ZW Data Action Technologies Reports Full Year 2023 Audited Financial Results

Rhea-AI Summary

ZW Data Action Technologies (Nasdaq: CNET) has reported its audited financial results for the year ending December 31, 2023. The company's revenues increased by 16.6% to $30.59 million, driven by the lifting of COVID-19 restrictions, which boosted advertising budgets and demands from SMEs. However, the cost of revenues also rose by 17.4% to $31.02 million, leading to a gross loss of $0.44 million.

Operating losses improved, decreasing from $11.12 million in 2022 to $6.01 million in 2023. The net loss attributable to CNET was $5.97 million, down from $9.79 million the previous year. General and administrative expenses were significantly reduced by 51.1% to $4.06 million. The company had cash and cash equivalents of $0.82 million as of December 31, 2023, compared to $4.39 million the previous year.

Positive

• Revenues increased by 16.6% to $30.59 million.
• Operating loss decreased from $11.12 million to $6.01 million.
• General and administrative expenses dropped by 51.1% to $4.06 million.

Negative

• Gross loss increased to $0.44 million from $0.19 million.
• Cost of revenues rose by 17.4% to $31.02 million.
• Net loss attributable to CNET was $5.97 million, with a loss per share of $0.83.
• Cash and cash equivalents decreased from $4.39 million to $0.82 million.
• Working capital dropped from $6.61 million to $4.11 million.

Insights

Financial Analyst

Revenue Growth: The reported 16.6% increase in revenues to $30.59 million is a positive indicator of business recovery, likely influenced by the lifting of COVID-19 restrictions. This is beneficial for short-term investor sentiment as it demonstrates a rebound in demand for advertising services.

Cost Management: A concern arises from a 17.4% increase in the cost of revenues, leading to a gross loss of $0.44 million. The gross loss margin widened slightly to 1.4%. Investors should watch whether the company can better control costs while scaling revenues, as sustained losses could undermine long-term profitability.

Operating Efficiency: The substantial reduction in operating loss to $6.01 million from $11.12 million is a significant improvement. This is largely thanks to decreased general and administrative expenses by 51.1%, indicating successful cost-cutting measures. However, the drop in research and development expenses by 92.6% is concerning, suggesting a potential setback in innovation and future service enhancements.

Market Research Analyst

Industry Trends: The improvement in revenues following the end of COVID-19 restrictions is in line with broader industry trends, where many advertising and marketing firms have seen increased investment from SMEs as business activities normalize. This reinforces confidence in the sector's recovery.

Client Dependence: Investors should note the company's reliance on search engine marketing services. Diversifying the service portfolio could mitigate risks associated with market fluctuations in this sector.

Cash Flow: The drop in cash and cash equivalents to $0.82 million from $4.39 million raises liquidity concerns. Reduced cash flow from operations and increased cash used in investing activities signify potential challenges in maintaining operational stability and growth investments.

Legal Expert

Warrant Liabilities: The notable decrease in net other income, primarily due to changes in the fair value of warrant liabilities, is an important legal and financial consideration. Warrant adjustments can impact investor perceptions of financial health due to their valuation complexities.

Financial Health Indicators: A reduction in accounts receivable to $0.84 million from $1.75 million suggests more efficient collections, but the lower working capital of $4.11 million versus $6.61 million indicates tighter financial conditions. Investors should monitor the company’s ability to manage liabilities and maintain liquidity, especially under current market conditions.

BEIJING, June 28, 2024 (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 audited financial results for the year ended December 31, 2023.

Full Year 2023 Financial Results

Revenues

For the full year of 2023, revenues increased by $4.35 million, or 16.6%, to $30.59 million from $26.24 million for the previous year. The increase in revenues was primarily attributable to the increase 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 lifting of COVID-19 related restrictions, which improved the advertising investment budgets and advertising services demands of our small medium enterprises (“SMEs”) clients.

Cost of revenues

Total cost of revenues increased by $4.59 million, or 17.4%, to $31.02 million for the full year of 2023 from $26.43 million for the previous year. The increase in cost of revenues was primarily attributable to the increase 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 increase in revenues from the related business category.

Gross loss and gross loss margin

Gross loss was $0.44 million for the full year of 2023, compared to $0.19 million for the previous year. Overall gross loss margin rate was 1.4% for the full year of 2023, compared to 0.7% for the previous year.

Operating expenses

Sales and marketing expenses were $0.27 million for the full year of 2023, compared to $0.27 million for the previous year. Due to certain aspects of our business nature, the fluctuation of our sales and marketing expenses usually does not have a direct linear relationship with the fluctuation of our net revenues.

