China Internet Cafe Holdings Group Announces Fourth Quarter & Full Year 2011 Financial Results, and Provides Fiscal 2012 Guidance
* FY 2011 Revenue increased 59% to $32.6 million year-over-year; resulting from 6.5% same store sales growth
* Net income was $9.5 million for FY 2011, up 65% year-over-year
* Added 15 internet cafes in 2011, bringing total to 59 internet cafes
* Cash of $19.6 million on December 31, 2011; Cash per common share of approximately $0.93
SHENZHEN, China, April 3, 2012 /PRNewswire/ -- China Internet Cafe Holdings Group, Inc. ("CICC" or the "Company") (OTC Bulletin Board: CICC), one of the largest owners and chain operators of internet cafes in Southern China, today announced its financial results for its fourth quarter and full year 2011, and provided guidance for fiscal year 2012.
SUMMARY FINANCIALS
Fourth Quarter 2011 Results |
||||
Q4 2011 |
Q4 2010 |
CHANGE |
||
Sales |
$8.9 million |
$6.3 million |
41% |
|
Gross Profit |
$2.8 million |
$2.3 million |
20% |
|
Full Year 2011 Results |
||||
FY 2011 |
FY 2010 |
CHANGE |
||
Sales |
$32.6 million |
$20.5 million |
59% |
|
Gross Profit |
$12.3 million |
$8.6 million |
43% |
|
Net Income |
$9.5 million |
$5.7 million |
65% |
|
EPS (Fully Diluted) |
$0.39 |
$0.29 |
34% |
|
Fourth Quarter of 2011 Financial Results
For the quarter ended December 31, 2011, net revenue increased 41% to $8.9 million, compared to $6.3 million in the fourth quarter of 2010. Revenue growth from locations opened at least one year was 1.3% and represented approximately $4.5 million in revenues. At December 31, 2011, the Company had over 2.4 million registered users, a 140% increase from 1 million at the end of 2010. Approximately 50% of all registered users were active in the past year while half have used their IC card at least once in the past week.
"We are pleased to report a great fourth quarter, which achieved strong top line growth to finish a successful 2011 with positive momentum," said Mr. Dishan Guo, Chief Executive Officer of China Internet Cafe. "During 2011, we opened 15 new stores, bringing the total number of internet cafes operating under the "Dragon Surf" brand name to 59. While we continue to expand our presence in Shenzhen, we have also worked to identify suitable acquisition targets in provinces beyond Guangdong, which will leverage our management expertise and operating infrastructure to capitalize on growth opportunities in other desirable geographic locations."
Gross profit for the fourth quarter of 2011 increased 20% to $2.8 million, compared to $2.3 million in the fourth quarter of 2010. Gross margin decreased 5 percentage points to 31.5%, as compared to 36.3% in the comparable period of 2010. The decrease was mainly attributable to the annual performance-based bonuses paid to employees and higher education expenses for employees.
Results for the Year Ended December 31, 2011
Net revenue was $32.6 million for the year ended December 31, 2011, an increase of 59% from $20.5 million for the same period in 2010. Revenue growth was driven by the opening of 15 new cafes in 2011 and an increase in same store sales of 6.5%. Cafes opened prior to January 1, 2011 contributed $27 million of revenue while locations opened during 2011 contributed $5.6 million.
$ 000's |
FY 2011 |
FY 2010 |
YOY% Change |
|
Same Store Sales |
$52,014 |
$ 48,846 |
6.5% |
|
IC Cards Sold |
1,158,000 |
558,087 |
107% |
|
Active Customers* |
1,523,000 |
1,008,676 |
51% |
|
*Customers who have used a CICC IC card during the corresponding periods Note: Average yearly RMB: USD exchange rate: 6.4544 for 2011, 6.7788 for 2010 |
||||
Gross profit for the full year 2011 was $12.3 million, an increase of 43% from $8.6 million in 2010. Gross margins increased 4 basis points year YOY to 42%, with the improvement attributable to positive operating leverage as a result of higher computer usage by customers.
General and administrative expenses for the year ended December 31, 2011 increased to $2.3 million, an increase of 258% from $0.6 million in the full year of 2010 due to increase in advisory, legal, investor relations and audit fees incurred as a publicly traded company.
Operating income for the year ended December 31, 2011 was $10.0 million, an increase of 26% from $8.0 million in the same period last year. Operating margins were 31%, a slight decrease from the 39% reported during 2010 due to public company expenses.
Net income was $9.5 million for 2011 with $0.44 in diluted earnings per share compared to $5.7 million, or $0.29 per share for last year. Calculations were base using weighted average shares of 20,990,725 and 19,601,644 for the year ended December 31, 2011 and December 31, 2010, respectively.
