BEIJING, June 28, 2012 /PRNewswire-Asia/ -- China Finance Online Co. Limited ("China Finance Online", "the Company") (NASDAQ GS: JRJC), a technology-driven, user-focused market leader in China in providing vertically integrated financial information and services including news, data, analytics, securities investment advisory and brokerage-related services, today announced its unaudited financial results for the first quarter ended March 31, 2012.
2012 Q1 Financial Summary
Key Developments
Mr. Zhiwei Zhao, Chairman and CEO of China Finance Online, commented, "Amid concerns toward a slowdown of the Chinese economy, the Chinese A-Share market again was one of the most underperforming global equity markets during the first quarter of 2012. Trading turnover and market capitalization shrank further as China's GDP and corporate earnings growth trended lower. Demand for paid securities analysis software continued to be negatively impacted across the board as investor sentiment remained fragile.
"As we transition our business toward securities investment advisory services, we continue to leverage our leadership in financial information services, data solutions and web technologies, to expand our user base. Our flagship sites jrj.com and stockstar.com are two of the most established financial portal sites in China with tens of millions of users. We keep strengthening our research and development in new areas including open-source platform application, wireless application, financial micro-blogging, and HTML5 technology. Furthermore, our exclusive partnership with Baidu will enable us to provide our market-leading financial information services to a much broader audience," Mr. Zhao concluded.
2012 First Quarter Results
Net revenues for the first quarter of 2012 were $9.1 million, compared with $15.0 million for the first quarter of 2011. The main sources of the Company's net revenues were subscription fees from individual customers, subscription fees from institutional customers, advertising revenues and revenues from brokerage-related services, which contributed 69%, 8%, 9% and 14% to total revenues respectively, compared with 80%, 4%, 8%, and 7%, respectively, for the comparable period in 2011. Revenues from subscription fees paid by individual customers decreased 47.8% year-over-year reflecting the decreased demand for paid securities analysis software amid a sluggish stock market in China and continuing impact on sales due to regulatory requirements effective from January of 2011. Institutional subscription revenues increased 17.9% year-over-year to $0.8 million. Revenues from brokerage-related services increased 15.5% year-over-year to $1.3 million.
For the first quarter of 2012, gross profit was $7.1 million compared with $12.7 million for the comparable period in 2011. Gross margin for the first quarter of 2012 was 78.2% compared with 85.0% for the first quarter of 2011. The year-over-year decrease in gross margin was mainly due to lowered revenues.
General and administrative ("G&A") expenses for the first quarter of 2012 were $2.8 million, or 30.4% of net revenues, compared with $2.7 million, or 18.2% for the comparable period in 2011. Excluding non-cash share-based compensation expenses of $0.2 million and $0.4 million for the first quarters of 2012 and 2011, respectively, adjusted G&A expenses for the first quarter of 2012 were $2.6 million, or 28.5% of net revenues, compared with $2.3 million, or 15.4% of net revenues in the first quarter of 2011. The increase in adjusted G&A expenses as a percentage of quarterly revenues was mainly due to lowered revenues.
Sales and marketing expenses for the first quarter of 2012 were $3.5 million, or 39.0% of net revenues, compared with $5.6 million, or 37.4% in the first quarter of 2011. The decrease in sales and marketing expenses in absolute value was due to less marketing expenses and sales commissions from reduced sales. The increase in sales and marketing expenses as a percentage of quarterly net revenues was primarily due to lowered revenues.
Product development expenses for the first quarter of 2012 were $3.2 million, or 35.2% of net revenues, compared with $3.2 million, or 21.6% of net revenues for the same quarter in 2011. The Company's management believes that investments in human and technical resources to improve the Company's data, product and technical capabilities are crucial for the Company's business in the long run.
Total operating expenses for the first quarter of 2012 were $9.5 million, down from $11.5 million in the first quarter of 2011. Excluding non-cash share-based compensation expenses, adjusted operating expenses were $9.3 million in the first quarter of 2012, down from $11.0 million for the first quarter of 2011.
GAAP net loss attributable to China Finance Online for the first quarter of 2012 was $1.3 million compared with a GAAP net income of $1.4 million in the 2011 first quarter. Non-GAAP net loss attributable to China Finance Online, which excluded the non-cash share-based compensation expenses of $0.2 million, was $1.1 million for the 2012 first quarter, compared with a non-GAAP net income of $1.9 million for the same quarter of 2011. Both basic and diluted weighted average number of ordinary shares in the first quarter of 2012 was 109 million. Each ADS represents five ordinary shares of the Company.
