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ZW Data Action Technologies Reports Third Quarter and First Nine Months 2022 Unaudited Financial Results

ZW Data Action Technologies Inc.
ZW Data Action Technologies Inc.

BEIJING, China, Nov. 18, 2022 (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, 2022.

Third Quarter 2022 Financial Results

Revenues

For the third quarter of 2022, revenues decreased by $4.68 million, or 39.4%, to $7.22 million from $11.90 million for the same period last year. The decrease in revenues was primarily attributable to the decrease in our main stream service revenues from the distribution of the right to use search engine marketing services business segment, as a result of the repeated regional COVID-19 rebound in many provinces in China during the first nine months of fiscal 2022, which adversely affected business of most of our small medium enterprises (“SMEs”) clients.

Cost of revenues

Total cost of revenues decreased by $4.59 million, or 38.7%, to $7.27 million for the third quarter of 2022 from $11.86 million for the same period last year. The decrease in cost of revenues was primarily 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, which was in line with the decrease in revenues from the related business category.

Gross profit (loss) and gross profit (loss) margin

Gross loss was $0.05 million for the third quarter of 2022, compared to a gross profit of $0.04 million for the same period last year. Overall gross loss margin rate was 0.7% for the third quarter of 2022, compared to a gross profit margin of 0.4% for the same period last year.

Operating expenses

Sales and marketing expenses were $0.07 million for the third quarter of 2022, compared to $0.06 million for the same period last year. The increase in sales and marketing expenses was mainly attributable to the increase in staff salaries, staff benefits and other general office expenses of our sales department in Guangzhou, as a result of the increase in business development activities of our Guangzhou office since the fourth fiscal quarter of 2021.

General and administrative expenses increased by $0.18 million, or 12.2%, to $1.65 million for the third quarter of 2022 from $1.47 million for the same period last year. The increase in general and administrative expenses was mainly attributable to the increase in amortization of administrative assets of $0.38 million, which was partially offset by the decrease in share-based compensation expenses of $0.04 million and other general administrative expenses of $0.16 million.

Research and development expenses decreased by $0.03 million, or 35.2%, to $0.06 million for the third quarter of 2022 from $0.09 million for the same period last year. The decrease in research and development expenses was primarily due to a reduction in headcount in the research and development department.

Operating loss

Loss from operations was $1.83 million for the third quarter of 2022, compared to $1.57 million for the same period last year. Operating loss margin was 25.4% for the third quarter of 2022, compared to 13.2% for the same period last year.

Other income (expenses), net

Net other expenses were $1.01 million for the third quarter of 2022, compared to a net other income of $2.82 million for the same period last year. The decrease was primarily attributable to the decrease in change in fair value of warrant liabilities of $3.88 million.
   
Net income (loss) attributable to CNET and earnings (loss) per share

Net loss attributable to CNET was $2.84 million, or loss per share of $0.08, for the third quarter of 2022. This was compared to a net income attributable to CNET of $1.38 million, or earnings per share of $0.04, for the same period last year.

First Nine Months 2022 Financial Results

Revenues

For the first nine months of 2022, revenues decreased by $13.03 million, or 37.4%, to $21.81 million from $34.85 million for the same period last year. The decrease in revenues was primarily attributable to the decrease in revenues from our distribution of the right to use search engine marketing services business segment, as a result of the repeated regional COVID-19 rebound in many provinces in China during the first nine months of fiscal 2022, which adversely affected business of most of our small medium enterprises (“SMEs”) clients.

Cost of revenues

Total cost of revenues decreased by $13.93 million, or 39.0%, to $21.81 million for the first nine months of 2022 from $35.74 million for the same period 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, which was in line with the decrease in revenues from the related business category.

Gross profit (loss) and gross profit (loss) margin

Gross profit was $0.002 million for the first nine months of 2022, compared to a gross loss of $0.89 million for the same period last year. Overall gross profit margin rate was 0.01% for the first nine months of 2022, compared to a gross loss margin of 2.6% for the same period last year. The generation of gross profit and improvement of our overall gross margin rate for the first nine months year of 2022 was mainly attributable to the improvement of gross margin rate of our main stream of service revenues, i.e., distribution of the right to use search engine marketing services, and the termination of the outdoor billboards advertising business in the four quarter of 2021, which suffered from a significant loss in fiscal 2021.

