Pacific Online Limited 2015 Interim Earnings Results

HONG KONG, Aug. 28, 2015 /PRNewswire/ -- Pacific Online Ltd. (HKSE: 543) ("Pacific Online," the "Company," or the "Group"), a leading internet content provider in China, today announced its 2015 interim results for the six months ended June 30, 2015. The Group will host a conference call to discuss these results at 9:00AM Hong Kong time on August 31, 2015. Dial-in details are provided at the bottom of this release.

2015 Interim Financial Highlights

• Total revenues increased 21.7% year-over-year to RMB491.2 million
• Gross profit increased 15.4% year-over-year to RMB321.0 million
• Net profit decreased 14.8% year-over-year to RMB80.6 million

"I am pleased to report another six months of solid growth despite an increasingly challenging environment in China," commented Mr. Lam Wai Yan, Chairman and Chief Executive Officer of Pacific Online Limited. "Our steady top line growth was driven in part by robust performances from our automobile, baby, and home improvement portals. Total revenue for the first half of the year came out to RMB491.2 million, an increase of 21.7%, while net profit decreased by 14.8% to RMB80.6 million."

"Several factors accounted for the decrease in profit. During the first half of the year, we increased our investment into marketing for both our PC and mobile platforms. The investment is critical to the long-term brand recognition of the Group. In March 2015, we acquired iCare Newlife Technologies, Inc., a startup that specializes in the development of smart hardware devices in the rapidly growing maternity and child-parenting markets. Though still in the early investment stage, iCare Newlife Technologies, Inc. recently launched a fetal heart monitoring device and an intelligent weight. These new products will help us to expand our user base and gather more data for expectant parents. We intend to integrate the data into PCbaby's current information-based platform, which will enhance user stickiness and drive account growth. We also increased product development headcount in our other portals as we seek new ways to support growth. We are committed to product innovation and development. That said, we will continue to allocate our resources carefully in order to ensure consistent and viable returns on our investments."

"Revenue from PCauto increased 42.4%, accounting for 66.0% of total revenue during the first half of the year. Our growing user base and lead generation capabilities are enabling us to become a more effective marketing platform. We continue to make good progress in the development of mobile products. Two of our newest mobile applications are a social-networking platform targeted at China's auto fan clubs, and a study tool that assists car learners preparing for the driver's test. We offered group sales, promotions for new car models, and other incentives to promote and increase transactions for our dealership customers. We are also excited about the products we currently have in the pipeline, including an automotive financing platform, new mobile applications, and after-sales service initiatives. We are confident that these initiatives will further strengthen our leading position in the market."

"Revenue from PConline declined 18.5% as the expected recovery in the PC and laptop market lagged behind expectations during the first half of 2015. We adapted our strategy to the changing preferences of our users as they migrate towards mobile devices and shopping online. We will continue to strengthen our e-commerce platform, best.pconline.com.cn, as it generates more advertising revenue from e-commerce vendors. We will also aggressively develop new advertising revenue from our mobile platform. In addition, we will continue to broaden our content to better serve the marketing needs of new and emerging product categories such as intelligent wearable devices and radio-controlled model aircrafts. With these initiatives, we maintain a positive outlook of PConline in the second half of 2015."

"Revenue from PClady decreased 8.4% as a result of the slowdown in advertising demand from luxury products and changes in customer mix. Despite these challenges, we will continue to streamline our operations as we remain focused on building PClady into a base for future growth.  We recently launched cherry, a mobile application that serves as an online-to-offline platform for the rapidly growing aesthetic services market. In June 2015, we announced the formation of a new corporate structure for PClady's operations, which will aid it in attracting investors for its future development and expansion."

"Revenue from other operations, including PCgames, PCbaby, and PChouse increased 34.0%. Both PCbaby and PChouse saw strong growth as their brand awareness and innovation capabilities increase. The combined revenue from these two portals is rapidly becoming more meaningful with robust growth expected to continue throughout the rest of the year. With our strong expertise, we are well positioned to benefit from the rapid development of the child-caring and home improvement."

"Looking ahead, we expect a challenging yet exciting environment throughout the remainder of 2015. We will continue to strengthen our ability to compete by expanding and improving our products and services."

2015 Interim Financial Results

Revenue

Revenue increased 21.7% from RMB403.6 million for the six months ended June 30, 2014 to RMB491.2 million for the six months ended June 30, 2015.

Revenue for PCauto, the Group's automobile portal, increased 42.4% from RMB227.5 million for the six months ended June 30, 2014 to RMB324.0 million during the six months ended June 30, 2015. The increase in revenue for PCauto was primarily due to increased advertising spending from automobile manufacturers and dealerships. As a percentage of revenue, PCauto accounted for 56.4% during the six months ended June 30, 2014 and 66.0% during the six months ended June 30, 2015.

Revenue for PConline, the Group's IT and consumer electronics portal, decreased 18.5% from RMB100.4 million during the six months ended June 30, 2014 to RMB81.8 million during the six months ended June 30, 2015. The decrease was driven by reduced digital marketing spending from major consumer electronics brands. As a percentage of revenue, PConline accounted for 24.9% during the six months ended June 30, 2014 and 16.7% during the six months ended June 30, 2015.

