayment and deposit to suppliers 4,073 4,072 Due from related
parties 263 109 Due from directors 3 -- Due from Control Group 13
243 Inventories 3 1 Other current assets 11 46 Total current assets
21,588 8,128 Property and equipment, net 838 678 Other long-term
assets 45 7 Total Assets $22,471 $8,813 Liabilities and
Stockholders' Equity Current liabilities: Accounts payable $154 $37
Advances from customers 972 608 Other payables 41 1,333 Accrued
payroll and other accruals 200 66 Due to related parties 20 346 Due
to Control Group 954 1,149 Due to director -- 10 Taxes payable
3,026 1,746 Total current liabilities 5,367 5,295 Long-term
liabilities: Long-term borrowing from director 128 128 Warrant
liabilities 6,428 -- Stockholders' equity: Series A convertible
preferred stock (US$0.001 par value; authorized- 8,000,000 shares;
issued and outstanding-4,121,600 and nil shares at September 30,
2009 and December 31, 2008 respectively) 4 -- Common stock
(US$0.001 par value; authorized-50,000,000 shares; issued and
outstanding-15,774,300 shares and 13,790,800 shares at September
30, 2009 and December 31, 2008 respectively) 16 14 Additional
paid-in capital 10,404 599 Appropriated retained earnings 304 304
(Cumulative deficits)/unappropriated retained earnings (296) 2,370
Accumulated other comprehensive income 116 103 Total stockholders'
equity 10,548 3,390 Total liabilities and shareholders' equity
$22,471 $8,813 CHINANET ONLINE HOLDINGS, INC. UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (In
thousands, except for number of shares and per share data) For the
nine months For the three months ended September 30, ended
September 30, 2009 2008 2009 2008 (US $) (US $) (US $) (US $)
(Unaudited) (Unaudited) (Unaudited) (Unaudited) Sales $27,305
$13,314 $8,126 $6,679 Cost of sales 15,918 8,663 4,029 3,700 Gross
margin 11,387 4,651 4,097 2,979 Operating expenses Selling expenses
3,253 1,103 624 525 General and administrative expenses 1,530 588
614 233 Research and development expenses 347 92 133 28 5,130 1,783
1,371 786 Income from operations 6,257 2,868 2,726 2,193 Other
income (expenses): Changes in fair value of warrants (1,289) --
(1,289) -- Interest income 9 5 4 3 Other income 8 -- 2 -- Other
expenses (100) (15) (99) -- (1,372) (10) (1,382) 3 Income before
income tax expense 4,885 2,858 1,344 2,196 Income tax expense 1,653
804 696 581 Net income 3,232 2,054 648 1,615 Other comprehensive
income Foreign currency translation gain 13 71 8 2 Comprehensive
income 3,245 2,125 656 1,617 Beneficial conversion feature of
Series A convertible preferred stock (5,898) -- (5,898) -- Net
income (loss) attributable to common shareholders (2,666) 2,054
(5,250) 1,615 Earnings /(loss) per share Earnings per common stock
Basic and diluted $(0.18) $0.15 $(0.33) $0.12 Weighted average
number of common shares outstanding: Basic and diluted shares
14,495,560 13,790,800 15,774,300 13,790,800 CHINANET ONLINE
HOLDINGS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands) For the nine months ended September 30, 2009 2008 (US $)
(US $) (Unaudited) (Unaudited) Cash flows from operating activities
Net income $3,232 $2,054 Adjustments to reconcile net income to net
cash provided by operating activities Depreciation and Amortization
134 36 Disposal of fixed assets 19 -- Share-based compensation
expenses 190 -- Changes in fair value of warrants 1,289 -- Changes
in operating assets and liabilities Accounts receivable (1,445)
(550) Other receivables (166) (88) Prepayment and deposit to
suppliers 9 (1,718) Due from related parties (154) (88) Due from/to
Control Group 33 737 Other current assets 33 (47) Accounts payable
117 (182) Advances from customers 361 273 Accrued payroll and other
accruals 134 8 Due to related parties (327) 200 Taxes payable 1,275
706 Net cash provided by operating activities 4,734 1,341 Cash
flows from investing activities Purchases of vehicles and office
equipment (310) (136) Purchases of Intangible and other long-term
assets (38) (6) Net cash used in investing activities (348) (142)
Cash flows from financing activities Increase of long-term
borrowing from director -- 125 Increase of short-term loan to third
parties (730) -- Increase/(decrease) in due to director (13) 536
Increase/(decrease) in other payables (1,294) 836 Cancellation and
retirement of common stock (300) -- Proceeds from issuance of
Series A convertible preferred stock and warrants (net of issuance
cost of US$ 1,142) 9,162 -- Net cash provided by financing
activities 6,825 1,497 Effect of exchange rate fluctuation on cash
and cash equivalents 10 78 Net increase in cash and cash
equivalents 11,221 2,774 Cash and cash equivalents at beginning of
year 2,679 317 Cash and cash equivalents at end of year $13,900
$3,091 Supplemental disclosure of cash flow information Interest
paid $-- $-- Income taxes paid $900 $161 Reconciliations of our
non-GAAP financial measures to unaudited condensed consolidated
statements of income and comprehensive income for the nine and
three months ended September 30, 2009 are as followed: For the nine
For the three months ended months ended September 30, September 30,
2009 2009 2009 2009 (US $) (US $) (US $) (US $) (Unaud- (Unaud-
(Unaud- (Unaud- ited) ited) ited) ited) GAAP NON GAAP GAAP NON GAAP
Income from operations 6,257 6,257 2,726 2,726 Other income
(expenses): Changes in fair value of warrants (1,289) -- (1,289) --
Interest income 9 9 4 4 Other income 8 8 2 2 Other expenses (100)
(100) (99) (99) (1,372) (83) (1,382) (93) Income before income tax
expense 4,885 6,174 1,344 2,633 Income tax expense 1,653 1,653 696
696 Net income 3,232 4,521 648 1,937 Other comprehensive income
Foreign currency translation gain 13 13 8 8 Comprehensive income
3,245 4,534 656 1,945 DATASOURCE: ChinaNet Online Holdings, Inc.
CONTACT: Mark Elenowitz, TriPoint Capital Advisors,
+1-917-512-0822; Ted Haberfield, HC International, Inc.,
+1-760-755-2716, Web site: http://www.chinanet-online.com/
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