Baosheng(BAOS) - 2022 Q3 - Quarterly Report

Baosheng Media Group H1 2022 Financial Results Management Commentary Management discusses challenging H1 2022 due to COVID-19 and budget cuts, highlighting service recognition and future digital economy opportunities - The company faced significant pressure in H1 2022 as clients reduced advertising budgets due to the COVID-19 pandemic resurgence[2] - Despite challenges, the company received multiple awards from Alibaba, including the 2022 Super Huichuan Excellent Service Provider Award, demonstrating high recognition of its service capabilities[2] - Future strategy involves seizing new opportunities in digital technology, cooperating with existing customers, investing in innovative industries, and improving the industrial chain to enhance business resilience[2] Financial Highlights H1 2022 saw severe downturn: revenue plummeted 82.3%, gross profit became a $1.1M loss, net loss expanded to $6.3M Financial Highlights for the First Half of 2022 vs 2021 | Metric | H1 2022 ($) | H1 2021 ($) | % Change | | :--- | :--- | :--- | :--- | | Revenues | 428,150 | 2,415,352 | -82.3% | | Gross (Loss) Profit | (1,062,518) | 1,444,334 | -173.6% | | Gross Margin | -248.2% | 59.8% | -515.0% | | Loss from Operations | (6,536,807) | (2,242,820) | 191.5% | | Net Loss | (6,310,346) | (271,671) | 2,222.8% | | Loss per Share | (0.22) | (0.01) | 2,100.0% | Detailed Financial Results Detailed H1 2022 results reveal significant revenue decline, increased costs, and higher operating expenses from doubtful accounts, culminating in a substantial net loss Revenues Total revenue decreased 82.3% to $0.4M, driven by an 84.1% drop in publisher rebates from Sogou contract termination, while non-SEM services surged 538.6% Revenue Breakdown by Source (H1 2022 vs H1 2021) | Revenue Source | H1 2022 ($) | H1 2021 ($) | % Change | | :--- | :--- | :--- | :--- | | Rebates and incentives from publishers | 373,508 | 2,355,036 | -84.1% | | Net fees from advertisers | 54,642 | 60,316 | -9.4% | | Total Revenues | 428,150 | 2,415,352 | -82.3% | - The decline in rebates was mainly due to a $2.0 million decrease in revenue from Sogou after their agency agreement ended in March 2021, and reduced ad budgets from major publishers due to the COVID-19 pandemic[7] Revenue Breakdown by Service Type (H1 2022 vs H1 2021) | Service Type | H1 2022 ($) | H1 2021 ($) | % Change | | :--- | :--- | :--- | :--- | | SEM services | 50,380 | 2,356,200 | -97.9% | | Non-SEM services | 377,770 | 59,152 | 538.6% | | Total Revenues | 428,150 | 2,415,352 | -82.3% | - The company focused on the short video feeds advertising business in H1 2022, driving the significant increase in non-SEM service revenues[10] Cost of Revenues and Gross Profit Cost of revenues increased 53.5% to $1.5M due to staff costs, leading to a $1.0M gross loss and -248.2% gross margin - Cost of revenues increased by 53.5% to $1.5 million, mainly due to a $0.5 million increase in staff costs from hiring 33 new employees for the short video feeds advertising business[11] - The company recorded a gross loss of $1.0 million in H1 2022, compared to a gross profit of $1.4 million in H1 2021, with gross margin falling to -248.2% from 59.8%[12] Operating Expenses Operating expenses rose 48.5% to $5.5M, driven by a 135.8% surge in doubtful accounts provision, despite decreased selling and marketing expenses - Selling and marketing expenses decreased by 32.9% to $0.3 million due to lower entertainment expenses for marketing activities, reflecting decreased gross billings[13] - General and administrative expenses remained stable at approximately $1.6 million[14] - Provision for doubtful accounts surged 135.8% to $3.5 million as advertisers in