ZW Data Action Technologies Reports Third Quarter and First Nine Months 2020 Unaudited Financial Results
BEIJING, Nov. 13, 2020 (GLOBE NEWSWIRE) — ZW Data Action Technologies Inc. (Nasdaq: CNET) (the “Company”), an integrated online advertising, precision marketing, data analytics and other value-added services provider serving enterprise clients, today announced its unaudited financial results for the three and nine months ended September 30, 2020.
Third Quarter of 2020 Financial HighlightsRevenues decreased by 20.7% to $12.30 million for the third quarter of 2020, primarily due to the decrease in revenues from our Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of the slow recovery after the COVID-19 outbreak.Gross loss was $0.64 million with a gross loss margin of 5.2% for the third quarter of 2020.Loss from operations was $1.40 million for the third quarter of 2020, compared to $0.28 million for the same period of last year, primarily attributable to the decrease in gross profit, which was partially offset by the decrease in operating expenses.Net loss attributable to CNET was $1.33 million, or loss per share of $0.06, for the third quarter of 2020, compared to net loss of $0.39 million, or loss per share of $0.02, for the same period of last year.“Despite continued decrease on a year-over-year basis, our third quarter revenues increased 18% sequentially and almost tripled from the trough level in the first quarter, highlighting the continuing post-pandemic recovery trend. Looking ahead, with restoring growth and profitability remaining a challenge for us in the near-term, we are actively pursuing new initiatives, opportunities, and strategic alternatives to right the ship,” said Mr. Handong Cheng, Chairman and Chief Executive Officer of ZW Data Action Technologies.Third Quarter 2020 Financial ResultsRevenuesFor the third quarter of 2020, revenues decreased by $3.20 million, or 20.7%, to $12.30 million from $15.51 million for the same period of last year. The decrease in revenues was primarily attributable to the decrease in revenues from the Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of slow business recovery after the COVID-19 outbreak during the first quarter of 2020.
Cost of revenuesTotal cost of revenues decreased by $1.67 million, or 11.4%, to $12.95 million for the third quarter of 2020 from $14.62 million for the same period of last year. The decrease in cost of revenues was primary attributable to the decrease in costs associated with the distribution of the right to use search engine marketing service we purchased from key search engines and cost related to providing Internet advertising services on our ad portals, which was in line with the decrease in the related revenues as discussed above.Gross profit (loss) and gross profit (loss) marginGross loss was $0.64 million for the third quarter of 2020, compared to gross profit of $0.89 million for the same period of last year, which was primarily due to gross loss incurred from our main revenue stream, the distribution of the right to use search engine marketing service business category, as a result of the slow recovery of economy after the COVID-19 outbreak during the first quarter of 2020, which was partially offset by the increase in gross profit generated from Internet advertising business. Gross loss margin was 5.2% for third quarter of 2020, compared to gross profit margin of 5.8% for the same period of last year.Operating expensesSales and marketing expenses decreased by $0.05 million, or 47.7%, to $0.06 million for the third quarter of 2020 from $0.11 million for the same period of last year. The decrease in sales and marketing expenses was mainly attributable to the decrease in performance based salary and bonus expenses, due to the decrease in revenues.General and administrative expenses decreased by $0.23 million, or 27.5%, to $0.59 million for the third quarter of 2020 from $0.82 million for the same period of last year. The decrease in general and administrative expenses was mainly attributable to the decrease in general departmental expenses, as a result of cost reduction plan executed by management after the COVID-19 outbreak.Research and development expenses decreased by $0.13 million, or 52.7%, to $0.11 million for the third quarter of 2020 from $0.24 million for the same period of last year. Research and development expenses accounted for 0.9% of total revenues for the third quarter of 2020, compared to 1.5% for the same period of last year.Operating lossLoss from operations was $1.40 million for the third quarter of 2020, compared to $0.28 million for the same period of last year. Operating loss margin was 11.4% for the third quarter of 2020, compared to 1.8% for the same period of last year.Other income (expense), netTotal other expenses decreased to $0.08 million for the third quarter of 2020, compared to $0.13 million for the same period of last year, which was primarily related to change in fair value of warrant liabilities.
