BEIJING, Nov. 21 /Xinhua-PRNewswire/ -- China Finance Online Co. Limited
(Nasdaq: JRJC), a leading Chinese online financial information and listed
company data provider, today announced its unaudited financial results for
the third quarter ended September 30, 2006:
Q3 2006 Financial Highlights
-- Net revenues of $1.73 million, down 4% year-on-year.
-- Net income of $557,000, down 56% year-on-year.
-- Non-GAAP net income (i.e. excluding the share-based compensation
expenses of $296,000 due to the adoption of SFAS 123R) of $853,000.
-- Basic and diluted income per ADS of $0.03. Basic and diluted income
per share of $0.01.
-- Non-GAAP basic and diluted income per ADS was $0.05 and $0.04,
respectively. Non-GAAP basic and diluted income per share is $0.01.
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.”
Financial Results
For the third quarter of 2006, China Finance Online reported net revenues
of $1.73 million, a decrease of 4% from $1.81 million for the same period in
2005. This decrease was primarily due to a decrease in revenues generated
from subscription service fees. Revenues from advertising related business
for the quarter contributed $353,000, representing 20% of net revenues for
the quarter.
Gross profit for the quarter decreased to $1.41 million, a decrease of
17% from $1.70 million for the same period in 2005. Gross margin was 81% in
the third quarter, compared to 94% in the same period in 2005.
Operating expenses for the third quarter totalled $1.16 million, an
increase of 15% from $1.01 million reported for the same period in 2005.
This increase is primarily due to an increase in general and administrative
expenses. Operating expenses for the third quarter of 2006 included $272,000
in stock-based compensation since companies are required to recognize in
their financial statements as compensation the fair value of stock-based
equity instruments, such as stock options, granted to employees on the grant
date.
-- General and administrative expenses for the quarter were $692,000, an
increase of 72% from $404,000 for the same period in 2005. This
increase is primarily due to an increase in stock-based compensation
expenses as a result of adopting SFAS 123R, and to a lesser extent, an
increase in professional service fees. The general and administrative
expenses for the third quarter included $221,000 in stock-based
compensation.
-- Sales and marketing expenses for the quarter decreased by 39% from
$540,000 for the same period in 2005 to $327,000. The decrease is
largely due to the completion of our one-year online marketing
campaign with Chinese portals. Sales and marketing expenses for
the third quarter of 2006 also included $23,000 in stock-based
compensation as a result of adopting SFAS 123R.
-- Product development expenses for the quarter were $145,000, an
increase of 118% from $66,000 for the same period in 2005. This
increase is primarily due to the research and development expenses
related to our new products. Product development expenses for the
quarter also included stock-based compensation of $28,000 as a result
of adopting SFAS 123R.
As a result of the foregoing, income from operations for the third
quarter of 2006 was $247,000, compared to $693,000 for the same period in
2005 and $39,000 for the previous quarter. Excluding the stock-based
compensation expenses of $296,000 due to adoption of SFAS 123R, income from
operations for the quarter would have been $543,000.
Net income for the third quarter of 2006 was $557,000, a decrease of 56%
from $1.27 million for the same period in 2005 and an increase of 26% from
$442,000 of the previous quarter. The year-over-year decrease was primarily
due to decrease in exchange gains, and the increase in cost of revenues and
stock-based compensation expenses. The quarter-over-quarter increase was
primarily due to the increase in net revenues. Non-GAAP net income, which
excludes the stock-based compensation expenses of $296,000 due to adoption of
SFAS 123R, was $853,000.
As part of the net income for the third quarter, the Company recorded a
net exchange gain of $56,000 due to the recent change in the exchange rates
between U.S. dollar and RMB.
Net income margin for the third quarter of 2006 was 32%, compared to 70%
for the same period in 2005 and 30% for the previous quarter. Non-GAAP net
income margin for the third quarter of 2006 was 49%. Total income tax
expense for the quarter was $18,000, compared to $115,000 for the same period
in 2005 and $7,000 for the previous quarter.
