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Operator: Good day, and welcome to the Acorn International Q2 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Elaine Ketchmere. Please go ahead.
Elaine Ketchmere: Thank you, operator and good morning everyone. Thank you for joining us today for the discussion of our unaudited financial results for the second quarter of 2019. With me today are Mr. Jacob Fisch, our CEO and President; and Mr. Martin Key, our Acting CFO. After our prepared remarks, we will open the line for questions. Before we continue, I would like to remind you that the discussion today will contain certain Forward-Looking Statements. These forward-looking statements include among others, statements with respect to the Company's continued focus on building brands and growing e-commerce sales particularly Babaka branded and Acorn Fresh, its planned for continued development as Acorn Digital Services and the company's expected completion of the shutdown of its call center in the third quarter of 2019, the classification and presentation of such shutdown as well as the further increase in efficiency, reduction in cost and increase in profit from continuing operations for the year such shutdown is expected to generate among others. A number of the potential inherent risks and uncertainties that Acorn's business involves are outlined in the Company's public filings with the U.S. Securities and Exchange Commission. As such, actual results may be materially different from the views expressed or anticipated results described today. Acorn International does not undertake any obligation to update any forward-looking statement, except as required by applicable law. Furthermore, the unaudited financial information discussed today is preliminary and subject to potential adjustments. Adjustments maybe identified when audit work has been performed for the Company's year-end audit, which could result in significant differences from this preliminary unaudited financial information. Now, I will turn the call over to Jacob Fisch, Acorn's CEO and President, who will discuss some operational highlights for the quarter. Jake.
Jacob Fisch: Great. Thank you, Elaine. Acorn posted another quarter of solid sales growth in the second quarter of 2019 with revenues up 38.6% from the second quarter of 2018 due to continued strong performance of Babaka branded products and Acorn Fresh on our e-commerce channels with gross margin improving to 71.8%. Due to increase investment in sales and marketing to support growth of our new business, our results were just below breakeven, net operating level while net income was $100,000. During the second quarter of 2019, our Babaka brand posture correction products continue to achieve record sales driven by the successful promotion of our core products through digital media in China and sell these products through third party e-commerce B2C platforms. Acorn Fresh which offers high-quality fresh food products via e-commerce continue to build momentum. During the quarter, we created a new business unit Acorn digital services under which we consolidated Acorn Entertainment our social media management business, Acorn streaming our digital content business and AKOL standing for Acorn opinion leader, which facilitates the development of local China influencers with the objective to optimize their ability to convert Acorn content into product sales. Acorn digital services has been gaining momentum recently entering into new agreements with brands and influencers across a range of industries, we are excited to represent Chef Works, a global leader in culinary and hospitality apparel, serving some of the world's top hotel brands, restaurants in culinary academies to provide them with social media and digital management services to help grow and further monetize the value of their brands in China. In addition, we recently signed a high-profile Dutch media influencer to provide social media and digital management services that help establish and monetize their brand in China. We are also exploring opportunities to expand our relationship with state-owned media powerhouse, Shanghai Media Group, with a focus on content creation and licensing. On August 28, our Board of Directors declared a cash dividend of $0.125 per ordinary share or $0.25 per ADS that in second quarter 2019. Our dividend policy calls for recurring quarterly dividend of $0.125 per ordinary share, or $0.25 per ADS subject to quarterly review approval and declaration by the board. Looking ahead, Acorn will continue to focus on building brands and growing e-commerce through those brands. We will focus on our principal brand including currently Babaka branded products and Acorn Fresh while also providing services to third-party brands through Acorn digital through which in certain cases, we have the opportunity to incubate new self-owned brands for the principal side of business in a risk manage manner. We're also in the process of shutting down our call center operations in Bushi, China; which are increasingly unproductive as a sales channel in China's new digital economy. We expect this will further allow us to focus our energies on digital and e-commerce, increase efficiency and lower cost and we hope to complete the process within the next few weeks. Once completed, we will be required by applicable accounting rules to treat the historical operations of the call center and discontinued operations which we believe based on our estimate will have a positive impact on our profit from continuing operations for the year. Based on our estimates and net effect of these discontinued operations in the first half of 2019 would have been the decrease revenue and gross profit by approximately $0.7 million and $0.4 million, respectively, and improve income loss from continued operations for the first half of 2019 by approximately $0.2 million. The results for full year 2019 will include the call centers operations as discontinued operations throughout the period. With that, I will turn the call over to Martin to discuss our financial results, Martin.
