Linkage Global Inc Announces First Half 2024 Financial Results

Rhea-AI Summary

Linkage Global Inc, a cross-border e-commerce integrated services provider, reported its financial results for H1 2024. Key highlights include:

- Net revenues decreased to USD4.80 million from USD9.03 million in H1 2023
- Gross profit fell 64% to USD0.71 million, with gross margin at 14.77%
- Net loss of USD0.90 million compared to net income of USD0.55 million in H1 2023

The decline was primarily due to tightened inspection policies for goods imported from Japan to China, Japanese yen depreciation, and reduced incentives from Google for digital marketing services. The company is diversifying its advertising partnerships and focusing on other e-commerce related services in response to these challenges.

Positive

• Revenues from training and consulting services increased by 24% to USD0.43 million
• The company entered into a new advertisement publishing agreement with Huntmobi Holdings for ad deployment on platforms like TikTok and Facebook

Negative

• Net revenues decreased by 47% to USD4.80 million
• Gross profit declined by 64% to USD0.71 million
• Gross margin decreased from 21.55% to 14.77%
• Loss from operations of USD0.91 million compared to income of USD0.87 million in the previous year
• Net loss of USD0.90 million compared to net income of USD0.55 million in the previous year
• Cross-border sales decreased by 34% to USD4.23 million
• Revenues from integrated e-commerce services decreased by 78% to USD0.57 million
• Digital marketing services revenue decreased by 94% to USD0.13 million due to Google's stringent incentive criteria
• General and administrative expenses increased by 58% to USD1.10 million

Insights

Financial Analyst

Linkage Global's first half 2024 results paint a concerning picture. Net revenues plummeted by 47% to $4.80 million, while gross profit nosedived 64% to $0.71 million. The company swung from an operating income of $0.87 million to a loss of $0.91 million. Several factors contributed to this downturn:

• Tightened Chinese inspection policies for Japanese imports
• Yen depreciation against the dollar (down 8.26%)
• Google's stricter incentive criteria for digital marketing services

The gross margin compression from 21.55% to 14.77% is particularly worrisome, indicating reduced pricing power and efficiency. The increase in operating expenses, especially professional fees and bad debt allowances, further squeezed profitability. Investors should closely monitor the company's ability to adapt to these challenges and reverse the negative trend in the coming quarters.

Market Research Analyst

Linkage Global's performance reflects broader cross-border e-commerce headwinds. The company's struggles with Chinese customs and currency fluctuations highlight the volatility in this sector. The dramatic 78% drop in integrated e-commerce services revenue, primarily due to changes in Google's incentive structure, underscores the risks of over-reliance on a single platform. However, there are some positive signs:

• Diversification efforts with new partnerships (e.g., Huntmobi Holdings)
• 24% growth in training and consulting services

These initiatives could help mitigate future risks. The e-commerce landscape is evolving rapidly and Linkage Global's ability to pivot and diversify will be crucial. Investors should watch for signs of success in new ventures and improved resilience to external shocks in the coming quarters.

Legal Expert

From a legal perspective, Linkage Global's financial report raises some potential concerns:

• The significant increase in bad debt allowance ($0.18 million) could signal issues with customer creditworthiness or contract enforcement.
• The company's reliance on incentives from platforms like Google, which can change unilaterally, may pose contractual and revenue recognition challenges.
• Stricter Chinese customs policies could lead to potential disputes or compliance issues in cross-border trade.

While no immediate legal red flags are apparent, these areas warrant close monitoring. The company should ensure robust risk management and compliance processes to navigate the complex international e-commerce landscape. Investors should seek clarity on any potential regulatory or contractual exposures in future disclosures.

TOKYO, Sept. 11, 2024 (GLOBE NEWSWIRE) -- Linkage Global Inc (“Linkage Cayman”, or the “Company”), a cross-border e-commerce integrated services provider headquartered in Japan, today announced its unaudited financial results for the six months ended March 31, 2024.

First Half 2024 Financial Highlights

• Net revenues were USD4.80 million for the six months ended March 31, 2024, compared to net revenues of USD9.03 million for the same period of 2023.
• Gross profit decreased by 64% to USD0.71 million for the six months ended March 31, 2024 from USD1.95 million for the same period of 2023. Gross margin was 14.77% for the six months ended March 31, 2024, compared to 21.55% for the same period of 2023.
• Loss from operations was USD0.91 million for the six months ended March 31, 2024, compared to income from operations of USD0.87 million for the same period of 2023.
• Net loss was USD0.90 million for the six months ended March 31, 2024, compared to net income of USD0.55 million for the same period of 2023.

First Half 2024 Financial Results

Revenues

Total revenues decreased by approximately USD4.23 million, or 47%, from approximately USD9.03 million for the six months ended March 31, 2023 to approximately USD4.80 million for the six months ended March 31, 2024.

