BEIJING, Nov. 24 /PRNewswire/ -- China Finance Online Co. Limited , a leading Chinese online financial information and listed company data provider, today announced its financial results for the third quarter ended September 30, 2008:
Q3 2008 Highlights Third Quarter 2008 2007 Variance in % 1)Financial Data: (in thousands of U.S. dollars, except per ADS data) Net revenues $15,228 $7,303 109% GAAP net income 4,772 1,902 151% Non-GAAP net income 6,383 2,983 114% GAAP net income per ADS Basic $0.24 $0.10 140% Diluted $0.21 $0.08 163% Non-GAAP net income per ADS Basic $0.32 $0.16 100% Diluted $0.28 $0.13 115% 2)Operating Data: Registered users 10,900,000 8,100,000 35% Active paid individual subscribers 115,000 45,500 153% -- In the third quarter of 2008, world financial market experienced unprecedented crisis that changed investors' behaviour globally. Particularly in September, as the credit crisis broke out in epic proportion, Chinese investors' confidence significantly deteriorated and in the first time since the downturn started Chinese investors seemed making direct connections between the global crisis and domestic market. As a result, our customers became more cautious in their investment activities. While our execution remained consistent, we noticed a meaningful change in customers' order pattern since September. Our cautious guidance for Q4 2008 also reflects our belief that current unfavourable macro environment may have lasting impact to our business in the coming quarters. -- Net revenues reached $15.23 million for Q3 2008, up 109% year-over-year and 4% quarter-over-quarter. This compares to our prior guidance of $15.5-16.5 million. The slightly weaker than expected results was primarily due to extremely difficult business environment in late Q3 2008. -- Non-GAAP net income, which is defined as net income excluding stock- based compensation expenses, was $6.38 million for Q3 2008, reaching the Company's previous guidance of $6.30 to $7.10 million, up 114% year-over-year. Both non-GAAP basic and diluted net income per share were $0.06, and non-GAAP basic and diluted net income per ADS were $0.32 and $0.28 for Q3 2008, respectively. -- GAAP net income was $4.77 million for Q3 2008, up 151% compared to $1.90 million for the third quarter of 2007. Basic and diluted GAAP net income per share were $0.05 and $0.04 for Q3 2008, respectively. Basic and diluted GAAP net income per ADS were $0.24 and $0.21 for Q3 2008, respectively. -- Registered user accounts of jrj.com and stockstar.com grew to 10.90 million, an increase of 400,000 from the previous quarter. Active paid individual subscribers, which refer to individual investors who subscribe for a fee to our products through downloading, via web or by mobile phones, grew to 115,000 up 14% from the previous quarter. As of September 30, 2008, our Hong Kong brokerage operation Daily Growth, which was acquired in November, 2007, had approximately 1,200 customer accounts.
Explanation of the Company's non-GAAP financial measures and the related reconciliations to GAAP financial measures are included in the accompanying "Reconciliation of NON-GAAP measures to Unaudited Condensed Consolidated Statements of Operations", "Non-GAAP Measures" and "Reconciliations from net income to EBITDA and adjusted EBITDA".
Q3 2008 Financial Results Net Revenues:
For the third quarter of 2008, China Finance Online reported net revenues of $15.23 million, compared to $7.30 million for the same period in 2007, and $14.68 million for the second quarter of 2008, up 109% year-over-year and 4% quarter-over-quarter. Revenues from subscription service fees paid by individual customers were $13.38 million in the third quarter of 2008, representing 88% of net revenues for the quarter. Revenues from mobile value added services were $170,000, representing 1% of net revenues for the quarter. Revenues from subscription service fees paid by institutional customers were $407,000 in the third quarter of 2008, representing 3% of net revenues for the quarter. Revenues from advertising-related business for the quarter contributed $764,000, representing 5% of net revenues for the quarter. Revenues from brokerage-related services, provided by Daily Growth, the Hong Kong securities brokerage firm which was acquired in November 2007, were $496,000 in the third quarter of 2008, representing 3% of net revenue for the quarter. Other revenues were $14,000, less than 1% of net revenues for the quarter.
