China Finance Online Co. Limited
Q3 2005 Earnings Call Transcript

Published: 17 Nov 2005

[Operator:]

Thank you for holding, and welcome to China Finance Online’s Third Quarter Earnings Release. At this time all participant lines are in listen-only mode. The presentation will be followed by a question and answer session. Any instruction will be informed at that time. I would now like to turn the conference over to your host, Ms. Jing Wu, of China Finance Online. Thank you, Ms. Wu.

[Jing Wu:]

All right. Thank you, Operator. Welcome everyone to China Finance Online’s Third Quarter 2005 Conference Call. Today, with me in the conference are Mr. Zhao Zhiwei, our CEO, and Mr. Zhongshan Qian, our President and CFO. After the market closed today, the company issued a press release containing the financial results for the third quarter 2005. The purpose of this conference call is to provide its investors (ph) with further detailed information regarding financial results. Following the formal remarks, we’ll be happy to take any questions you might have. Before we begin, it is my duty to remind you that, during today’s conference call, we might be making forward-looking statements. This announcement contains forward-looking statements. These statements are made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Statements that are not historical fact, 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 risk and uncertainty. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Potential risks and uncertainties include, but are not limited to, China Finance Online's historical and possible future losses, limited operating history, uncertain regulatory landscape in the People’s Republic of China, fluctuations in quarterly operating results, failure to successfully compete against new and existing competitors, and the company's reliance on China Finance Online's reliance on relationships with Chinese stock exchanges and raw data providers. 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, 2004, and other filings with the Securities and Exchange Commission. China Finance Online does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Now, I will pass this call to Mr. Zhao Zhiwei, our CEO.

[Zhao Zhiwei:]

Through interpreter

[Zhongshan Qian:]

Thanks, Zhiwei. Good morning for those in Asia, and good evening for those in Northern America. In addition to the highlights of our financial and operational results in today’s earnings release, I would like here to discuss a few points in more detail. Our total net revenue for the quarter was $1.81 million, up about 8%, year-over-year and relatively flat compared to the last quarter. Among the net revenues, our advertising-related revenue in Q3 has reached US$449,000, representing 25% of the total net revenue. The advertising growth is 34% quarter-over-quarter and 138% compared to the same quarter a year ago. We believe our advertising growth was due to the increased traffic to our website because of the online marketing campaign and the company’s more efforts dedicated to the advertising-related business division. Our gross margin for the quarter was 94%, which is relatively the same compared to the last quarter. This is because our cost of revenue remains relatively stable. Our operating expense for the quarter totaled $1.01 million for the third quarter, up 139% from $424,000 year-over-year. The quarter-over-quarter comparison is flat. Our year-over-year expense increase is primarily due to the increase of our general and administrative expenses, and our sales and marketing expenses after the IPO. The sales and marketing expenses are related to the marketing campaigns that started in the second quarter of 2005. We have established sponsorship and a co-branding partnership with over 30 high-traffic Chinese websites, such as tfol.com, Mattie (ph), tom.com, China.com and 21cn. The co-branding partnerships will help us to (NYSE