BEIJING, Feb. 28 /Xinhua-PRNewswire/ -- China Finance Online Co. Limited (Nasdaq: JRJC), a leading Chinese online financial information and listed company data provider, today announced its financial results for the fourth quarter and the full year ended December 31, 2006:
(Logo: http://www.prnasia.com/sa/20061107160632-68.jpg )
Q4 2006 Financial Highlights
-- Due to strong growth in prepaid subscription service fees, deferred
revenue at the end of the fourth quarter ended December 31, 2006
reached the Company's record high of $6.42 million, up 245% year-on-
year.
-- Net revenues of $2.52 million for Q4 2006, up 33% year-on-year.
-- Net loss of $1.70 million for Q4 2006, compared to $1.06 million of net
income for the same period in 2005, a decrease of 260% year-on-year.
-- Due to substantial negative impact from regulatory changes on mobile
value-added service ("MVAS")in the second half of 2006, investment
impairment of $1.32 million, a non-cash nonrecurring item, was recorded
in Q4 2006 against the Company's investment in Moloon International
Inc. ("Moloon")
-- Excluding the investment impairment of $1.32 million in Moloon and
stock-based compensation expenses of $225,000 primarily due to the
adoption of SFAS 123R, non-GAAP net loss for Q4 2006 would have been
$149,000.
-- Basic and diluted loss per ADS of US$0.09 and US$0.08, respectively,
for the fourth quarter in 2006. Both basic and diluted loss per share
were US$0.02 for the fourth quarter in 2006.
-- Excluding investment impairment in Moloon and stock-based compensation
expenses primarily due to the adoption of SFAS 123R, both non-GAAP
basic and diluted loss per ADS would have been US$0.01 each, for the
fourth quarter in 2006, and both non-GAAP basic and diluted loss per
share were US$0.00 for the fourth quarter in 2006.
Explanation of the Company's non-GAAP financial measures and the related reconciliations to GAAP financial measures are included in the accompanying "Non-GAAP Measures" and the "Reconciliation to Unaudited Condensed Consolidated Statements of Operations".
Full Year 2006 Financial Highlights
-- Net revenues decreased by 5% to $7.13 million in 2006 from $7.48
million in 2005.
-- Net income decreased by 113% from $4.62 million in 2005 to a net loss
of $600,000 in 2006.
-- Diluted loss per ADS was US$0.03 in 2006 and diluted loss per share was
US$0.01 in 2006.
Financial Results
Due to strong growth in sales of subscription packages particularly the Value Engine series, deferred revenue at the end of the fourth quarter of 2006, which represents prepaid service fees made by customers for subscription services that have not been rendered as at December 31, 2006, reached the Company's historical high of $6.42 million, an increase of 245% compared to $1.86 million for the same period in year 2005 and an increase of 126% compared to $2.84 million in the previous quarter.
During the fourth quarter of 2006, China Finance Online reported net revenues of $2.52 million, an increase of 33% from $1.90 million for the same period in 2005, and an increase of 46% from $1.73 million in the third quarter of 2006. The increase is primarily due to the growth in subscription service fees from individual customers. Revenues from advertising-related business for the quarter contributed $194,000, representing 8% of net revenues for the quarter. Revenues from subscription service fees paid by institutional customers for the quarter were $179,000, representing 7% of net revenues for the quarter. Revenues from wireless related services for the quarter were $298,000, representing 12% of net revenues for the quarter.
For the full year ended December 31, 2006, net revenues decreased by 5% to US$7.13 million from US$7.48 million for the full year 2005.
Gross profit for the quarter was $1.89 million, an increase of 8% from $1.75 million for the same period in 2005 and an increase of 34% from $1.41 million for the third quarter of 2006. Gross margin was 75% in the fourth quarter, compared to 92% for the same period in 2005 and to 81% for the third quarter of 2006.
Gross profit for the full year 2006 decreased by 19% to $5.66 million from $7 million for the full year 2005. Gross margin for the full year 2006 was 79% compared with 94% for the full year 2005.
Operating expenses for the fourth quarter totalled $2.64 million, an increase of 155% from $1.03 million reported for the same period in 2005. This increase is primarily due to expansion in operating scale associated with the acquisitions of Stockstar.com and Shenzhen Genius, as well as increase in compensation expenses as a result of increased sales force and product development headcounts in the fourth quarter. Operating expenses for the fourth quarter of 2006 included $201,000 of stock-based compensation primarily as a result of adopting SFAS 123R in 2006 to recognize stock-based compensation over the service period.
