EX-99.1 2 c93085exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
Exhibit 99.1
CHINA FINANCE ONLINE REPORTS UNAUDITED Third QUARTER 2009 RESULTS
(Beijing, China, November 24, 2009) 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 third quarter ended September 30, 2009:
Q3 2009 Highlights
                 
    Third Quarter  
    2009     2008  
    (in thousands of U.S. dollars,  
    except per ADS data)  
1)Financial Data:
                
Net revenues
   $ 14,577     $ 15,228  
GAAP net income (loss)
     (1,033 )     4,772  
Non-GAAP net income
     600       6,383  
GAAP net income (loss) per ADS
                
Basic
   $ (0.05 )   $ 0.24  
Diluted
   $ (0.05 )   $ 0.21  
Non-GAAP net income per ADS
                
Basic
   $ 0.03     $ 0.32  
Diluted
   $ 0.03     $ 0.28  
 
                
2)Operating Data:
                
Registered users
     13,120,000       10,900,000  
Active paid individual subscribers
     112,000       115,000  
  *  
Non-GAAP net income, which is defined as net loss excluding stock-based compensation expenses, was $600,000 for the third quarter of 2009, compared to non-GAAP net loss of $761,000 for the second quarter of 2009.
 
  *  
Net revenues were $14.58 million for Q3 2009, up 19% quarter-over-quarter, exceeded the high end of the Company’s prior guidance of $12.0 to 13.0 million.
 
  *  
Registered user accounts of jrj.com and stockstar.com grew to 13.12 million, an increase of 720,000 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, were 112,000. As of September 30, 2009, our Hong Kong brokerage operation Daily Growth had approximately 1,420 customer accounts.

 

 

 

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 “Reconciliations from net income to adjusted EBITDA”.
Q3 2009 Financial Results
Net Revenues:
For the third quarter of 2009, China Finance Online reported net revenues of $14.58 million, compared to $15.23 million for the same period in 2008, and $12.28 million for the second quarter of 2009, down 4% year-over-year and up 19% quarter-over-quarter. Revenues from subscription service fees paid by individual customers were $11.39 million in the third quarter of 2009, representing 78% of net revenues for the quarter. Revenues from mobile value added services were $250,000, representing 2% of net revenues for the quarter. Revenues from subscription service fees paid by institutional customers were $423,000 in the third quarter of 2009, representing 3% of net revenues for the quarter. Revenues from advertising-related business for the quarter contributed $1.12 million, representing 8% of net revenues for the quarter. Revenues from brokerage-related services, provided by Daily Growth, were $1.38 million in the third quarter of 2009, representing 9% of net revenue for the quarter. Other revenues were $16,000, less than 1% of net revenues for the quarter.
Revenues breakdown is summarized in the following table:
                                                 
    Three months ended  
    September 30,2009     June 30,2009     September 30,2008  
    (In thousands of U.S. dollars)  
1)Subscription service fees paid by individual customers
     11,389       78 %     10,709       88 %     13,377       88 %
2)Revenues from mobile value added services
     250       2 %     271       2 %     170       1 %
3)Subscription service fees paid by institutional customers
     423       3 %     279       2 %     407       3 %
4)Revenues from advertising-related business
     1,116       8 %     774       6 %     764       5 %
5)Revenues from brokerage-related services
     1,383       9 %     206       2 %     496       3 %
6)Revenues from others
     16       <1 %     41       <1 %     14       <1 %
Total net revenues
     14,577       100 %     12,280       100 %     15,228       100 %

 

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Gross Profit:
Gross profit for the quarter was $12.27 million, compared to $12.46 million for the same period in 2008 and $10.25 million for the second quarter of 2009. Gross margin was 84% in the third quarter of 2009, compared to 82% in the same period of 2008 and 83% in the second quarter of 2009.
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 2009 were $1.35 million, compared to $1.33 million for the third quarter of 2008 and $1.51 million for the previous quarter. As a percentage of net revenue, website maintenance expenses for the third quarter of 2009 were 9%, compared to 9% for the third quarter of 2008 and 12% for the previous quarter.
Operating Expenses:
Operating expenses for the third quarter of 2009 totalled $14.29 million compared to $8.56 million for the same period in 2008 and $13.62 million for the previous quarter. Excluding stock-based compensation of $1.63 million, operating expenses was $12.66 million for the third quarter of 2009, compared to $6.95 million for the third quarter of 2008 and $11.99 million for the second quarter of 2009.
•  
General and administrative expenses for the quarter were $5.0 million, compared to $3.42 million for the same period of 2008 and $4.03 million for the previous quarter. Excluding stock-based compensation of $1.60 million, general and administrative expenses were $3.40 million for the third quarter, compared to $1.88 million in the third quarter of 2008 and $2.43 million in the previous quarter.
 