Operating expenses

Sales and marketing expenses increased by $0.06 million, or 37.7%, to $0.22 million for the first nine months of 2022, compared to $0.16 million for the same period last year. The increase in sales and marketing expenses was mainly attributable to the increase in staff salaries, staff benefits and other general office expenses of our sales department in Guangzhou, as a result of the increase in business development activities of our Guangzhou office since the fourth fiscal quarter of 2021.

General and administrative expenses decreased by $4.67 million, or 45.0%, to $5.70 million for the first nine months of 2022 from $10.37 million for the same period last year. The decrease in general and administrative expenses was mainly attributable to the decrease in share-based compensation expenses of $6.81 million, which was partially offset by the increase in allowance for doubtful accounts of $0.95 million, amortization of administrative assets of $1.16 million, and other administrative expenses of $0.03 million, respectively.

Research and development expenses decreased by $0.07 million, or 27.9%, to $0.18 million for the first nine months of 2022 from $0.25 million for the same period last year. The decrease in research and development expenses was primarily due to a reduction in headcount in the research and development department.

Operating loss

Loss from operations was $6.10 million for the first nine months of 2022, compared to $11.67 million for the same period last year. Operating loss margin was 27.9% for the third quarter of 2022, compared to 33.5% for the same period last year.

Other income (expenses), net

Net other income decreased to $0.82 million for the first nine months of 2022 from $9.91 million for the same period last year. The decrease was primarily attributable to the decrease in gain from change in fair value of warrant liabilities of $8.92 million.
   
Net loss attributable to CNET and loss per share

Net loss attributable to CNET was $5.27 million, or loss per share of $0.15, for the first nine months of 2022. This was compared to a net loss attributable to CNET of $1.59 million, or loss per share of $0.05, for the same period last year.

Financial Condition

As of September 30, 2022, the Company had cash and cash equivalents of $2.15 million, compared to $7.17 million as of December 31, 2021. Accounts receivable, net was $3.00 million as of September 30, 2022, compared to $3.44 million as of December 31, 2021. Working capital was $7.82 million as of September 30, 2022, compared to $11.10 million as of December 31, 2021.

Net cash used in operating activities was $4.41 million for the third quarter of 2022, compared to $6.60 million for the same period last year. Net cash used in investing activities was $0.48 million for the third quarter of 2022, compared to $6.10 million for the same period last year.

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, the Company 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 clients. More information about the Company can be found at: http://www.zdat.com/.

Safe Harbor Statement

This 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 Inc.’s 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 Inc. will be those anticipated by ZW Data Action Technologies Inc. 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 Inc. 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


ZW DATA ACTION TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for number of shares and per share data)

 

 

 

September 30,
2022

 

December 31,
2021

 

 

 

(US $)

 

(US $)

 

 

 

(Unaudited)

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

 

$

2,154

 

 

$

7,173

 

Accounts receivable, net of allowance for doubtful accounts of $2,337 and $2,236, respectively

 

 

 

2,999

 

 

 

3,439

 

Prepayment and deposit to suppliers

 

 

 

7,593

 

 

 

7,559

 

Due from related parties

 

 

 

15

 

 

 

90

 

Other current assets, net

 

 

 

1,623

 

 

 

1,657

 

Total current assets

 

 

 

14,384

 

 

 

19,918

 

 

 

 

 

 

 

Long-term investments

 

 

 

2,149

 

 

 

2,280

 

Operating lease right-of-use assets

 

 

 

1,838

 

 

 

2,019

 

Property and equipment, net

 

 

 

267

 

 

 

375

 

Intangible assets, net

 

 

 

5,896

 

 

 

7,523

 

Long-term deposits and prepayments

 

 

 

68

 

 

 

75

 

Deferred tax assets, net

 

 

 

398

 

 

 

441

 

Total Assets

 

 

$

25,000

 

 

$

32,631

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable *

 

 

$

276

 

 

$

1,119

 

Advance from customers *

 

 

 

951

 

 

 

1,245

 

Accrued payroll and other accruals *

 

 

 

170

 

 

 

389

 

Taxes payable *

 

 

 

3,199

 

 

 

3,534

 

Operating lease liabilities *

 

 

 

389

 

 

 

202

 

Lease payment liability related to short-term leases *

 

 

 

99

 

 

 

152

 

Other current liabilities *

 

 

 

197

 

 

 

141

 