As of March 31, 2012, total cash, cash equivalents and restricted cash were $79.9 million and short-term investments were $10.8 million. Accounts receivable in non-margin related business were $2.8 million while Daily Growth's margin-related accounts receivables was $16.7 million. Daily Growth continues to implement strict margin account screening and ongoing monitoring to ensure the safe return of capital.
Total China Finance Online Co. Limited's shareholders' equity was $89.9 million as of March 31, 2012, compared with $90.9 million as of December 31, 2011.
The combined current and non-current deferred revenues at the end of the first quarter of 2012, which represented prepaid service fees made by customers for subscription services that have not been rendered as of March 31, 2012, were $20.1 million.
As of March 31, 2012, the number of active paid subscribers of the Company was approximately 85,000.
Key Developments
On June 18, 2012, China Finance Online announced that one of its flagship portal sites Stockstar.com ("Stockstar") entered into an exclusive partnership with Baidu.com ("Baidu") on a mobile web application to provide financial information services.
Under the partnership, Stockstar and Baidu launched a mobile web application integrating Stockstar's proven financial information services with leading internet technologies. The application allows users to access a variety of information on companies traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange.
The web application went live in June 2012. Through the application, smartphones running on Google Android and Apple iOS operating systems are now able to access financial information by inputting company name or ticker into Baidu's search engine.
"Stockstar is one of the most established financial portal sites in China with a proven track record in data processing, website optimization, and client development. As more Chinese are spending more time seeking market intelligence online, extending our competitive advantages to the mobile internet market is a natural choice," Mr. Zhiwei Zhao, Chairman and CEO of China Finance Online, commented. "Meanwhile, we are excited to provide our timely, reliable and robust financial information services to Baidu users. I am optimistic that by building on Baidu's powerful and far-reaching platform we will be able to expand our potential users and provide them with a better mobile experience in accessing financial information that is faster and more streamlined," Mr. Zhao concluded.
Strategic Operational Transition
As stated previously, assessing the profound secular changes taking place in both capital markets and our own industry, the Board of Directors decided upon the following strategic transition. Beginning in April 2012, as the Company continues to offer basic versions of paid individual subscription services to individual investors through its flagship portal sites and accumulate paid subscribers with basic software and information services, the Company is no longer accepting new paid subscribers or renewals for its premium individual subscription service, instead, targeting unpaid users of its flagship web portals and low-end subscribers for our securities investment advisory service and over time provide other wealth management services. Such strategic transition may adversely affect our performances in the short term and result in losses of profit during such transition period.
In China, securities investment advisory refers to fee-based investing advice and counsel on stocks and related financial products from licensed professionals who assist in clients' investment decision-making process. Such new business and other wealth management services are still in the early stage of development. The Company does not expect these areas to contribute material revenues any time soon.
Cost reduction associated with the transition will help offset the loss in revenues and mitigate the loss of cash flow to a certain extent. The Company plans to implement additional cost-cutting initiatives to increase efficiency and improve operational performance. Deferred revenues will continue to be realized until the expiration of outstanding premium individual subscriptions. The Company intends to preserve its cash balance as ample cash is critical for ensuring the success of the strategic transition.
Conference Call Information
The Company will host a conference call and a simultaneous webcast, on June 27, 2012 at 8:00 p.m. Eastern Time/June 28, 2012 8:00 a.m. Beijing Time. Interested parties may participate in the conference call by dialing approximately five minutes before the call start time at U.S. +1-877-847-0047, Hong Kong +852-3006-8101, Singapore 8008-523-396, or China 800-876-5011, and the pass code for all regions is 675169.
A replay of the conference call will be available shortly after the conclusion of the event through 11:59 a.m. Eastern Time on July 5, 2012 (or 11:59 p.m. Beijing Time on July 5, 2012). The dial-in details for the replay: U.S. +1-866-572-7808, Hong Kong +852-3012-8000, Singapore 800-101-2157, China 800-876-5013. Access code: 675169.
