CNIT ANNOUNCES FIRST HALF-YEAR 2016 RESULTS
SHENZHEN, China, August 30, 2016 -- China Information Technology, Inc. (Nasdaq:CNIT), a growing provider of cloud-app-terminal technologies for Internet-of-Things (IoT) platforms, digital advertising delivery and other internet-based information distribution systems throughout China, today said that, for the first six months of calendar 2016 ended June 30, the Company had a net loss of approximately $7.1 million, or ($.18) per share, on revenue of approximately $3.0 million, compared to a net loss of approximately $7.2 million, or ($.22) per share, on revenue of approximately $4.7 million in the first half of calendar 2015.
Excluding non-cash items mainly in the categories of impairment of goodwill and intangible assets, provision for doubtful accounts on account receivables and other current assets, amortization of intangibles, depreciation expenses and stock-based compensation, the Company’s adjusted net loss for the first six months of 2016 was approximately $2.9 million, or ($.07) per share, compared to an adjusted net loss of approximately $6.2 million, or ($.19) per share, for the comparable period a year ago.
Weighted average number of shares outstanding was 40,119,106 for the first half of 2016 and 32,549,632 for the prior-year six-month period.
As of June 30, 2016, the Company had $2.8 million in cash and cash equivalents, and short-term debt and bills payable were $6.5 million and zero, respectively, down from $15.3 million and $1.3 million, respectively, at the end of 2015.
CNIT’s reduction of its net loss compared to the prior-year six-month period was partially the result of its continuing transition from a traditional custom-made IT software development and system integrations (TIT) provider to the government sector over to a cloud-based technology (CBT) solutions provider to private enterprise – a role that enables considerably higher sales margins. During the first six months of 2016, for example, 79.5 percent of the Company’s revenue was derived from its CBT business (up from 58.5 percent in the first half of last year), which achieved a 53 percent gross margin. The remaining 20.5 percent of Company revenue produced by CNIT’s TIT segment (down from 41.5 percent for the first six months of 2015), was mainly comprised of maintenance services provided for certain previously completed projects and had a gross margin of negative 51.7 percent.
This same transition -- which de-emphasized the Company’s pursuit of low-margin and long account receivable cycle TIT contracts and shifted its CBT unit away from custom-made hardware manufacturing to standardized cloud-based terminal products and services -- was also responsible for CNIT’s reduction in total revenue as compared to the first six months in 2015.
The Company’s reduction of its net loss compared to the first six months of last year also resulted from reductions of $1.9 million in interest expense, $.7 million in selling expense and $.5 million in R&D expense. These reductions were offset somewhat by an increase of $.8 million in administrative expense, due primarily to an increase of $1.3 million in provision for doubtful accounts receivables.
Due to CNIT’s trial sale of certain of its cloud-based new product lines during the first half of 2016, and the deterioration of gross margin in its traditional TIT business, gross margin for this period slightly declined to 31.5% from 33.2% for the first half of 2015. This effect, however, is believed by the Company to be only temporary and is expected to pick up when these product lines enter full scale rollout during the latter half of this year.
“We believe our six-month results provide further evidence that our transition to a leading CBT provider is progressing well,” said CNIT CEO and chairman, Mr. Jianghuai Lin. “Once again, we have reduced our net loss by migrating our business over to higher-margin cloud-based solution opportunities, - a process which, combined with our expansion into new markets and our tighter control of costs, should hasten our return to profitability.”
This return to profitability, though previously projected to occur by the fourth quarter of this year, will likely be delayed two or three quarters due primarily to a longer than anticipated period necessary to achieve full transition to a cloud-based solutions provider, said Mr. Lin.
However, he added, beginning in the latter part of 2017, the Company should experience “a sustained period of accelerating revenue and strong earnings.”
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures for earnings that exclude non-cash charges. The Company believes that these non-GAAP financial measures are useful to investors because they exclude non-cash charges that management excludes when it internally evaluates the performance of the Company’s business and makes operating decisions, including internal budgeting, and performance measurement, as these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of the Company. Accordingly, management excludes the expenses arising from certain non-cash charges when making operational decisions. The Company also believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand the Company’s financial performance in comparison to historical periods. In addition, it allows investors to evaluate the Company’s performance using the same methodology and information as that used by the Company’s management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, the Company’s management compensates for these limitations by providing the relevant disclosure of the items excluded.
The following table presents the non-GAAP financial measures contained in this press release and the most directly comparable GAAP measures and provides a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures.
Six Months Ended June 30, 2016 and 2015 Reconciliation of Net Loss Attributable to the Company and EPS to Exclude Amortization of Intangible Assets, Depreciation, Stock-based Expenses, Provision on Doubtful Accounts of Account Receivables and Other Asset Write-downs (unaudited)
About China Information Technology, Inc.
China Information Technology, Inc. (NASDAQ: CNIT) is a leading Internet service company that provides cloud-app-terminal technologies for Internet-of-Things (IoT) platforms and integrated cloud-based solutions, enabling innovation and smart living in the fields of new media, city safety management, education, etc.
Through continuous innovation, CNIT is aiming to leverage its proprietary Cloud-Application-Terminal technology to level the competitive landscape in the new media industry and deliver value for its shareholders, employees, customers, and the community. To learn more, please visit http://en.chinacnit.com.
Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating to the business of China Information Technology, Inc., and its subsidiaries and other consolidated entities. All statements, other than statements of historical fact included herein, are "forward-looking statements" in nature within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, often identified by the use of forward-looking terminologies such as “may”, “will”, “should”, "believe", "expect" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company and its subsidiaries and other consolidated entities or persons acting on their behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
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China Information Technology, Inc.
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CHINA INFORMATION TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2016 AND DECEMBER 31, 2015
Expressed in U.S. dollars (Except for share amounts)
CHINA INFORMATION TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015
Expressed in U.S. dollars (Except for share and per amounts)
CHINA INFORMATION TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2016 AND 2015
Expressed in U.S. dollars