Revenues breakdown is summarized in the following table: Three months ended September 30, June 30, September 30, 2008 2008 2007 (In thousands of U.S. dollars) 1)Subscription service fees paid by individual customers 13,377 88% 13,133 89% 6,163 84% 2)Revenues from mobile value added services 170 1% 370 3% 335 5% 3)Subscription service fees paid by institutional customers 407 3% 267 2% 216 3% 4)Revenues from advertising- related business 764 5% 758 5% 504 7% 5)Revenues from brokerage-related services 496 3% 121 1% n/a n/a 6)Revenues from others 14 <1% 30 <1% 85 1% Total net revenues 15,228 100% 14,679 100% 7,303 100% Gross Profit:
Gross profit for the quarter was $12.46 million, compared to $6.11 million for the same period in 2007 and $12.58 million for the second quarter of 2008. Gross margin was 82% in the third quarter, compared to 84% in the same period of 2007 and 86% in the second quarter of 2008.
A large portion of costs of revenue are website maintenance expenses, which consist of bandwidth costs, personnel-related expenses, server depreciation expenses, and content expenses for our jrj.com and stockstar.com websites. Website maintenance expenses for the third quarter of 2008 was $1.33 million in the quarter, compared to $634,000 from the third quarter of 2007 and $1.12 million for the previous quarter. As a percentage of net revenue, website maintenance expenses for the third quarter of 2008 was 9% in the quarter, compared to 9% for the third quarter of 2007 and 8% for the previous quarter.
Operating Expenses:
Operating expenses for the third quarter of 2008 totalled $8.56 million compared to $4.67 million for the same period in 2007 and $9.0 million from the previous quarter. The decrease from Q2 2008 is primarily due to the decreased stock-based compensation and the professional fees. Excluding stock-based compensation of $1.61 million, operating expenses was $6.95 million for the third quarter of 2008, compared to $3.59 million for the third quarter of 2007 and $7.03 million for the second quarter of 2008. As a percentage of net revenue for the quarter, operating expenses excluding stock- based compensation was 46%, compared to 49% for the third quarter of 2007 and 48% for the second quarter of 2008.
-- General and administrative expenses for the quarter were $3.42 million, compared to $2.17 million for the same period in 2007 and $4.12 million from the previous quarter. The decrease from the previous quarter is primarily due to the decreased stock-based compensation and the professional fees. Excluding stock-based compensation of $1.54 million, general and administrative expenses was $1.88 million for the third quarter, compared to $1.16 million in the third quarter of 2007 and $2.23 million in the previous quarter. As a percentage of net revenue in the quarter, general and administrative expenses excluding stock- based compensation for the third quarter was 12%, and decreased from 16% for the third quarter of 2007 and 15% for the second quarter of 2008. -- Sales and marketing expenses for the third quarter were $3.64 million, compared to $1.89 million for the same period in 2007 and $3.64 million from the previous quarter. Excluding stock-based compensation of $61,000, sales and marketing expenses was $3.58 million for the third quarter, compared to $1.85 million in the third quarter of 2007 and $3.57 million in the previous quarter. As a percentage of net revenue in the quarter, sales and marketing expenses excluding stock-based compensation for the third quarter was 24%, and decreased from 25% the same quarter in 2007, and flat from the second quarter of 2008. -- Product development expenses for the third quarter were $1.49 million, compared to $614,000 for the same period in 2007 and $1.24 million from the previous quarter. The increase is primarily due to the increases in employee compensation as a result of increased headcounts and server depreciation expenses. Excluding stock-based compensation of $11,000, product development expenses were $1.48 million, compared to $575,000 in the third quarter of 2007 and $1.23 million in the previous quarter. As a percentage of net revenue in the quarter, product development expenses excluding stock-based compensation for the third quarter was 10%, increased from 8% in the third quarter of 2007 and the previous quarter. Income from Operations:
Income from operations for the third quarter of 2008 was $3.90 million, compared to $1.44 million for the same quarter in 2007 and $3.58 million for the second quarter of 2008. Adjusted income from operations (non-GAAP), which is defined as income from operations excluding stock-based compensation expenses of $1.61 million, was $5.51 million for the quarter, compared to $2.52 million for the same quarter in 2007 and $5.54 million for the second quarter of 2008.