•  
Sales and marketing expenses for the third quarter were $6.42 million, compared to $3.64 million for the same period in 2008 and $6.56 million for the previous quarter. Excluding stock-based compensation of $21,000, sales and marketing expenses was $6.40 million for the third quarter, compared to $3.58 million in the third quarter of 2008 and $6.54 million in the previous quarter.
 
•  
Product development expenses for the third quarter were $2.87 million, compared to $1.49 million for the same period in 2008 and $3.03 million for the previous quarter. Excluding stock-based compensation of $13,000, product development expenses were $2.86 million, compared to $1.48 million in the third quarter of 2008 and $3.02 million in the previous quarter.
Income (Loss) from Operations:
Loss from operations for the third quarter of 2009 was $1.81 million, compared to income from operations of $3.90 million for the same quarter of 2008, and loss from operations of $3.22 million for the second quarter of 2009. Adjusted loss from operations (non-GAAP), which is defined as loss from operations excluding stock-based compensation expenses of $1.63 million, was $173,000 for the quarter, compared to adjusted income from operations (non-GAAP) of $5.52 million for the same quarter of 2008, and adjusted loss from operations (non-GAAP) of $1.59 million for the second quarter of 2009.

 

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Net Income (Loss) and Non-GAAP Net Income (Loss):
Net loss for the third quarter was $1.03 million, compared to net income of $4.77 million for the third quarter of 2008, and net loss of $2.40 million for the second quarter of 2009. Net income margin was -7% for the third quarter of 2009, compared to 31% for the same period of 2008 and -20% for the second quarter of 2009.
Total income tax benefit for the quarter was $456,000, compared to $248,000 for the same period of 2008, and $538,000 for the previous quarter.
Non-GAAP net income, which is defined as net loss excluding stock-based compensation expenses, was $600,000 for the third quarter of 2009, compared to $6.38 million for the third quarter of 2008, and non-GAAP net loss of $761,000 for the second quarter of 2009. Excluding stock-based compensation expenses, non-GAAP net income margin for the third quarter of 2009 was 4%, compared to non-GAAP net income margin of 42% for the same period of 2008 and -6% for the second quarter of 2009.
As part of the net loss for the third quarter of 2009, the Company recorded a foreign exchange gain of $8,000, compared with net foreign exchange gain of $184,000 for the third quarter of 2008, and foreign exchange loss of $16,000 for the previous quarter.
Deferred Revenue:
Deferred revenue at the end of the third quarter of 2009, which represents prepaid service fees made by customers for subscription services that have not been rendered as of September 30, 2009, was $43.38 million, with current deferred revenue of $28.25 million and non-current deferred revenue of $15.13 million.
Cash and Cash Equivalents:
Balance of cash and cash equivalents was approximately $104.41 million at the end of the third quarter of 2009, including cash denominated in RMB with an equivalent to $89.45 million and cash denominated in other foreign currencies with an equivalent to $14.96 million.

 

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Cash Flow:
Cash inflow from subscription services provided to individual customers was $13.50 million, compared to $14.53 million for the third quarter of 2008 and $21.03 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 $578,000 for the third quarter of 2009, compared to $6.10 million in the third quarter of 2008 and -$899,000 in the previous quarter.
Other Operating Metrics
As of September 30, 2009, the Company has 13.12 million registered user accounts on its two websites jrj.com and stockstar.com, compared to 12.40 million in the previous quarter, an increase of 720,000 quarter-on-quarter.
Active paid individual subscribers were 112,000 at the end of the third quarter 2009.
As of September 30, 2009, our Hong Kong based brokerage service Daily Growth had approximately 1,420 customer accounts.
Outlook for Fourth Quarter 2009
The Company believes that Chinese economy continues on a gradual rebound mode, and the path to a full recovery will be uneven, as such, the volatile domestic equity market will continue to influence the Company’s operating results in the coming quarters.
The Company currently expects to generate net revenues in an amount ranging from $13.0 million to $14.0 million for the fourth quarter of 2009, compared to $15.28 million in the corresponding period in 2008, and $14.58 million in the prior quarter.
For 2009, the Company will focus effort and invest resources to upgrade key areas of its operations, such as people, data, products, customers, technologies and execution, thus build a solid foundation to sustain healthy long-term growth. At the same time, management understand challenges ahead and will be extremely prudent to manage balance sheet while deploying necessary resources in core areas. The Company intends to achieve free cash flow positive in 2009 on a full year basis, excluding potential M&A activities.
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.

