SOURCE: China INSonline Corp.

February 18, 2009 11:20 ET

China INSOnline Reports Second Quarter and Six Month Revenues Advanced 31% and 77% Respectively as Online Insurance Advertising Continued Strong Growth

However, Net Income Declined in Both Periods Due to Costs of Successful 2008 Ad Campaign, Reduced Revenues From Software Segment and Decision to Post Charge for Bad Debt

BEIJING--(Marketwire - February 18, 2009) - China INSOnline Corp. (NASDAQ: CHIO), a rapidly growing integrated licensed insurance services provider, which operates www.soobao.cn, one of China's leading insurance services web portals, today reported second quarter and six month results for the periods ending December 31, 2008.

According to the Company, revenues in the second quarter this year grew 31% from $2,954,064 in the same period in the last fiscal year to $3,876,754, primarily as a result of a more than doubling of revenues from online insurance advertising sales in the quarter to $3,565,037 from $1,751,511 in the second quarter last year. The Company said that this growth was spurred by the growth in insurance teams and agents that placed ads in the period, resulting in 186 ad contracts being in effect compared with 134 contracts in the second quarter of the prior fiscal year.

The Company also saw a small (8%) but significant contribution to revenues in the period from its insurance agency operations following the acquisition of the GHIA Company in October 2008, with revenues in the quarter of about $297,000 compared with $57,685 in the same quarter last year.

The Company's software development operations, however, contributed $14,649 to this year's second quarter revenues compared with $1,144,868 in the same period last year, as it was engaged on only one small project during the period.

While gross profits in the second quarter ended December 31, 2008 increased 17% to $3,225,744, the Company said net income in the period declined 64% to $788,870 or $0.02 per share, as compared with $2,205,567 or $0.08 per share, in the prior year's second quarter. The Company said EPS figures reflect an increase in weighted average shares outstanding from 28,394,270 at December 31, 2007 to 40,000,000 as of December 31, 2008.

In addition to the small contribution to net income from software operations compared to the prior quarter, the Company cited the following as key reasons for the decline in net income in the quarter:

--  In the quarter, the Company incurred a $991,134 cost for advertising
    expenses.  This expense relates to the successful campaign launched in May
    2008 to build awareness of the Company and its industry leading insurance
    portal.  Though costs of the campaign were incurred over several months,
    the cost was recorded in the second quarter on completion of the campaign.
    In last year's second quarter there was no advertising expense.
--  In view of the current economic environment, in the second quarter
    this year the Company created a bad debt provision of $646,740 for
    customers affected by the global financial crisis.
    

Six Month Results

For the six months ended December 31, 2008 the Company said revenues grew 77% to $9,397,053, compared with revenues of $5,300,753 in the same period last year. This reflected a significant contribution from its software segment in the first quarter of 2008 and a $7,098,892 contribution through the first six months of the year from online insurance advertising.

In the current year's first half the Company said gross profits grew 64% compared to the same period last year. Net income in the first half this year, however, was down approximately 20% compared to the same period last year, reaching $3,245,270 or $0.08 per share, compared with $4,038,203 or $0.16 per share in the first half of the prior fiscal year. (EPS figures are computed on the basis of 40,000,000 average weighted shares outstanding in the first half of the year ended December 31, 2008 compared with 26,712,035 average weighted shares outstanding in the period ended December 31, 2007).

The Company said these results were mainly a consequence of the same factors that reduced net income in the second quarter. Specifically, the advertising expense recorded by the Company in the second quarter, the reduced contribution in the second quarter from the software segment, and a provision for bad debt of $932,338 in the first six months of 2008. Additionally, in the first half this year, there was an 80% increase in income taxes compared with the prior year first half.

Continuing Confidence

Mrs. Betty Xu, Chief Executive Officer of the Company, stated: "While we were not happy to report a decline in net income, clearly the Company made substantial progress in the quarter. This was reflected, in particular, in our strong online advertising sales gains as well as in the underlying reason for this, namely, the continued strong growth in insurance agency groups from which ads were placed."

She added, "While the current environment may have some impact on our business, at this time it would be difficult to quantify. However, we remain very confident in our long term growth model."

Mr. Zhenyu Wang, Chairman of the Board of China INSOnline Corp., added, "We believe the decision to post a substantial bad debt provision was appropriate in this environment and will take all steps necessary to collect past due amounts. Meanwhile, we continue to see growth in China, and a population that is vastly underinsured compared to the rest of the world, which creates an outstanding growth opportunity for us."

About China INSOnline Corp.

