China Finance Online Co. Limited (NASDAQ:JRJC)
F1Q 2013 Earnings Call
July 04, 2013, 08:00 AM ET
Shiwei Yin – IR
Jun Wang – CFO
Ladies and gentlemen, thank you for standing by and welcome to the JRJC First Quarter 2013 Earnings Call. At this time all participants are in a listen-only mode. There will be presentation followed by question-and-answer session. (Operator Instructions) I'd like to point you that this conference is being recorded today Friday 5th July, 2013. I would now like to hand the conference over to your host today. Mr. Yin Shiwei. Thank you. Please go ahead.
Thank you, Eric. Thank you for joining us today. First of all, we would like apologize for having to host today's call on a public holiday as the management had prior travelling obligation.
Before we begin, I will remind all listeners that throughout this call we may present statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, estimate, plan, expect, anticipate, project, target, optimistic, intend, aim, future, will, or similar expressions are intended to identify forward-looking statements.
All statements other than historical facts may be deemed forward-looking. These forward-looking statements are based on current expectations or beliefs, including, but not limited to statements concerning China Finance Online’s operations, financial performance and condition.
China Finance Online cautions that these statements by their nature involves risks and uncertainties and actual results may differ materially depending on a variety of important factors including those discussed in China Finance Online’s reports filed with the Securities and Exchange Commission from time-to-time. China Finance Online specifically disclaims any obligation to update the forward-looking information in the future.
Now I’ll first read prepared remarks by Mr. Zhiwei Zhao, Chairman and CEO of China Finance Online after which our CFO Mr. Jun Wang will review the financials of the first quarter.
In the first quarter the Chinese stock market underperformed all major global indices and continue to show strong volatility. As Shanghai Composite Index ended the quarter in negative territory, while equity markets in Europe, Japan and the U.S. scored double-digit gains.
Investor confidence is still weak and the business environment remains challenging. Partially as a result of ongoing streamlining efforts our operations showed early signs of improvement in the first quarter as our top-line gained quarter-over-quarter and our operating expenses decreased both year-over-year and quarter-over-quarter.
We continue to expect further improvement in our financial positions in the second half of 2013 and we remain confident in the long-term prospect of our business. Looking ahead, we continue to believe that Internet will play an increasingly important role in China's financial industry. Leveraging on the massive user base of our flagship portals and our professional capabilities, we aim to provide higher quality financial products and services to our customers.
We have been consolidating and integrating with complementary industry resources and we look forward to working closely with industry leaders in the future to bring better products and services to our customers. Despite a sluggish domestic stock market, we are proactively laying the foundation of growth through integrating our proven capabilities in financial information, financial service and Internet capabilities.
Now I would turn over the call to Mr. Jun Wang, Chief Financial Officer to give an overview of our financials.
Thank you, Shiwei. Let's briefly review our first quarter financial results. All financial numbers are written in U.S. Dollars and rounded to one decimal point for approximation. Our net revenues for the first quarter were $5.5 million compared with $9.1 million for the quarter of 2012.
We are up almost $5.2 million for the fourth quarter of 2012. Subscription fees from individual customers, subscription fees from institutional customers, advertising revenues and revenues from iSTAR Finance which contributed 41%, 12%, 26% and 17% to total revenues respectively, compared with 69%, 8%, 9%, and 14%, respectively a year ago.
Revenues from subscription fees paid by individual customers decreased 64.0% year-over-year to $2.3 million. The decrease is largely due to the Company's previously disclosed strategic transition and sluggish Chinese stock market. Institutional subscription revenues decreased 15.0% year-over-year to $0.7 million. Revenues from advertising increased 85.0% year-over-year to $1.5 million from $0.8 million in the first quarter of 2012. Revenues from iSTAR Finance were $0.9 million in the first quarter.
