First Half of Fiscal Year 2019 Financial Highlights (compared to prior year period unless stated otherwise)
- Total sales decreased by 13.5% to
$12.8 million from$14.8 million . - Gross profit decreased by 23.0% to
$4.6 million from$6.0 million . Gross margin decreased to 36.1% from 40.5%. - Income from operations decreased by 97.0% to
$0.1 million from$3.7 million . Operating margin decreased to 0.9% from 25.1%. - Net income decreased by 75% to
$0.7 million from$2.9 million . Fully diluted net income per share decreased to$0.03 from$0.18 .
Mr.
“For the remainder of the fiscal year, we will continue to adapt to the macro environment while focusing on our growth through technological innovation, new product development, international expansion, and strategic partnerships,” concluded Mr. Chen.
Unaudited Financial Results for the Six Months Ended
Revenues
Revenues decreased by approximately
Revenue by geography
For the six months ended December 31, | |||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||
Countries | Revenue | % of total Revenue |
Revenue | % of total Revenue |
Variance | Variance % | |||||||||||||||
China | $ | 8,249,593 | 64.3 | % | $ | 7,220,836 | 48.7 | % | $ | 1,028,757 | 14.2 | % | |||||||||
United States | 2,963,086 | 23.1 | % | 6,071,386 | 40.9 | % | (3,108,300 | ) | (51.2 | )% | |||||||||||
Europe | 1,260,242 | 9.8 | % | 951,754 | 6.4 | % | 308,488 | 32.4 | % | ||||||||||||
Australia | 110,960 | 0.9 | % | 185,127 | 1.2 | % | (74,166 | ) | (40.1 | )% | |||||||||||
Canada | 58,353 | 0.5 | % | 92,328 | 0.6 | % | (33,975 | ) | (36.8 | )% | |||||||||||
Central and South America | 81,927 | 0.6 | % | 103,891 | 0.7 | % | (21,964 | ) | (21.1 | )% | |||||||||||
Japan and other Asian countries and regions | 112,490 | 0.9 | % | 207,383 | 1.4 | % | (94,893 | ) | (45.8 | )% | |||||||||||
Total | $ | 12,836,651 | 100 | % | $ | 14,832,706 | 100 | % | $ | (1,996,055 | ) | (13.5 | )% |
The Company’s export sales to
The Company increased its marketing activities and sales efforts in the domestic market in the wake of the growing pet consumption market in
The Company also expanded its sales channels to more European countries, such as
The Company’s increase in sales in
Revenue by product category
For the six months ended December 31, | |||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||
Product category | Revenue | % of total Revenue |
Revenue | % of total Revenue |
Variance | Variance % | |||||||||||||||
Pet collars | $ | 3,423,555 | 26.7 | % | $ | 5,504,792 | 37.1 | % | $ | (2,081,237 | ) | (37.8 | )% | ||||||||
Pet leashes | 3,094,754 | 24.1 | % | 3,328,950 | 22.4 | % | (234,196 | ) | (7.0 | )% | |||||||||||
Gift suspenders | 2,074,218 | 16.2 | % | 1,726,310 | 11.6 | % | 347,908 | 20.2 | % | ||||||||||||
Pet harnesses | 1,875,311 | 14.6 | % | 2,610,480 | 17.6 | % | (735,169 | ) | (28.2 | )% | |||||||||||
Retractable dog leashes | 762,508 | 5.9 | % | 919,254 | 6.2 | % | (156,746 | ) | (17.1 | )% | |||||||||||
Intelligent pet products | 568,474 | 4.4 | % | - | - | 568,474 | - | ||||||||||||||
Other pet accessories | 1,037,831 | 8.1 | % | 742,920 | 5.0 | % | 294,911 | 39.7 | % | ||||||||||||