Financial Condition
As of December 31, 2011, the Company had $19.6 million in cash and cash equivalents, compared to $3.8 million at year-end 2010, working capital of $13.9 million and a current ratio of 2.95. As of December 31, 2011, shareholders' equity was $23.7 million, up from $13.5 million at the end of 2010.
CICC operates a cash business, with revenue from IC cards credited in its bank account approximately 15 days after a card is sold. The Company does not run accounts receivable balances.
For the year ended December 31, 2011, the Company generated $15.7 million in cash from operating activities, compared with $6.5 million for last year. Net cash used in investing activities was $5.9 million for the year ended December 31, 2011, which included of the build out of new cafes and leasehold improvements to existing cafes.
Fiscal 2012 Guidance and Business Outlook
Management expects $50 million of revenues and $14 of net income for fiscal year ending December 31, 2012.
FY2011 |
FY2012 Guidance |
YOY % Growth |
||
Revenue |
$32.6 million |
$50 million |
56% |
|
Net Income |
$9.5 million |
$14 million |
47% |
|
In 2012 the China Internet Cafe will focus on organic growth of its owned and operated ("O&O") internet cafe outlets as it continues to expand its presence in Shenzhen, where population growth and the influx of migrant workers are expected to continue. CICC opened 15 new cafes in 2011, an increase of 34% from 44 in 2010. The average capital expenditures per cafe in 2011 were $0.25 million and are consistent with the strategy to open more high-end cafes with a larger number of total seats. With average revenue per store of $0.55 million per year and a 29% net margin, the average payback period is 1.5 to 2 years.
In 2012, management expects to add 25 new cafes. This includes a mix between small and large depending on the demographics surrounding each location and potentially acquiring an internet cafe chain company.
The Company plans to drive same store sales by offering new loyalty programs such as online gaming competition and focusing on increasing the availability of high quality value-added content such movies, TV shows and video games.
Management is currently evaluating acquisitions outside Shenzhen in order to expand its geographic footprint and to eventually secure a national internet cafe license. The Company continues to carry out stringent due diligence on potential targets, with a disciplined focus on accretive opportunities.
About China Internet Cafe Holdings Group, Inc.
Since opening its first internet cafe in 2006 under the name Shenzhen Junlong Culture Communication CO. Ltd., China Internet Cafe Holdings Group, Inc. has expanded quickly to 59 cafes in Shenzhen, Guangdong province, China. The Company provides high quality, affordable internet services to consumers who purchase reloadable cards. Customers can access a range of online services, including email, web surfing, watching movies, online gaming, voice over IP, and social media in a comfortable, friendly and safe environment. CICC offers a variety of internet connectivity stations with varying speeds, monitor sizes and seating arrangements.
Safe Harbor Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks outlined in the Company's public filings with the Securities and Exchange Commission, including the Company's registration statement on Form F-1, as amended. All information provided in this press release is as of the date hereof. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
Contact Information:
China Internet Cafe Holdings Group, Inc.
Mr. Dishan Guo
Chief Executive Officer
Phone: +86-755-8989-1398
Mr. Jingwei Li
Vice President of Corporate Finance
Phone: +86-755-8989-0998
Email: [email protected]
China Internet Cafe Holdings Group, Inc. |
||||||
December 31, 2011 |
December 31, 2010 |
|||||
ASSETS |
||||||
Current assets: |
||||||
Cash |
$ |
19,629,680 |
$ |
3,836,824 |
||
Restricted cash |
- |
945,280 |
||||
Loan receivable |
- |
2,419,916 |
||||
Rental deposit |
86,580 |
55,512 |
||||
Equipment deposit |
994,732 |
1,300,650 |
||||
Inventory |
212,607 |
180,582 |
||||
Deferred tax assets |
