Lion Announces Unaudited First Half of 2020 Financial Results
HONG KONG, Aug. 19, 2020 /PRNewswire/ -- Lion Group Holding Ltd. ("Lion" or "the Company") (NASDAQ: LGHL), operator of an all-in-one trading platform that offers a wide spectrum of products and services with a focus on Chinese investors, today announced its unaudited financial results for the six months ended June 30, 2020.
First Half of 2020 Financial and Operating Highlights
All comparisons are made on a year-over-year ("yoy") basis.
-- Total revenues decreased by 19.7% to $6.4 million from $8.0 million.
-- Net income decreased by 31.3% to $2.4 million from $3.5 million.
-- Total number of revenue-generating customer accounts decreased by 1.7%
to 3,980 from 4,047 due to the decline in Lion's insurance business.
-- Total revenue-generating CFD (contract for difference) trading client
accounts increased by 25% to 2,295 from 1,843.
-- CFD trading volume decreased by 67.1% to 111,418 lots from 338,873 lots.
-- Futures brokerage trading volume decreased by 62.0% to 223,656 lots from
595,554 lots.
-- TRS (total return swap) trading volume was $9.1 million in the first
half of 2020 and $11.3 million in July 2020.
Mr. Chunning (Wilson) Wang, CEO of Lion, commented, "As the COVID-19 outbreak disrupted business operations around the world in the first half of 2020, our businesses were negatively affected by border closures in particular. Travel restrictions in Hong Kong caused cancellations and prevented management from attending branding, business promotion, and exhibition activities, which limited our opportunities to acquire new customers. In addition, the economic impact of the pandemic negatively affected our customers, as many are business owners. This caused a decrease in both their willingness to trade and make investments as well as their disposable income allocated making such transactions. Furthermore, our customers' concerns about future unpredictability due to COVID-19 and heightened geopolitical tensions also caused their trading activity to decline, impacting our CFD trading business in particular. Despite these challenges, we are seeing signs of revenue recovery and believe our business is optimized for improved performance as normal operations resume."
"We were also able to make progress towards new business opportunities. We have entered into ISDA master agreements and related supplementary agreements with CICC and Guotai Junan Securities, two of the top five swap traders in China. In addition, we recently launched the total return swap (TRS) trading services in an official capacity, offering international investors the opportunity to invest in China's stock market with higher leverage compared to buying China's stocks directly. We are also pleased to announce that Lion successfully completed its business combination in June and is now trading on the NASDAQ under ticker 'LGHL'."
"Uncertainty surrounding the COVID-19 outbreak is a challenge that our industry, and Lion will continue to navigate in the coming months, especially with recent flare-ups in our operating geographies. However, we will continue to closely monitor the situation, and we remain committed to building and growing our integrated trading platform to provide pioneering, world-class, high-quality services to Chinese investors around the world," concluded Mr. Wang.
FINANCIAL RESULTS
For the Six Months Ended June 30, 2020:
Revenues
Total revenues were $6.4 million in the first half of 2020, representing a decrease of 19.7% yoy from $8.0 million in the first half of 2019. The decrease was attributable to: (i) a decrease in market marking commission income; (ii) a decrease in futures and securities brokerage income; and (iii) a decrease in insurance brokerage income, partially offset by an increase in CFD trading profits.
-- Revenues generated from CFD trading services were $5.1 million,
representing an increase of 9.0% yoy from $4.7 million in the prior year
period. The Company began offering CFD trading services in May 2019.
Such revenues are derived from the commissions charged to clients who
trade on Lion's platform, as well as bid/offer spreads and trading
profit. Trading profit increased by $1.6 million, partially offset by a
decrease of $1.1 million in market making commission income. Market
making commission income decreased by 29.2% to $2.7 million for the six
months ended June 30, 2020 from $3.8 million for the six months ended
June 30, 2019, primarily due to the decrease in CFD trading volume to
111,418 lots from 338,873 lots, which was mainly attributable to the
economic and financial challenges caused by the COVID-19 pandemic and
our customers' concerns about future uncertainty. In addition, travel
restrictions limited our opportunities to acquire new customers. As a
percentage of total revenues, revenues from CFD trading services
comprised of 79.7% of revenues compared to 58.7% in the prior year
period.
-- Revenues generated from insurance brokerage services were $0.6 million,
representing a decrease of 64.9% yoy from $1.8 million in the prior year
period. The decrease was attributable to travel restrictions in Hong
Kong stemming from the COVID-19 outbreak and the unstable political
environment in Hong Kong, which have discouraged Chinese clients from
purchasing insurance products in Hong Kong. As a percentage of total
revenues, revenues from insurance brokerage services comprised of 9.9%
of revenues compared to 22.7% in the prior year period.