Revenues from cross-border sales decreased by approximately USD2.18 million, or 34%, from approximately USD6.41 million for the six months ended March 31, 2023 to approximately USD4.23 million for the six months ended March 31, 2024. EXTEND CO., LTD, a Japanese corporation and a subsidiary of the Company, contributed to approximately USD3.50 million, or 73% of the Company’s total revenues, a decrease of 36% for the six months ended March 31, 2024 compared to the same period in 2023. The decrease in cross-border sales was mainly due to the following reasons: (i) China has tightened the inspection policy for goods imported from Japan, which resulted in more goods held up by China customs authorities for two to three months, leading to a decrease in exports to China, and (ii) the depreciation of the Japanese yen against U.S. dollars. The average exchange rate for the six months ended March 31, 2024 and 2023 was at $1=¥148.1735 and $1=¥136.8638, respectively, representing a decrease of 8.26%.

Revenues from integrated e-commerce services decreased by approximately USD2.05 million, or 78%, from approximately USD2.62 million for the six months ended March 31, 2023 to approximately USD0.57 million for the six months ended March 31, 2024, which was mainly due to a decrease in digital marketing services provided. HQT NETWORK CO., LIMITED, a subsidiary of the Company, acts as an authorized agent of Google for digital marketing services. In the six months ended March 31, 2024, Google imposed more stringent criteria for incentives, resulting in reduced amount of incentives. For instance, since 2023, Google stopped providing incentives for qualifying spends made by existing cross-border e-commerce sellers (both enterprises and individuals) that purchase products, e-commerce operation training and software support services and other cross-border e-commerce sellers and suppliers (collectively, the “Merchants”) , and only qualifying spends from new Merchants are counted when calculating incentives. Therefore, revenues from digital marketing services decreased by approximately USD2.13 million, or 94%, from approximately USD2.26 million for the six months ended March 31, 2023 to approximately USD0.13 million for the six months ended March 31, 2024.

In response to the change of Google’s policies, we entered into an advertisement publishing agreement with Huntmobi Holdings Limited, an online advertising agency based in China, for the deployment of ads on certain media or marketing platforms through Huntmobi Holdings Limited, including but not limited to TikTok and Facebook, and we also focused on the growth of other e-commerce related services. Revenues generated from training and consulting services increased by USD0.08 million, or 24%, from approximately USD0.35 million for the six months ended March 31, 2023 to approximately USD0.43 million for the six months ended March 31, 2024.

Cost of Revenues

Cost of revenues decreased by USD3 million, or 42%, from approximately USD7.09 million for the six months ended March 31, 2023 to approximately USD4.09 million for the six months ended March 31, 2024, primarily attributable to a decrease of cost of revenue for cross-border sales and digital marketing services, which is in line with the decrease of sales.

Gross Profit

Gross profit decreased to USD0.71 million for the six months ended March 31, 2024 from USD1.95 million for the same period of 2023, primarily attributable to the decrease of integrated e-commerce services mainly resulting from reduced incentives and more stringent incentive policies of Google. Gross margin was 14.77% for the six months ended March 31, 2024 compared to 21.55% for the same period of 2023.

Operating Expenses

Operating expenses increased by USD0.54 million, or 50%, from USD1.08 million for the six months ended March 31, 2023 to USD1.62 million for the six months ended March 31, 2024.

General and administrative expenses increased by USD0.40 million, or 58%, from USD0.69 million for the six months ended March 31, 2023 to approximately USD1.10 million for the six months ended March 31, 2024. This increase was primarily attributable to an increase of USD0.27 million in professional fees since its initial public offering, and an increase of USD0.18 million in bad debt allowance of accounts receivable.

Selling and marketing expenses decreased by USD0.06 million, or 22%, from USD0.29 million for the six months ended March 31, 2023 to approximately USD0.23 million for the six months ended March 31, 2024. This decrease was primarily attributable to a decrease of freight expenses and salaries due to the decrease in sales.

Research and development expenses remained stable and was USD0.29 million and USD0.30 million for the six months ended March 31, 2023 and 2024, respectively.

Gain from disposal of property and equipment was USD1.97 million and nil for the six months ended March 31, 2023 and 2024, respectively.

Profit/ (loss) from operations

Loss from operations was USD0.91 million for the six months ended March 31, 2024, compared to profit from operations of USD0.87million for the same period of 2023.

Other expenses, net

Other expenses decreased to USD59,728 for the six months ended March 31, 2024 from USD60,073 for the same period of 2023, which was mainly attributable to (i) a decrease of USD22,526 in interest expenses due to a decrease in bank borrowings; and (ii) a decrease of USD27,038 in COVID-19 related government subsidies.

Income tax (provision)/benefit

The Company had an income tax benefit of USD0.08 million for the six months ended March 31, 2024, and incurred income tax provision of USD0.25 million for the same period of 2023, which was primarily attributable to net loss for the six months ended March 31, 2024.

Net (loss)/ income

Net loss was USD0.90 million for the six months ended March 31, 2024, compared to net income of USD0.55 million for the same period of 2023.

About Linkage Global Inc

Linkage Global Inc is a holding company incorporated in the Cayman Islands with no operations of its own. Linkage Cayman conducts its operations through its operating subsidiaries in Japan, Hong Kong, and mainland China. As a cross-border e-commerce integrated services provider headquartered in Japan, through its operating subsidiaries, the Company has developed a comprehensive service system comprised of two lines of business complementary to each other, including (i) cross-border sales and (ii) integrated e-commerce services. For more information, please visit www.linkagecc.com.