For the first quarter of 2012, gross profit was $3.6 million compared with $7.1 million for the first quarter in 2012, but up from $3.4 million in the fourth quarter of 2012. Gross margin for the first quarter of 2013 was 66.1% compared with 78.2% for the first quarter of 2012, but up from 65.5% in the fourth quarter of 2012. The year-over-year decrease in gross margin was mainly due to lower revenues.
G&A expenses for the first quarter of 2013 were $2.9 million or 52.7% of net revenues, compared with $2.8 million or 30.4% of net revenues a year ago, but down from $3.1 million or 59.8% of net revenues for the fourth quarter of 2012.
Sales and marketing expenses for the first quarter were $3.1 million or 56.7% of net revenues compared with $3.5 million or 39.0% in the first quarter of 2012 and $3.2 million or 61.6% in the fourth quarter of 2012. The year-over-year decrease in sales and marketing expenses in absolute value was due to lower marketing expenses and reduced sales commissions.
Product development expenses for the first quarter were $2.2 million or 40.2% of net revenues, compared with $3.2 million or 35.2% of net revenues a year ago.
Total operating expenses for the first quarter were $8.2 million, down from $9.5 million in the first quarter of 2012 and $8.5 million in the fourth quarter of 2012.
Net loss attributable to China Finance Online for the first quarter of 2013 was $4.3 million, compared with a net loss of $1.3 million in the first quarter of 2012. Both basic and diluted weighted average number of ordinary shares in the first quarter of 2013 was 109.0 million.
Now let me walk you through our financial position. As of March 31, 2013, total cash, cash equivalents and restricted cash were $50.6 million and short-term investments were $1.0 million. Accounts receivable in non-margin related business were $8.5 million, while iSTAR Finance had margin-related accounts receivables of $2.5 million.
As a result of the Company's participation in the Langfang City real estate project as disclosed in the fourth quarter earnings release, the long-term investment, net was $22.5 million as of March 31, 2013 compared with $0.8 million as of December 31, 2012. Total shareholder's equity was $75.9 million as of March 31, 2013.
The combined current and non-current deferred revenues at the end of the first quarter of 2013, which mainly represents prepaid subscription fees from individual customers and had not been rendered as of March 31, 2013, were $9.3 million. We are done operator. We are ready to begin the Q&A session. Thank you.
Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions). Your first question comes from the line of Kevin Vincent. Please ask your question.
Yes, I noticed that Alexa's Traffic Ranking has been trending up for both JRJ.com and stockstar.com. Can you comment on that please?
I think, it shows actually we are doing the right thing in engaging end users and improvement can be attributed to range of process that we made for the past years also. In addition, we recently started real-time trading broadcast to attract the investors to interact directly with professional investment advisors in real-time and we also continue to host key investment forums and ongoing stock trading simulation contests and all these kinds of activities have contributed to improve our brand loyalty among users and also to - nothing is more important than continually enlarging our customer base in the Internet arena.
We continue to develop Internet capabilities to enhance our core competitiveness and also to expand the influence of our financial media platform and we believe that Internet will play a huge role in China's financial industry and the beginning of Internet based finance is already there, so leveraging on the massive user base of our flagship portals and then our professional capabilities in the financial data procurement and financial services, we believe, we will continue to innovate to provide higher quality investment products and services to our customers and also lead Internet finance in China. Thank you.
Okay. I have a second question, please. What are you doing to consolidate resources and grow new business?
We have been leveraging on the massive user base of our flagship portals to consolidate in this resource. So we are looking forward to working currently with other industry leaders to take advantage of the assets, capabilities and services that are complementary to each other and at the same time, we perform ongoing evaluation of potential acquisition targets or potential strategic alliance partnership and prefer to keep our assets liquid, so that we can act promptly when the opportunity presents itself. Thank you, Kevin.
Thank you very much. (Operator Instructions). There is no further question at this time. I will now hand it back to Mr. Shiwei Yin. Please go ahead.
Thank you all for participating in today's earnings call and webcast and we look forward to speaking with you again. Have a good day.
Ladies and gentlemen, that does conclude the conference for today. Thank you for participation. You may all disconnect.
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