-- General and administrative expenses for the quarter were $1.05 million,
an increase of 142% from $433,000 for the same period in 2005. This
increase is primarily due to expansion in operating scale associated
with the acquisitions of Stockstar.com and Shenzhen Genius, and to a
lesser extent, an increase in stock-based compensation expenses
primarily as a result of adopting SFAS 123R. General and
administrative expenses for the fourth quarter included $150,000 in
stock-based compensation.
-- Sales and marketing expenses for the fourth quarter increased by 131%
from $541,000 for the same period in 2005 to $1.25 million. This
increase is largely due to compensation expenses as a result of
increased sales forces, including those associated with the
acquisitions. Sales and marketing expenses for the fourth quarter of
2006 also included $23,000 in stock-based compensation primarily as a
result of adopting SFAS 123R.
-- Product development expenses for the quarter were $334,000, an increase
of 476% from $58,000 for the same period in 2005, which is primarily
due to increases in employee compensation as a result of increased
headcounts, including those associated with the acquisitions. Product
development expenses for the quarter also included stock-based
compensation of $28,000 primarily as a result of adopting SFAS 123R.
For the year ended December 31, 2006, total operating expenses were $6.36 million, an increase of 69% from $3.77 million for the full year 2005.
As a result of the foregoing, loss from operations for the fourth quarter of 2006 was $741,000, compared to operating income of $722,000 for the same period in 2005 and operating income of $247,000 for the third quarter of 2006. Excluding stock-based compensation expenses of $225,000 primarily due to adoption of SFAS 123R, loss from operations for the quarter would have been $516,000.
Net loss for the fourth quarter of 2006 was recorded $1.70 million, a decrease of 260% from net income of $1.06 million for the same period in 2005 and a decrease of 405% from net income of $557,000 for the previous quarter. In the fourth quarter the Company recorded an investment impairment of $1.32 million in our cost investment in Moloon. Non-GAAP net loss, which excludes the stock-based compensation expenses of $225,000 primarily due to adoption of SFAS 123R and the $1.32 million investment impairment in Moloon, was $149,000.
As part of the net loss for the fourth quarter, the Company recorded a net exchange gain of $82,000 due to the recent change in the exchange rates between U.S. dollar and RMB.
For the full year 2006, loss from operations was $704,000, a decrease of 122% from operating income of $3.23 million for the full year 2005. Net loss for the full year 2006 was $600,000, compared to net income of $4.62 million for the full year 2005, a decrease of 113% year-over-year.
Net income margin for the fourth quarter of 2006 was -67%, compared to 56% for the same period in 2005 and 32% for the third quarter. Excluding the investment impairment of $1.32 million in Moloon and stock-based compensation expenses of $225,000 primarily due to the adoption of SFAS 123R, non-GAAP net income margin for the fourth quarter of 2006 would have been -6%. Total income tax benefit for the quarter was $77,000, compared to income tax provision of $80,000 for the same period in 2005 and income tax provision of $18,000 for the third quarter of 2006.
Basic loss per ADS was $0.09, and basic loss per share was $0.02 for the fourth quarter of 2006. Diluted loss per ADS was $0.08, and diluted loss per share was $0.02 for the quarter. Excluding the investment impairment of $1.32 million in Moloon and stock-based compensation expenses of $225,000 primarily due to the adoption of SFAS 123R, non-GAAP basic and diluted loss per ADS were both $0.01, and non-GAAP basic and diluted loss per share were both $0.00.
For the full year 2006, net income margin was -8% compared to 62% for the full year 2005. Basic and diluted loss per ADS was both US$0.03 for the full year 2006. Basic and diluted loss per share was both US$0.01 for the full year 2006.
Balance of cash and cash equivalents was approximately $44.96 million at the end of the fourth quarter of 2006.
Investment Impairment
In December of 2005, the Company purchased a minority interest in Moloon, a provider of mobile stream media technology and services. During the second half of 2006, China Mobile Communication Corporation announced policy changes in accordance with directives from China's Ministry of Information Industry. The changes involve, among other things, requirements for mobile value-added service ("MVAS") providers such as Moloon to extend free trial periods for customers prior to subscriptions and to send reminders confirming new and existing subscriptions. These policy changes had a substantial negative impact on all MVAS providers including on Moloon's MVAS business in the fourth quarter of 2006. Consequently, following an independent valuation of the Company's equity investment in Moloon based on its MVAS business, it is determined that a decline in value had occurred and the Company recorded non-cash asset impairment in total of $1.32 million, reducing the carrying balance of such investment from $13.93 million to $12.61 million.
Currently, Moloon has adopted new strategies to transform itself into a leading provider of mobile online gaming services, and the value of our investment in Moloon may improve if such strategies prove to be effective.