Net Income and Non-GAAP Net Income:
Net income was $4.77 million, compared to net income of $1.90 million for the third quarter of 2007 and $4.56 million for the second quarter of 2008. Net income margin was 31% for Q3 2008, compared to 26% for the same period in 2007 and 31% for the second quarter of 2008.
Total income tax benefit for the quarter was $248,000, compared to $176,000 for the same period in 2007 and $88,000 for the previous quarter.
Non-GAAP net income, which is defined as net income excluding stock-based compensation expenses, was $6.38 million for the third quarter of 2008, compared to $2.98 million for the third quarter of 2007, and $6.53 million for the second quarter of 2008. Excluding stock-based compensation expenses, non-GAAP net income margin for the third quarter of 2008 was 42%, compared to non-GAAP net income margin of 41% for the same period in 2007 and 44% for the second quarter of 2008.
As part of the net income for the third quarter, the Company recorded a net foreign exchange gain of $184,000, compared with $41,000 from the third quarter of 2007 and $559,000 from the previous quarter.
Deferred Revenue:
Deferred revenue at the end of the third quarter of 2008, which represents prepaid service fees made by customers for subscription services that have not been rendered as of September 30, 2008, was $35.28 million, with current deferred revenue of $26.63 million and non-current deferred revenue of $8.65 million.
Cash and Cash Equivalents:
Balance of cash and cash equivalents was approximately $82.40 million at the end of the third quarter of 2008, including cash denominated in RMB with an equivalent to $65.81 million and cash denominated in other foreign currencies with an equivalent to $16.59 million.
Cash Flow:
Cash inflow from subscription services provided to individual customers was $14.53 million, compared to $11.06 million for the third quarter of 2007 and $16.72 million for the previous quarter.
Adjusted EBITDA (Non-GAAP):
Adjusted EBITDA (non-GAAP), which is defined as earnings before interest, taxes, depreciation, amortization, other non-operating income and stock-based compensation expenses, was $6.10 million for the third quarter of 2008, compared to $2.78 million in the third quarter of 2007 and $6.0 million in previous quarter.
Other Operating Metrics
As of September 30, 2008, the Company has 10.90 million registered user accounts on its two websites jrj.com and stockstar.com, compared to 10.50 million in the previous quarter, an increase of 400,000 quarter-on-quarter.
Active paid individual subscribers grew to 115,000 at the end of the third quarter 2008, up 14% from 100,600 in the previous quarter.
As of September 30, 2008, our Hong Kong based brokerage service Daily Growth, which was acquired in November 2007, had approximately 1,200 customer accounts.
Outlook for Fourth Quarter 2008
The Company currently expects to generate net revenues in an amount ranging from $14.50 million to $15.0 million for the fourth quarter of 2008, representing a 63% to 69% increase from the corresponding period in 2007. Under the backdrop of the unprecedented market turmoil and the looming global recession, the company believes it is prudent to take a conservative view on business planning and resource deployment. The company does not forecast a meaningful turnaround of the Chinese stock market and assumes still a challenging business environment in the coming quarters. Given the uncertainty ahead, we suggest our investors and analysts take an equally conservative stand in their forecast for Q4 2008 and 2009.
The above forecast reflects the Company's current and preliminary view, which is subject to change. A number of important factors including, but not limited to, fluctuation in the Chinese stock market, could cause the actual results to differ materially from those contained in the above guidance.
Conference Call
China Finance Online's management team will host a conference call at 8:00PM Eastern Standard Time on November 24, 2008 (or 9:00AM November 25, 2008 in the Beijing/HK time zone) following the announcement to discuss detailed operating results.
The conference call will be available on webcast live and replay at: http://tinyurl.com/6qkatg . 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: 5512.
A replay of the conference call will be available from approximately 11:00PM Eastern Standard Time on November 24, 2008 (or 12:00PM November 25, 2008 in the Beijing/HK time zone) to 11:00PM Eastern Standard Time on December 01, 2008 (or 12:00PM December 02, 2008 in the Beijing/HK time zone). The dial-in details for the replay: 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, Access code for all regions: 028967.
About China Finance Online Co. Limited
China Finance Online Co. Limited is the market leader 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, information and analytics 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. Through its subsidiary, Daily Growth Investment Company Limited, the company provides securities brokerage services for stocks listed on Hong Kong Stock Exchange.