The conference call will be available as a live webcast and replay at: http://www.media-server.com/m/p/6itzpumo
About China Finance Online
China Finance Online Co. Limited is a technology-driven, user-focused market leader in China in providing vertically integrated financial information and services including news, data, analytics, securities investment advisory and brokerage-related services. Through its flagship portal sites, www.jrj.com and www.stockstar.com, the Company offers basic software and information services to individual investors which integrate financial and listed-company data, information and analytics from multiple sources. Leveraging on its robust internet capabilities and registered user base, China Finance Online is developing securities investment advisory and over time wealth management services. Through its subsidiary, Genius, the Company provides financial database and analytics to institutional customers including domestic brokerages and investment firms. Through its subsidiary, Daily Growth, the Company provides securities brokerage services in Hong Kong.
Safe Harbor Statement
This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, this release contains the following forward-looking statements regarding:
Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which risks and uncertainties include, among others, the following:
Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F under "Forward-Looking Information" and "Risk Factors". The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
Non-GAAP Measures
To supplement the unaudited condensed consolidated financial information presented in accordance with Accounting Principles Generally Accepted in the United States of America ("GAAP"), the Company uses non-GAAP measures of income from operations, net income, and diluted net income per ADS, which are adjusted from results based on GAAP to exclude the non-cash share-based compensation expenses and non-cash goodwill, intangible assets and investment impairment. The non-GAAP financial measures are provided to enhance the investors' overall understanding of the Company's current and past financial performance in on-going core operations as well as prospects for the future. These measures should be considered in addition to results prepared and presented in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Management uses both GAAP and non-GAAP information in evaluating and operating business internally and therefore deems it important to provide all of this information to investors. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliation of the Company's GAAP financial measures to Non-GAAP financial measures" set forth at the end of this release.
Contact:
Julie Zhu
China Finance Online Co. Limited
+86-10-5832-5288
ir@jrj.com
Shiwei Yin
Grayling
646-284-9474
shiwei.yin@grayling.com
China Finance Online Co. Limited | ||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||
(In thousands of U.S. dollars) | ||
Mar. 31, 2012 | Dec. 31, 2011 | |
Assets | ||
Current assets: | ||
Cash and cash equivalents | 50,493 | 64,641 |
Restricted cash | 29,432 | 29,861 |
Trust bank balances held on behalf of customers | 11,645 | 18,664 |
Accounts receivable, net - others | 2,821 | 1,468 |
Accounts receivable, net - Margin clients | 16,715 | 12,889 |
Loan receivable | 9,574 | 9,566 |
Short-term investments | 10,832 | 10,701 |
Prepaid expenses and other current assets | 3,623 | 3,577 |
Deferred tax assets, current | 503 | 634 |
Total current assets | 135,638 | 152,001 |
Property and equipment, net | 5,819 | 6,530 |
Acquired intangible assets, net | 2,749 | - |
Rental deposits | 739 | 738 |
Deferred tax assets, non-current | 511 | 484 |
Other deposits | 223 | 224 |
Total assets | 145,679 | 159,977 |
Liabilities and equity | ||
Current liabilities: | ||
Deferred revenue, current (including deferred revenue, current of the | 14,037 | 17,287 |
Accrued expenses and other current liabilities (including accrued | 4,360 | 6,458 |
Short-term loan (including short-term loan of the consolidated variable | 18,545 | 19,171 |
Amount due to customers for trust bank balances held on behalf of | 11,645 | 18,664 |
Accounts payable (including accounts payable of the consolidated | 398 | 144 |
Deferred tax liability, current (including deferred tax liability, current of the | 4 | 45 |
