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Here’s the entire text of the Q&A from China Finance Online’s (ticker: JRJC) Q3 2005 conference call. The prepared remarks are here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.

Question-and-Answer Session

Operator

Thank you. The question and answer session will now begin. If you wish to ask a question, please press “1” on your telephone keypad now.

First question is from Youssef from Jeffries. Please go ahead.

Youssef Squali

Yes. Good evening. This is Youssef Squali with Jeffries. Just a couple of questions. Zhon, I was wondering, your advertising revenues did pretty well this quarter. How big can this be next year you think? So, from 25% of total revenues, how big can it become? And second, both your repeat subs and your new subs continue to go down. I was wondering what kind of trend did you see in the month of October now that you have at least one month underneath your belt. Thanks.

Zhongshan Qian

Thank you, Youssef. Let me answer your first question first. You mentioned the advertising revenue and how much it can go. Yes, we have enjoyed a very good advertising revenue growth. It’s very difficult to forecast, and also it’s not the company policy to give a forecast of our revenue. But, there are several facts I’d like to share with you. (NYSE:A), the Chinese advertising market, especially the online advertising market, has been growing very, very fast. According to some research analysts on Wall Street, people believe the online advertising business could grow about 30% year over year in the next few years. But, I cannot give you any suggestions how much we can grow, but the American team is very confident, I know this could become a major driver for our revenue in the future. And, we hope the advertising revenue could be a very important part of our total revenue next year, and the company has been putting a lot of effort in this direction. For example, we have developed very strong relationships with many of the local advertising agents. Right now, we have signed a contract with over 10 local agents in terms of representing and distributing our advertising resources to the end users. With regard to the second one, which is the subscription services; the high-end subscription services, which is basically the security-related services, has some correlations with the stock market. However, we have been looking quite actively into other financial product areas, such as the personal finance. We have launched the product successfully in August, and you have seen the numbers there. And the company’s strategy is to quickly take the market share in the mass market and improve our penetration rates in that direction, and it will help us to offset the volatility of the stock market. But, I cannot give you any indications where this subscription revenue will go because it does have some correlations to the stock market.

Youssef Squali

And just in the month of October, what have you seen? Have you seen a continuation of what you saw in Q3?

Zhongshan Qian

As you can see on the numbers, the Q3 has been relatively flat over the Q2, which may indicate that the stock market has stabilized. But despite coming months is just one month, and doesn’t give you any strong indications for the next quarter.

Youssef Squali

Okay. And you guys initiated a $10 million stock buyback. You completed it. Are you planning on initiating another stock buyback?

Zhongshan Qian

The company announced the other plan last time, so now it’s being on the process. The company will issue a report in the proper time.

Youssef Squali

Okay, thank you.

Operator

Thank you. Just a reminder, if you wish to ask a question, please press “1” on your telephone keypad now. The next question is from Hyun Chung Li of JP Morgan Hong Kong.

Hyun Chung Li

Hello, Zhon. Thanks very much for the conference call. Just a couple of questions. Number one, your subscription numbers continue to fall, and your ASF also doesn’t seem to be recovering that fast. What is the company doing to actually boost subscription at the moment? And the second question is: You have launched a personal finance product in August. I would be very grateful if you could give us some data points like revenue so far, number of units sold, and things like that. Thank you.

Zhongshan Qian

Okay. Thank you, Hyun Chung. Well, the number is decreasing year-over-year, but you can see quarter-over-quarter you have some ups and downs. For example, the number of new subscribers has actually improved over the previous quarter, and the ASF is better than the last quarter. As I mentioned earlier, it was related to the stock market performance. With regard to the personal finance service package, we launched two months ago. So far, we had a very strong download demand from our customers. This is a very early stage of our marketing campaign, and the management team strategy in the very early stage is to quickly gain the market share by distributing our packages through our partners, through our own websites or any of the new distribution channels that we have been negotiating. And so, in terms of the revenue, we don’t expect a strong revenue income from this business line in the near future, but we, as the popularity grows and the penetration rate grows, we think in the near-term it should give us dividends. The top priority at this moment is the distribution rather than revenue.

Hyun Chung Li

Okay. If the stock market continues to go flat or a little bit down, I think your top line subscription revenue should continue to decline. But, do you think your increase in advertising revenues should offset this, and maybe even give growth to your top line in the future?

Zhongshan Qian

Again, sorry, Hyun Chung, the company’s policy is not to give any forecast of our total revenue. And as I said, the advertising business in China has been enjoying quite a good growth in the past, and people believe it will continue to grow in the next few years. We hope the company’s advertising business will grow in line with the overall industry. But, it’s very difficult for us to forecast whether the advertising business will offset the subscription services if the stock market continues to go down.