Net loss attributable to CNET and loss per shareNet loss attributable to CNET was $1.33 million, or loss per share of $0.06, for the third quarter of 2020. This compared to net loss attributable to CNET of $0.39 million, or loss per share of $0.02, for the same period of last year.First Nine Months 2020 Financial ResultsRevenuesFor the first nine months of 2020, revenues decreased by $12.42 million, or 31.4%, to $27.10 million from $39.53 million for the same period of last year. The decrease in revenues was primarily attributable to the decrease in revenues from our Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of the COVID-19 outbreak during the first fiscal quarter and the slow recovery in the second and third quarters of 2020.Cost of revenuesFor the first nine months of 2020, cost of revenues decreased by $11.28 million, or 29.8%, to $26.55 million from $37.83 million for the same period of last year, which was primarily due to the decrease in costs associated with the distribution of the right to use search engine marketing service we purchased from key search engines and cost related to providing Internet advertising services on our ad portals, which was in line with the decrease in the related revenues.Gross profit and gross marginGross profit decreased by $1.14 million, or 67.3%, to $0.56 million for the first nine months of 2020 from $1.70 million for the same period of last year, as a result of the gross loss of our distribution of the right to use search engine marketing service and partially offset by and the increase in gross profit generated from our Internet advertising service, Ecommerce O2O advertising and marketing services and technical solution services during the first nine months of 2020.Overall gross margin was 2.1% for first nine months of 2020, compared to 4.3% for the same period of last year.Operating expensesSales and marketing expenses decreased by $0.17 million, or 36.4%, to $0.29 million for the first nine months of 2020 from $0.46 million for the same period of last year. The changes in sales and marketing expenses was mainly attributable to the following reasons: (1) staff salary and benefit expenses and general departmental expenses decreased by $0.29 million, due to office shutdown during the first fiscal quarter of 2020, resulted from the COVID-19 outbreak during the period and related epidemic control measures imposed by the local governments where we operate, and slow recovery of business performance after the outbreak in the following quarters; and (2) the increase in share-based compensation expenses of $0.12 million, related to restricted shares granted and issued to our sales staff during the first fiscal quarter of 2020.General and administrative expenses increased by $1.65 million, or 57.2%, to $4.52 million for the first nine months of 2020 from $2.88 million for the same period of last year. The increases in general and administrative expenses was mainly attributable to the following reasons: (1) the increase in share-based compensation expenses of $1.49 million, due to restricted shares granted and issued in the first fiscal quarter of 2020; and (2) the increase in allowance for doubtful accounts of $0.31 million.Research and development expenses decreased by $0.16 million, or 26.0%, to $0.44 million for the first nine months of 2020 from $0.60 million for the same period of last year. Research and development expenses accounted for 1.6% of total revenues for the first nine months of 2020, compared to 1.5% for the same period of last year.Operating lossLoss from operations increased by $2.47 million, or 110.3%, to $4.70 million for the first nine months of 2020 from $2.24 million for the same period of last year. Operating loss margin was 17.3% for the first nine months of 2020, compared to 5.7% for the same period of last year.Other income (expense), netTotal other income was $nil for the first nine months of 2020, compared to $0.31 million for the same period of last year, which was primarily related to change in fair value of warrant liabilities.