Total | $ | 12,836,651 | 100.0 | % | $ | 14,832,706 | 100.0 | % | $ | (1,996,055 | ) | (13.5 | )% |
The Company’s pet collars, pet leashes, gift suspenders, and pet harnesses continued to account for the greatest percentages of total sales. Sales of the Company’s retractable dog leashes slightly decreased from 6.2% of the Company’s total sales for the six months ended
Pet leashes
Revenue from pet leashes decreased by approximately
Pet collars
Revenue from pet collars decreased by approximately
Pet harnesses
Revenue from pet harnesses decreased by approximately
Gift suspenders
Revenue from gift suspenders increased by approximately
Retractable dog leashes
Revenue from retractable dog leashes decreased by 17.1%, to approximately
Intelligent pet products
Revenue from intelligent pet products amounted to approximately
Other pet accessories
Other pet accessories include various comfort wrap harnesses, pet muzzles, metal chain traffic leashes, pet belt and ropes, and others, which are normally customized to fulfill customers’ purchase orders. Revenue from other pet accessories increased by 39.7%, to approximately
Sales to related party
During the six months ended
Gross profit
During the six months ended
Gross profit by product category
For the six months ended December 31, | |||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||
Product category | Gross profit |
Gross profit % |
Gross profit |
Gross profit % |
Variance in Gross profit |
Variance in Gross profit % |
|||||||||||||||
Pet collars | $ | 1,256,541 | 36.7 | % | $ | 2,282,617 | 41.5 | % | $ | (1,026,076 | ) | (4.8 | )% | ||||||||
Pet leashes | 1,134,887 | 36.7 | % | 1,285,758 | 38.6 | % | (150,871 | ) | (1.9 | )% | |||||||||||
Pet harnesses | 735,971 | 39.2 | % | 1,112,320 | 42.6 | % | (376,349 | ) | (3.4 | )% | |||||||||||
Gift suspenders | 678,785 | 32.7 | % | 699,399 | 40.5 | % | (20,614 | ) | (7.8 | )% | |||||||||||
Retractable dog leashes | 324,192 | 42.5 | % | 342,809 | 37.3 | % | (18,617 | ) | 5.2 | % | |||||||||||
Intelligent pet products | 196,171 | 34.5 | % | - | - | 196,171 | 34.5 | % | |||||||||||||
Other pet accessories | 302,045 | 29.1 | % | 291,252 | 39.2 | % | 10,793 | (10.1 | )% | ||||||||||||
Total | $ | 4,628,592 | 36.1 | % | $ | 6,014,155 | 40.5 | % | $ | (1,385,563 | ) | (4.4 | )% |
Gross margins for pet leashes, pet collars, and gift suspenders decreased by 1.9%, 4.8% and 7.8%, respectively, compared to the same period in fiscal 2018. Raw material costs increased in conjunction with the increase in production of more leather products instead of fabric products. Salary expenses also increased due to higher labor costs.
Gross margins for pet harnesses and other pet accessories decreased by 3.4% and 10.1%, respectively, compared to the same period in fiscal 2018. The decrease was mainly due to lower average unit selling prices as part of promotional activity.
The gross margin for retractable dog leashes increased by 5.2% compared to the same period in fiscal 2018. The increase was mainly a result of improved materials and functionality of the Company’s retractable dog leash products, which reduced the cost of production per unit.
