China Finance Online Reports 2020 First Quarter Unaudited Financial Results

BEIJING, July 24, 2020 /PRNewswire/ — China Finance Online Co. Limited (“China Finance Online”, or the “Company”, “we”, “us” or “our”) (NASDAQ GS: JRJC), a leading web-based financial services company that provides Chinese retail investors with fintech-powered online access to securities trading services, wealth management products, securities investment advisory services, as well as financial database and analytics services to institutional customers, today announced its unaudited financial results for the first quarter ended March 31, 2020.

First Quarter 2020 Financial Highlights and Recent Development
 

  • Net revenues were $9.8 million, compared with $9.9 million during the first quarter of 2019 and $8.7 million during the fourth quarter of 2019.
     
  • Revenues from the financial information and advisory business were $3.5 million, compared with $3.2 million during the first quarter of 2019 and $2.2 million in the fourth quarter of 2019.
  • The bottom line losses continued to narrow. Net loss attributable to China Finance Online was $1.9 million, compared with a net loss of $2.8 million in the first quarter of 2019 and a net loss of $3.4 million in the fourth quarter of 2019.
     
  • The moderate strategy of Lingxi Robo-Advisor (“Lingxi”), with a return of 2.8% and a drawdown rate of 0.03% in the first quarter, outperformed a loss of 10.35% and a drawdown rate of 14.62% in the Shanghai Composite Index.
     
  • China Finance Online signed a partnership agreement with Dow Jones to join forces to serve the large financial information and data market in China.

Mr. Zhiwei Zhao, Chairman and CEO of China Finance Online, commented, ” during the first quarter of 2020, the COVID-19 pandemic caused a devastating blow to the Chinese economy and created unprecedented uncertainties for the global economy. The stock markets around the world experienced massive selloffs and unusual volatility. As a result, our institutional business was negatively impacted as some institutions scaled down or postponed their advertising placements and our business development activities were limited by the lockdowns and travel restrictions. However, our financial results of stable revenue and reduced loss in the first quarter demonstrated the resilience of our diversified offerings and the further improvement of cost controls while we weathered the storm and extended our leadership in online user engagement.”

“Our ability to navigate through the challenging first quarter amid the downturn of the Shanghai stock market is mainly attributable to the outstanding performance of the investment advisory services. Over the decade, we’ve dedicated ourselves to better understanding the behaviors of mass retail investors. We strongly believe that, as the Chinese stock market continues to mature, more and more retail investors would willingly seek professional advices, and the transition from simple trading transactions to sophisticated wealth management programs will present more opportunities for professional financial service providers, including us.”

“The growth of wealth management business also benefited from the fintech wealth management empowerment system that we’ve developed over the years. Now, we are introducing this system to institutions. Along with the secular trend that drives financial institutions’ emphasis on wealth management, our investor education services, investment advisory services and asset allocation services are well received by more and more institutions. Our recent partnership with Dow Jones will also enable us to not only bring timely, credible, and trusted global business news and data to the domestic Chinese market but further broaden our audiences’ global vision as well.”

“In this new environment shaped by the pandemic, we continued to bring innovations to our operations. As a tier-one financial news aggregator, we enhanced our production capabilities to introduce a series of high-quality content such as webinars where we invited renowned domestic and international economists and chief strategists to share their views on the economy as well as the emerging growth opportunities in the complicated post-pandemic world. We also continued to explore different media and diversified channels to deliver our enriched content to our audience. For example, our account on the popular short-form video social media, DouYin, has already attracted nearly one million viewers. On new services, we introduced enterprise value added services in the recent year. Through both online and offline channels, we provide professional communication services to companies listed on domestic or international market. This new service has been retaining its growth momentum even during the turbulent first quarter.”

“Looking into the future, we will continue to strengthen our fintech capability through optimization and upgrades of our services and products to empower the wealth management sector in China,” Mr. Zhao concluded.

First Quarter 2020 Financial Results

Net revenues were $9.8 million, compared with $9.9 million during the first quarter of 2019 and $8.7 million during the fourth quarter of 2019. During the first quarter of 2020, revenues from financial services, the financial information and advisory business, advertising business and enterprise value-added services contributed 42%, 36%, 14%and 8% of the net revenues, respectively, compared with 45%, 33%, 14% and 7%, respectively, for the corresponding period in 2019.

Revenues from financial services were $4.2 million, compared with $4.5 million during the first quarter of 2019 and $4.1 million during the fourth quarter of 2019. Revenues from financial services were mainly generated from equity brokerage services. Revenues from the equity brokerage business decreased by 10.8% year-over-year but increased by 8.9% quarter-over-quarter. The year-over-year decrease in revenues from financial services was mainly due to reduced revenue from the equity brokerage business.