Net loss attributable to CNET and loss per shareAs a result of the foregoing, net loss attributable to CNET was $4.61 million, or loss per share of $0.22, for the first nine months of 2020. This compared to net loss attributable to CNET of $1.91 million, or loss per share of $0.12, for the same period of last year.Financial ConditionAs of September 30, 2020, the Company had cash and cash equivalents of $0.50 million, compared to $1.60 million as of December 31, 2019. Accounts receivable, net was $2.28 million as of September 30, 2020, compared to $3.26 million as of December 31, 2019. Working capital was $2.35 million as of September 30, 2020, compared to $4.92 million as of December 31, 2019.Net cash provided by operating activities was $0.60 million for the first nine months of 2020, compared to net cash used in operating activities of $4.06 million for the same period of last year. Net cash used in investing activities was $1.27 million for the first nine months of 2020, compared to $0.80 million for the same period of last year. Net cash used in financing activities was $0.43 million for the first nine months of 2020, compared to net cash provided by financing activities of $1.96 million for the same period of last year.Recent DevelopmentsEffective October 14, 2020, the Company changed its corporate name change from “ChinaNet Online Holdings, Inc.” to “ZW Data Action Technologies Inc.”On August 7, 2020, the Company appointed Mr. Charles Chiu to the position of the Company’s Chief Operating Officer and Mr. Mark Li, the current Chief Financial Officer of the Company, to serve as Secretary of the Company. On the same date, Mr. George Chu resigned from the roles of Chief Operating Officer and Secretary of the Company due to personal reasons. Mr. Chu continued to serve as a director of the Board of Directors of the Company.About ZW Data Action Technologies Inc.Established in 2003 and headquartered in Beijing, China, ZW Data Action Technologies Inc. (the “Company”) offers online advertising, precision marketing, data analytics and other value-added services for enterprise clients. Leveraging its fully integrated services platform, proprietary database, and cutting-edge algorithms, ZW Data Action Technologies delivers customized, result-driven business solutions for small and medium-sized enterprise clients in China. The Company also develops blockchain and artificial intelligence enabled web/mobile applications and software solutions for general public, enterprise clients, and government agencies. More information about the Company can be found at: http://www.zdat.com/.Safe Harbor StatementThis release contains certain “forward-looking statements” relating to the business of ZW Data Action Technologies 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 ZW Data Action Technologies current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting ZW Data Action Technologies will be those anticipated by ZW Data Action Technologies. 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. ZW Data Action Technologies 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 more information, please contact:Sherry Zheng
Weitian Group LLC
Email: shunyu.zheng@weitian-ir.com
Phone: +1 718-213-7386
Third Quarter of 2020 Financial HighlightsRevenues decreased by 20.7% to $12.30 million for the third quarter of 2020, primarily due to the decrease in revenues from our Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of the slow recovery after the COVID-19 outbreak.Gross loss was $0.64 million with a gross loss margin of 5.2% for the third quarter of 2020.Loss from operations was $1.40 million for the third quarter of 2020, compared to $0.28 million for the same period of last year, primarily attributable to the decrease in gross profit, which was partially offset by the decrease in operating expenses.Net loss attributable to CNET was $1.33 million, or loss per share of $0.06, for the third quarter of 2020, compared to net loss of $0.39 million, or loss per share of $0.02, for the same period of last year.“Despite continued decrease on a year-over-year basis, our third quarter revenues increased 18% sequentially and almost tripled from the trough level in the first quarter, highlighting the continuing post-pandemic recovery trend. Looking ahead, with restoring growth and profitability remaining a challenge for us in the near-term, we are actively pursuing new initiatives, opportunities, and strategic alternatives to right the ship,” said Mr. Handong Cheng, Chairman and Chief Executive Officer of ZW Data Action Technologies.Third Quarter 2020 Financial ResultsRevenuesFor the third quarter of 2020, revenues decreased by $3.20 million, or 20.7%, to $12.30 million from $15.51 million for the same period of last year. The decrease in revenues was primarily attributable to the decrease in revenues from the Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of slow business recovery after the COVID-19 outbreak during the first quarter of 2020.