69,405 |
- |
||||
Total current assets |
20,993,004 |
8,738,764 |
||||
Property, plant and equipment, net |
13,000,745 |
6,848,342 |
||||
Intangible assets, net |
161,083 |
191,087 |
||||
Rental deposit-long term portion |
314,736 |
235,509 |
||||
Total assets |
$ |
34,469,568 |
$ |
16,013,702 |
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||
Current liabilities: |
||||||
Short term loan |
$ |
- |
$ |
151,245 |
||
Accounts payable |
100,480 |
69,373 |
||||
Registration penalties payable |
448,844 |
- |
||||
Deferred revenue |
2,084,086 |
579,822 |
||||
Payroll and payroll related liabilities |
323,286 |
199,548 |
||||
Income and other taxes payable |
1,316,209 |
987,194 |
||||
Accrued expenses |
365,696 |
102,018 |
||||
Amount due to a shareholder |
2,135,218 |
465,741 |
||||
Dividend payable on preferred stock |
72,729 |
- |
||||
Derivative financial instrument - preferred stock |
147,704 |
- |
||||
Derivative financial instrument - warrants |
129,496 |
- |
||||
Total current liabilities |
7,123,748 |
2,554,941 |
||||
Commitments and contingencies (Note 17) |
||||||
Preferred stock ($0.00001 par value, 100,000,000 shares authorized, 4,274,703 |
3,682,473 |
- |
||||
Stockholders' Equity: |
||||||
Common stock ($0.00001 par value, 100,000,000 shares authorized, 21,124,967 |
212 |
202 |
||||
Additional paid in capital |
1,728,726 |
1,628,417 |
||||
Statutory surplus reserves |
718,744 |
718,744 |
||||
Retained earnings |
19,760,289 |
10,499,454 |
||||
Accumulated other comprehensive income |
1,455,376 |
611,944 |
||||
Total stockholders' equity |
23,663,347 |
13,458,761 |
||||
Total liabilities and stockholders' equity |
$ |
34,469,568 |
$ |
16,013,702 |
||
CHINA INTERNET CAFE HOLDINGS GROUP, INC. AND SUBSIDIARIES |
||||||
For The Year Ended |
||||||
December 31, |
||||||
2011 |
2010 |
|||||
Revenue |
$ |
32,597,144 |
$ |
20,460,459 |
||
Cost of revenue |
20,270,919 |
11,823,456 |
||||
Gross profit |
12,326,225 |
8,637,003 |
||||
Operating Expenses |
||||||
General and administrative expenses |
2,274,760 |
634,739 |
||||
Total operating expenses |
2,274,760 |
634,739 |
||||
Income from operations |
10,051,465 |
8,002,264 |
||||
Non-operating income (expenses) |
||||||
Change in fair value of derivative financial instrument - preferred stock |
1,457,090 |
- |
||||
Change in fair value of derivative financial instrument – warrants |
783,290 |
- |
||||
Interest income |
12,439 |
8,265 |
||||
Interest expenses |
(9,303) |
(9,437) |
||||
Other expenses |
(563) |
(43) |
||||
Reorganizational expenses |
(435,086) |
|||||
Total non-operating income (expenses) |
2,242,953 |
(436,301) |
||||
Income before income taxes |
12,294,418 |
7,565,963 |
||||
Income taxes |
2,786,097 |
1,819,380 |
||||
Net income |
9,508,321 |
5,746,583 |
||||
Dividend on preferred stock |
(247,486) |
- |
||||
Net income attributable to China Internet Cafe Holdings Group, Inc. common stockholders |
$ |
9,260,835 |
$ |
5,746,583 |
||
Other comprehensive income |
||||||
Net income |
$ |
9,508,321 |
$ |
5,746,583 |
||
Foreign currency translation |
843,432 |
400,949 |
||||
Total comprehensive income |
$ |
10,351,753 |
$ |
6,147,532 |
||
Earnings per share |
||||||
- Basic |
$ |
0.44 |
$ |
0.29 |
||
- Diluted |
$ |
0.39 |
$ |
0.29 |
||
Weighted average common stock outstanding |
||||||
- Basic |
20,990,725 |
19,601,644 |
||||
- Diluted |
23,656,429 |
19,601,644 |
||||
CHINA INTERNET CAFE HOLDINGS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY |
||||||||||||||||||||
Common stock |
||||||||||||||||||||
Number of shares |
Amount |
Additional |
Statutory reserves |
Retained Earnings |
Accumulated other comprehensive income |
Total |
||||||||||||||
Balance at December 31, 2008 |
19,000,000 |
$ |
190 |
$ |
1,367,032 |
$ |
399,802 |
$ |
683,364 |
$ |
202,037 |
$ |
2,652,425 |
|||||||
Contributed capital by existing shareholders |
- |
- |
6,452 |
- |
- |
- |
6,452 |
|||||||||||||
Transfers to statutory reserves |
- |
- |
- |
318,942 |
(318,942) |
- |
- |
|||||||||||||
Net income for the year |
- |
- |
- |
- |
4,388,449 |
- |
4,388,449 |
|||||||||||||
Foreign currency translation difference |
- |
