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Edited Transcript of ATV earnings conference call or presentation 12-Aug-16 12:30pm GMT

Q2 2016 Acorn International Inc Earnings Call

Shanghai Mar 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Acorn International Inc earnings conference call or presentation Friday, August 12, 2016 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jacob A. Fisch

Acorn International, Inc. - President & CEO

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Conference Call Participants

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* Elaine Ketchmere

Compass Investor Relations - Partner

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Presentation

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Operator [1]

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Good day and welcome to the Acorn International Second Quarter Earnings Conference Call. Today's conference is being recorded.

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

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Elaine Ketchmere, Compass Investor Relations - Partner [2]

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Thank you, operator. Good morning, everyone, and thank you for joining us today for the discussion of our unaudited financial results for the second quarter of 2016. With me today are Mr. Jacob Fisch, our President; and Mr. 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 the company's ability to increase revenue, maintain its cost structure and generate additional cash flow; the company's ability to grow sales of its proprietary branded products as well as third-party products and brands through e-commerce, its other direct sales platforms as well as its nationwide distribution network; and the company's ability to sell its noncore assets as planned.

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 turn the call over to Jacob Fisch, who will discuss our financial results for the quarter.

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Jacob A. Fisch, Acorn International, Inc. - President & CEO [3]

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Thank you, Elaine.

In the second quarter of 2016, Acorn's management continued to execute on its plan to reorganize and turn around the business. The year-over-year decline in revenue reflects the ongoing transition of the company's business model. However, higher gross margin, significant reductions in operating expenses and a $12.1 million gain from the sale of shares of Yimeng Software Technology Co., Ltd., a publicly traded company in China, resulted in a net profit of $5.7 million for the quarter and an improved cash position.

In the second half of 2016, Acorn will continue its efforts to increase revenue, maintain its cost structure and generate additional cash flow. Management will focus on growing sales of its proprietary branded products as well as third-party products and brands through e-commerce, its other direct sales platforms, as well as its nationwide distribution network.

As part of its ongoing policy to liquidate noncore assets, Acorn plans to sell certain noncore assets with the carrying amount of approximately $17.6 million and may sell additional shares of Yimeng as appropriate.

Now turning to the financial results for the second quarter of 2016. Total net revenues were $3.9 million in the second quarter of 2016, down from $8.1 million in the second quarter of 2015.

Cost of sales in the second quarter of 2016 was $1.7 million, down from $5.7 million in the second quarter of 2015.

Gross profit in the second quarter of 2016 was $2.2 million as compared to $2.5 million in the second quarter of 2015. Gross margin was 57% in the second quarter of 2016, up from 30% in the second quarter of 2015.

Total operating expenses in the second quarter of 2016 were $5.9 million compared to a total -- compared to total operating expenses of $16.2 million in the second quarter of 2015.

Loss from operations was $3.7 million in the second quarter of 2016 as compared to a loss from operations of $13.7 million in the second quarter of 2015.

Share-based compensation was $0.4 million in the second quarter of 2016 as compared to 0 in the second quarter of 2015.

Other income was $12.4 million in the second quarter of 2016, primarily attributable to gains from sales of Yimeng shares as compared to other income of $0.4 million in the second quarter of 2015.

Net income was $5.7 million in the second quarter of 2016 as compared to a net loss of $13.2 million in the second quarter of 2015.

As of June 30, 2016, Acorn's cash and cash equivalents with restricted cash totaled $30.5 million as compared to $12.3 million as of December 31, 2015.

In other developments, effective August 8, 2016, our Board of Directors authorized an expansion of the share repurchase program. Under the original share repurchase program announced in January 2016, the company was authorized to purchase up to $2 million worth of its American depositary shares, ADSs. The board increased the company's repurchase authority under the stock repurchase program so that up to $4 million worth of ADSs can be repurchased. As of June 30, the company had repurchased approximately 13,005 ADSs at an average price of $4.36 per ADS. Please note that the company's proposed repurchases may be made from time to time on the open market prevailing market prices in privately negotiated transaction -- transactions, in block trades and/or through other legally permissible means depending on market conditions and in accordance with applicable rules and regulations. The timing and extent of any purchases will depend upon market conditions, trading price of its ADSs and other factors and are subject to the restrictions relating to volume, price and timing under applicable law. The company plans to fund repurchases from its existing cash balance.

That concludes the prepared remarks section of this call. Now, myself and Geoffrey Gao, our CFO, will remain on the line for our Q&A session. Operator, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And it appears there are no questions at this time.

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Elaine Ketchmere, Compass Investor Relations - Partner [2]

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Okay. Well, thank you, everyone. And with that, I would like to conclude our conference call for today. For any additional questions or any questions you may have, feel -- please feel free to contact any member of our IR team at ir@chinadrtv.com. Thank you all again, and have a good day. Goodbye.

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Operator [3]

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Thank you for your participation. That does conclude today's conference. You may now disconnect.