Income taxes payable (including income taxes payable of the consolidated | 101 | 135 |
Total current liabilities | 49,090 | 61,904 |
Deferred revenue, non-current (including deferred revenue, non-current | 6,025 | 7,237 |
Deferred tax liability, non-current (including deferred tax liability, non-current | 688 | - |
Total liabilities | 55,803 | 69,141 |
Noncontrolling interests | (20) | (105) |
Total China Finance Online Co. Limited Shareholders' equity | 89,896 | 90,941 |
Total liabilities and equity | 145,679 | 159,977 |
China Finance Online Co. Limited | |||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
(in thousands of U.S. dollars, except share and ADS related data) | |||
Three months ended | |||
Mar.31, 2012 | Mar.31, 2011 | Dec.31, 2011 | |
Net revenues | 9,109 | 14,955 | 10,760 |
Cost of revenues | (1,988) | (2,237) | (2,067) |
Gross profit | 7,121 | 12,718 | 8,693 |
Operating expenses | |||
General and administrative(includes share-based compensation expenses of $174, $428 and $216, respectively) | (2,766) | (2,726) | (2,747) |
Sales and marketing (includes share-based compensation expenses of $8, $44 and $11, respectively) | (3,549) | (5,598) | (4,453) |
Product development (includes share-based compensation expenses of $3, $32 and $26, respectively) | (3,205) | (3,225) | (3,416) |
Loss from impairment of intangible assets | - | - | (3,437) |
Loss from impairment of goodwill | - | - | (11,796) |
Total operating expenses | (9,520) | (11,549) | (25,849) |
Government subsidies | 19 | 113 | 14 |
Income (loss) from operations | (2,380) | 1,282 | (17,142) |
Interest income | 1,088 | 706 | 740 |
Interest expense | (124) | (54) | (58) |
Investment gain | 178 | 773 | 178 |
Other income (loss), net | 79 | 2 | (76) |
Exchange gain, net | 25 | 268 | 246 |
Income (loss) before income tax benefit (expenses) | (1,134) | 2,977 | (16,112) |
Income tax benefit (expenses) | (56) | (1,437) | 708 |
Net income (loss) | (1,190) | 1,540 | (15,404) |
Less: Net income attributable to the non-controlling interest | 63 | 147 | 2 |
Net Income (loss) attributable to China Finance Online Co. Limited | (1,253) | 1,393 | (15,406) |
Net income(loss) | (1,190) | 1,540 | (15,404) |
Changes in foreign currency translation adjustment | 60 | 604 | 408 |
Net unrealized (loss) on available-for-sale securities, net of tax effects of ($3), nil and ($6), respectively | (15) | - | (32) |
Other comprehensive income, net of tax | 45 | 604 | 376 |
Comprehensive income (loss) | (1,145) | 2,144 | (15,028) |
Less: comprehensive income attributable to non-controlling interest | 63 | 147 | 2 |
Comprehensive income (loss) attributable to China Finance Online Co. Limited | (1,208) | 1,997 | (15,030) |
Net income (loss)per share attributable to China Finance Online Co. Limited | |||
Basic | (0.01) | 0.01 | (0.14) |
Diluted | (0.01) | 0.01 | (0.14) |
Income (loss) per ADS | |||
Basic | (0.06) | 0.06 | (0.71) |
Diluted | (0.06) | 0.06 | (0.71) |
Weighted average ordinary shares | |||
Basic | 108,982,101 | 108,945,295 | 108,976,122 |
Diluted | 108,982,101 | 113,684,068 | 108,976,122 |
Weighted average ADSs | |||
Basic | 21,796,420 | 21,789,059 | 21,795,224 |
Diluted | 21,796,420 | 22,736,814 | 21,795,224 |
Non-GAAP Measures(in thousands of U.S. dollars, except ADS related data) | |||
Three months ended | |||
Mar.31, 2012 | Mar.31, 2011 | Dec.31, 2011 | |
Income (loss) from operations (GAAP) | (2,380) | 1,282 | (17,142) |
Share-based compensation | 185 | 504 | 253 |
Loss from impairment of intangible assets | - | - | 3,437 |
Loss from impairment of goodwill | - | - | 11,796 |
Adjusted income (loss) from operations (Non-GAAP) | (2,195) | 1,786 | (1,656) |
Three months ended | |||
Mar.31, 2012 | Mar.31, 2011 | Dec.31, 2011 | |
Net income (loss) attributable to China Finance Online Co. Limited (GAAP) | (1,253) | 1,393 | (15,406) |
Share-based compensation | 185 | 504 | 253 |
Loss from impairment of intangible assets | - | - | 3,437 |
Loss from impairment of goodwill | - | - | 11,796 |
Adjusted net income (loss) attributable to China Finance Online Co. Limited (Non-GAAP) | (1,068) | 1,897 | 80 |
Diluted adjusted net income (loss) per ADS attributable to China Finance Online Co. Limited (Non-GAAP) | (0.05) | 0.08 | 0.00 |
ADSs used in calculating diluted adjusted net income (loss) attributable to China Finance Online Co. Limited (Non-GAAP) | 21,796,420 | 22,736,814 | 22,494,305 |