- |
- |
- |
- |
8,958 |
8,958 |
|||||||||||||
Balance at December 31, 2009 |
19,000,000 |
190 |
1,373,484 |
718,744 |
4,752,871 |
210,995 |
7,056,284 |
|||||||||||||
Contributed capital by existing shareholders |
- |
- |
251,612 |
- |
- |
- |
251,612 |
|||||||||||||
Reorganization for reverse merger |
1,200,000 |
12 |
3,321 |
- |
- |
- |
3,333 |
|||||||||||||
Net income for the year |
- |
- |
- |
- |
5,746,583 |
- |
5,746,583 |
|||||||||||||
Foreign currency translation difference |
- |
- |
- |
- |
- |
400,949 |
400,949 |
|||||||||||||
Balance at December 31, 2010 |
20,200,000 |
202 |
1,628,417 |
718,744 |
10,499,454 |
611,944 |
13,458,761 |
|||||||||||||
Issuance of common stock |
924,967 |
10 |
100,309 |
- |
- |
- |
100,319 |
|||||||||||||
Preferred stock dividend |
- |
- |
- |
- |
(247,486) |
- |
(247,486) |
|||||||||||||
Net income for the year |
- |
- |
- |
- |
9,508,321 |
- |
9,508,321 |
|||||||||||||
Foreign currency translation difference |
- |
- |
- |
- |
- |
843,432 |
843,432 |
|||||||||||||
Balance at December 31, 2011 |
21,124,967 |
$ |
212 |
$ |
1,728,726 |
$ |
718,744 |
$ |
19,760,289 |
$ |
1,455,376 |
$ |
23,663,347 |
|||||||
CHINA INTERNET CAFE HOLDINGS GROUP, INC. AND SUBSIDIARIES |
||||||
For The Year Ended |
||||||
December 31, |
||||||
2011 |
2010 |
|||||
Cash flows from operating activities |
||||||
Net income |
$ |
9,508,321 |
$ |
5,746,583 |
||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
||||||
Change in fair value of derivative financial instrument - preferred stock |
(1,457,090) |
- |
||||
Change in fair value of derivative financial instrument- warrants |
(783,290) |
- |
||||
Advisory fee |
450,000 |
- |
||||
Depreciation |
2,948,401 |
1,664,405 |
||||
Amortization |
37,212 |
23,540 |
||||
Deferred tax assets |
(68,307) |
- |
||||
Changes in operating assets and liabilities: |
||||||
Restricted cash |
968,332 |
737,599 |
||||
Prepayment |
- |
(2,360,317) |
||||
Rental deposit |
(96,983) |
(114,027) |
||||
Inventory |
(24,259) |
30,604 |
||||
Accounts payable |
29,718 |
31,592 |
||||
Deferred revenue |
1,457,156 |
(217,133) |
||||
Payroll and payroll related liabilities |
113,758 |
69,171 |
||||
Income and other taxes payable |
284,120 |
432,880 |
||||
Accrued expenses |
704,897 |
52,936 |
||||
Amount due to a shareholder |
1,643,408 |
456,842 |
||||
Net cash provided by operating activities |
15,715,394 |
6,554,675 |
||||
Cash flows from investing activities |
||||||
Purchase of property, plant and equipment |
(7,477,866) |
(4,152,294) |
||||
Receipt of loan receivable due to termination of an investment agreement |
2,478,929 |
- |
||||
Deposits paid for property, plant and equipment |
(896,904) |
(1,270,511) |
||||
Assets acquisition of cafes |
- |
(728,866) |
||||
Net cash used in investing activities |
(5,895,841) |
(6,151,671) |
||||
Cash flows from financing activities |
||||||
Net proceeds from issuance of preferred stock and warrants |
5,675,614 |
- |
||||
Increase/(Decrease) from short term loan |
(154,933) |
- |
||||
Cash acquired from reverse merger |
- |
1,442 |
||||
Capital contribution by shareholder |
- |
251,612 |
||||
Net cash flows provided by financing activities: |
5,520,681 |
253,054 |
||||
Effect of foreign currency translation on cash |
452,622 |
118,910 |
||||
Net increase in cash |
15,792,856 |
774,968 |
||||
Cash - beginning of year |
3,836,824 |
3,061,856 |
||||
Cash - end of year |
$ |
19,629,680 |
$ |
3,836,824 |
||
Cash paid during the period for: |
||||||
Interest paid |
$ |
9,303 |
$ |
9,437 |
||
Income taxes paid |
$ |
2,775,996 |
$ |
1,630,711 |
||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
||||||
Summary of Assets Acquired from Acquisitions: |
||||||
Net property and equipment |
- |
503,492 |
||||
Other current assets |
- |
15,792 |
||||
Intangible assets |
- |
209,582 |
||||
Net assets acquired |
- |
728,866 |
||||
Transfer of equipment deposits paid in property and equipment |
$ |
1,250,275 |
$ |
83,811 |
||
Registration penalties |
$ |
448,844 |
||||
Advisory fee |
$ |
450,000 |
$ |
- |
||
SOURCE China Internet Cafe Holdings Group, Inc.
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