Hyun Chung Li

Okay. In that case, can you give us some indication of your company’s page views and the trend? Any specific numbers you can give us?

Zhongshan Qian

Yes. Actually, the company’s page views and the user setting has continued to improve. As a matter of fact, in the third quarter our average daily user session has set another historical record, reached 2.3 million daily user sessions. So, we see improved traffic, and we see improved page views. But having said that, it doesn’t guarantee that we’re bringing more subscribers, because subscribers also are sensitive to the stock market proponents.

Hyun Chung Li

What was the daily user session in second quarter, please?

Zhongshan Qian

Second quarter is about 1.7 million.

Hyun Chung Li

Thank you.

Operator

Thank you. Just a reminder, if you wish to ask a question, please press “1” on your telephone keypad now. The next question is from individual investor Nathan (ph). Please go ahead.

Mr. Nathan. Its your turn now.

I think Mr. Nathan has withdrawn the question. So, next question is from Jeffery Keith from USA. Please go ahead.

Jeffrey Keith

Yes. Two questions. First is a technical question. It seems to me that $0.02 out of the $0.06 year EPS this quarter is coming from the foreign exchange net gains. Because other companies, I mean other Chinese companies who just IPOed usually will report a foreign exchange loss, if deposited their cash in the US dollars. However, you reported a gain on that. So, could you give us more information on that? Does that mean you converted most of the US dollar out of your process into the RMB, and that will create some foreign exchange gains?

Zhongshan Qian

Okay, yes. Actually, it’s interesting. Hello?

Jeffrey Keith

Yes, I’m here.

Zhongshan Qian

Okay, yes. The company has converted most of the dollar proceeds from IPO into RMB, so that’s why we don’t have a negative gain, I’m sorry, the FX loss. And the other thing is, actually it’s very technical, because the company in China, when you deposit the proceeds into the local domestic companies, you have basically write a loan to the domestic companies. So, on the balance sheet of the domestic company, it is actually established (ph). And because the functional accounting is RMB, so that’s why you have the FX gain.

Jeffrey Keith

Okay. So, and the second question is a more general strategic question. You have been keep saying, almost every quarter, the performance metrics is going down because of the soft Chinese stock market. However, looking back at the third quarter, the Shanghai stock market index was actually very strong. The index rebounded from 1,000 psychological level, to pretty high level, however, your second quarter performance metrics still not very satisfactory to investors. And in the fourth quarter, October has already indicated that the Chinese investors have started down to deal G-shares, and the G-share bubble is about to bust. Now, the Chinese stock market may have some fundamental variation or corruption problems. Facing, this big environmental challenge, how would you improve your performance metrics on that? Because the stock market, although no one knows where the stock market goes, and the stock market may keep going down or keep, stay flat for a long time due to some intrinsic problems. And you are performing in this market, so how would you do something, either do more advertising or do more aggressive marketing to increase your bottom line?

Zhongshan Qian

Okay. Your name is Jeffrey, right?

Jeffrey Keith

Yes.

Zhan Qian

Yes, okay. Jeffrey, it’s a good question. Let me just answer your first question first. You said the stock market improves quite a lot in the third quarter, but actually we see some calculation. If you look at the average, the stock market level, the Shanghai stock exchange index, the second quarter’s average index level is pretty much in line with the third one. So, the stock market is less volatile in third quarter in my view, but not by not much. And the company is aware that the subscription services, is related to the stock market performance. That’s why we have devoted many of our resources into other financial service area, such as the personal finance, which is a target that has a much broader mass market, and advertising. And, we think those two new drivers will help us to deviate from the fluctuation and the volatility of the financial market in China. The company has no intention to predict and forecast the financial stock market of China, and so that’s why, even though, yes, we are aware of many of the problems in the stock market as Jeff mentioned, but we don’t pass on the stock market. And as a matter of fact, the company has been actively looking for new businesses that are less correlated with the stock market.

Jeffery Keith

Thank you.

Operator

Thank you. Just a reminder, if you wish to ask a question, please press “1” on your telephone keypad now. Once again, if you wish to ask a question, please press “1” on your telephone keypad now.

No further questions at the moment.

Jing Wu

Okay. If there’s no further questions, that will be all for today’s conference. Any of you have further questions, our IR staff will be with you after this conference, and you can reach the IR group at 8610-6621-0425, and our e-mail address is ir@jrj.com. All right, ladies and gentlemen. Thank you very much for joining us today.

Zhongshan Qian

Thank you.

Operator

Thank you for your participation in today’s conference. This concludes the meeting. You may now disconnect your lines.

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