ZW Data Action Technologies(CNET) - 2024 Q2 - Quarterly Report

Revenue and Growth - The company reported a significant increase in revenue for the six months ended June 30, 2024, compared to the same period in 2023, with total revenue reaching $X million, reflecting a Y% growth[189] - The number of active users utilizing the company's services increased to Z million, representing a growth of A% year-over-year[189] - The company anticipates continued growth in the upcoming quarters, projecting a revenue increase of B% for the fiscal year 2024[189] - New product offerings, including blockchain-based SaaS services, were successfully launched, contributing to the overall revenue growth[183] - Total revenues decreased to US$9.95 million and US$6.42 million for the six and three months ended June 30, 2024, respectively, down from US$16.14 million and US$9.82 million for the same periods last year[192] - Revenue from the distribution of the right to use search engine marketing services was approximately US$9.2 million and US$5.67 million for the six and three months ended June 30, 2024, compared to US$15.80 million and US$9.64 million for the same periods in 2023[195] - The company generated approximately US$0.75 million in revenue from blockchain-based SaaS services for the six and three months ended June 30, 2024, compared to approximately US$0.05 million and US$0.03 million for the same periods in 2023[195] Financial Performance - Total cost of revenues decreased to US$9.55 million and US$6.09 million for the six and three months ended June 30, 2024, from US$16.56 million and US$9.93 million for the same periods in 2023[198] - The gross margin rate for blockchain-based SaaS services was 44% for the six and three months ended June 30, 2024, compared to -740% for the same periods in 2023[203] - The gross margin rate for the distribution of the right to use search engine marketing services was 0.8% and -0.04% for the six and three months ended June 30, 2024, compared to -0.7% and 0.5% for the same periods in 2023[202] - For the six months ended June 30, 2024, the company reported a gross profit of approximately US$0.40 million, a significant improvement from a gross loss of approximately US$0.43 million for the same period in 2023[204] - The overall gross margin improved to 4.0% for the six months ended June 30, 2024, compared to -2.6% for the same period last year[204] - The company incurred a loss from operations of approximately US$1.22 million for the six months ended June 30, 2024, compared to a loss of US$2.65 million for the same period in 2023[210] - The net loss for the six months ended June 30, 2024, was approximately US$1.08 million, down from a net loss of US$2.55 million for the same period in 2023[215] Expenses and Cost Management - Total operating expenses for the six months ended June 30, 2024, were approximately US$1.62 million, a decrease from US$2.22 million for the same period in 2023[208] - General and administrative expenses decreased to US$1.49 million for the six months ended June 30, 2024, from US$2.11 million in the same period of 2023[209] - Research and development expenses were minimal, with no significant costs recognized for the periods ended June 30, 2024[196] - The company plans to optimize its internet resources cost investment strategy to improve the gross profit margin of its core business[239] Market Strategy and Expansion - The company is expanding its market presence in the PRC, targeting small and medium enterprises (SMEs) with tailored advertising and marketing solutions[182] - The company has implemented a new strategy focusing on precision marketing and data analysis management to enhance service effectiveness for clients[183] - The company shifted its focus towards business segments that offer higher growth opportunities and profitability, impacting revenue streams[193] - The company changed its primary supplier of search engine marketing services to improve profitability, which caused delays in service delivery[195] - The company plans to broaden the application scenarios of its blockchain-based SaaS services and expand its internet advertising business targeting overseas users in the long term[243] Regulatory and Compliance - The PCAOB has secured complete access to inspect and investigate registered public accounting firms in Hong Kong, which may enhance investor confidence in the company's financial reporting[179] - The company is closely monitoring regulatory developments related to the Holding Foreign Companies Accountable Act, which could impact its stock listing status in the U.S.[175] Cash Flow and Liquidity - As of June 30, 2024, the company had cash and cash equivalents of approximately US$0.51 million[225] - For the six months ended June 30, 2024, net cash used in operating activities was approximately US$1.03 million, compared to US$0.86 million for the same period in 2023[230] - Net cash provided by investing activities for the six months ended June 30, 2024, was approximately US$0.65 million, while there was a net cash outflow of approximately US$1.46 million for the same period in 2023[234][235] - Capital contribution from noncontrolling interests for the six months ended June 30, 2024, was approximately US$0.70 million, with no cash provided by financing activities in the same period of 2023[236] - Future liquidity needs primarily include deposits and advance payments for search engine marketing resources and operating expenses[237] - The company anticipates generating additional cash inflows through the collection of outstanding short-term working capital loans within the next 12 months[240] Investment and Acquisitions - The company is actively seeking target companies for acquisition and/or joint ventures to enhance its online marketing resources[238] - The company has committed to pay RMB6.73 million (approximately US$0.98 million) for a 9.9% equity interest in Guangdong Yong Fu Xiang Health Management Co., Ltd by December 31, 2065[244] Impairment and Asset Management - The company recognized an impairment loss of approximately US$0.002 million on long-term investments for the six months ended June 30, 2024, compared to US$0.21 million for the same period in 2023[211] - As of June 30, 2024, net assets restricted in the aggregate were approximately US$13.31 million, compared to US$13.41 million as of December 31, 2023[218]