Gross margin for the Company’s intelligent pet products was 34.5% during the six months ended
Selling expenses
Selling expenses primarily included expenses incurred for participating in various trade shows to promote product sales, salary and sales commission expenses paid to the Company’s sales personnel, customs clearance charges for product exports, and shipping and delivery expenses. Selling expenses increased by
General and administrative expenses
General and administrative expenses increased by approximately
Research and development expenses
Research and development expenses increased by approximately
Other income (expense)
Other income (expense) primarily included interest income or expense and foreign exchange gain or loss. For the six months ended
Income tax
Income tax expense decreased by approximately
Net income
Net income was approximately
Cash and cash flows
As of
Recent developments
In
About
Forward Looking Statements
No statement made in this press release should be interpreted as an offer to purchase or sell any security. Such an offer can only be made in accordance with the Securities Act of 1933, as amended, and applicable state securities laws. Certain statements in this press release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the “safe harbor” under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding our ability to raise capital on any particular terms, fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, our ability to realize revenue from expanded operation and acquired assets in
Contacts:
Rose Zu
Tel: +1-646-588-0383
Email: ir@dognesspet.com
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL DATA Unaudited Condensed Consolidated Balance Sheets (In USD) |
||||||||||||||||||
As of | ||||||||||||||||||
December 31, 2018 | June 30, 2018 | |||||||||||||||||
ASSETS | ||||||||||||||||||
CURRENT ASSETS | ||||||||||||||||||
Cash | $ | 3,202,532 | $ | 7,085,235 | ||||||||||||||
Short-term investments | 17,479,325 | 28,233,035 | ||||||||||||||||
Accounts receivable, net | 6,036,343 | 5,641,501 | ||||||||||||||||
Accounts receivable - related parties | 238,364 | - | ||||||||||||||||
Inventories, net | 5,673,259 | 4,153,583 | ||||||||||||||||
Due from related party | 8,982 | - | ||||||||||||||||
Prepayments and other current assets | 1,203,611 | 1,105,783 | ||||||||||||||||
Total current assets | 33,842,416 | 46,219,137 | ||||||||||||||||
Long term investments | 471,224 | - | ||||||||||||||||
Long term prepayment | 4,107,550 | - | ||||||||||||||||
Property, plant and equipment, net | 26,843,483 | 20,950,685 | ||||||||||||||||
Intangible assets, net | 2,313,381 | 2,390,571 | ||||||||||||||||
Deferred tax assets | 30,927 | 22,297 | ||||||||||||||||
TOTAL ASSETS | $ | 67,608,981 | $ | 69,582,690 | ||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||||
Short-term bank loans | $ | 2,923,498 | $ | 4,835,200 | ||||||||||||||
Accounts payable | 1,267,039 | 351,375 | ||||||||||||||||
Accounts payable - related party | 104,975 | - | ||||||||||||||||
Advance from customers | 178,888 | 240,216 | ||||||||||||||||
Accrued liabilities and other payable | 624,488 | 1,120,579 | ||||||||||||||||
Taxes payable | 2,565,193 | 2,295,788 | ||||||||||||||||
Total current liabilities | 7,664,081 | 8,843,158 | ||||||||||||||||
Commitments | ||||||||||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||||||||
Common Shares, $0.002 par value, 100,0000,0000 shares authorized, 25,913,631 and 15,000,0000 issued and outstanding at December 31, 2018 and June 30, 2018, respectively |
||||||||||||||||||
Class A Common Shares | 33,689 | 33,689 | ||||||||||||||||
Class B Common Shares | 18,138 | 18,138 | ||||||||||||||||
Additional paid-in capital | 52,486,018 | 52,144,891 | ||||||||||||||||
Statutory reserves | 164,367 | 164,367 | ||||||||||||||||
Retained earnings | 10,989,789 | 10,263,198 | ||||||||||||||||
Accumulated other comprehensive (deficit) | (3,747,101 | ) | (1,884,751 | ) | ||||||||||||||
Total stockholders’ equity | 59,944,900 | 60,739,532 | ||||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 67,608,981 | $ | 69,582,690 |
