SHANGHAI, March 7, 2019 /PRNewswire/ -- Acorn
International, Inc. (NYSE: ATV) ("Acorn" or the "Company"), today
announced its preliminary unaudited financial results for the
fourth quarter and full year ended December
31, 2018.
Fourth Quarter 2018 Preliminary Financial Highlights
- Net revenues increased 65.7% year-over-year in Q4 2018 to
US$8.4 million
- Gross profit rose 65.8% year-over-year in Q4 2018 to
US$5.9 million
- Gross margin remained stable year-over-year at 69.8% in Q4
2018
- Income from continuing operations was US$1.7 million in Q4 2018, compared to a loss
from continuing operations of US$1.0
million in Q4 2017
- Net income was US$1.6 million in
Q4 2018 as compared to net income of US$7.5
million in Q4 2017
Full Year 2018 Preliminary Financial Highlights
- Full year net revenues rose 40.2% in 2018 to US$28.4 million
- Gross profit increased 42.3% in 2018 to US$20.2 million
- Gross margin increased to 71.1% in 2018 from 70.1% in 2017
- Income from continuing operations was US$2.9 million in 2018, compared to a loss from
continuing operations of US$4.2
million in 2017
- Net income was US$29.1 million in
2018, as compared to net income of US$12.4
million in 2017
For the first time in recent history, Acorn achieved
profitability at the operating level for the full year.
Revenue growth of 40.2% combined with strong gross margin and
significant operating leverage led to income from continuing
operations of US$2.9 million in 2018,
up from a loss from continuing operations of US$4.2 million in 2017. Net income attributable
to Acorn for 2018 was US$29.1
million, including a one-time gain of US$30.0 million from the sale of non-core assets
in May 2018.
Throughout 2018, Acorn leveraged its 20-year history as a
leading marketing and branding company in China to focus on new media in China, while simultaneously expanding its
e-commerce B2C platforms and promoting its products through digital
media in China.
The Company's Babaka brand of posture correction products
continued to perform well, and new product category Acorn Fresh saw
monthly net revenue more than double from October to
December. The Company recently began promoting its popular
line of collectibles, which were historically sold offline, on
Acorn Streaming in an effort to further drive online
sales.
In the year ahead, Acorn plans to build on its success in 2018
by focusing on growing e-commerce sales via streaming content as it
taps into this large and growing market in China, and also seeks to drive further revenue
from Acorn Entertainment, which is a social media business that
helps western sports and entertainment talent and a diverse range
of brands develop a deep and meaningful impact in the Chinese
market and Acorn Streaming, which is primarily focused on live
streaming and pre-recorded video content creation and
distribution.
Preliminary Financial Results for the Fourth Quarter of
2018:
Total net revenues were US$8.4
million in the fourth quarter of 2018, up 65.7% from
US$5.1 million in the fourth quarter
of 2017, primarily due to an increase in e-commerce sales of Babaka
branded products as well as other products.
Cost of sales in the fourth quarter of 2018 was US$2.5 million, up 65.6% from US$1.5 million in the fourth quarter of 2017. The
increase was attributable to increased sales volume and net
revenues.
Gross profit in the fourth quarter of 2018 was US$5.9 million, up 65.8% from US$3.5 million in the fourth quarter of 2017.
Gross margin was 69.8% in the fourth quarter of 2018, unchanged
from the fourth quarter of 2017.
Total operating expenses in the fourth quarter of 2018 were
US$4.1 million, down 9.3% from
US$4.6 million in the fourth quarter
of 2017, due primarily to lower general and administrative
expenses, which were partially offset by an increase in selling and
marketing expenses to support e-commerce sales.
Income from continuing operations was US$1.7 million in the fourth quarter of 2018, as
compared to a loss from continuing operations of US$1.0 million in the fourth quarter of 2017.
Income tax expense was US$0.3
million in the fourth quarter of 2018. This compares to an
income tax benefit of US$9.6 million
in the fourth quarter of 2017, which was due to the recording of a
tax asset of US$8.0 million from
deductible loss and a US$1.6 million
write-down of previously accrued income tax expenses based on the
full-year financial performance.
Net income from continuing operations was US$1.4 million in the fourth quarter of 2018.
This compares to net income from continuing operations of
US$8.7 million in the fourth quarter
of 2017, which was primarily due to the previously mentioned income
tax benefit realized in 2017.