Martin Key: Thanks, Jake. So for the second quarter, total net revenues were $8.7 million up 38.6% from $6.3 million in the second quarter of 2018 primarily due to an increase in e-commerce sales above our branded products as well as other products. Gross profit in the second quarter of 2019 was $6.3 million up 39.9% from $4.5 million in the second quarter of 2018. Gross margin was 71.8% in the second quarter of 2019, up from 71.2% in the second quarter of 2018 due primarily to a higher proportion of sales from BABA cobranded products. Total operating in the second quarter 2019 were $6.7 million up 35.5% from $5 million of the second quarter of 2018. The increase in operating expenses was due primarily to an increase in selling and marketing expenses to support e-commerce sales which are partially offset by slight decrease in general and administrative expenses and an increase in other operating income due to increased revenues from Acorn digital services and interest from the loans [indiscernible]. Loss from continuing operations was $0.5 million in the second quarter of 2019 which is comparable to a loss of continuing operations $0.5 million in the second quarter of 2018. Other income was $0.3 million in the second quarter of 2019 compared to other income of $27.7 million in the second quarter of 2018. The year ago period includes the $27.7 million capital gain from the sale of the bright rainbow investments limited subsidiary in April 2018. Net income from continuing operations was $0.1 million from the second quarter of 2019 this compared to net income from continuing operations of $25.1 million in the second quarter of 2018 which is primarily due to the previously mentioned $27.7 million gain -- capital gain from the sale of our green book [ph]. Net loss from discontinued operations which reflects the sale of a majority stake in the company Hajisen [ph] electronic learning products business to a third-party investor and operator in 2017, was $5000 in the second quarter of 2019 compared to a net loss from discontinued operations of $1.3 million in the second quarter of 2018. I would like to point out that our call center operations will be included and discontinued operations once we have completed shutting down those operations, which is most likely in the third quarter of 2019. Net income attributable to Acorn was $0.1 million in the second quarter of 2019 this compares to a net loss attributable to Acorn a $23.8 million in the second quarter of 2018. Now turning to the first half results. Total net revenues were $17.8 million in the first half of 2019, a 52.5% from $11.7 million in the first half of 2018 primarily due to an increase in e-commerce sales of BABA club branded product as well as other products. Gross profit in the first half of 2019 was $12.8 million a 55.1% from $8.3 million in the first half of 2018. Gross margin was 71.8% in the first half of 2019, up from 78.6% in the first half of 2018. The increase in gross margin was due to a higher proportion of sales from BABA club branded products. Total operating expenses in the first half of 2019 were $12.8 million up from $8.9 million in the first half of 2018. The increase in operating expenses was due primarily to an increase in selling and marketing expenses to support e-commerce growth. Income from continuing operations was $3000 in the first half of 2019 as compared to a loss from continuing operations of $0.6 million in the first half of 2018. Other income was $4.9 million in the first half of 2019, primarily associated with the gain on the sale of the company's former principal office in Shanghai to a third-party. This compared to other income of $27.8 million in the first half of 2018 and it was primarily due to a gain on the sale of the company's bright rainbow investment limited subsidiary on April 2018. Net income from continuing operations was $5 million in the first half of 2019. This compares to net income from continuing operations to $25.1 million from the first half of 2018 which is primarily due to the previously mentioned $27.7 million capital gain from [indiscernible]. Net loss from discontinued operations, which reflects the sale of majority stake in the company's HJX [ph] electronic learning products business to a third-party investor and operator in 2017. It was $41,000 in the first half of 2019 compared to a net loss from discontinued operations of $1.6 million in the first half of 2018. Net income attributable to Acorn was $4.9 million in the first half of 2019 this compares to net income attributable to Acorn of $23.5 million in the first half of 2018. As of June 30, 2019 Acorn's cash and cash equivalents of restricted cash totaled $11.6 million. The cash balance at the end of the first half of 2019 reflects the payment of cash dividends totaling approximately $3.2 million in June 2019; this compares the cash and equivalents with restricted cash of $20.2 million as of December 31, 2018. Now I'll turn the call back over to Jake for some closing remarks.