Unaudited Condensed Consolidated Statement of
Income and Other Comprehensive Income (Loss)
(In USD)
For the Six Months Ended December 31, | ||||||||||
2018 | 2017 | |||||||||
Revenues | ||||||||||
Revenues | $ | 12,630,599 | $ | 14,832,705 | ||||||
Revenues - related parties | 206,052 | - | ||||||||
Total Revenues | 12,836,651 | 14,832,705 | ||||||||
Cost of revenues | (8,208,059 | ) | (8,818,550 | ) | ||||||
Gross Profit | 4,628,592 | 6,014,155 | ||||||||
Operating expenses: | ||||||||||
Selling expenses | 1,155,750 | 532,287 | ||||||||
General and administrative expenses | 2,821,646 | 1,583,049 | ||||||||
Research and development expenses | 538,680 | 170,387 | ||||||||
Total operating expenses | 4,516,076 | 2,285,723 | ||||||||
Income from operations | 112,516 | 3,728,432 | ||||||||
Other income (expenses): | ||||||||||
Interest income (expenses), net | 400,104 | (153,154 | ) | |||||||
Foreign transaction exchange gain (loss) | 526,745 | (175,053 | ) | |||||||
Other income, net | 16,322 | 1,506 | ||||||||
Total other income (expense) | 943,171 | (326,701 | ) | |||||||
Income before income taxes | 1,055,678 | 3,401,731 | ||||||||
Provision for income taxes | 329,096 | 511,010 | ||||||||
Net income | 726,591 | 2,890,721 | ||||||||
Other comprehensive income: | ||||||||||
Foreign currency translation gain (loss) | (1,862,350 | ) | 364,042 | |||||||
Comprehensive income (loss) | $ | (1,135,759 | ) | $ | 3,254,763 | |||||
Earnings Per share - Basic and Diluted | $ | 0.03 | $ | 0.18 | ||||||
Weighted Average Shares Outstanding - Basic and diluted | 25,913,631 | 15,775,285 |
Unaudited Condensed Consolidated Statements of Cash Flows (In USD) |
|||||||||
For the Six Months Ended December 31, | |||||||||
2018 | 2017 | ||||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 726,591 | $ | 2,890,721 | |||||
Adjustments to reconcile net income to net cash | |||||||||
(used in) provided by operating activities: | |||||||||
Depreciation and amortization | 643,777 | 576,755 | |||||||
Share based compensation for services | 341,127 | - | |||||||
Changes in inventory reserve | (4,747 | ) | (18,735 | ) | |||||
Recovery of doubtful account | (38,609 | ) | (33,593 | ) | |||||
Deferred tax expenses (benefit) | (9,498 | ) | 9,730 | ||||||
Unrealized foreign exchange gain | 68,314 | 123,823 | |||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | (878,054 | ) | (885,680 | ) | |||||
Inventories | (1,037,754 | ) | (2,319,591 | ) | |||||
Prepayments and other assets | (4,258,776 | ) | (28,083 | ) | |||||
Accounts payables | 1,036,739 | 1,110,063 | |||||||
Accrued expenses and other liabilities | (467,613 | ) | 2,461,702 | ||||||
Advance from customers | (52,411 | ) | (196,510 | ) | |||||
Taxes payable | 356,989 | 452,151 | |||||||
Net cash (used in) provided by operating activities | (3,573,926 | ) | 4,142,753 | ||||||
Cash flows from investing activities: | |||||||||
Additions to property, plant and equipment | (7,268,272 | ) | (819,309 | ) | |||||
Long-term investments | (471,224 | ) | - | ||||||
Purchase of intangible assets | (22,031 | ) | - | ||||||
Proceeds upon maturity of short-term investments | 9,715,318 | - | |||||||
Net cash provided by (used in) investing activities | 1,953,791 | (819,309 | ) | ||||||
Cash flows from financing activities: | |||||||||
Net Proceeds from initial public offering | - | 50,200,285 | |||||||
Repayment of short-term bank loans | (1,734,102 | ) | (918,660 | ) | |||||
Repayment of related party loans | (9,045 | ) | (736,894 | ) | |||||
Net cash (used in) provided by financing activities | (1,743,147 | ) | 48,544,731 | ||||||
Effect of exchange rate changes on cash | (519,421 | ) | (18,861 | ) | |||||
Net increase (decrease) in cash | (3,882,703 | ) | 51,849,314 | ||||||
Cash, beginning of period | 7,085,235 | 1,504,596 | |||||||
Cash, end of period | $ | 3,202,532 | $ | 53,353,910 | |||||
Supplemental disclosure information: | |||||||||
Cash paid for income tax | $ | 16,751 | $ | 40,624 | |||||
Cash paid for interest | $ | 55,993 | $ | 154,479 | |||||
Source: Dogness (International) Corporation