Revenues from the financial information and advisory business were $3.5 million, compared with $3.2 million during the first quarter of 2019 and $2.2 million in the fourth quarter of 2019. Revenues from the financial information and advisory business were mainly comprised of subscription services from individual and institutional customers and financial advisory service. The year-over-year and quarter-over-quarter increases in revenues from the financial information and advisory business were mainly due to the fast-growing investment advisory services. During the first quarter, investment advisory services for retail investors rose by 61.7% from first quarter of 2019 and 194.1% from the fourth quarter of 2019 as more retail investors were seeking professional advice in the volatile market during the outbreak of the COVID-19 Pandemic.

Revenues from advertising business were $1.3 million, compared with $1.4 million in the first quarter of 2019 and $1.4 million in the fourth quarter of 2019.

Revenues from enterprise value-added services were $0.8 million, compared with $0.7 million in the first quarter of 2019 and $0.9 million in the fourth quarter of 2019. Enterprise value-added services is a relatively new service that came out of our advertising business. Leveraging its accumulated large corporate data and research and increasing audience base online, China Finance Online provides professional communication services to companies listed on domestic or international market to help increase their visibility in the market.

Gross profit was $5.9 million, compared with $6.4 million in the first quarter of 2019 and $5.5 million in the fourth quarter of 2019. Gross margin in the first quarter was 60.1%, compared with 64.5% in the first quarter of 2019 and 63.8% in the fourth quarter of 2019. The year-over-year decrease in gross margin was mainly due to decreased revenue contribution from individual subscription services which has a higher gross margin and the decreased gross margin related to the Hong Kong brokerage business in the first quarter of 2020.

General and administrative expenses were $2.2 million, compared with $2.7 million in the first quarter of 2019, and $4.7 million in the fourth quarter of 2019. The year-over-year decrease was mainly attributable to further streamlining of the corporate managerial operations. The quarter-over-quarter decrease was mainly attributable to one-time charges including higher bad debt provision in the fourth quarter of 2019.

Sales and marketing expenses were $3.3 million, compared with $3.6 million in the first quarter of 2019, and $3.1 million in the fourth quarter of 2019. The year-over-year decrease was mainly attributable to improved efficiency. The quarter-over-quarter increase was mainly due to higher marketing expenses related to the investment advisory business.

Research and development expenses were $2.0 million, compared with $2.6 million in the first quarter of 2019 and $1.8 million in the fourth quarter of 2019. The year-over-year decrease was mainly attributable to improved efficiency after consolidation of research and development teams throughout different business units. The Company continues to support research and development in the fintech segment to further develop its fintech capabilities.

Total operating expenses were $7.5 million, compared with $8.9 million in the first quarter of 2019, and $9.6 million in the fourth quarter of 2019. The year-over-year decrease was mainly due to improved efficiency and effective cost controls. The quarter-over-quarter decrease was mainly due to bad debt provisions at the Hong Kong equity brokerage business in the fourth quarter of 2019.

Loss from operations was $1.6 million, compared with a loss from operations of $2.5 million in the first quarter of 2019 and a loss from operations of $4.1 million in the fourth quarter of 2019.

Net loss attributable to China Finance Online was $1.9 million, compared with a net loss of $2.8 million in the first quarter of 2019 and a net loss of $3.4 million in the fourth quarter of 2019.

Fully diluted loss per American Depository Shares (“ADS”) attributable to China Finance Online was $0.83 for the first quarter of 2020, compared with fully diluted loss per ADS of $1.22 for the first quarter of 2019 and fully diluted loss per ADS of $1.53 for the fourth quarter of 2019. Basic and diluted weighted average numbers of ADSs for the first quarter of 2020 were 2.3 million, compared with basic and diluted weighted average number of ADSs of 2.3 million for the first quarter of 2019. Each ADS represents fifty ordinary shares of the Company.

Recent Developments 

  • Lingxi Robo-Advisor recorded strong performance in first quarter of 2020

According to our proprietary asset allocation system, our Robo-Advisor product, Lingxi, provides Chinese retail investors with a wide array of investment combinations and personalized global asset allocations through Chinese domestic mutual funds. Since its inception, Lingxi established a solid track record of balancing performance and risk management. During the first quarter of 2020, the Chinese stock market experienced an unprecedented loss due to the COVID-19 pandemic. However, Lingxi produced an average return of 0.2%, once again outclassing most peer Robo-Advisor products in the marketplace and significantly outperforming the Shanghai Composite Index that suffered a loss of 10.4% during the same period. The best strategy of Lingxi posted a return of 2.8% in the first quarter of 2020. All strategies of Lingxi managed to control the expected annualized fluctuation under 12.6% while the expected annualized volatility of Shanghai Composite Index reached 27.8% during the same period. 

  • China Finance Online Signs Partnership Agreement with Dow Jones

In July, the Company announced it has signed a partnership agreement with global news and data business, Dow Jones. Under the agreement, Dow Jones will provide China Finance Online with access to a sub-set of its Chinese language newswire service, which will include market commentary and spot news in Chinese. The two parties will work together to better serve the huge financial information and data market in China. This partnership will combine global economic data as well as financial news and information expertise from Dow Jones with China Finance Online’s domestic market-leading data and audience engagement to bring timely, quality and professional capital market information and insight to Chinese investment and business audiences.

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