Revenue for PClady, the Group's lady and fashion portal, decreased 8.4% from RMB37.8 million during the six months ended June 30, 2014 to RMB34.6 million during the six months ended June 30, 2015. The decrease was driven by a slowdown in advertising demand from luxury products and changes in product mix. As a percentage of revenue, PClady accounted for 9.3% during the six months ended June 30, 2014 and 7.0% during the six months ended June 30, 2015.

Revenue from other operations, including the PCgames, PCbaby and PChouse portals, increased by 34.0% from RMB37.9 million during the six months ended June 30, 2014 to RMB50.8 million during the six months ended June 30, 2015. Revenue from these segments increased as advertisers allocated more of their marketing budgets towards online advertising. As a percentage of revenue, revenue from other operations accounted for 9.4% during the six months ended June 30, 2014 and 10.3% during the six months ended June 30, 2015.

Cost of Revenue

Cost of revenue increased 35.7% from RMB125.4 million during the six months ended June 30, 2014 to RMB170.2 million during the six months ended June 30, 2015. Gross profit margin was 68.9% during the six months ended June 30, 2014 and 65.4% during the six months ended June 30, 2015.

The increase in cost of revenue was due to a rise in sales commission to adverting agencies, content production personnel-related expenses as well as higher costs related to offline marketing activities.

Selling and Marketing Costs

Selling and marketing costs increased 43.4% from RMB94.2 million during the six months ended June 30, 2014 to RMB135.1 million during the six months ended June 30, 2015. The increase was mainly due to increases in staff costs, as well as marketing expenses related to brand development through search engines and other related channels.

Administrative Expenses

Administrative expenses increased by 27.4% from RMB37.8 million during the six months ended June 30, 2014 to RMB48.1 million during the six months ended June 30, 2015, due to an increase in headcount in support of the Group's growth during the period.

Product Development Expenses

Product development expenses increased by 31.2% from RMB27.7 million during the period ended June 30, 2014 to RMB36.3 million during the period ended June 30, 2015. The increase was primarily due to increases in the number of staff in the Group's research and development team.

Operating Profit before Share-based Compensation Expenses (non-GAAP)

Operating profit before share-based compensation expenses (non-GAAP) was RMB105.3 million during the six months ended June 30, 2015, representing a 13.2% decrease from RMB121.3 million during the six months ended June 30, 2014.

Finance Income and Cost

Net finance income was RMB4.2 million during the six months ended June 30, 2014 and net finance cost was RMB0.1 million during the six months ended June 30, 2015.

Income Tax Expense

Income tax expenses decreased 20.9% from RMB28.1 million during the six months ended June 30, 2014 to RMB22.2 million during the six months ended June 30, 2015.

Net Profit

Net profit decreased 14.8% from RMB94.6 million during the six months ended June 30, 2014 to RMB80.6 million during the six months ended June 30, 2015.

Liquidity and Financial Resources

As of June 30, 2015, the Group had short-term deposits and cash totaling RMB232.2 million, compared with RMB394.8 million as of December 31 2014. The decline in cash was primarily due to the payment of a cash dividend totaling RMB155.0 million during the six months ended 30 June 2015.

The Company had no external debt as of December 31, 2014 and June 30, 2015.

Business Outlook

Despite the challenges ahead, the Group expects steady revenue growth from its well-balanced portal portfolio. The Group will leverage its core strengths as it continues to invest in select markets. PCOnline believes this is the best course of action to increase shareholder value and drive sustainable future growth.

Conference Call

Management will host a conference call to discuss the results at 9:00 AM Hong Kong time on Monday, August 31, 2015 (9:00 PM Eastern Daylight Time on Sunday, August 30, 2015). Mr. Lam Wai Yan, Chairman and Chief Executive Officer and, Mr. Ma Man Ho, Finance Director, will discuss the results and take questions following the prepared remarks.

The dial-in details for the live conference call are as follows:

A telephone replay of the call will be available for seven days after the conclusion of the conference call.  The dial-in details for the replay are as follows:

About Pacific Online Limited (corp.pconline.com.cn)

Pacific Online is one of the leading Internet content providers in the PRC in terms of total advertising revenue.  The Company operates six vertically-integrated portals, which, according to industry practice, are portals that focus on specific content.  Among the Company's portals are PConline, one of the largest portals in the PRC specializing in IT product-related content, and PCauto, one of the largest portals in the PRC specializing in automobile-related content.

Safe Harbor Statement

This press release contains forward-looking statements which are subject to risks and uncertainties. Actual results may differ from those discussed in the press release.  In addition, any projections about the Company's future performance represent management's estimates as of today August 28, 2015. The Company assumes no obligation to update these projections in the future as business and market conditions change.

For further information, please contact:

Pacific Online Limited
Mr. Hudson Wong
Company Secretary
Tel: +852 2121 0634 
Email: [email protected]

Christensen Investor Relations
Mr. Tip Fleming
Tel: +852-9212 0684
Email: [email protected]

SOURCE Pacific Online Limited