Net income from discontinued operations, which reflects the sale
of a majority stake in the Company's HJX electronic learning
products business to a third-party investor and operator in 2017
(Refer to "Discontinued Operations" discussion below), was
US$0.2 million in the fourth quarter
of 2018, compared to a net loss from discontinued operations of
US$1.2 million in the fourth quarter
of 2017.
Net income attributable to Acorn was US$1.6 million in the fourth quarter of 2018.
This compares to net income attributable to Acorn of US$7.5 million in the fourth quarter of 2017,
which was primarily due to the previously mentioned tax benefit
realized in 2017.
During the fourth quarter of 2018, the Company repurchased
14,615 ADSs at an average price of US$20.56 per ADS under its share repurchase
program, which was approved by the Board of Directors on
December 8th, 2017.
Preliminary Full Year 2018 Financial Results
Total net revenues were US$28.4
million in 2018, up 40.2% from US$20.3 million in 2017, primarily due to an
increase in e-commerce sales of Babaka branded products as
well as other products.
Cost of sales in 2018 was US$8.2
million, up 35.2% from US$6.1
million in 2017. The increase was attributable to increased
sales volume and net revenues.
Gross profit in 2018 was US$20.2
million, up 42.3% from US$14.2
million in 2017. Gross margin was 71.1% in 2018, up from
70.1% in 2017. The slight increase in gross margin was due to a
larger proportion of higher margin products in the product mix.
Total operating expenses in 2018 were US$17.4 million, down 5.7% from operating
expenses of US$18.4 million in 2017,
due primarily to lower general and administrative expenses and an
increase in other operating income from loan interest income
and net revenue from Acorn Entertainment, which were partially
offset by an increase in selling and marketing expenses to
support e-commerce.
Income from continuing operations was US$2.9 million in 2018, as compared to a loss
from continuing operations of US$4.2
million in 2017.
Other income was US$30.0 million
in 2018, primarily due to a gain on the sale of non-core assets, as
compared to other income of US$11.6
million in 2017, which was primarily due to dividends
received and gains from sales of shares of E-Money Holding Co.,
Ltd. (formerly known as "Yimeng Software Technology Co., Ltd."), a
publicly traded company in China.
Income tax expense was $3.0
million in 2018. This compares to an income tax benefit of
$7.9 million in 2017, which was
primarily due to the recording of a one-time tax asset
of US$8.0 million from a deductible loss in the fourth
quarter of 2017.
Net income from continuing operations was US$30.3 million in 2018, compared to net income
from continuing operations of US$15.9
million in 2017.
Net loss from discontinued operations, which reflects the sale
of a majority stake in the Company's HJX electronic learning
products business to a third-party investor and operator in 2017
(Refer to "Discontinued Operations" discussion below), was
US$1.2 million in 2018, compared to
net loss from discontinued operations of US$3.5 million in 2017.
Net income attributable to Acorn was US$29.1 million in 2018 as compared to net income
attributable to Acorn of US$12.4
million in 2017. Net income for 2018 includes the
one-time gain of US$30.0 million from
the sale of non-core assets while net income for 2017 includes the
one-time gain of US$11.8 million due
to dividends received and gains from sales of E-Money/Yimeng
shares, along with an income tax benefit of US$9.6 million in the fourth quarter of 2017.
As of December 31, 2018, Acorn's
cash and cash equivalents, with restricted cash, totaled
US$20.1 million. The cash balance at
the end of 2018 reflects the payment of a special cash dividend of
approximately US$40 million in
June 2018. Cash and equivalents, with
restricted cash, totaled US$21.1
million as of December 31,
2017.
On December 10, 2018, we executed
an agreement to sell Acorn's former principal office in
Shanghai to a third party for
US$6.7 million and received the
initial payment of US$5.1 million on
December 24, 2018.
In addition to a tax asset of $8.2
million already netted against deferred tax liabilities in
the balance sheet as of December 31,
2018, Acorn also has an
aggregate net deductible loss of approximately $33.4 million expiring within the next 5 years,
which we will strive to utilize for our benefit going forward.
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
existing businesses and brands with higher profit margins, and on
achieving profitable growth of new, potentially high margin
businesses. Acorn maintains 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
historical operations of the wholly owned HJX Business as
discontinued operations and the minority stake in the HJX Business
as equity in losses of affiliates in the consolidated statements of
operations for all periods presented, subject to the consolidation
of the HJX Business into the joint venture entity.