Safe Harbor Statement

Certain statements in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company’s current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as “approximates,” “assesses,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or similar expressions. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s annual reports on Form 20-F and other filings with the U.S. Securities and Exchange Commission.

For more information, please contact:

Investor Relations
WFS Investor Relations Inc.
Connie Kang, Partner
Email: ckang@wealthfsllc.com
Tel: +86 1381 185 7742

Linkage Global Inc CONDENSED CONSOLIDATED BALANCE SHEETS (In U.S. dollars, except for share and per share data, or otherwise noted)
	As of
	September 30, 2023				March 31, 2024
	USD				USD
						(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		1,107,480				1,483,720
Accounts receivable, net		2,011,047				2,874,998
Deferred offering costs		1,076,253				-
Inventories, net		679,732				138,012
Prepaid expenses and other current assets, net		4,771,460				8,877,509
Total current assets		9,645,972				13,374,239
Non-current assets
Property and equipment, net		158,642				119,207
Deferred tax assets		149,129				191,004
Right-of-use assets, net		624,945				661,799
Other non-current assets		54,825				55,399
Total non-current assets		987,541				1,027,409
TOTAL ASSETS		10,633,513				14,401,648
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term debts		-				98,532
Current portion of long-term debts		535,226				533,244
Accounts payable		1,142,667				822,039
Contract liabilities		530,488				853,417
Amounts due to related parties		1,413,604				1,948,959
Income tax payable		581,235				1,481,629
Accrued expenses and other current liabilities		309,986				304,799
Lease liabilities-current		187,214				174,777
Total current liabilities		4,700,420				6,217,396
Non-current liabilities
Long-term debts		1,996,326				939,926
Lease liabilities-noncurrent		439,854				496,048
Total non-current liabilities		2,436,180				1,435,974
Total liabilities		7,136,600				7,653,370
Commitments and contingencies
Shareholders’ equity
Ordinary shares (par value of US$0.00025 per share; 200,000,000 ordinary shares authorized as of September 30, 2023 and March 31, 2024, respectively; 20,000,000 and 21,500,000 ordinary shares issued and outstanding as of September 30, 2023 and March 31, 2024, respectively)		5,000				5,375
Additional paid in capital		1,549,913				6,367,921
Statutory reserve		11,348				19,214
Retained earnings		2,052,553				1,146,573
Accumulated other comprehensive loss		(121,901	)			(790,805	)
Total shareholders’ equity		3,496,913				6,748,278
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		10,633,513				14,401,648

Linkage Global Inc UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS) (In U.S. dollars, except for share and per share data, or otherwise noted)
	For the six months ended March 31,
	2023				2024
	USD				USD
	(Unaudited)
Revenues		9,031,327				4,798,363
Cost of revenues		(7,085,228	)			(4,089,486	)
Gross profit		1,946,099				708,877
Operating expenses
Selling and marketing expenses		(294,240	)			(228,956	)
General and administrative expenses		(694,449	)			(1,097,010	)
Research and development expenses		(287,971	)			(297,811	)
Gain from disposal of property and equipment		196,503				-
Total operating expenses		(1,080,157	)			(1,623,777	)
Operating profit/(loss)		865,942				(914,900	)
Other (expenses)/income
Investment loss		(4,857	)			-
Interest expenses, net		(83,252	)			(60,726	)
Others, net		28,036				998
Total other expenses, net		(60,073	)			(59,728	)
Income/(loss) before income taxes		805,869				(974,628	)
Income tax (provision)/benefit		(251,042	)			76,514
Net income/(loss)		554,827				(898,114	)
Net income/(loss)		554,827				(898,114	)
Foreign currency translation adjustment		16,351				(668,904	)
Total comprehensive income/(loss) attributable to the Company’s ordinary shareholders		571,178				(1,567,018	)
Earnings/(loss) per ordinary share attributable to ordinary shareholders
Basic and Diluted		0.03				(0.04	)
Weighted average number of ordinary shares outstanding
Basic and Diluted		20,000,000				20,848,901

FAQ

What were Linkage Global's (LGCB) net revenues for H1 2024?

Linkage Global's net revenues for H1 2024 were USD4.80 million, down from USD9.03 million in the same period of 2023.

How did Linkage Global's (LGCB) gross profit change in H1 2024?

Linkage Global's gross profit decreased by 64% to USD0.71 million in H1 2024, compared to USD1.95 million in H1 2023.

What factors contributed to Linkage Global's (LGCB) revenue decline in H1 2024?

The revenue decline was mainly due to tightened inspection policies for goods imported from Japan to China, Japanese yen depreciation, and reduced incentives from Google for digital marketing services.

How is Linkage Global (LGCB) responding to changes in Google's incentive policies?

Linkage Global is diversifying its advertising partnerships, including an agreement with Huntmobi Holdings for ad deployment on platforms like TikTok and Facebook, and focusing on growing other e-commerce related services.