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ZW Data Action Technologies Reports Third Quarter and First Nine Months 2023 Unaudited Financial Results

BEIJING, Nov. 20, 2023 (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, 2023.

Third Quarter 2023 Financial Results

Revenues

For the third quarter of 2023, revenues increased by approximately $1.97 million, or 27.2%, to $9.18 million from $7.22 million for the same period last year. The increase in revenues was primarily attributable to the increase in our main stream service revenues, i.e. distribution of the right to use search engine marketing services as a result of the decline in the peak COVID-19 wave during the first fiscal quarter of 2023 leading to a gradual return to normal business activities and performance in the second fiscal quarter. Additionally, some of our clients shifted their advertising consumption from our ad portal placement services to our search engine marketing service.

Cost of revenues

Total cost of revenues increased by approximately $1.92 million, or 26.4%, to $9.19 million for the third quarter of 2023 from $7.27 million for the same period last year. The increase in cost was related to cost associated with distribution of the right to use search engine marketing service we purchased from key search engines, which was in line with the increase in the related revenues.

Gross loss and gross loss margin

Gross loss was approximately $0.004 million for the third quarter of 2023, compared to $0.05 million for the same period last year. Overall gross loss margin rate was 0.04% for the third quarter of 2023, compared to 0.7% for the same period last year.

Operating expenses

Sales and marketing expenses were approximately $0.06 million for the third quarter of 2023, compared to $0.07 million for the same period last year. The decrease in sales and marketing expenses was mainly attributable to the gradual downsize of the sales team in our Hubei office during the period, as part of management’s cost reduction plan in fiscal 2023.

General and administrative expenses decreased by approximately $0.10 million, or 6.3%, to $1.55 million for the third quarter of 2023 from $1.65 million for the same period last year. The decrease in general and administrative expenses was mainly attributable to the decrease in amortization of administrative assets of approximately $0.44 million, primarily due to impairment loss recognized against intangible assets by the end of fiscal 2022 and the decrease in other administrative expenses of approximately $0.55 million, as a result of the cost reduction plan executed by management, partially offset by the increase in allowance for expected credit losses of approximately $0.89 million.

Operating loss

Loss from operations was approximately $1.61 million for the third quarter of 2023, compared to $1.83 million for the same period last year. Operating loss margin was 17% for the third quarter of 2023, compared to 25% for the same period last year.

Other income/(expenses), net

Total other income, net was approximately $0.09 million for the third quarter of 2023, compared to total other expenses, net of approximately $1.01 million for the same period last year. The increase was primarily attributable to the increase in change in fair value of warrant liabilities.

Net loss and loss per share

Net loss was approximately $1.52 million, or loss per share of $0.21, for the third quarter of 2023. This was compared to a net loss of $2.84 million, or loss per share of $0.40, for the same period last year.

First Nine Months 2023 Financial Results

Revenues

For the first nine months of 2023, revenues increased by approximately $3.50 million, or 16.1%, to $25.32 million from $21.81 million for the same period last year. The increase in revenues was primarily attributable to the increase in our main stream service revenues, i.e., distribution of the right to use search engine marketing services.

Cost of revenues

Total cost of revenues increased by approximately $3.94 million, or 18.0%, to $25.75 million for the first nine months of 2023 from $21.81 million for the same period last year. The increase in cost of revenues was primary attributable to the increase in costs associated with distribution of the right to use search engine marketing service we purchased from key search engines during the period, which was in line with the increase in the related revenues.

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

Gross loss was approximately $0.43 million for the first nine months of 2023, compared to a gross profit of $0.002 million for the same period last year. Overall gross loss margin was 2% for the first nine months of 2023, compared to a gross profit margin of 0.01% for the same period last year.

Operating expenses

Sales and marketing expenses decreased by approximately $0.07 million, or 32.4%, to $0.15 million for the first nine months of 2023, compared to $0.22 million for the same period last year. The decrease in sales and marketing expenses was mainly attributable to the gradual downsize of the sales team in our Hubei office during the period, as part of management’s cost reduction plan in fiscal 2023.

General and administrative expenses decreased by approximately $2.04 million, or 35.8%, to $3.66 million for the first nine months of 2023 from $5.70 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 approximately $0.04 million; the decrease in amortization of administrative assets of approximately $1.33 million, primarily due to impairment loss recognized against intangible assets by the end of fiscal 2022; and the decrease in other administrative expenses of approximately $1.07 million, as a result of the cost reduction plan executed by management, partially offset by the increase in allowance for expected credit losses of approximately $0.40 million.

Operating loss

Loss from operations was approximately $4.25 million for the first nine months of 2023, compared to $6.10 million for the same period last year. Operating loss margin was 17% for the third quarter of 2023, compared to 28% for the same period last year.

Other income, net

Total other income, net decreased to approximately $0.19 million for the first nine months of 2023 from $0.82 million for the same period last year. The decrease was primarily attributable to the decrease in gain of the change in fair value of warrant liabilities.

Net loss and loss per share

Net loss was approximately $4.07million, or loss per share of $0.57, for the first nine months of 2023. This was compared to a net loss of $5.27 million, or loss per share of $0.74, for the same period last year.

Financial Condition

As of September 30, 2023, the Company had cash and cash equivalents of approximately $1.31 million, compared to $4.39 million as of December 31, 2022. Accounts receivable, net was approximately $0.77 million as of September 30, 2023, compared to $1.75 million as of December 31, 2022. Working capital was approximately $4.29 million as of September 30, 2023, compared to $6.61 million as of December 31, 2022.