Cost of revenuesTotal cost of revenues decreased by $1.67 million, or 11.4%, to $12.95 million for the third quarter of 2020 from $14.62 million for the same period of last year. The decrease in cost of revenues was primary attributable to the decrease in costs associated with the distribution of the right to use search engine marketing service we purchased from key search engines and cost related to providing Internet advertising services on our ad portals, which was in line with the decrease in the related revenues as discussed above.Gross profit (loss) and gross profit (loss) marginGross loss was $0.64 million for the third quarter of 2020, compared to gross profit of $0.89 million for the same period of last year, which was primarily due to gross loss incurred from our main revenue stream, the distribution of the right to use search engine marketing service business category, as a result of the slow recovery of economy after the COVID-19 outbreak during the first quarter of 2020, which was partially offset by the increase in gross profit generated from Internet advertising business. Gross loss margin was 5.2% for third quarter of 2020, compared to gross profit margin of 5.8% for the same period of last year.Operating expensesSales and marketing expenses decreased by $0.05 million, or 47.7%, to $0.06 million for the third quarter of 2020 from $0.11 million for the same period of last year. The decrease in sales and marketing expenses was mainly attributable to the decrease in performance based salary and bonus expenses, due to the decrease in revenues.General and administrative expenses decreased by $0.23 million, or 27.5%, to $0.59 million for the third quarter of 2020 from $0.82 million for the same period of last year. The decrease in general and administrative expenses was mainly attributable to the decrease in general departmental expenses, as a result of cost reduction plan executed by management after the COVID-19 outbreak.Research and development expenses decreased by $0.13 million, or 52.7%, to $0.11 million for the third quarter of 2020 from $0.24 million for the same period of last year. Research and development expenses accounted for 0.9% of total revenues for the third quarter of 2020, compared to 1.5% for the same period of last year.Operating lossLoss from operations was $1.40 million for the third quarter of 2020, compared to $0.28 million for the same period of last year. Operating loss margin was 11.4% for the third quarter of 2020, compared to 1.8% for the same period of last year.Other income (expense), netTotal other expenses decreased to $0.08 million for the third quarter of 2020, compared to $0.13 million for the same period of last year, which was primarily related to change in fair value of warrant liabilities.
Net loss attributable to CNET and loss per shareNet loss attributable to CNET was $1.33 million, or loss per share of $0.06, for the third quarter of 2020. This compared to net loss attributable to CNET of $0.39 million, or loss per share of $0.02, for the same period of last year.First Nine Months 2020 Financial ResultsRevenuesFor the first nine months of 2020, revenues decreased by $12.42 million, or 31.4%, to $27.10 million from $39.53 million for the same period of last year. The decrease in revenues was primarily attributable to the decrease in revenues from our Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of the COVID-19 outbreak during the first fiscal quarter and the slow recovery in the second and third quarters of 2020.Cost of revenuesFor the first nine months of 2020, cost of revenues decreased by $11.28 million, or 29.8%, to $26.55 million from $37.83 million for the same period of last year, which was primarily due to the decrease in costs associated with the distribution of the right to use search engine marketing service we purchased from key search engines and cost related to providing Internet advertising services on our ad portals, which was in line with the decrease in the related revenues.Gross profit and gross marginGross profit decreased by $1.14 million, or 67.3%, to $0.56 million for the first nine months of 2020 from $1.70 million for the same period of last year, as a result of the gross loss of our distribution of the right to use search engine marketing service and partially offset by and the increase in gross profit generated from our Internet advertising service, Ecommerce O2O advertising and marketing services and technical solution services during the first nine months of 2020.Overall gross margin was 2.1% for first nine months of 2020, compared to 4.3% for the same period of last year.Operating expensesSales and marketing expenses decreased by $0.17 million, or 36.4%, to $0.29 million for the first nine months of 2020 from $0.46 million for the same period of last year. The changes in sales and marketing expenses was mainly attributable to the following reasons: (1) staff salary and benefit expenses and general departmental expenses decreased by $0.29 million, due to office shutdown