Integration of Stockstar.com and Shenzhen Genius
In the fourth quarter of 2006, the Company made significant progress in fully integrating Stockstar.com and Shenzhen Genius with its existing operations in such key areas as sales, product development and IT. Collectively, Stocktar.com and Shenzhen Genius contributed positive operating cash flows in this fourth quarter.
Release of User Data
With the completion of the Stockstar.com acquisition in October 2006, the Company believes that the user data previously reported for the Company's http://www.jrj.com web site no longer fully reflects its integrated business performance. Beginning with the fourth quarter of 2006, the following data will be provided to enhance investors' overall understanding of the Company's on-going status and development opportunities:
-- Registered user accounts, which refer to user accounts registered by
individuals with either http://www.jrj.com or http://www.stockstar.com.
-- Fee-based active subscribers, which refer to registered users who
subscribe for a fee to one of our subscription-based services offered
by either http://www.jrj.com or http://www.stockstar.com by download or
through internet.
As of December 31, 2006, the Company has around 6.05 million registered user accounts, and 28,316 fee-based active subscribers.
Conference Call
China Finance Online's management team will host a conference call at 8:00PM Eastern Time on February 27, 2007 (or 9:00AM February 28, 2007 in the Beijing/HK time zone) following the announcement.
The conference call will be available on Webcast live and for replay at: http://www.chinafinanceonline.com/investor/earning_releases.asp . The call will be archived for 12 months at this website.
The dial-in details for the live conference call: U.S Toll Free Number +1-877-847-0047, Hong Kong Dial In Number +852-3006-8101, and France Toll Free Number 0800-910-584, Password for all regions: 6133.
A replay of the call will be available from approximately 9:00PM Eastern Time on February 27, 2007 (or 10:00AM February 28, 2007 in the Beijing/HK time zone) to 9:00PM Eastern Time on March 6, 2007 (or 10:00AM March 7, 2007 in the Beijing/HK time zone). The dial-in details for the replay: U.S. Toll Free Number +1-877-847-0047, Hong Kong Toll Free Number +852-3006-8101, and France Toll Free Number 0800-910-584, Passcode: 995012.
About China Finance Online Co. Limited
China Finance Online Co. Limited specializes in providing online financial and listed company data, information and analytics in China. Through its websites, http://www.jrj.com and http://www.stockstar.com , the company provides individual users with subscription-based service packages that integrate financial and listed company data and information from multiple sources with features and functions such as data and information search, retrieval, delivery, storage and analysis. These features and functions are delivered through proprietary software available by download, through internet or through mobile handsets. Through its subsidiary, Shenzhen Genius Information Technology Co. Ltd, the Company provides financial information database and analytics to institutional customers including domestic securities and investment firms.
Safe Harbor Statements
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, our historical and possible future losses, limited operating history, uncertain regulatory landscape in the People's Republic of China, fluctuations in quarterly operating results, our ability to successfully compete against new and existing competitors, our reliance on relationships with Chinese stock exchanges and raw data providers, changes in accounting policies, our ability to successful acquire and integrate businesses and the impact of our investments on our financial results. Further information regarding these and other risks is included in China Finance Online's annual report on Form 20-F for the year ended December 31, 2005, and other filings with the Securities and Exchange Commission. China Finance Online does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
Non-GAAP Measures
To supplement the unaudited condensed consolidated financial information presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company uses non-GAAP measures of net income and net income per share, which are adjusted from results based on GAAP to exclude non-cash investment impairment and the compensation cost of share-based awards granted to employees primarily due to the adoption of SFAS 123R, which became effective on January 1, 2006. 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.
Reconciliations of the Company's non-GAAP financial measures to unaudited Condensed Consolidated Statements of Operations are set forth after the "Condensed Consolidated Statements of Operations" included in this release.
China Finance Online Co. Limited
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
Dec. 31 2005 Dec. 31 2006
(note) (unaudited)
Assets
Current assets:
Cash and cash equivalents $46,168 $44,955
Accounts receivable, net 145 478
Prepaid expenses and other
current assets 1,132 928
Deferred tax assets 64 44
Total current assets 47,509 46,405
Property and equipment, net 512 1,698
Rental deposits 41 86
Cost method investment 15,000 12,607
Acquired intangible assets, net -- 2,045
Goodwill 51 8,152
Total assets $63,113 $70,993
Liabilities and shareholders'
equity
Current liabilities:
Deferred revenue $1,859 $6,419
Accrued expenses and other
current liabilities 382 2,097
Deferred tax liability -- 19
Income tax payable 41 5
Total current liabilities $2,282 $8,540
Shareholders' equity
Ordinary shares 13 13
Additional paid in capital 64,565 65,757
Treasury stock (13,200) (13,200)
Retained earnings 8,849 8,249
Deferred stock compensation (67) --
Accumulated other comprehensive
income 671 1,634
Total shareholders' equity 60,831 62,453
Total liabilities and shareholders' $63,113 $70,993
equity
Note: the information for the year ended December 31, 2005, is derived
from the audited financial statements.