China INSOnline Corp., incorporated in Delaware and headquartered in Beijing, is a rapidly growing licensed insurance agency in The People's Republic of China. Representing major insurance underwriting firms in China, the Company offers online automobile, property and life insurance services through its industry web portal, www.soobao.cn. The Company's online platform also provides consumers, agents and insurance companies with online transaction capabilities, advertising, online inquiry, news circulation, statistical analysis and software development services. For more information, please visit www.china-insonline.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and condition. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company 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, but not limited to, market competition, pricing and new technology; effectiveness of marketing; changes in laws and regulations; risks inherent in our operations and other factors such as those discussed in the Company's reports filed with the Securities and Exchange Commission. In addition, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof. No securities regulatory authority has either approved or disapproved the contents of this news release.

                                 TABLES

                         China INSOnline Corp.

                         Results of Operations

  For the Three Months Ended December 31, 2008 Compared To Three Months
                        Ended December 31, 2007

Our operating results are presented on a condensed consolidated basis for the three months ended December 31, 2008, as compared to the three months ended December 31, 2007.

The following table sets forth the amounts and the percentage relationship to revenues of certain items in our condensed consolidated statements of income for the three months ended December 31, 2008 and 2007.

                             2008             2007           Variance
                       ---------------  ---------------  -----------------

REVENUES               $ 3,876,754 108% $ 2,954,064 102% $    922,690   31%
DISCOUNTS                  296,453   8%      61,779   2%      234,674  380%
                       -----------      -----------      ------------
REVENUES, NET            3,580,301 100%   2,892,285 100%      688,016   24%
COST OF SALES              354,557  10%     129,729   4%      224,828  173%
                       -----------      -----------      ------------
GROSS PROFIT             3,225,744  90%   2,762,556  96%      463,188   17%
Selling expenses            81,619   2%      35,227   1%       46,392  132%
Advertising expenses       991,134  28%           0   0%      991,134  100%
General &
 administrative
 expenses                  348,978  10%     136,864   5%      212,114  155%
Bad debts                  646,740  18%           0   0%      646,740  100%
                       -----------      -----------      ------------
OPERATING INCOME         1,157,273  32%   2,590,465  90%   (1,433,192)(55)%
Financial income, net       22,932   1%       5,204   0%       17,728  341%
                       -----------      -----------      ------------
INCOME BEFORE TAXES      1,180,205  33%   2,595,669  90%   (1,415,464)(55)%
Income tax expense         391,335  11%     390,102  13%        1,233    0%
                       -----------      -----------      ------------
NET INCOME             $   788,870  22% $ 2,205,567  76% $ (1,416,697)(64)%
                       ===========      ===========      ============



                                China INSOnline Corp.

                 For the Six Months Ended December 31, 2008 Compared To
                           Six Months Ended December 31, 2007

Our operating results are presented on a condensed consolidated basis for the six months ended December 31, 2008, as compared to the six months ended December 31, 2007.

The following table sets forth the amounts and the percentage relationship to revenues of certain items in our condensed consolidated statements of income for the six months ended December 31, 2008 and 2007.


                            2008             2007            Variance
                      ---------------  ---------------  -----------------

REVENUES              $9,397,053  104% $5,300,753  101% $ 4,096,300    77%
DISCOUNTS                363,388    4%     61,779    1%     301,609   488%
                      ----------       ----------       -----------
REVENUES, NET          9,033,665  100%  5,238,974  100%   3,794,691    72%
COST OF SALES            790,413    9%    222,833    4%     567,580   255%
                      ----------       ----------       -----------
GROSS PROFIT           8,243,252   91%  5,016,141   96%   3,227,111    64%
Selling expenses         165,893    2%     55,943    1%     109,950   197%
Advertising expenses   1,901,068   21%          0    0%   1,901,068   100%
General &
 administrative
 expenses                738,371    8%    214,962    4%     523,409   243%
Bad debts                932,338   10%          0    0%     932,338   100%
                      ----------       ----------       -----------
OPERATING INCOME       4,505,582   50%  4,745,236   91%    (239,654)  (5)%
Financial income, net     22,818    0%      6,475    0%      16,343   252%
                      ----------       ----------       -----------
INCOME BEFORE TAXES    4,528,400   50%  4,751,711   91%    (223,311)  (5)%
Income tax expense     1,283,130   14%    713,508   14%     569,622    80%
                      ----------       ----------       -----------
NET INCOME            $3,245,270   36% $4,038,203   77% $  (792,933) (20)%
                      ==========       ==========       ===========

Contact Information

  • Contacts:

    Ms. Liya Wu
    China INSOnline Corp.
    Tel: 646-573-7654

    Ken Donenfeld
    DGI Investor Relations
    Tel: 212-425-5700
    Email: donfgroup@aol.com