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Acorn's Stock Soars 17% on Robust Revenue Growth

Belinda Zhou 2019-09-17 03:25 AM

Shares in Acorn International Inc. (NYSE: ATV) soared 17 percent by Monday afternoon, at $19.59 apiece, after the company reported strong revenue growth for the second quarter.

The Shanghai-based company said its revenue in the second quarter reached $8.7 million, up 39 percent year-over-year. Its net income, however, narrowed to $100,000, compared with income of $23.8 million in the corresponding period of 2018.

Acorn, which provides marketing and branding, attributed the sharp decline in profit to the sale of a subsidiary, Bright Rainbow Investments Ltd., in the second quarter of 2018, for which it received $27.7 million.

“Because of increased investment in sales and marketing to support e-commerce sales, our results were near breakeven at the operating level while net income was $0.1 million,” Jacob A. Fisch, the chief executive officer of Acorn International, said in the statement.

Babaka branded products and Acorn Fresh contributed the most to Acorn's revenue gains, according to the report. 

“Our Babaka brand of posture correction products continued to achieve record sales, driven by the successful promotion of our core products through digital media in China as well as expansion on third-party e-commerce B2C platforms,” Fisch said. He added that Acorn Fresh, which sells fresh grocery online, said it has gained momentum, while Acorn Digital Services, the company's social media and digital services arm, has benefited from new client deals during the second quarter.

The company said it began shutting down operations at its call center in Wuxi City in China and expects to complete the process in the third quarter of 2019, which it estimated will reduce revenue by $700,000.

Looking ahead, Acorn said it will keep shutting down call center operations, which it described as “unproductive." The company added that it will continue to focus on building brands and growing e-commerce, particularly Babaka branded products and Acorn Fresh as its expansion strategy.

Last week, Acorn announced a cash dividend of 25 cents per American depositary share for the second quarter. Acorn's shareholders of record as of Sept. 20 will receive a cash payout on Sept. 27, according to the announcement.