 

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Conference Call
China Finance Online’s management team will host a conference call at 8:00PM Eastern Daylight Time on November 24, 2009 (or 9:00AM November 25, 2009 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/yelv7cm . 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: 582177.
A replay of the conference call will be available from approximately 11:00PM Eastern Standard Time on November 24, 2009(or 12:00PM November 25, 2009 in the Beijing/HK time zone) to 11:00PM Eastern Standard Time on December 1, 2009 (or 12:00PM December 2, 2009 in the Beijing/HK time zone). The dial-in details for the replay: U.S. Toll Free Number +1-866-572-7808, Hong Kong Dial In Number +852-3012-8000, and Access code: 582177.
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, www.jrj.com and 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.

 

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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, 2008, 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. 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.
For further information please contact:
Investor Relations
China Finance Online Co. Limited
Tel: (86-10) 5832-5288
Email: ir@jrj.com

 

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China Finance Online Co. Limited
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
                 
    Sep. 30, 2009     Dec. 31, 2008  
Assets
                
Current assets:
                
RMB account
     89,447       80,308  
Foreign currency account
     14,962       17,236  
Cash and cash equivalents
     104,409       97,544  
Trust bank balances held on behalf of customers
     5,485       2,010  
Advance to employees
     —       161  
Accounts receivable, net
     3,425       2,876  
Advance to customers
     4,008       —  
Prepaid expenses and other current assets
     6,332       8,582  
Deferred tax assets, current
     3,388       2,526  
Total current assets
     127,047       113,699  
Cost method investment
     1,480       1,480  
Property and equipment, net
     9,752       8,589  
Acquired intangible assets, net
     3,171       3,473  
Rental deposits
     759       592  
Goodwill
     12,568       12,019  
Deferred tax assets, non-current
     2,467       1,754  
Other deposits
     221       218  
Total assets
     157,465       141,824  
 
                
Liabilities and shareholders’ equity
                
Current liabilities:
                
Deferred revenue, current
     28,247       28,202  
Accrued expenses and other current liabilities
     5,857       4,897  
Bank loan
     2,839       —  
Amount due to customers for trust bank balances held on behalf of customers
     5,485       2,010  
Accounts payable
     223       222  
Deferred tax liability, current
     387       —  
Income taxes payable
     144       142  
Total current liabilities
     43,182       35,473  
Deferred tax liability, non-current
     695       623  
Deferred revenue, non-current
     15,130       8,786  
Total liabilities
     59,007       44,882  
Total shareholders’ equity
     98,458       96,942  
Total liabilities and shareholders’ equity
     157,465       141,824  

 

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China Finance Online Co. Limited
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of U.S. dollars, except per share data)
                         
    Three months ended  
    Sep. 30, 2009     Sep. 30, 2008     Jun. 30, 2009  
Net revenues
     14,577       15,228       12,280  
Cost of revenues
     (2,309 )     (2,768 )     (2,032 )
Gross profit
     12,268       12,460       10,248  
Operating expenses
                        
General and administrative (includes share-based compensation expense of $1,599, $1,539, and $1,600, respectively)
     (5,004 )     (3,422 )     (4,032 )
Sales and marketing (includes share-based compensation expense of $21, $61, and $22, respectively)
     (6,416 )     (3,641 )     (6,560 )
Product development (includes share-based compensation expense of $13, $11, and $13, respectively)
     (2,873 )     (1,493 )     (3,030 )
 
                        
Total operating expenses
     (14,293 )     (8,556 )     (13,622 )
Subsidy income
     219       —       150  
Income (loss) from operations
     (1,806 )     3,904       (3,224 )
Interest income
     379       515       302  
Investment loss
     —       (76 )     —  
Other income, net
     (70 )     (3 )     4  
Exchange gain (loss), net
     8       184       (16 )
 
                        
Income (loss) before income tax benefit
     (1,489 )     4,524       (2,934 )
Income tax benefit
     456       248       538  
 
                        
Net income (loss)
     (1,033 )     4,772       (2,396 )
Income (loss) per share
                        
Basic
     (0.01 )     0.05       (0.02 )
Diluted
     (0.01 )     0.04       (0.02 )
Income (loss) per ADS
                        
Basic
     (0.05 )     0.24       (0.11 )
Diluted
     (0.05 )     0.21       (0.11 )
Weighted average ordinary shares
                        