-- Revenues generated from futures and securities brokerage services were
$0.6 million, representing a decrease of 57.8% yoy from $1.5 million in
the prior year period. The decrease was attributable to a significant
decrease in trading volume of futures products and securities, primarily
caused by the economic and financial challenges brought on by COVID-19.
In addition, travel restrictions limited our opportunities to acquire
new customers. As a percentage of total revenues, revenues from futures
and securities brokerage services comprised of 9.6% of revenues compared
to 18.3% in the prior year period.
-- Revenues generated from other services were $0.05 million, representing
an increase of 118.5% yoy from $0.02 million in the prior year period,
primarily attributable to the increase in interest income.
Operating expenses
Total operating expenses were $4.1 million in the first half of 2020, representing a decrease of 9.8% yoy from $4.5 million in the first half of 2019. The decrease was attributable to a decrease in commission expenses, partially offset by increases in compensation expenses, communication and technology, professional fees, occupancy, and other expenses.
-- Commission expenses decreased by 66.5% to $0.8 million from $2.3 million
in the prior year period, primarily due to a decrease in insurance
brokerage commission expenses and futures and securities brokerage
commission expenses, which is in line with the overall decreases in the
insurance brokerage business as well as futures and securities brokerage
services.
-- Compensation expenses increased by 46.0% to $1.5 million from $1.0
million in the prior year period, primarily due to the growing number of
employees, in line with business growth and an increase in average
compensation.
-- Occupancy expenses increased by 36.6% to $0.3 million from $0.2 million
in the prior year period, primarily due to the rental of new office
space.
-- Communication and technology expenses increased by 28.5% to $0.47
million from $0.37 million in the prior year period, primarily due to an
increase in trading systems service fees and market data fees, which was
in line with the growth of the Company's CFD trading services and the
launch of its TRS trading services.
-- General and administrative expenses decreased by 8.6% to $0.29 million
from $0.32 million in the prior year period.
-- Professional fees increased to $0.15 million from $0.06 million in the
prior year period, primarily due to legal and consulting services fees
in relation to the Company's operations in the Cayman Islands.
-- Services fees increased by 41.0% to $0.23 million from $0.16 million in
the prior year period due to greater outside services needed as a result
of business growth.
-- Interest expenses increased to $0.08 million from almost nil in the
prior year period, primarily due to interest on the outstanding balance
from a one-off bridge loan, as well as interest paid on loans borrowed
from Lion's TRS trading service business partners.
-- Other expenses, which comprised of depreciation, marketing expenses,
payment service charges, and other operating expenses, were $0.3 million
compared to $0.1 million in the prior year period, mainly due to an
increase of US$0.2 million in marketing expenses incurred for the
promotion of Lion's businesses.
Income tax expense
BC Wealth Management Limited, the Company's Hong Kong subsidiary engaging in the insurance brokerage business, is the only entity within Lion that is subject to income taxes. Income tax expenses decreased to approximately $3,000 for the six months ended June 30, 2020, from $0.06 million for the six months ended June 30, 2019, primarily resulting from a decrease in profit before income taxes in the current period, due to a significant decrease in commission income for insurance brokerage services.
Net income
As a result of the above, net income was $2.4 million in the first half of 2020 compared to $3.5 million in the first half of 2019. Diluted net income per ADS was $0.32 in the first half of 2020 compared to diluted net income per ADS of $0.49 in the first half of 2019.
In the first half of 2020, the Company's weighted average number of ADSs used in calculating diluted net income per ADS, was 7,461,884 compared to 7,090,381 in the prior year period. As of June 30, 2020, the Company had a total of 17,399,176 Class A and B ordinary shares outstanding, or the equivalent of 17,399,176 ADSs.
Liquidity
As of June 30, 2020, the Company's cash and restricted cash were $9.6 million (including $1.5 million of restricted cash) compared to $8.6 million (including $2.2 million of restricted cash) as of December 31, 2019. Net cash provided by operating activities was $2.1 million. Net cash used in investing activities was $0.4 million. Net cash used in financing activities was $0.6 million. The effect of exchange rate changes on cash was $0.02 million.
BUSINESS OUTLOOK
Based on current market and operating conditions, the Company expects revenues for the second half of 2020 to be between $10 million and $13 million.
About Lion
Lion Group Holding Ltd. (NASDAQ: LGHL) operates an all-in-one trading platform that offers a wide spectrum of products and services with a focus on Chinese investors. Through its state-of-the-art technology, Lion offers contract-for-difference (CFD) trading, total return swap (TRS) trading, insurance brokerage, futures brokerage, and securities brokerage on its platform, which can be accessed through applications available on the iOS, Android, Windows, and macOS systems. Lion's customers are predominantly well-educated and affluent Chinese individual investors residing both inside and outside the PRC as well as institutional clients in Hong Kong. Additional information may be found at http://ir.liongrouphl.com.