Conference Call
The Company will host a conference call at 8:30 a.m.
ET on March 7, 2019 to discuss financial results.
Dial-in details for the earnings conference call are as
follows:
US/Canada:
|
877-260-1479
|
International:
|
+1
334-323-0522
|
Please dial in 10 minutes before the call is scheduled to begin
and provide the passcode 3807702 to join the call. A replay will be
available approximately two hours following the conclusion of the
conference call through March 14,
2019 and can be accessed by dialing (888) 203-1112, or (719)
457-0820, passcode 3807702. An archived audio file of the
call will be available on the Company's
website http://www.acorninternationalgroup.com/news-and-events/webcasts-and-presentations/.
About Acorn International, Inc.
Acorn International is a leading marketing and branding company
in China, leveraging a twenty-year
direct marketing history to monetize brand IP, content creation and
distribution, and product sales, through digital media in
China. Previously the leading TV
infomercial company in China,
Acorn today has three divisions to support its growth: 1) Product
Division, 2) Content Division, and 3) Influencer Management
Division.
In the Product Division, Acorn sells products 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 refocused 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, leading U.S. celebrity talent
and brands to China, representing
their in-country digital presence. For more information visit
www.acorninternationalgroup.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
belief it will continue to maintain positive income from continuing
operations for the year 2019, the Company's ability to maintain
healthy margins, manage expenses and generate additional cash flow,
the expectation that the Company's focus on new media in
China, along with further
expansion on additional e-commerce B2C platforms, will continue to
drive e-commerce sales in the future, efforts to implement its
proposed business plans, including growing e-commerce sales via
streaming content and driving further revenues from Acorn
Entertainment and Acorn Streaming. 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 fourth 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.
|
CONSOLIDATED
BALANCE SHEETS
|
(In US
dollars)
|
|
|
|
|
|
|
|
2017/12/31
|
|
2018/12/31
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Cash and cash
equivalents
|
|
21,019,834
|
|
19,981,455
|
Restricted
cash
|
|
78,051
|
|
76,243
|
Accounts receivable,
net
|
|
1,442,750
|
|
3,298,289
|
Inventory
|
|
1,516,283
|
|
1,696,207
|
Other prepaid
expenses and current assets, net
|
|
4,030,812
|
|
5,870,543
|
Current portion of
convertible loan
|
|
3,587,204
|
|
3,714,920
|
Current
assets
|
|
31,674,934
|
|
34,637,657
|
|
|
|
|
|
Property and
equipment, net
|
|
4,037,294
|
|
1,016,507
|
Held-for-sale
assets
|
|
17,022,630
|
|
2,881,370
|
Available-for-sale
securities
|
|
44,479,922
|
|
42,347,696
|
Loan to related
party
|
|
3,628,415
|
|
10,025,096
|
Other long-term
assets
|
|
64,176
|
|
243,236
|
Total
assets
|
|
100,907,371
|
|
91,151,562
|
|
|
|
|
|
Accounts
payable
|
|
2,100,933
|
|
2,086,958
|
Dividend
payable
|
|
-
|
|
174,658
|
Accrued expenses and
other current liabilities
|
|
8,643,756
|
|
12,542,673
|
Income taxes
payable
|
|
353,635
|
|
1,621,003
|
Deferred
revenue
|
|
512,009
|
|
174,826
|
Current
liabilities
|
|
11,610,333
|
|
16,600,118
|
|
|
|
|
|
Deferred tax
liability, net
|
|
1,952,990
|
|
1,903,780
|
Total
liabilities
|
|
13,563,323
|
|
18,503,898
|
|
|
|
|
|
Ordinary
shares
|
|
918,844
|
|
918,844
|
Additional paid-in
capital
|
|
161,962,670
|
|
122,338,614
|
Statutory
reserve
|
|
8,350,142
|
|
