Yueda Digital Holding, Inc.

Revenue from continuing operations in Q3 2015 was $10.4 million, down 41.7% year over year and down 12.4% quarter over quarter. Cost of revenues was $22.9 million, down 9.5% year over year and down 4.7% sequentially; concession fees were $18.1 million, down 1.7% year over year and 9.6% quarter over quarter. Gross profit was negative $12.5 million versus negative $7.6 million a year ago and negative $12.4 million in Q2; gross margin was negative 120.9% versus negative 43.3% last year. Net loss attributable to shareholders was $9.7 million, compared with a $5.5 million loss a year ago and a $19.4 million loss last quarter. Adjusted EBITDA from continuing operations attributable to shareholders was a loss of $17.5 million versus a loss of $9.5 million a year ago and a loss of $15.8 million in Q2. Cash, restricted cash, and short-term investments totaled $127.7 million as of September 30, 2015, up from $81.1 million at year-end 2014, helped by the receipt of RMB800 million from Longde Wenchuang. Management said it expects to close the deal before year-end and indicated it is close to satisfying the remaining preconditions.

No CEO spoke on the call; CFO Richard Wu delivered the strategic commentary. He emphasized that the Longde Wenchuang transaction is progressing well, that the company has already received the first installment, and that the remaining preconditions are nearing completion despite a few weeks of delay caused by business restructuring and government system upgrades. He also said the company remains confident about the 2015 earn-out target and is working through the privatization process.

Richard Wu focused on the quarter’s financial deterioration in continuing operations and the balance-sheet impact of the transaction proceeds. He cited revenue of $10.4 million, gross profit of negative $12.5 million, operating expenses of $9.7 million, net loss of $9.7 million, and adjusted EBITDA loss of $17.5 million. He also noted cash, restricted cash, and short-term investments of $127.7 million at quarter-end, up from $81.1 million at December 31, 2014, largely due to the RMB800 million first installment, and said capex was $8.9 million in Q3.

Analysts asked about the timing of the 75% equity sale, the privatization timeline, financing, and investor litigation. Management said the second installment is delayed mainly by divestiture-related filings and government system upgrades, but still expects to close before year-end and has already filed the 13-E. On financing, Wu said the China Merchants Bank loan guarantee is in place, that third-party equity participation remains an option, and that the main condition is the founders and buying group pledging shares. He also said the litigants’ holdings appear to be only a small amount of ADS or trading shares and that no broader disputes have emerged.