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 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, 2007, 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 Accounting Principles Generally Accepted in the United States of America ("GAAP"), the Company uses non-GAAP measures of income from operations, net income, net income per share and net income per ADS, which are adjusted from results based on GAAP to exclude the stock-based compensation expenses primarily due to the adoption of SFAS 123R, which became effective on January 1, 2006. Adjusted EBITDA (non-GAAP) is defined as earnings before interest, taxes, depreciation, amortization, other non- operating income and stock-based compensation expenses. 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 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars) Sep. 30 Dec. 31 2008 2007 Assets Current assets: RMB account 65,810 51,129 Foreign currency account 16,585 23,600 Cash and cash equivalents 82,395 74,729 Short term investments-trading securities 137 -- Trust bank balances held on behalf of customers 2,220 2,850 Advance to employees 2,657 1,673 Accounts receivable, net 4,413 1,491 Prepaid expenses and other current assets 15,659 2,947 Deferred tax assets, current 389 1,130 Total current assets 107,870 84,820 Cost method investment 1,480 1,480 Property and equipment, net 8,852 5,455 Acquired intangible assets, net 1,842 1,938 Rental deposits 594 500 Goodwill 10,770 9,652 Deferred tax assets, non-current 1,279 14 Other deposits 25 25 Total assets 132,712 103,884 Liabilities and shareholders' equity Current liabilities: Deferred revenue, current 26,636 20,457 Accrued expenses and other current liabilities 5,543 6,951 Amount due to customers for trust bank balances held on behalf of customers 2,220 2,850 Accounts payable 529 764 Deferred tax liability, current 132 -- Income taxes payable -- 12 Total current liabilities 35,060 31,034 Deferred tax liability, non-current 257 352 Deferred revenue, non-current 8,646 4,665 Total liabilities 43,963 36,051 Minority interests -- 471 Total shareholders' equity 88,749 67,362 Total liabilities and shareholders' equity 132,712 103,884 China Finance Online Co. Limited UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands of U.S. dollars, except per share data) Three months ended Sep. 30, 2008 Sep. 30, 2007 Jun. 30, 2008 Net revenues 15,228 7,303 14,679 Cost of revenues (2,768) (1,192) (2,101) Gross profit 12,460 6,111 12,578 Operating expenses General and administrative (includes share-based compensation expenses of $1,539, $1,005 and $1,888, respectively) (3,422) (2,169) (4,121) Sales and marketing (includes share-based compensation expenses of $61, $37 and $66, respectively) (3,641) (1,887) (3,639) Product development (includes share-based compensation expenses of $11, $39 and $13, respectively) (1,493) (614) (1,241) Total operating expenses (8,556) (4,670) (9,001) Income from operations 3,904 1,441 3,577 Interest income 515 243 345 Investment loss (76) -- -- Other income (loss), net (3) 1 (11) Exchange gain, net 184 41 559 Income before income tax benefit 4,524 1,726 4,470 Income tax benefit 248 176 88 Minority interests in net income of consolidated subsidiary 3 Net income 4,772 1,902 4,561 Income attributable to ordinary shareholders 4,772 1,902 4,561 Income per share Basic $0.05 $0.02 $0.05 Diluted $0.04 $0.02 $0.04 Income per ADS Basic $0.24 $0.10 $0.23 Diluted $0.21 $0.08 $0.20 Weighted average ordinary shares Basic 99,059,916 94,746,984 98,829,766 Diluted 113,911,176 112,667,599 114,810,694 Weighted average ADSs Basic 19,811,983 18,949,397 19,765,953 Diluted 22,782,235 22,533,520 22,962,139 China Finance Online Co. Limited UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of U.S. dollars) Three months ended Sep. 30, 2008 Sep. 30, 2007 Jun. 30, 2008 Cash flows from operating activities: Net income 4,772 1,902 4,561 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation 1,611 1,081 1,967 Depreciation and amortization 580 254 