Warrant liabilities

 

 

 

1,280

 

 

 

2,039

 

Total current liabilities

 

 

 

6,561

 

 

 

8,821

 


Long-term liabilities:

 

 

 

 

 

 

Operating lease liabilities-Non current *

 

 

 

1,557

 

 

 

1,907

 

 

Long-term borrowing from a related party

 

 

 

123

 

 

 

137

 

 

Total Liabilities

 

 

 

8,241

 

 

 

10,856

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

ZW Data Action Technologies Inc.’s stockholders’ equity

 

 

 

 

 

 

Common stock (US$0.001 par value; authorized 100,000,000; issued and outstanding 35,827,677 shares and 35,332,677 shares at September 30, 2022 and December 31, 2021, respectively)

 

 

 

36

 

 

 

35

 

 

Additional paid-in capital

 

 

 

61,972

 

 

 

61,785

 

 

Statutory reserves

 

 

 

2,598

 

 

 

2,598

 

 

Accumulated deficit

 

 

 

(49,005

)

 

 

(43,734

)

 

Accumulated other comprehensive income

 

 

 

1,158

 

 

 

1,082

 

 

Total ZW Data Action Technologies Inc.’s stockholders’ equity

 

 

 

16,759

 

 

 

21,766

 

 

 

 

 

 

 

 

 

Total equity

 

 

 

16,759

 

 

 

21,766

 

 

 

 

 

 

 

 

 

Total Liabilities and Equity

 

 

$

25,000

 

 

$

32,631

 

 

* Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets.


ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME
(In thousands, except for number of shares and per share data)

 

 

Nine Months Ended September 30,

 

Three Months Ended September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

(US $)

 

(US $)

 

(US $)

 

(US $)

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

Revenues

 

 

 

 

 

 

 

 

From unrelated parties

 

$

21,813

 

 

$

34,843

 

 

$

7,216

 

 

$

11,896

 

From a related party

 

 

-

 

 

 

4

 

 

 

-

 

 

 

4

 

Total revenues

 

 

21,813

 

 

 

34,847

 

 

 

7,216

 

 

 

11,900

 

Cost of revenues

 

 

21,811

 

 

 

35,739

 

 

 

7,267

 

 

 

11,857

 

Gross profit/(loss)

 

 

2

 

 

 

(892

)

 

 

(51

)

 

 

43

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Sales and marketing expenses

 

 

219

 

 

 

159

 

 

 

72

 

 

 

58

 

General and administrative expenses

 

 

5,697

 

 

 

10,366

 

 

 

1,651

 

 

 

1,471

 

Research and development expenses

 

 

181

 

 

 

251

 

 

 

57

 

 

 

88

 

Total operating expenses

 

 

6,097

 

 

 

10,776

 

 

 

1,780

 

 

 

1,617

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(6,095

)

 

 

(11,668

)

 

 

(1,831

)

 

 

(1,574

)

 

 

 

 

 

 

 

 

 

Other income/(expenses)

 

 

 

 

 

 

 

 

Interest income

 

 

96

 

 

 

3

 

 

 

21

 

 

 

1

 

Other (expenses)/income, net

 

 

(33

)

 

 

265

 

 

 

(5

)

 

 

(37

)

Loss on disposal of long-term investments

 

 

-

 

 

 

(38

)

 

 

-

 

 

 

-

 

Change in fair value of warrant liabilities

 

 

759

 

 

 

9,682

 

 

 

(1,023

)

 

 

2,853

 

Total other income/(expenses)

 

 

822

 

 

 

9,912

 

 

 

(1,007

)

 

 

2,817

 

 

 

 

 

 

 

 

 

 

(Loss)/income before income tax benefit/(expense) and noncontrolling interests

 

 

(5,273

)

 

 

(1,756

)

 

 

(2,838

)

 

 

1,243

 

Income tax benefit/(expenses)

 

 

2

 

 

 

171

 

 

 

(2

)

 

 

131

 

Net (loss)/income

 

 

(5,271

)

 

 

(1,585

)

 

 

(2,840

)

 

 

1,374

 

Net (income)/loss attributable to noncontrolling interests

 

 

-

 

 

 

(1

)

 

 

-

 

 

 

1

 

Net (loss)/income attributable to ZW Data Action Technologies Inc.