financial, education, and gaming industries faced pandemic and regulatory impacts, leading to slower payments[15] Net Loss Net loss significantly widened to $6.3M in H1 2022, with loss per share at $0.22, compared to $0.3M loss and $0.01 per share in H1 2021 - The H1 2021 result included a $1.9 million net remeasurement gain from the change in fair value of warrant liabilities, which was not present in H1 2022[16] Net Loss and Loss Per Share | Metric | H1 2022 ($) | H1 2021 ($) | | :--- | :--- | :--- | | Net Loss | (6,310,346) | (271,671) | | Basic and Diluted Loss per Share | (0.22) | (0.01) | Financial Condition and Cash Flow As of June 30, 2022, cash was $5.0M; operating cash flow improved to $4.0M used, investing provided $1.7M, and financing used $1.3M for dividends - As of June 30, 2022, cash and cash equivalents were $5.0 million, compared to $4.8 million as of December 31, 2021[18] Net Cash Flow by Activity (H1 2022 vs H1 2021) | Cash Flow Activity | H1 2022 ($) | H1 2021 ($) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (4.0 million) | (27.8 million) | | Net Cash Provided by (Used in) Investing Activities | 1.7 million | (5.7 million) | | Net Cash (Used in) Provided by Financing Activities | (1.3 million) | 38.5 million | - The improvement in operating cash flow in H1 2022 was mainly due to a smaller net loss after non-cash adjustments and favorable changes in working capital, including decreases in prepayments and accounts payable[18] - Cash used in financing activities in H1 2022 was mainly for a $1.2 million dividend payment, whereas cash provided in H1 2021 was from net proceeds from the IPO ($30.2 million) and a private placement ($9.9 million)[21] Financial Statements This section presents the unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, and Cash Flows for H1 2022 and 2021 Unaudited Condensed Consolidated Balance Sheets Total assets decreased from $94.1M to $77.8M, driven by reduced accounts receivable and prepayments, while total liabilities and shareholders' equity also declined Selected Balance Sheet Data (As of June 30, 2022 vs Dec 31, 2021) | Account | June 30, 2022 ($) | Dec 31, 2021 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | 5,031,813 | 4,751,538 | | Accounts receivable, net | 51,036,740 | 56,363,183 | | Total Assets | 77,832,446 | 94,080,133 | | Total Liabilities | 13,598,736 | 20,018,844 | | Total Shareholders' Equity | 64,233,710 | 74,061,289 | Unaudited Condensed Consolidated Statements of Operations The statement of operations details a significant H1 2022 decline, with revenues dropping to $0.4M, a $1.1M gross loss, and net loss expanding to $6.3M Consolidated Statement of Operations (H1 2022 vs H1 2021) | Metric | For the Six Months Ended June 30, 2022 ($) | For the Six Months Ended June 30, 2021 ($) | | :--- | :--- | :--- | | Revenues | 428,150 | 2,415,352 | | Gross (Loss) Profit | (1,062,518) | 1,444,334 | | Loss from Operations | (6,536,807) | (2,242,820) | | Net Loss | (6,310,346) | (271,671) | | Loss per Share | (0.22) | (0.01) | Unaudited Condensed Consolidated Statements of Cash Flows The cash flow statement shows $4.0M net cash used in operations, $1.7M provided by investing, and $1.3M used in financing, resulting in a $3.8M decrease in cash Consolidated Statement of Cash Flows (H1 2022 vs H1 2021) | Cash Flow Activity | For the Six Months Ended June 30, 2022 ($) | For the Six Months Ended June 30, 2021 ($) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (4,000,579) | (27,756,592) | | Net Cash Provided by (Used in) Investing Activities | 1,702,834 | (5,718,715) | | Net Cash (Used in) Provided by Financing Activities | (1,285,912) | 38,486,717 | | Net (decrease) increase in cash | (3,775,452) | 5,739,709 |