China Finance Online Co. Limited (FNZA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to China Finance Online Reports Q3 2020 Earnings Conference Call. [Operator Instructions] I must advise you that this conference is being recorded. I would now like to hand the conference over to your participant today, Mr. Dixon Chen. Thank you. Please go ahead.

Thank you. Thank you, operator. Welcome to China Finance Online 2020 Third Quarter and First 9 Months Financial Results Conference Call. With us today are Mr. Zhiwei Zhao, Chairman and CEO; and Ms. Julie Zhu Acting, Chief Financial Officer. Mr. Zhao will provide a summary of business lines in the quarter, and then Ms. Zhu will review the quarterly financial results. Thereafter, the management will hold a Q&A session. Before we begin, I'll remind all listeners that throughout this call, we may present statements that may contain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. The words believe, estimates, plan, expects, anticipate, projects, targets, optimistic, intend, aim, future, role or similar expressions are intended to identify forward-looking statements. All statements other than historical facts may be deemed forward-looking statements. These forward-looking statements are based on our current expectations of belews including, but not limited to, statements concerning China Finance Online's operations, financial performance and competitions. China Finance Online cautions that these statements, by their nature, involve 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 statements for the future. At this time, I'll now like to turn the conference call over to Mr. Zhao. Zhao?

[Foreign Language]

Good morning, and good evening. Thank you for joining us for today's earnings call.

[Foreign Language]

During the third quarter, we continue to expect our top line, plus our financial information and advisory business experienced robust growth in the market that participation keeps reaching new highs among retail investors. We are pleased that our years of accumulated experience in fintech and wealth management are gaining popularity and showing results. Through our product mix change and vigorous cost control, we further reduced our bottom line loss in the fourth -- in the third quarter as well.

[Foreign Language]

As a professional financial media, we continue to retain our leadership and market influence. On October 16, the prestigious Hurun Institute published its 2020 Hurun China's Most Influential Financial Media Report and awarded China Finance Online as the Top 8 Most Influential Financial Media. This new ranking is based on Hurun Institute's research of leading Chinese financial media outlets, public data, website unique visitors, social media followers and article leadership. As Mr. Rupert Hoogewerf, the Chairman of Hurun Institute and Research -- Research in Chief of Hurun Report commented: "In the fast-moving information age, credibility of information source is essentially crucial. High-quality original content is the most important determining factor of media's competitiveness. This ranking list enables corporates to identify the most influential financial media in chat, and China Finance Online is proud of being 1 of them.

[Foreign Language]

We continue to promote innovations. And the rise of short-form video demonstrates how new media is becoming the new entry player for online traffic. As a professional financial media provider, we have strengthened our new media operations to deliver our enriched content to audiences through different channels. With our original company and proprietary program, we made substantial strides in the popular short-form video social media, Douyin. In recent years, we have also been providing value added service to public companies listed from domestic and international exchanges which helped grow our revenue in the third quarter.

[Foreign Language]

In addition, our fintech offerings to empower wealth management, buy-side services began to bear fruits. Our one-stop health management service platform, I-TAMP, not only empowers investment advisers and wealth managers, but also helps elevate their service efficiency and professionalism. Our I-TAMP platform has supported more than 100 third-party platforms and reached nearly 40 million investors with the growing scale of the platform. Our revenue of the Serfin services for individual investors increased significantly during the third quarter.

[Foreign Language]

Our two-year-old robo-adviser, Lingxi, remains committed to providing personalized services for global asset allocation to the vast investor population. Since its inception, Lingxi established a solid track record of balance sheet performances and risk management. During the first 9 months of 2020, the Chinese stock market experienced unprecedented volatility. Lingxi once again outclassed most of its peer global base products in the marketplace and outperformed the Shanghai Composite Index. The best strategy of Lingxi posted a return of 13.34% in the first 9 months, while the Shanghai Composite Index has a return of 5.5% during the same period. All strategies of Lingxi managed to control expected annual fluctuation under 9.54% while the expected annualized volatility of Shanghai Composite Index reached 22.47% during the same period. Lingxi's outstanding performance didn't go unnoticed by the financial industry and academia. In the 2020 China Robo-Adviser Industry Report recently published by Tsinghua University, Lingxi won as the top 10 best global advisers.

[Foreign Language]

On December 10, we hosted the 2020 Leading China Annual Award, our annual -- our annual event in Beijing. The key discussion were digital transformation of the financial industry, application of Fintech and wealth management, mutual funds and pension finance. The conference is committed to promoting the long-term development of the financial industry in China and has received high recognition from financial regulators and institutions. There were senior government officials and over 1,100 professionals from nearly 300 financial institutions in attendance at the event.

[Foreign Language]

On the institutional wealth management service front, we are forming partnerships with more and more financial institutions with the growing popularity of our content, our services and investor education, to increasingly more attention than on projects from leading financial institutions. We strongly believe that China presents a massive market opportunity in wealth management. We will continue to develop and upgrade our technologies, products and services to empower the wealth management sector in China.

[Foreign Language]

With that, I'll now turn the call to our acting CFO, Julie Zhu, to go over the financial details for the quarterly and first 9 months results. Thank you.

Thank you, Mr. Zhao. Let me walk you through our major items for the third quarter. Please note that all financial numbers are unaudited. And presented in U.S. dollars rounded to 1 decimal point for approximation. Net revenues were USD 10.7 million compared with USD 8.1 million during the third quarter of 2019 and USD 9.7 million during the second quarter of 2020. During the third quarter of 2020, revenues from financial services, financial information Advisory business, Advertising Business and enterprise value-added service contributed 29%, 47%, 15% and 9% of the net revenues, respectively, compared with 45%, 30%, 17% and 9%, respectively, for the corresponding period in 2019. Revenues from Financial services were USD 3.1 million compared with USD 3.6 million during the third quarter of 2019 and USD 3.2 million during the second quarter of 2020. The year-over-year and quarter-over-quarter decreases in revenues from financial services were mainly due to reduced revenue from the equity brokerage business. Revenues from the Financial Information Advisory business were USD 5 million compared with USD 2.4 million during the third quarter of 2019 and USD 4.6 million in the second quarter of 2020. Revenues from the Financial information Advisory business were mainly comprised of subscription services from individual and institutional customers and the financial advisory services. The year-over-year and quarter-over-quarter increases in revenues from Financial Information Advisory business were mainly due to the fast-growing investment advisory service and subscription fees from individual investors. Revenue from the Individual Investors Subscription business rose by 139.6% from third quarter of 2019, and 9.5% from the second quarter of 2020. Investment advisory service also registered strong growth with an increase of 176.3% from the third quarter of 20 -- second quarter of 2020. Revenues from the Advertising business were USD 1.6 million, compared with USD 1.3 million in the third quarter of 2019 and USD 1 million in the second quarter of 2020. Revenues from enterprise value-added service were USD 1 million compared with USD 700,000 in the third quarter of 2019

Operator? Operator?

Dixon, can you hear me okay. Zin Zhu dropped her phone. Just give me 1 second.