8,350,142
|
Retained
earnings
|
|
(118,876,715)
|
|
(89,802,366)
|
Beginning
balance
|
|
(131,262,030)
|
|
(118,876,715)
|
Net income (loss)
attributable to Acorn
|
|
12,384,303
|
|
29,074,349
|
Appropriation of
statutory reserve fund
|
|
1,012
|
|
-
|
Accumulated other
comprehensive income
|
|
60,968,963
|
|
59,128,629
|
Treasury stock, at
cost
|
|
(26,335,296)
|
|
(28,620,325)
|
Total Acorn
International, Inc. shareholders' equity
|
|
86,988,608
|
|
72,313,538
|
|
|
|
|
|
Noncontrolling
interests
|
|
355,440
|
|
334,126
|
Total
equity
|
|
87,344,048
|
|
72,647,664
|
Total liabilities
and equity
|
|
100,907,371
|
|
91,151,562
|
ACORN
INTERNATIONAL, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In US
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months
Ended December 31
|
|
12 Months
Ended December 31
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
Net
revenues
|
|
|
|
|
|
|
|
Direct
sales
|
4,878,717
|
|
6,769,852
|
|
18,942,436
|
|
23,636,928
|
Distribution
sales
|
184,940
|
|
1,622,897
|
|
1,347,851
|
|
4,800,328
|
Total net
revenues
|
5,063,656
|
|
8,392,749
|
|
20,290,287
|
|
28,437,256
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
|
|
|
|
|
Direct
sales
|
(1,289,612)
|
|
(2,036,402)
|
|
(5,244,490)
|
|
(6,646,991)
|
Distribution
sales
|
(240,017)
|
|
(496,164)
|
|
(827,495)
|
|
(1,559,922)
|
Total cost of
revenues
|
(1,529,629)
|
|
(2,532,566)
|
|
(6,071,985)
|
|
(8,206,913)
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
|
|
|
|
|
Direct
sales
|
3,589,105
|
|
4,733,450
|
|
13,697,946
|
|
16,989,937
|
Distribution
sales
|
(55,077)
|
|
1,126,733
|
|
520,356
|
|
3,240,406
|
Total gross
profit
|
3,534,027
|
|
5,860,183
|
|
14,218,302
|
|
20,230,343
|
|
|
|
|
|
|
|
|
Operating (expenses)
income
|
|
|
|
|
|
|
|
Other selling and
marketing expenses
|
(3,296,575)
|
|
(3,711,055)
|
|
(10,114,870)
|
|
(11,913,375)
|
General and
administrative expenses
|
(1,797,534)
|
|
(961,001)
|
|
(9,759,145)
|
|
(7,615,487)
|
Other operating
income, net
|
521,066
|
|
525,834
|
|
1,473,055
|
|
2,182,433
|
Total operating
(expenses) income
|
(4,573,044)
|
|
(4,146,222)
|
|
(18,400,960)
|
|
(17,346,428)
|
Income (loss) from
continuing operations
|
(1,039,016)
|
|
1,713,961
|
|
(4,182,658)
|
|
2,883,915
|
|
|
|
|
|
|
|
|
Interest
expense
|
-
|
|
-
|
|
-
|
|
(95)
|
Interest
income
|
144,127
|
|
14,102
|
|
533,622
|
|
399,335
|
Other income
(expenses), net
|
(4,186)
|
|
(15,801)
|
|
11,638,843
|
|
30,041,892
|
Income (loss) from
continuing operations before
income taxes and equity
in losses of affiliates
|
(899,075)
|
|
1,712,262
|
|
7,989,807
|
|
33,325,047
|
|
|
|
|
|
|
|
|
Income tax -
current
|
1,796,158
|
|
(275,047)
|
|
21,873
|
|
(3,018,150)
|
Income tax -
deferred
|
7,842,672
|
|
-
|
|
7,842,672
|
|
-
|
Income (loss) from
continuing operations before equity
in losses of affiliates
|
8,739,755
|
|
1,437,215
|
|
15,854,352
|
|
30,306,897
|
|
|
|
|
|
|
|
|
Discontinued
operations :
|
|
|
|
|
|
|
|
Income (loss)
from discontinued operations
|
(1,235,263)
|
|
179,539
|
|
(3,474,506)
|
|
(1,236,984)
|
Income (loss) from
discontinued operations before
equity in losses of affiliates
|
(1,235,263)
|
|
179,539
|
|
(3,474,506)
|
|
(1,236,984)
|
|
|
|
|
|
|
|
|
Equity in losses of
affiliates
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
7,504,492
|
|
1,616,754
|
|
12,379,846
|
|
29,069,913
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to non-controlling interests
|
1,188
|
|
882
|
|
4,457
|
|
4,436
|
Net income (loss)
attributable to Acorn International,
Inc.
|
7,505,680
|
|
1,617,636
|
|
12,384,303
|
|
29,074,349
|
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SOURCE Acorn International, Inc.