Basic income per ADS was $0.03, and basic income per share was $0.01 for
the third quarter of 2006. Diluted income per ADS was $0.03 and diluted
income per share was $0.01 for the quarter. Non-GAAP basic and diluted
income per ADS was $0.05 and $0.04 respectively. Non-GAAP basic and diluted
income per share were both $0.01.
The number of new subscribers for the third quarter of 2006 was 1,996,
representing a decrease of 24% from 2,626 for the same period in 2005 but an
increase of 6% from 1,877 for the second quarter of 2006. Repeat subscribers
for the third quarter of 2006 totalled 3,430, representing an increase of 80%
from 1,910 for the same period in 2005 and an increase of 4% from 3,297 for
the last quarter.
Average subscription fee per subscriber, or ASF, for new subscribers
decreased by 16% to $139 for the third quarter of 2006 from $166 for the same
period in 2005 and decreased by 53% from $297 for the previous quarter. ASF
for repeat subscribers increased by 94% to $490 for the third quarter of 2006
from $253 for the same period in 2005 and increased by 90% from $258 for the
previous quarter.
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
the compensation cost of share-based awards granted to employees under 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.
Other Developments
On September 21, 2006, we closed the acquisition of Shenzhen Genius
Information Technology Co. Ltd (“Genius”), a financial information database
provider mainly serving domestic securities and investment firms.
On October 1, 2006, we closed the acquisition of Stockstar Information
Technology (Shanghai) Company Limited, and on the same day, an affiliate of
China Finance Online closed the acquisition of a related company of Stockstar
Information Technology that operates Stockstar.com (the two companies are
referred to collectively as “Stockstar”).
As a result of our acquisition of Genius and Stockstar, the Company’s
financial statements for the quarterly period ended December 31, 2006, will
reflect the consolidated financial results of Genius and Stockstar.
Primarily due to the amortization of acquired intangible assets, the Company
expects to incur a loss under US GAAP in the fourth quarter of 2006 despite
its projected growth in subscription services in the fourth quarter. The
Company believes that it will generate positive operating cash flows on a
consolidated basis.
Updates on Our New Products
In late August, the Company formally launched the high-end version of
Value Engine, which is specially designed for investors who primarily use
fundamental analysis in selecting stocks or who use fundamental analysis to
supplement technical analysis. In September, we rolled out a lower-end
version of Value Engine to capitalize on investors’ demand for fundamental
analysis tools. As of October 31, there were about 500 subscribers of Value
Engine with the total payments of around $1.7 million.
Conference Call
China Finance Online’s management team will host a conference call at
8:00PM Eastern Standard Time on November 21, 2006 (or 9:00AM November 22,
2006 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: 5735.
A replay of the call will be available from approximately 9:00PM Eastern
Time on November 21, 2006 (or 10:00AM November 22, 2006 in the Beijing/HK
time zone) to 9:00PM Eastern Time on November 28, 2006 (or 10:00AM November
29, 2006 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: 419739.
About China Finance Online Co. Limited
China Finance Online Co. Limited specializes in providing online
financial and listed company data and information in China. Through its
websites, http://www.jrj.com and http://www.stockstar.com , the company
offers 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 that is available by download. Through its subsidiary, Shenzhen
Genius Information Technology Co. Ltd, the Company provides financial
information database mainly to 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 of our growth in subscription services in the fourth
quarter and that we will generate positive operating cash flows on a
consolidated basis, 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, China Finance Online’s historical and possible
future losses, limited operating history, changes in accounting policies,
uncertain regulatory landscape in the People’s Republic of China,
fluctuations in quarterly operating results, failure to successfully compete
against new and existing competitors, and the company’s reliance on
relationships with Chinese stock exchanges and raw data providers. 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.