Jacob Fisch: Thank you, Martin. In closing, Acorn is performing well. So far in 2019 we have continued sales growth of e-commerce of our Babaka branded products and Acorn Fresh. Acorn digital services beginning to ramp with new client engagements and partnerships and we are further streamlining our operations by eliminating call center. We will continue to leverage or 20 years of direct marketing experience in China to build brand and expand e-commerce sales into the future. That concludes the prepared remarks section of this call and we will now open the call up for questions. And I turn it back to the operator.
Operator: [Operator Instructions] Our first question coming from Anthony Martin [ph], a Private Investor. Please go ahead. Your line is now open.
Unidentified Analyst: Hi, good morning, guys. Couple of questions for you. The increased expenses for marketing for this quarter is this a, can we anticipate this to be a permanent higher level of spending or is this something that was my first question, is this something that was just unusual in the quarter or can we anticipate that this will remain this way for the foreseeable future?
Jacob Fisch: To some extent the increase in expenses are correlated to the growth and some extent, there was investment in growth in other parts of the business. So part of the business is simply driven by increase in selling expenses and other parts of the businesses we required some investment. I would in terms of estimating the future I'm not going to do it from a financial perspective, but in terms of the degree of investment needed to grow the business that will continue to be managed, we have said it time and time again that we want to grow profitably and that doesn't mean that there isn't going to be investment in that growth but it's going can be managed growth. And that is key, so there may be certain periods in which we're investing more in certain periods in which we are investing less but overall, our strategy is to grow in a managed manner and ultimately to focus on profitability.
Unidentified Analyst: And just sort of a follow-up. I know you mentioned you are not going to make any forward-looking predictions in terms of profitability. But I believe one of the reasons the stock is trading close to its 52-week low is just investor's uncertainty as to where the business is going. So to that extent can we anticipate that future quarters should be better than breakeven at this point?
Jacob Fisch: Yes, again, I would stay away from making those kinds of financial projections but we are, our goal is to maintain a profitable position. Certainly, as we round out the year of that would be what we would like to be able to do. So that's about as far as I feel real comfortable, responding at this point I hope that helpful.
Unidentified Analyst: And final question with the stock trading at these levels. And if one does basic math, which I think you know unfortunately lot of people don't. Is there a buyback program or as the company considered buying back the stock and if so have they brought back any stock?
Jacob Fisch: You may know have had buyback programs in place in the past, we have and currently are continuing to assess the possibility of doing that, obviously one downside at this stage is that we would be narrowing and already fairly thin float. So that sort of the countervailing concern of putting in place, putting back in place the program, and we received comments from shareholders about the thinness of the flow being a concern. So, we're trying to balance that but at the same time we continue to consider options and continue to consider that as an option. I was just going to add.
Unidentified Analyst: I will make a comment out for the people, to the investors that say Jesus the float is too thin, you should buyback the stock that they should be buying the stock in the open market, you can't have it both ways. We told the company not to buy the stock back, but then you and I will have to buy the stock in the open market. So, it's just my own comments. I appreciate the comments.
Jacob Fisch: Got it, thank you very much.
Operator: [Operator Instructions] Next question coming from Richard Greulich, REG Capital Advisors. Please go ahead. Your line is now open.
Richard Greulich: Thank you. I wanted to follow-up on the share repurchase question. It would seem to me that given the book value and the current stock price. It's a pretty good investment and I would suggest not worrying too much about the flow that usually will take care of itself with valuation. Maybe let me phrase it in a question, why would you not be buying back stock again?
Jacob Fisch: It's a good question. Once again we have considered the concerns that we’ve received on sort of both sides of the fence and I appreciate your rhetorical question perhaps and let's take that on board and take another look at it.
Operator: [Operator Instructions] So, there are no further questions at this time. I would like to turn the conference back to you for additional remarks.
Elaine Ketchmere: Thank you, everyone. With that we will conclude our call for today. For additional questions, feel free to contact us at ir@chinadrtv.com. And thank you all again and have a good day.
Jacob Fisch: Thank you.
Operator: This concludes today's call. Thank you for your participation. You may now disconnect.
No analyst estimates available