during the first fiscal quarter of 2020, resulted from the COVID-19 outbreak during the period and related epidemic control measures imposed by the local governments where we operate, and slow recovery of business performance after the outbreak in the following quarters; and (2) the increase in share-based compensation expenses of $0.12 million, related to restricted shares granted and issued to our sales staff during the first fiscal quarter of 2020.General and administrative expenses increased by $1.65 million, or 57.2%, to $4.52 million for the first nine months of 2020 from $2.88 million for the same period of last year. The increases in general and administrative expenses was mainly attributable to the following reasons: (1) the increase in share-based compensation expenses of $1.49 million, due to restricted shares granted and issued in the first fiscal quarter of 2020; and (2) the increase in allowance for doubtful accounts of $0.31 million.Research and development expenses decreased by $0.16 million, or 26.0%, to $0.44 million for the first nine months of 2020 from $0.60 million for the same period of last year. Research and development expenses accounted for 1.6% of total revenues for the first nine months of 2020, compared to 1.5% for the same period of last year.Operating lossLoss from operations increased by $2.47 million, or 110.3%, to $4.70 million for the first nine months of 2020 from $2.24 million for the same period of last year. Operating loss margin was 17.3% for the first nine months of 2020, compared to 5.7% for the same period of last year.Other income (expense), netTotal other income was $nil for the first nine months of 2020, compared to $0.31 million for the same period of last year, which was primarily related to change in fair value of warrant liabilities.
Net loss attributable to CNET and loss per shareAs a result of the foregoing, net loss attributable to CNET was $4.61 million, or loss per share of $0.22, for the first nine months of 2020. This compared to net loss attributable to CNET of $1.91 million, or loss per share of $0.12, for the same period of last year.Financial ConditionAs of September 30, 2020, the Company had cash and cash equivalents of $0.50 million, compared to $1.60 million as of December 31, 2019. Accounts receivable, net was $2.28 million as of September 30, 2020, compared to $3.26 million as of December 31, 2019. Working capital was $2.35 million as of September 30, 2020, compared to $4.92 million as of December 31, 2019.Net cash provided by operating activities was $0.60 million for the first nine months of 2020, compared to net cash used in operating activities of $4.06 million for the same period of last year. Net cash used in investing activities was $1.27 million for the first nine months of 2020, compared to $0.80 million for the same period of last year. Net cash used in financing activities was $0.43 million for the first nine months of 2020, compared to net cash provided by financing activities of $1.96 million for the same period of last year.Recent DevelopmentsEffective October 14, 2020, the Company changed its corporate name change from “ChinaNet Online Holdings, Inc.” to “ZW Data Action Technologies Inc.”On August 7, 2020, the Company appointed Mr. Charles Chiu to the position of the Company’s Chief Operating Officer and Mr. Mark Li, the current Chief Financial Officer of the Company, to serve as Secretary of the Company. On the same date, Mr. George Chu resigned from the roles of Chief Operating Officer and Secretary of the Company due to personal reasons. Mr. Chu continued to serve as a director of the Board of Directors of the Company.About ZW Data Action Technologies Inc.Established in 2003 and headquartered in Beijing, China, ZW Data Action Technologies Inc. (the “Company”) offers online advertising, precision marketing, data analytics and other value-added services for enterprise clients. Leveraging its fully integrated services platform, proprietary database, and cutting-edge algorithms, ZW Data Action Technologies delivers customized, result-driven business solutions for small and medium-sized enterprise clients in China. The Company also develops blockchain and artificial intelligence enabled web/mobile applications and software solutions for general public, enterprise clients, and government agencies. More information about the Company can be found at: http://www.zdat.com/.Safe Harbor StatementThis release contains certain “forward-looking statements” relating to the business of ZW Data Action Technologies 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 ZW Data Action Technologies current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting ZW Data Action Technologies will be those anticipated by ZW Data Action Technologies. 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. ZW Data Action Technologies 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 more information, please contact:Sherry Zheng
Weitian Group LLC
Email: shunyu.zheng@weitian-ir.com
Phone: +1 718-213-7386