455 Deferred taxes (249) (146) (94) Loss on disposal of property and equipment 16 -- 11 Loss from short term investments 76 -- -- Minority interests -- -- (3) Changes in assets and liabilities: Accounts receivable 56 92 (2,643) Prepaid expenses and other current assets (4,446) (896) (3,777) Advance to employees (500) (1,650) (1,013) Trust bank balances held on behalf of customers 2,567 -- (1,585) Rental deposits (2) (29) (34) Deferred revenue 54 4,195 4,214 Accounts payable 38 11 29 Amount due to customers for trust bank balances held on behalf of customers (2,567) -- 1,585 Accrued expenses and other current liabilities (1,312) 1,548 669 Income taxes payable (6) (33) (76) Net cash provided by operating activities 688 6,329 4,266 Cash flows from investing activities: Prepayment of businesses acquisition (3,583) -- (628) Purchase of property and equipment (1,325) (648) (2,269) Net cash used in investing activities (4,908) (648) (2,897) Cash flows from financing activities: Proceeds from stock options exercised by employees 194 1,199 312 Proceeds from exercise of options granted to non-employees 42 214 -- Proceeds from capital Injection -- -- 1,006 Net cash provided by financing activities 236 1,413 1,318 Effect of exchange rate changes 451 836 843 Net increase in cash and cash equivalents (3,533) 7,930 3,530 Cash and cash equivalents, beginning of quarter 85,928 56,152 82,398 Cash and cash equivalents, end of quarter 82,395 64,082 85,928 China Finance Online Co. Limited RECONCILIATIONS OF NON-GAAP MEASURES TO UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (U.S. Dollar in thousands, except per share data) Three months ended Sep. 30, 2008 Reported Adjusted US GAAP Adjustment Non-GAAP Net revenues 15,228 15,228 Cost of revenues (2,768) (2,768) Gross profit 12,460 12,460 Operating expenses General and administrative (3,422) 1,539 (a) (1,883) Sales and marketing (3,641) 61 (a) (3,580) Product development (1,493) 11 (a) (1,482) Total operating expenses (8,556) 1,611 (6,945) Income from operations 3,904 1,611 5,515 Interest income 515 515 Investment loss (76) (76) Other loss, net (3) (3) Exchange gain, net 184 184 Income (loss) before income tax benefit 4,524 1,611 6,135 Income tax benefit 248 248 Net income 4,772 1,611 6,383 Net income per share Basic $0.05 $0.01 $0.06 Diluted $0.04 $0.02 $0.06 Net income per ADS Basic $0.24 $0.08 $0.32 Diluted $0.21 $0.07 $0.28 Weighted average ordinary shares Basic 99,059,916 99,059,916 Diluted 113,911,176 113,911,176 Weighted average ADSs Basic 19,811,983 19,811,983 Diluted 22,782,235 22,782,235 (a) Exclude total share-based compensation expense of $1,611. Non-GAAP Measures Three months ended Three months ended Three months ended Sep. 30, 2008 Sep. 30, 2007 Jun. 30, 2008 (U.S. Dollar in (U.S. Dollar in (U.S. Dollar in thousands) thousands) thousands) Non- Non- Non- GAAP Adjust- GAAP GAAP Adjust- GAAP GAAP Adjust- GAAP Result ment Results Result ment Results Result ment Results (a) (a) (a) Income from operations 3,904 1,611 5,515 1,441 1,081 2,522 3,577 1,967 5,544 Three months ended Three months ended Three months ended Sep. 30, 2008 Sep. 30, 2007 Jun. 30, 2008 (U.S. Dollar in (U.S. Dollar in (U.S. Dollar in thousands) thousands) thousands) Non- Non- Non- GAAP Adjust- GAAP GAAP Adjust- GAAP GAAP Adjust- GAAP Result ment Results Result ment Results Result ment Results (a) (a) (a) Net income 4,772 1,611 6,383 1,902 1,081 2,983 4,561 1,967 6,528 (a) The adjustment is for share-based compensation expenses. Reconciliations from net income to EBITDA and adjusted EBITDA Three Three Three months months months ended ended ended Sep. 30, Sep. 30, Jun. 30, 2008 2007 2008 (U.S. Dollar in thousands) Net income 4,772 1,902 4,561 Adjustment Interest income (515) (243) (345) Income tax benefit (248) (176) (88) Other income and expenses (105) (42) (551) Depreciation 498 180 375 Amortization of intangibles and others 82 74 80 EBITDA 4,484 1,695 4,032 Share-based compensation 1,611 1,081 1,967 Adjusted EBITDA 6,095 2,776 5,999
