Fri. Jan 24th, 2020

Acorn International Reports Fiscal Results for the 3rd-Quarter of 2k19, Declares Quarterly Dividend

49 min read

Acorn International, Inc. (NYSE: ATV) (“Acorn” or the “Company”), a leading marketing and branding company in China, released its preliminary unaudited financial results for the quarter and 9.0-months finished September 30, 2k19.

3rd-Quarter 2k19 Fiscal Highlights

  • Net revenues inclined 49.40 percent year-over-year in Q3 2k19 to US$11.30M.
  • Gross profit rose 47.00 percent year-over-year in Q3 2k19 to US$8.40M.
  • Gross margin was 73.90 percent in Q3 2k19, compared to 75.10 percent in Q3 2k18.
  • Income from continuing operations was US$1.40M in Q3 2k19, compared to US$1.50M in Q3 2k18.
  • Net income was US$1.20M in Q3 2k19 as compared to net income of US$3.80M in Q3 2k18. The year-ago duration includes a US$2.40M capital gain from the sale of the Company’s Bright Rainbow Investments Limited (“Bright Rainbow”) subsidiary.
  • The board of directors declared a cash dividend for the 3rd-quarter of 2k19 of US$0.0125 for each ordinary share, or approximately US$0.250 for each ADS, each of which represents twenty ordinary shares.

 

Preliminary Financial Results for the 3rd-Quarter of 2k19:

Total net revenues were US$11.30M in the 3rd-quarter of 2k19, up 49.40 percent from US$7.60M in the 3rd-quarter of 2k18, primarily due to an incline in e-commerce sales of Babaka branded products and other products.

The cost of sales in the 3rd-quarter of 2k19 was US$3.00M, up 56.80 percent from US$1.90M in the 3rd-quarter of 2k18. The incline was attributable to inclined sales volume and net revenues.

Gross profit in the 3rd-quarter of 2k19 was US$8.40M, up 47.00 percent from US$5.7M in the 3rd-quarter of 2k18. Gross margin was 73.90 percent in the 3rd-quarter of 2k19, compared with 75.10 percent in the 3rd-quarter of 2k18. The slight decline in gross margin was due to changes in the product and platform mix of Babaka and a higher proportion of Acorn Fresh products, which have a slightly lower margin than Babaka branded products, in the product mix.

Total operating costs in the 3rd-quarter of 2k19 were US$7.00M, up 67.50 percent from US$4.20M in the 3rd-quarter of 2k18. The incline in operating costs was due primarily to an incline in selling and marketing costs to support e-commerce sales as well as higher general and administrative costs associated with higher staff costs due to the expansion of Acorn Digital Services. These were partially offset by an incline in other operating income due to inclined revenues from Acorn Digital Services and interest from the long-term loan to Cachet Hotels & Resorts.

Income from continuing operations was US$1.40M in the 3rd-quarter of 2k19, as compared to income from continuing operations of US$1.50M in the 3rd-quarter of 2k18.

Other income was US$0.70M in the 3rd-quarter of 2k19, compared to other income of US$2.40M in the 3rd-quarter of 2k18. The year-ago duration includes a US$2.40M capital gain associated with the sale of the Company’s Bright Rainbow subsidiary.

Net income from continuing operations was US$2.00M in the 3rd-quarter of 2k19. This compares to net income from continuing operations of US$3.60M in the 3rd-quarter of 2k18. 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 2k17 as well as the Company’s call center operations which were discontinued in the 3rd-quarter of 2k19 (Refer to “Discontinued Operations” discussion below), was US$0.80M in the 3rd-quarter of 2k19, compared to net income from discontinued operations of US$0.20M in the 3rd-quarter of 2k18.

Net income attributable to Acorn was US$1.20M in the 3rd-quarter of 2k19. This compares to net income attributable to Acorn of US$3.80M in the 3rd-quarter of 2k18.

In the 4th-quarter of 2k19, the Company reached an agreement to sell its oxygen-generating products business, which is described in further detail below.

Preliminary 9.0 Months of 2k19 Fiscal Results

Total net revenues were US$28.30M in the 1st-9.0 months of 2k19, up 61.20 percent from US$17.60M in the 1st-9.0 months of 2k18, primarily due to an incline in e-commerce sales of Babaka branded products as well as other products.

The cost of sales in the 1st-9.0 months of 2k19 was US$7.60M, up 68.90 percent from US$4.50M in the 1st-9.0 months of 2k18. The incline was attributable to inclined sales volume and net revenues.

Gross profit in the 1st-9.0 months of 2k19 was US$20.70M, up 58.60 percent from US$13.10M in the 1st-9.0 months of 2k18. Gross margin was 73.10 percent in the 1st-9.0 months of 2k19, compared with 74.30 percent in the 1st-9.0 months of 2k18. The slight decline in gross margin was due to changes in the product and platform mix of Babaka and a higher proportion of Acorn Fresh products, which have a slightly lower margin than Babaka branded products, in the product mix.

Total operating costs in the 1st-9.0 months of 2k19 were US$19.30M, up 58.60 percent from US$12.20M in the 1st-9.0 months of 2k18. The incline in operating costs was due primarily to an incline in selling and marketing costs to support e-commerce sales as well as higher general and administrative costs associated with higher staff costs due to the expansion of Acorn Digital Services. These were partially offset by an incline in other operating income due to inclined revenues from Acorn Digital Services and interest from the long-term loan to Cachet Hotels & Resorts.

Income from continuing operations was US$1.40M in the 1st-9.0 months of 2k19, as compared to income from continuing operations of US$0.90M in the 1st-9.0 months of 2k18.

Other income was US$5.50M in the 1st-9.0 months of 2k19, primarily associated with a gain on the sale of the Company’s former principal office in Shanghai to a 3rd-party. This compared to other income of US$30.10M in the 1st-9.0 months of 2k18, which was primarily due to a gain on the sale of the Company’s Bright Rainbow subsidiary.

Net income from continuing operations was US$7.00M in the 1st-9.0 months of 2k19. This compares to net income from continuing operations of US$28.60M in the 1st-9.0 months of 2k18, which was primarily due to the previously mentioned capital gain from the sale of Bright Rainbow.

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 2k17 as well as the Company’s call center operations which were discontinued in the 3rd-quarter of 2k19 (Refer to “Discontinued Operations” discussion below), was US$0.90M in the 1st-9.0 months of 2k19, compared to a net loss from discontinued operations of US$1.30M in the 1st-9.0 months of 2k18.

Net income attributable to Acorn was US$6.20M in the 1st-9.0 months of 2k19. This compares to net income attributable to Acorn of US$27.30M in the 1st-9.0 months of 2k18.

As of September 30, 2k19, Acorn’s cash and cash equivalents, with restricted cash, totalled US$13.30M. The cash balance at the end of the 1st-9.0 months of 2k19 reflects the payment of cash dividends totalling approximately US$3.90M in 2k19 and a drawdown of approximately US$4.90M under the long-term loan to Cachet Hotels & Resorts after the incline of loan capacity from US$10.00M to US$15.00M. This compares to cash and equivalents, with restricted cash, of US$20.20M as of December 31, 2k18.

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