Net cash used in operating activities was approximately $1.54 million for the first nine months of 2023, compared to $4.41 million for the same period last year. Net cash used in investing activities was approximately $1.50 million for the first nine months of 2023, compared to $0.48 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 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,
2023
 December 31,
2022
   (US $) (US $)
   (Unaudited)  
Assets     
Current assets:     
Cash and cash equivalents  $1,314  $4,391 
Accounts receivable, net of allowance for credit loss of $3,943 and $3,760, respectively   771   1,745 
Prepayment and deposit to suppliers   4,874   4,567 
Other current assets, net   2,422   1,610 
Total current assets   9,381   12,313 
      
Long-term investments   1,000   1,596 
Operating lease right-of-use assets   1,406   1,761 
Property and equipment, net   165   249 
Intangible assets, net   2,364   3,264 
Long-term deposits and prepayments   69   69 
Deferred tax assets, net   394   406 
Total Assets  $ 14,779  $ 19,658 
      
Liabilities and Equity     
Current liabilities:     
Accounts payable *  $196  $205 
Advance from customers *   1,133   739 
Accrued payroll and other accruals *   132   438 
Taxes payable *   3,155   3,248 
Operating lease liabilities *   216   347 
Lease payment liability related to short-term leases *   98   101 
Other current liabilities *   162   437 
Warrant liabilities   -   185 
Total current liabilities   5,092   5,700 


Long-term liabilities:     
Operating lease liabilities-Non current *   1,324   1,535 
Long-term borrowing from a related party   122   126 
Total Liabilities   6,538   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 September 30, 2023 and December 31, 2022, respectively)   7   7** 
Additional paid-in capital   62,055   62,017** 
Statutory reserves   2,598   2,598 
Accumulated deficit   (57,782)  (53,525)
Accumulated other comprehensive income   1,363   1,200 
Total shareholders’ equity   8,241   12,297 
      
Total Liabilities and Equity  $ 14,779  $ 19,658 

* Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets.
**Retrospectively restated for effect of the 1-for-5 reverse stock split on January 18, 2023.



 
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except for number of shares and per share data)
 
  Nine Months Ended September 30, Three Months Ended September 30,
   2023   2022   2023   2022 
  (US $) (US $) (US $) (US $)
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
                 
Revenues $25,317  $21,813  $9,181  $7,216 
Cost of revenues  25,746   21,811   9,185   7,267 
Gross (loss)/ profit  (429)  2   (4)  (51)
         
Operating expenses        
Sales and marketing expenses  148   219   55   72 
General and administrative expenses  3,659   5,697   1,547   1,651 
Research and development expenses  18   181   -   57 
Total operating expenses  3,825   6,097   1,602   1,780 
         
Loss from operations  (4,254)  (6,095)  (1,606)  (1,831)
         
Other income/(expenses)        
Interest income  230   96   79   21 
Other expenses, net  (20)  (33)  (6)  (5)
Impairment on long-term investment  (207)  -   2   - 
Change in fair value of warrant liabilities  185   759   13   (1,023)
Total other income/(expenses)  188   822   88   (1,007)
         
Loss before income tax benefit/(expense) and noncontrolling interests  (4,066)  (5,273)  (1,518)  (2,838)
Income tax benefit/(expenses)  -   2   (2)  (2)
Net loss $ (4,066) $ (5,271) $ (1,520) $ (2,840)


Net loss $(4,066) $(5,271) $(1,520) $(2,840)
Foreign currency translation income/(loss)  163   76   (39)  93 
Comprehensive loss  

$


(3,903


)
 

$


(5,195


)
 

$


(1,559


)
 

$


(2,747


)
         
Loss per share                
Loss per common share        
Basic and diluted** $(0.57) $(0.74) $(0.21) $(0.40)
         
Weighted average number of common shares outstanding:        
Basic and diluted**  7,191,649   7,123,411   7,204,506   7,174,506 

**Retrospectively restated for effect of the 1-for-5 reverse stock split on January 18, 2023.



 
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
   
  Nine Months Ended September 30,
   2023   2022 
  (US $) (US $)
  (Unaudited) (Unaudited)
Cash flows from operating activities    
Net loss $(4,066) $(5,271)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation and amortization  966   1,660 
Amortization of operating lease right-of-use assets  310   239 
Share-based compensation expenses  95   135 
Provision for allowances for credit losses  1,347   947 
Loss on disposal of long-term investments  207   - 
Deferred taxes  -   (2)
Disposal of fixed assets  7   - 
Change in fair value of warrant liabilities  (185)  (759)
Other non-operating income  (229)  (93)
Changes in operating assets and liabilities    
Accounts receivable  655   (211)
Prepayment and deposit to suppliers  (389)  (459)
Due from related parties  -   59 
Other current assets  -   25 
Accounts payable  (3)  (784)
Advance from customers  425   (179)
Accrued payroll and other accruals  (304)  (205)
Other current liabilities  (78)  735 
Taxes payable  (1)  4 
Lease payment liability related to short-term leases  -   (40)
Operating lease liabilities  (293)  (210)
Net cash used in operating activities  (1,536)  (4,409)
     
Cash flows from investing activities    
Investments and advances to ownership investee entities  (43)  - 
Proceeds from disposal of long-term investments  428   - 
Deposit paid for purchase of equipment  (52)  - 
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   2,109 
Net cash used in investing activities  (1,499)  (479)


Cash flows from financing activities    
     
Net cash provided by financing activities  -   - 
     
Effect of exchange rate fluctuation on cash and cash equivalents  (42)  (131)
     
Net decrease in cash and cash equivalents  (3,077)  (5,019)
     
Cash and cash equivalents at beginning of the period  4,391   7,173 
Cash and cash equivalents at end of the period $ 1,314  $ 2,154 
     

**Retrospectively restated for effect of the 1-for-5 reverse stock split on January 18, 2023.


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