Safe Harbor Statement
This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, Lion's actual results may differ from their expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company, and the industry in which it operates. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," "might" and "continues," and similar expressions are intended to identify such forward-looking statements. Lion cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Lion does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, subject to applicable law.
CONTACTS
Lion Group Holding Ltd.
Tel: +852 2820 9011
Email: ir@liongrouphl.com
ICR, LLC
William Zima
Tel: +1 203 682 8233
Email: ir@liongrouphl.com
LION GROUP HOLDING LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE GAIN/LOSS
(in dollar amount)
Six months ended June 30,
2020 2019
---
Revenue
CFD trading services $5,126,239 $4,703,195
Insurance brokerage services 638,574 1,820,214
Futures and securities brokerage services 617,242 1,461,652
Other 48,461 22,180
6,430,516 8,007,241
---
Expenses
Commission 762,061 2,275,430
Compensation 1,486,160 1,017,639
Occupancy 323,224 236,701
Communication and technology 469,662 365,576
General and administrative 292,788 320,507
Professional fees 153,853 62,622
Services fees 231,785 164,414
Interest 79,343 979
Other expenses 254,442 48,246
Depreciation 21,992 24,312
Marketing 199,948 248
Payment service charge 19,309
Other operating expenses 13,193 23,686
Total Expenses 4,053,318 4,492,114
---
Income before income taxes 2,377,198 3,515,127
---
Income tax expense (3,321) (59,993)
Net income $2,373,877 $3,455,134
Other comprehensive income
Foreign currency translation adjustment 20,560 (39,839)
Comprehensive income $2,394,437 $3,415,295
Earnings per share - basic and dilutive (i) $0.32 $0.49
Weighted average number of ordinary shares(i) 7,461,884 7,090,381
===
(i) Share and per share data have been retroactively restated to give effect to the business combination which was completed
on June 16, 2020 and accounted for as a reverse recapitalization.
LION GROUP HOLDING LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in dollar amount)
June 30,
December 31,
2020 2019
Assets
Cash and cash equivalents $8,111,409 $6,388,978
Restricted cash -Bank balances held on behalf of
customers 1,470,486 2,192,201
Securities owned, at fair value 9,424 180,201
Derivatives, at fair value 11,069 194,110
Receivables from broker-dealers and clearing
organizations 18,703 20,409
Receivables from broker-dealers and clearing
organizations - customer accounts 2,182,623 1,664,552
Commissions receivable 60,839 88,560
Short-term loans receivable 2,087,593 1,637,310
Other receivable 306,368 166,064
Prepaids, deposits and other 452,385 510,291
Fixed assets, net 53,186 73,688
Intangible asset 86,762 67,964
Other assets 219,558 233,343
Deferred taxes 198 677
Total assets $15,070,603 $13,418,348
Liabilities and Equity
Liabilities
Payables to customers $3,044,689 $3,853,693
Payable to broker-dealers 607,132
Commissions payable 16,953 29,439
Dividends payable 385,901
Other payables 1,149,637 417,445
Short-term borrowings 621,101 1,412,570
Short-term borrowings from related party 128,415
Total liabilities 5,439,512 6,227,463
Commitments and Contingencies
Equity
Preferred shares, $0.0001 par value, 50,000,000 shares authorized,
none issued and outstanding as of June 30, 2020 and
$ -
$ -
December 31, 2019, respectively
Class A ordinary shares, $0.0001 par value, 300,000,000 shares
authorized, 7,647,962 and 3,140,388 shares issued and outstanding
at June 30, 2020 and December 31, 2019,
respectively (i) 765 314
Class B ordinary shares, $0.0001 par value, 150,000,000 shares
authorized, 9,751,214 and 3,949,993 shares issued and outstanding
at June 30, 2020 and December 31, 2019,
respectively (i) 975 395
Additional paid in capital (i) 7,649,772 7,605,034
Retained earnings (accumulated deficit) 1,996,974 (376,903)
Accumulated other comprehensive income (losses) (17,395) (37,955)
Total equity 9,631,091 7,190,885
Total liabilities and equity $15,070,603 $13,418,348
(i) Par value of ordinary shares, additional paid-in capital and share data have been retroactively restated to give effect to the
reverse recapitalization.
LION GROUP HOLDING LTD
UNAUDITED SUMMARY OF CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS DATA
(in dollar amount)
Six months ended June 30,
2020 2019
Net cash provided by operating activities $2,061,335 $4,189,410
Net cash used in investing activities (447,673) (9,832)
Net cash used in financing activities (631,692) (4,432,953)
Effect of exchange rate changes on cash 18,746 (39,997)
Net increase (decrease) in cash 1,000,716 (293,372)
Cash and restricted cash at beginning of period 8,581,179 7,108,158
---
Cash and restricted cash at end of period $9,581,895 $6,814,786
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SOURCE Lion Group Holding Ltd.