General and administrative expenses decreased by $4.24 million, or 51.1%, to $4.06 million for the full year of 2023 from $8.30 million for the previous year. The decrease in general and administrative expenses was mainly attributable to the decrease in allowance for doubtful accounts of $1.4 million and general administrative expenses of $2.9 million.

Research and development expenses decreased by $0.21 million, or 92.6%, to $0.02 million for the full year of 2023 from $0.23 million for the previous 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 $6.01 million for the full year of 2023, compared to $11.12 million for the previous year. Operating loss margin was 19.7% for the full year of 2023, compared to 42.4% for the previous year.

Other income, net

Net other income was $0.04 million for the full year of 2023, compared to $1.33 million for the previous year. The decrease was primarily attributable to the decrease in change in fair value of warrant liabilities of $1.67 million.

Net loss attributable to CNET and loss per share

Net loss attributable to CNET was $5.97 million, or loss per share of $0.83, for the full year of 2023. This was compared to a net loss attributable to CNET of $9.79 million, or loss per share of $1.37, for the previous year.

Financial Condition

As of December 31, 2023, the Company had cash and cash equivalents of $0.82 million, compared to $4.39 million as of December 31, 2022. Accounts receivable, net was $0.84 million as of December 31, 2023, compared to $1.75 million as of December 31, 2022. Working capital was $4.11 million as of December 31, 2023, compared to $6.61 million as of December 31, 2022.

Net cash used in operating activities was $2.01 million for the full year of 2023, compared to $3.19 million for the previous year. Net cash used in investing activities was $1.54 million for the full year of 2023, compared to net cash provided by investing activities of $0.55 million for the previous 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)
			As of December 31,
			2023			2022
			(US $)			(US $)
Assets
Current assets:
Cash and cash equivalents			$	817		$	4,391
Accounts receivable, net of allowance for doubtful accounts of $3,987 and $3,760 respectively				844			1,745
Prepayment and deposit to suppliers				4,505			4,567
Other current assets, net				2,794			1,610
Total current assets				8,960			12,313
Long-term investments, net				794			1,596
Operating lease right-of-use assets				22			1,761
Property and equipment, net				215			249
Intangible assets, net				841			3,264
Long-term deposits and prepayments				-			69
Deferred tax assets, net				401			406
Total Assets			$	11,233		$	19,658
Liabilities and Equity
Current liabilities:
Accounts payable *			$	201		$	205
Advances from customers *				843			739
Accrued payroll and other accruals *				350			438
Taxes payable *				3,194			3,248
Operating lease liabilities *				24			347
Lease payment liabilities related to short-term leases *				99			101
Other current liabilities *				144			437
Warrant liabilities				-			185
Total current liabilities				4,855			5,700

Long-term liabilities:
Operating lease liabilities-Non current *				-				1,535
Long-term borrowing from a related party				124				126
Total Liabilities				4,979				7,361
Commitments and contingencies
Equity:
ZW Data Action Technologies Inc.’s stockholders’ equity
Common stock (US$0.001 par value; authorized 20,000,000 shares; issued and outstanding 7,204,506 shares and 7,174,506 shares at December 31, 2023 and 2022, respectively)				7				7
Additional paid-in capital				62,067				62,017
Statutory reserves				2,598				2,598
Accumulated deficit				(59,690	)			(53,525	)
Accumulated other comprehensive income				1,272				1,200
Total ZW Data Action Technologies Inc.’s stockholders’ equity				6,254				12,297
Noncontrolling interests				-				-
Total equity				6,254				12,297
Total Liabilities and Equity			$	11,233			$	19,658

* 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)
		Year Ended December 31,
			2023				2022
		(US $)				(US $)
Revenues		$	30,585			$	26,235
Cost of revenues			31,021				26,429
Gross (loss)			(436	)			(194	)
Operating expenses
Sales and marketing expenses			267				269
General and administrative expenses			4,061				8,304
Research and development expenses			17				229
Impairment on intangible assets			1,231				2,123
Total operating expenses			5,576				10,925
Loss from operations			(6,012	)			(11,119	)
Other income/(expenses)
Change in fair value of warrant liabilities			185				1,854
Interest income			298				116
Impairment on long-term investments			(433	)			(596	)
Gain on disposal of subsidiaries			10				-
Other expenses, net			(24	)			(49	)
Total other income			36				1,325
Loss before income tax benefit/(expense) and noncontrolling interests			(5,976	)			(9,794	)
Income tax benefit/(expenses)			2				3
Net loss			(5,974	)			(9,791	)
Net income attributable to noncontrolling interests			-				-
Net loss attributable to ZW Data Action Technologies Inc.		$	(5,974	)		$	(9,791	)