China Finance Online Co. Limited
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of U.S. dollars)
Sep. 30 2006 Dec. 31 2005
(unaudited) (note)
Assets
Current assets:
Cash and cash equivalents 41,624 46,168
Account receivable, net 432 145
Prepaid expenses and other current
assets 8,269 1,132
Deferred tax assets -- 64
Total current assets 50,325 47,509
Property and equipment, net 1,264 512
Rental deposit 9 41
Investment in associates 13,929 15,000
Acquired intangible assets, net 444 --
Goodwill 1,251 51
Total assets 67,222 63,113
Liabilities and shareholders’ equity
Current liabilities:
Deferred revenue 2,840 1,859
Deferred tax liabilities 38 --
Accrued expenses and other current
liabilities 806 382
Income tax payable 6 41
Total current liabilities 3,690 2,282
Shareholders’ equity
Ordinary shares 13 13
Additional paid in capital 65,514 64,498
Treasury stock (13,200) (13,200)
Retained earnings 9,945 8,849
Accumulated other comprehensive
income 1,260 671
Total shareholders’ equity 63,532 60,831
Total liabilities and shareholders’
equity 67,222 63,113
China Finance Online Co. Limited
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of U.S. dollars, except share and per share data)
Three months ended
Sep. 30, 2006 Sep. 30, 2005 Jun. 31, 2006
(unaudited) (unaudited) (unaudited)
Gross revenues $1,768 $1,850 $1,509
Business tax (35) (38) (42)
Net revenues 1,733 1,812 1,467
Cost of revenues
(includes share-based )
compensation expense
of $24, $0 and $24,
respectively) (322) (109) (304)
Gross profit 1,411 1,703 1,163
Operating expenses
General and
administrative
(includes share-based
compensation expense of
$221, $98 and $150,
respectively) (692) (404) (583)
Sales and marketing
(includes share-based
compensation expense
of $23, $1 and $23,
respectively) (327) (540) (371)
Product development
(includes share-based
compensation expense
of $28, $0 and $28,
respectively) (145) (66) (170)
Total operating expenses (1,164) (1,010) (1,124)
Income from operations 247 693 39
Interest income 272 369 258
Other income -- -- 115
Exchange gain (net) 56 327 37
Income before income taxes 575 1,389 449
Income tax expenses (18) (115) (7)
Net income $557 $1,274 $442
Income per share
Basic and Diluted $0.01 $0.01 $0.00
Income per ADS
Basic $0.03 $0.07 $0.02
Diluted $0.03 $0.06 $0.02
Weighted average ordinary
shares
Basic 93,666,903 91,137,056 93,636,903
Diluted 101,904,969 101,496,896 104,580,684
Weighed average ADSs
Basic 18,733,381 18,227,411 18,727,381
Diluted 20,380,994 20,299,379 20,916,137
China Finance Online Co. Limited
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of U.S. dollars, except share and per share data)
NON-GAAP NET INCOME EXCLUDING SHARE-BASED COMPENSATION EXPENSE
Three months ended Sep. 30, 2006
Reported Adjustments Adjusted
Gross revenues 1,768 -- 1,768
Business tax (35) -- (35)
Net revenues 1,733 -- 1,733
Cost of revenues (322) 24 (a) (298)
Gross profit 1,411 (24) 1,435
Operating expenses
General and
administrative (692) 221 (a) (471)
Sales and
marketing (327) 23 (a) (304)
Product
development (145) 28 (a) (117)
Total operating expenses (1,164) 272 (892)
Income from operations 247 296 543
Interest income 272 -- 272
Other income -- -- --
Exchange gain (net) 56 -- 56
Income before income
taxes 575 296 871
Income tax expenses (18) -- (18)
Net income 557 296 853
Income per share
Basic and
Diluted $0.01 $0.01
Income per ADS
Basic $0.03 $0.05
Diluted $0.03 $0.04
Weighted average ordinary
shares
Basic 93,666,903 93,666,903
Diluted 101,904,969 101,904,969
Weighed average ADSs
Basic 18,733,381 18,733,381
Diluted 20,380,994 20,380,994
Note: the information at December 31, 2005 is derived from the audited
financial statements.
(a) To exclude the share-based compensation expense of $296,000 as
measured using the fair value method under SFAS 123R.