 



$



(5,271



)

 



$



(1,586



)

 



$



(2,840



)

 



$



1,375

 


Net (loss)/income

 

$

(5,271

)

 

$

(1,585

)

 

$

(2,840

)

 

$

1,374

 

Foreign currency translation income/(loss)

 

 

76

 

 

 

(25

)

 

 

93

 

 

 

(2

)

Comprehensive (loss)/income

 

$

(5,195

)

 

$

(1,610

)

 

$

(2,747

)

 

$

1,372

 

Comprehensive income attributable to noncontrolling interests

 

 

-

 

 

 

(1

)

 

 

-

 

 

 

-

 

Comprehensive (loss)/income attributable to ZW Data Action Technologies Inc.

 



$



(5,195



)

 



$



(1,611



)

 



$



(2,747



)

 



$



1,372

 

 

 

 

 

 

 

 

 

 

(Loss)/earnings per share

 

 

 

 

 

 

 

 

(Loss)/earnings per common share

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.15

)

 

$

(0.05

)

 

$

( 0.08

)

 

$

0.04

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

35,572,200

 

 

 

32,279,304

 

 

 

35,827,677

 

 

 

35,332,220

 


ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

 

2021

 

 

 

(US $)

 

(US $)

 

 

(Unaudited)

 

(Unaudited)

Cash flows from operating activities

 

 

 

 

Net loss

 

$

(5,271

)

 

$

(1,585

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

Depreciation and amortization

 

 

1,660

 

 

 

450

 

Amortization of operating lease right-of-use assets

 

 

239

 

 

 

149

 

Share-based compensation expenses

 

 

135

 

 

 

6,945

 

Provision for allowances for doubtful accounts

 

 

947

 

 

 

-

 

Loss on disposal of long-term investments

 

 

-

 

 

 

38

 

Deferred taxes

 

 

(2

)

 

 

(171

)

Change in fair value of warrant liabilities

 

 

(759

)

 

 

(9,682

)

Other non-operating income/(losses)

 

 

(93

)

 

 

24

 

Changes in operating assets and liabilities

 

 

 

 

Accounts receivable

 

 

(211

)

 

 

(257

)

Prepayment and deposit to suppliers

 

 

(459

)

 

 

(1,698

)

Due from related parties

 

 

59

 

 

 

-

 

Other current assets

 

 

25

 

 

 

6

 

Long-term deposits and prepayments

 

 

-

 

 

 

(314

)

Accounts payable

 

 

(784

)

 

 

142

 

Advance from customers

 

 

(179

)

 

 

(133

)

Accrued payroll and other accruals

 

 

(205

)

 

 

(126

)

Other current liabilities

 

 

735

 

 

 

(230

)

Taxes payable

 

 

4

 

 

 

(31

)

Lease payment liability related to short-term leases

 

 

(40

)

 

 

(54

)

Operating lease liabilities

 

 

(210

)

 

 

(73

)

Net cash used in operating activities

 

 

(4,409

)

 

 

(6,600

)

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Payment for leasehold improvements and purchase of vehicles, furniture and office equipment

 

 

-

 

 

 

(306

)

Cash effect of deconsolidation of VIEs’ subsidiaries

 

 

-

 

 

 

(8

)

Investments and advances to ownership investee entities

 

 

-

 

 

 

(1,919

)

Repayment from ownership investee entities

 

 

12

 

 

 

-

 

Short-term loans to unrelated parties

 

 

(2,600

)

 

 

(1,507

)

Repayment of short-term loans and interest income from unrelated parties

 

 

2,109

 

 

 

1,303

 

Payment for purchase of software technologies

 

 

-

 

 

 

(1,160

)

Deposit and prepayment paid for contracts of other investing activities

 

 

-

 

 

 

(2,500

)

Net cash used in investing activities

 

 

(479

)

 

 

(6,097

)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Proceeds from issuance of common stock and warrant (net of cash offering cost of US$1,600)

 

 

-

 

 

 

17,111

 

Net cash provided by financing activities

 

 

-

 

 

 

17,111

 

 

 

 

 

 

Effect of exchange rate fluctuation on cash and cash equivalents

 

 

(131

)

 

 

20

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

 

(5,019

)

 

 

4,434

 

 

 

 

 

 

Cash and cash equivalents at beginning of the period

 

 

7,173

 

 

 

4,297

 

Cash and cash equivalents at end of the period

 

$

2,154

 

 

$

8,731