Net loss		$	(5,974	)		$	(9,791	)
Foreign currency translation income/(loss)			72				118
Comprehensive loss		$	(5,902	)		$	(9,673	)
Comprehensive income attributable to noncontrolling interests			-				-
Comprehensive loss attributable to ZW Data Action Technologies Inc.		$	(5,902	)		$	(9,673	)
Loss per share
Loss per common share
Basic and diluted **		$	(0.83	)		$	(1.37	)
Weighted average number of common shares outstanding :
Basic and diluted **			7,194,890				7,136,290

ZW DATA ACTION TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
		Year Ended December 31,
			2023				2022
		(US $)				(US $)
Cash flows from operating activities
Net loss		$	(5,974	)		$	(9,791	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization			1,288				2,215
Amortization of operating lease right-of-use assets			364				341
Share-based compensation expenses			107				186
Loss on disposal of fixed assets			6				-
Impairment on long-term investments			433				596
Impairment on intangible assets			1,231				2,123
Provision of allowances for doubtful accounts			1,033				2,394
Change in fair value of warrant liabilities			(185	)			(1,854	)
Deferred taxes			(2	)			(3	)
Gain on disposal of subsidiaries			(10	)			-
Effect of termination of an operating lease contract			(138	)			-
Other non-operating (income)/losses			(300	)			(113	)
Changes in operating assets and liabilities
Accounts receivable			593				(276	)
Prepayment and deposit to suppliers			36				1,652
Due from related parties			-				59
Other current assets			3				2
Accounts payable			(1	)			(848	)
Advances from customers			115				(420	)
Accrued payroll and other accruals			(80	)			60
Other current liabilities			(184	)			836
Taxes payable			(4	)			(6	)
Operating lease liabilities			(343	)			(302	)
Lease payment liability related to short-term leases			-				(40	)
Net cash used in operating activities			(2,012	)			(3,189	)
Cash flows from investing activities
Payment for leasehold improvements and purchase of vehicles, furniture and office equipment			(81	)			-
Net proceeds from disposal of fixed assets			14				-
Cash effect of deconsolidation of subsidiaries			(3	)			-
Investment and advances to ownership investee entities			(64	)			-
Proceeds from disposal of subsidiaries			3				-
Proceeds from disposal of ownership investee entities			426				-
Repayment of short-term loans from ownership investee entities			-				12
Short-term loans to unrelated parties			(2,000	)			(2,600	)
Repayment of short-term loans and interest income from unrelated parties			168				2,140
Deposit and prepayment repaid from/(paid for) contracts of other investing activities			-				1,000
Net cash provided by/(used in) investing activities			(1,537	)			552
Cash flows from financing activities
Proceeds from issuance of common stock and warrants (net of cash offering cost of $1,600)			-				-
Net cash provided by financing activities			-				-
Effect of exchange rate fluctuation on cash and cash equivalents			(25	)			(145	)
Net (decrease)/increase in cash and cash equivalents			(3,574	)			(2,782	)
Cash and cash equivalents, at beginning of the year			4,391				7,173
Cash and cash equivalents, at end of the year		$	817			$	4,391
Supplemental disclosure of cash flow information
Income taxes paid		$	-			$	-
Interest expense paid		$	-			$	-

FAQ

What were ZW Data Action Technologies' revenues for 2023?

ZW Data Action Technologies reported revenues of $30.59 million for the year 2023, a 16.6% increase from the previous year.

What was the net loss attributable to CNET for 2023?

The net loss attributable to CNET for the year 2023 was $5.97 million, compared to $9.79 million in 2022.

How much did ZW Data Action Technologies' operating loss decrease in 2023?

ZW Data Action Technologies' operating loss decreased from $11.12 million in 2022 to $6.01 million in 2023.

What was the gross loss for ZW Data Action Technologies in 2023?

ZW Data Action Technologies reported a gross loss of $0.44 million for the year 2023.

How much did ZW Data Action Technologies' general and administrative expenses decrease in 2023?

The general and administrative expenses decreased by 51.1%, totaling $4.06 million in 2023.

What were the cash and cash equivalents for ZW Data Action Technologies as of December 31, 2023?

As of December 31, 2023, ZW Data Action Technologies had cash and cash equivalents of $0.82 million.