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Edited Transcript of ATV earnings conference call or presentation 3-Feb-16 1:30pm GMT

Q4 2015 Acorn International Inc Earnings Call

Shanghai Mar 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Acorn International Inc earnings conference call or presentation Wednesday, February 3, 2016 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Samuel Patterson

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Presentation

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Operator [1]

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(technical difficulty)

Acorn International Preliminary Fourth Quarter and Full Year 2015 Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Samuel Patterson. Please go ahead.

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Samuel Patterson, [2]

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Good morning, everyone. Thank you for joining us today for our discussion of preliminary financial results for the fourth quarter and full year 2015. With me today are Mr. Robert Roche, our Chairman and Chief Executive Officer; Jake Fisch, our President; and Geoffrey Gao, our CFO. After our prepared remarks, we will open the line for questions.

Before we continue, I would like to remind you that the discussion today will contain certain forward-looking statements. These forward-looking statements include, among others, statements regarding Acorn's anticipated future revenue mix and operating results. A number of the potential inherent risks and uncertainties that Acorn's business involves are outlined in the company's public filings with the U.S. Securities and Exchange Commission. As such, actual results may be materially different from the views expressed or anticipated results described today. Acorn International does not undertake any obligation to update any forward-looking statements, except as required by applicable law.

Now I will read our prepared remarks before Robert Roche, Jake Fisch and Geoffrey Gao take over for the Q&A section of this call. Due to the management change and ongoing restructuring of the business, the company believes comparing the second half of 2015 financial results with the first half of 2015 is more useful to investors than full year comparisons in evaluating the operating performance of the company under its new leadership and management, which was installed in May 2015. And therefore, such information is presented in the press release first, in addition to the fourth quarter and full year 2015 financial results.

On May 4, 2015, Acorn's original Co-Founder, Chairman and majority shareholder, Robert W. Roche, returned as CEO of the company to focus on restructuring and turning around the business after his improper removal on August 26, 2014. Under Mr. Roche's stewardship, the company has reduced operating expenses and reduced cash burn. Net revenues in the second half 2015 stabilized. Gross margin improved and losses from operations narrowed despite severance and other nonrecurring expenses associated with the restructuring of approximately $14.2 million. The company anticipates further reductions in operating expenses and confirms it will complete the sale of certain noncore real estate assets with contract amounts of approximately $11.3 million in 2016 as part of the company's ongoing policy to liquidate noncore assets.

Comparison of first and second half of 2015 financial results. Total net revenues were $23 million in the second half of 2015 as compared to $23.8 million in the first half of 2015. Cost of sales in the second half of 2015 was $11.4 million, down from $14 million in the first half of 2015. Gross profit in the second half of 2015 was $11.5 million as compared to $9.8 million in the first half of 2015, showing an improvement of 18%. Gross margin was 50% in the second half of 2015, up from 41% in the first half of 2015, showing improvement of 22%. Total operating and administrative expenses were $29.3 million in the second half of 2015, down from $32.7 million in the first half of 2015, showing a reduction in expenses of 10%. Other operating income was $1.1 million in the second half of 2015 as compared to $1 million in the first half of 2015.

As a result of all of the items above, operating loss was $16.6 million in the second half of 2015 as compared to $21.9 million in the first half of 2015, showing a reduction and loss of 24%. Share-based compensation was 0 in the second half of 2015 as compared to $71,333 in the first half of 2015. Net loss was $16.6 million in the second half of 2015 as compared to $23 million in the first half of 2015, showing a reduction in net loss of 28%. Severance and other nonrecurring expenses in the first half of 2015 was $8.9 million. Severance and other nonrecurring expenses in the second half of 2015 was $14.2 million. Accordingly, netting out severance and other nonrecurring expenses, operating loss was $13 million in the first half of 2015 compared with $2 million in the second half of 2015, showing a reduction in operating loss of 82%.

The cash loss for the company for the year 2014 was $38 million compared to the cash loss for the company for the year 2015 of $32 million, a decrease of 16%. The cash loss for the company for the first half of 2015 was $26 million, which is 81% of the cash loss in 2015. The cash loss for the company for the second half of 2015 was $6 million, which is 19% of the cash loss in 2015. The cash loss in the second half of 2015 represents a decrease of 78% compared with the first half.

Preliminary financial results for the fourth quarter of 2015. Total net revenues were $8.9 million in the fourth quarter of 2015, down from $20.6 million in the fourth quarter of 2014. Cost of sales in the fourth quarter of 2015 was $4 million, down from $13.5 million in the fourth quarter of 2014. Gross profit in the fourth quarter of 2015 was $4.9 million as compared to $7.1 million in the fourth quarter of 2014. Gross margin was 55% in the fourth quarter of 2015, up from 35% in the fourth quarter of 2014.

Total operating and administrative expenses in the fourth quarter of 2015 were $13.3 million, down from $20.7 million in the fourth quarter of 2014. Other operating income was $0.6 million in the fourth quarter of 2015 as compared to $0.7 million in the fourth quarter of 2014. The operating loss was $7.8 million in the fourth quarter of 2015 as compared to $12.9 million in the fourth quarter of 2014. Share-based compensation was 0 in the fourth quarter of 2015 as compared to $107,000 in the fourth quarter of 2014. Net loss was $6.8 million in the fourth quarter of 2015 as compared to $13.8 million in the fourth quarter of 2014. As of December 31, 2015, Acorn's cash and cash equivalents with restricted cash totaled $12.3 million as compared to $44.4 million as of December 31, 2014.

Preliminary financial results for the full year of 2015. Total net revenues were $46.8 million in 2015, down from $94.8 million in 2014. Cost of sales in 2015 was $25.5 million, down from $56.9 million in 2014. Gross profit in 2015 was $21.3 million as compared to $37.8 million in 2014. Gross margin was 46% in 2015, up from 40% in 2014. Total operating and administrative expenses were $62 million in 2015, down from $84.8 million in 2014. Other operating income was $2.2 million in 2015 as compared to $2.1 million in 2014.

As a result of all of the items above, operating loss was $38.5 million in 2015 as compared to $44.9 million in 2014. Share-based compensation was $71,333 in 2015 as compared to $428,000 in 2014. Net loss was $39.7 million in 2015 as compared to $44.3 million in 2014.

That concludes the prepared remarks section of this call. Now Robert Roche, our Chairman and CEO; Jake Fisch, our President; and Geoffrey Gao, our CFO, will remain on the line for our Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) It appears there are no questions at this time. Mr. Patterson, I'd like to turn the call back to you for any closing or additional remarks.

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Samuel Patterson, [2]

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Thank you, everyone. With that, I will conclude our call today. For additional questions, please feel free to contact any member of our IR team at ir@chinadrtv.com. That's ir@chinadrtv.com. Thank you all again, and have a great day. Goodbye.

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Operator [3]

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This does conclude today's conference. We thank you for your participation. You may now disconnect.