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Acorn Reports Q3 2007 Financial Results

Acorn International, an integrated multi-platform marketing company in China engaged in developing, promoting and selling consumer products and services, announced its third quarter results for the three months ended September 30, 2007.

Net revenues were US$73.2 million, an increase of 21.5% compared to US$60.3 million in the third quarter of 2006. Gross margin was 50.3%, compared to 64.8% in the same period of 2006.

"Due to heightened competition in the mobile handset and Ozing electronic learning product categories, we did not achieve the expected growth in our operating income in this past quarter," said James Hu, chairman and CEO of Acorn International. "Nevertheless, we have made a number of strategic and operational changes to address these issues, including adjusting our product mix on TV and implementing a new pricing and distribution strategy for Ozing. We are also happy to see the continued strong sales growth of CPS, our branded stock tracking software product. We believe that our overall business remains strong, and by making the changes that we did, we will be able to overcome the temporary setbacks and remain a long term leader in TV direct sales in China."

Income from operations was US$1 million, an increase of 59.9% compared to $0.6 million in the third quarter of 2006. Excluding share-based compensation expenses, income from operations was US$2.6 million, down 41.6% from US$4.4 million in the third quarter of 2006. Operating margin was 1.3%, compared to 1.0% in the third quarter of 2006. Excluding share-based compensation expenses (non-GAAP), operating margin was 3.5%, compared to 7.3% in the third quarter of 2006.

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