China Finance Online Co. Limited
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of U.S. dollars, except per share data)
Three months ended Year ended Dec.31
Dec 31, Dec 31, Sept 30,
2006 2005 2006 2005 2006
Gross revenues $2,608 $1,961 $1,768 $7,627 $7,337
Business taxes (86) (58) (35) (145) (209)
Net revenues 2,522 1,903 1,733 7,482 7,128
Cost of revenues
(includes
share-based
compensation
expenses of
$24,$1,$24,$1
and $112
respectively) (628) (149) (322) (482) (1,468)
Gross profit 1,894 1,754 1,411 7,000 5,660
Operating expenses
General and
administrative
(includes
share-based
compensation
expenses of
$150,$96,$221
$366 and $833
respectively) (1,051) (433) (692) (1,740) (2,955)
Sales and
marketing
(includes
share-based
compensation
expenses of
$23,$1,$23,$2
and $107
respectively) (1,250) (541) (327) (1,795) (2,666)
Product
development
(includes
share-based
compensation
expenses of
$28,$1,$28,$2
and $131
respectively) (334) (58) (145) (236) (743)
Total operating
expenses (2,635) (1,032) (1,164) (3,771) (6,364)
Income(loss) from
operations (741) 722 247 3,229 (704)
Interest income 208 386 272 1,486 1,003
Other expense -- -- -- -- 115
Exchange gain
(net) 82 37 56 366 267
Loss from
impairment of
cost method
investment (1,322) -- -- -- (1,322)
Income(loss)
before
income tax
benefit(provision) (1,773) 1,145 575 5,081 (641)
Income tax benefit
(provision) 77 (80) (18) (457) 41
Net income(loss) (1,696) 1,065 557 4,624 (600)
Income(loss)
attributable
to ordinary
shareholders (1,696) 1,065 557 4,624 (600)
Income(loss) per
share
Basic $-0.02 $0.01 $0.01 $0.05 $-0.01
Diluted $-0.02 $0.01 $0.01 $0.04 $-0.01
Income(loss) per
ADS
Basic $-0.09 $0.06 $0.03 0.25 $-0.03
Diluted $-0.08 $0.05 $0.03 0.22 $-0.03
Weighted average
ordinary
shares
Basic 93,676,903 91,362,783 93,666,903 94,341,061 93,650,653
Diluted 101,585,606 100,601,264 101,904,969 104,781,492 101,961,727
Weighed average
ADSs
Basic 18,735,381 18,272,557 18,733,381 18,868,212 18,730,131
Diluted 20,317,121 20,120,253 20,380,994 20,956,298 20,392,345
China Finance Online Co. Limited
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(U.S. Dollar in thousands, except share data)
Three months ended Dec 31, 2006
Reported Adjustment Adjusted
US GAAP Non-GAAP
Gross revenues 2,608 2,608
Business tax (86) (86)
Net revenues 2,522 2,522
Cost of revenues (628) 24 (a) (604)
Gross profit 1,894 1,918
Operating expenses
General and
administrative (1,051) 150 (a) (901)
Sales and marketing (1,250) 23 (a) (1,227)
Product development (334) 28 (a) (306)
Total operating expenses (2,635) (2,434)
Loss from operations (741) (516)
Interest income 208 208
Exchange gain (net) 82 82
Loss from impairment of cost
Method investment (1,322) 1,322 (b) --
Loss before income tax benefit (1,773) (226)
Income tax benefit 77 77
Net loss (1,696) (149)
Net loss per share
Basic and Diluted -0.02 -0.00
Net loss per ADS
Basic -0.09 -0.01
Diluted -0.08 -0.01
Weighted average ordinary shares
Basic 93,676,903 93,676,903
Diluted 101,585,606 101,585,606
Weighed average ADSs
Basic 18,735,381 18,735,381
Diluted 20,317,121 20,317,121
Note:
(a) Exclude share-based compensation expense of $225,000 recorded
primarily under SFAS 123R.
(b) Exclude the investment impairment of $1.32 million in Moloon.
For further information, please contact:
Jeff Wang
Chief Financial Officer
China Finance Online Co. Limited
Tel: +86-10-5832-5288
Email: ir@jrj.com