Basic
     105,621,910       99,059,916       104,810,265  
Diluted
     105,621,910       113,911,176       104,810,265  
Weighted average ADSs
                        
Basic
     21,124,382       19,811,983       20,962,053  
Diluted
     21,124,382       22,782,235       20,962,053  

 

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China Finance Online Co. Limited
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)
                         
    Three months ended  
    Sep. 30, 2009     Sep. 30, 2008     Jun.30, 2009  
Cash flows from operating activities:
                        
Net income (loss)
     (1,033 )     4,772       (2,396 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                        
Stock-based compensation
     1,633       1,611       1,635  
Depreciation and amortization
     751       580       690  
Deferred taxes
     (596 )     (249 )     (684 )
Loss on disposal of property and equipment
     —       16       —  
Loss from short term investments
     —       76       —  
Changes in assets and liabilities:
                        
Accounts receivable
     (658 )     56       (533 )
Advance to customers
     (1,526 )     —       (2,482 )
Prepaid expenses and other current assets
     2,314       (4,446 )     117  
Advance to employees
     —       (500 )     —  
Trust bank balances held on behalf of customers
     (2,143 )     2,567       (869 )
Rental deposits
     —       (2 )     (179 )
Deferred revenue
     1,572       54       9,270  
Accounts payable
     (152 )     38       223  
Amount due to customers for trust bank balances held on behalf of customers
     2,143       (2,567 )     869  
Accrued expenses and other current liabilities
     270       (1,312 )     1,321  
Income taxes payable
     (4 )     (6 )     104  
Net cash provided by operating activities
     2,571       688       7,086  
Cash flows from investing activities:
                        
Acquisition of businesses
     —       (3,583 )     (293 )
Purchase of property and equipment
     (1,696 )     (1,325 )     (2,116 )
Net cash used in investing activities
     (1,696 )     (4,908 )     (2,409 )
Cash flows from financing activities:
                        
Proceeds from stock options exercised by employees
     40       194       24  
Proceeds from exercise of options granted to non-employee
     —       42       —  
Bank loan
     2,839       —       —  
Net cash provided by financing activities
     2,879       236       24  
Effect of exchange rate changes
     27       451       28  
Net increase (decrease) in cash and cash equivalents
     3,781       (3,533 )     4,729  
Cash and cash equivalents, beginning of month/quarter
     100,628       85,928       95,899  
Cash and cash equivalents, end of month/quarter
     104,409       82,395       100,628  

 

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Non-GAAP Measures
                                                                         
    Three months ended Sep. 30, 2009     Three months ended Sep. 30, 2008     Three months ended Jun. 30, 2009  
    (U.S. Dollar in thousands)     (U.S. Dollar in thousands)     (U.S. Dollar in thousands)  
    GAAP             Non-GAAP     GAAP             Non-GAAP     GAAP             Non-GAAP  
    Result     Adjustment     Results     Result     Adjustment     Results     Result     Adjustment     Results  
            (a)                     (a)                     (a)          
Income (loss) from operations
     (1,806 )     1,633       (173 )     3,904       1,611       5,515       (3,224 )     1,635       (1,589 )
                                                                         
    Three months ended Sep. 30, 2009     Three months ended Sep. 30, 2008     Three months ended Jun. 30, 2009  
    (U.S. Dollar in thousands)     (U.S. Dollar in thousands)     (U.S. Dollar in thousands)  
    GAAP             Non-GAAP     GAAP             Non-GAAP     GAAP             Non-GAAP  
    Result     Adjustment     Results     Result     Adjustment     Results     Result     Adjustment     Results  
            (a)                     (a)                     (a)          
Net income (loss)
     (1,033 )     1,633       600       4,772       1,611       6,383       (2,396 )     1,635       (761 )
  (a)  
The adjustment is for share-based compensation expenses.
Reconciliations from net income (loss) to adjusted EBITDA
                         
    Three months ended     Three months ended     Three months ended  
    Sep. 30, 2009     Sep. 30, 2008     Jun. 30, 2009  
    (U.S. Dollar in thousands)  
Net income (loss)
     (1,033 )     4,772       (2,396 )
Adjustment
                        
Interest income
     (379 )     (515 )     (302 )
Income tax benefit
     (456 )     (248 )     (538 )
Other income and expenses
     62       (105 )     12  
Depreciation
     640       498       579  
Amortization of intangibles and others
     111       82       111  
Share-based compensation
     1,633       1,611       1,635  
Adjusted EBITDA
     578       6,095       (899 )

 

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