Lion Announces Unaudited Full Year 2023 Financial Results
HONG KONG, April 30, 2024 /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, today announced its unaudited financial results for the full year ended December 31, 2023 ("2023").
All figures are stated in U.S. dollars ("$").
FINANCIAL AND OPERATING HIGHLIGHTS
-- Revenues in 2023 increased to $21.1 million, from total revenue losses
of $2.5 million in the prior year, primarily due to an increase in
contract for difference (CFD) trading services.
-- Total number of revenue-generating customer accounts decreased to 2,443
in 2023, from 4,526 in 2022, mainly due to decline in policy renewal
clients in insurance business and CFD trading customers.
-- Income generated from CFD trading services increased by $26.0 million
from a loss of $6.7 million in 2022 to an income of $19.3 million in
2023, attributable to an increase in trading gains and commission income
due to the notable moderation in market volatility in 2023.
-- Total expenses decreased by 14.6% from $31.5 million in 2022 to $26.9
million in 2023, primarily due to a decrease in research and development
expenses and impairment of fixed assets.
-- Diluted net loss attributable to LGHL ordinary shareholders per ADS was
$5.94 in 2023 compared to a diluted net loss per ADS of $34.97 in the
prior year.
-- Non-GAAP diluted net loss attributable to LGHL ordinary shareholders per
ADS was $0.75 in 2023, compared to non-GAAP diluted net loss per ADS of
$29.52 in the prior year.
-- As of December 31, 2023, the Company's cash and restricted cash were
$31.1 million, compared to $14.4 million as of December 31, 2022. Net
cash provided by operating activities was $13.4 million compared to the
amount used of $3.9 million in the prior year.
Mr. Chunning (Wilson) Wang, CEO of Lion, commented, "2023 was a year of inflection for us. We are very pleased with our performance in the year, meeting or exceeding all our internal expectations. This achievement was made possible by the collective efforts of everyone at Lion. These results demonstrate our ability to execute and deliver growth in the face of certain geographic economic challenges. Our revenue surged from a negative amount in 2022 to $21.1 million in 2023, primarily due to a significant increase in CFD trading services and other income. To better serve our customers and provide high-quality services, we leveraged AI technology and will continue to do so to seize market opportunities."
"Simultaneously, we enlarged our investments in risk management to mitigate volatilities and protect our customers, especially for our CFD and TRS (total return swap) trading business. For instance, we have driven our experienced risk management team to sustainably optimize models, meanwhile, connecting with liquidity providers, enabling direct hedging. Additionally, we established various parameters to control risk exposures; at the same time, we have implemented a system that automatically triggers liquidation of customer positions when risk exceeds predefined limits. These strategies not only minimize Lion's risk going forward, but also serve to protect our customers from significant investment losses."
"During the reported period we observed an increase in the number of OTC stock options trading client accounts and in the trading volume. This underscores the solid execution of our new market focus and our sound market reputation, attracting new customers and driving further growth. We remain diligent in executing on our core business segments; meanwhile we work on strategically expanding our services with a near-term focus on OTC options, which we believe will be an important revenue driver for Lion. Moving forward, we remain committed to investing more in AI technologies to enhance customer services, reduce costs for customers, and improve our overall business efficiency. We are confident about our prospects in 2024 and with a view to delivering long-term value to our customers, shareholders, and other stakeholders."
FINANCIAL & OPERATING RESULTS
REVENUES
Note: The revenue segments in this report have been reclassified for the prior period for comparison to better represent business performance. The reclassification has no effect on previously reported net assets or net income (loss).
Total revenue for the year ended December 31, 2023 increased to $21.1 million, from total revenues (losses) of $(2.5) million for the full year ended December 31, 2022, primarily due to an increase in CFD trading services. Total number of revenue-generating customer accounts decreased to 2,443 as of December 31, 2023, from 4,526 as of December 31, 2022 mainly due to a decline in policy renewal clients in the insurance business and CFD trading customers.
Year ended December 31,
2023 2022
$ %
$ %
CFD trading services 19,326,140 91.6 (6,694,312) 271.0
TRS trading services (2,342,395) (11.1) (595,871) 24.1
OTC stock options trading[1] (798,725) (3.6) 937,109 (38.0)
Futures and securities brokerage services 2,570,495 12.1 3,284,729 (132.9)
Others[2] 2,335,729 11.0 598,252 (24.2)
Total 21,091,244 100.0 (2,470,093) 100.0
-- CFD Trading Services Income (Losses). Income generated from CFD trading
services increased by $26.0 million from a loss of $(6.7) million in
2022 to an income of $19.3 million in 2023, attributable to an increase
of $23.7 million in trading gains and an increase of $2.3 million in
commission income. This is mainly attributable to the notable moderation
in market volatility in 2023 in contrast with the prior year when global
financial markets experienced high fluctuation and volatility in
reaction to a series of unpredictable events, including the Russia and
Ukraine conflict, surging inflation, etc. In addition, the enhancement
of our risk management practice through the continued optimization of
risk modelling and methods also contributed to the increase in CFD
trading gains. Market making commission income increased from $0.8
million in 2022 to $3.1 million in 2023, mainly attributable to the
increase in the trading volume. Total revenue-generating CFD trading
client accounts decreased to 1,547 as of December 31, 2023, from 1,935
as of June 30, 2023. CFD trading volume increased to 703,764 lots for
the year ended December 31, 2023, from 116,607 lots for the year ended
December 31, 2022, which was mainly due to the low base in 2022.
-- TRS Trading Services Income (Losses). Revenues generated from TRS
trading services decreased by $1.7 million from a loss of $(0.6) million
in 2022 to a loss of $(2.3) million in 2023, due to the $1.2 million
increase in trading losses from our proprietary TRS trading activities,
and a $0.6 million decrease in interest income earned on loans provided
to TRS trading customers. Our proprietary TRS trading activities
suffered significant losses in 2022 and 2023 from China's stock markets
which have suffered a protracted slump since 2021, caused by China's
economic slowdown, dismal economic outlook, heightened geopolitical
tensions such as U.S.-China relation, escalated friction over the Taiwan
Strait and South China Sea, and unpredictable regional military conflict
worldwide etc. The decrease in interest income was primarily
attributable to the decline in the daily average balance of the loans
borrowed by TRS trading customers, as a result of investors' weakened
sentiment towards China's stock markets. Total revenue-generating TRS
trading client accounts increased to 348 accounts as of December 31,
2023, from 276 accounts as of June 30, 2023. TRS trading volume was $580
million and $484 million for the years ended December 31, 2023 and 2022,
respectively.
-- OTC Stock Options Trading Income (Losses). The Company started to sell
OTC stock call options in 2021 and in the fourth quarter of 2023 OTC
stock options trading business grew rapidly. OTC stock options income
(loss) consisting of the changes in fair value associated with the call
options we sold to customers as well as the offsetting call options we
purchased from third party option issuers, decreased from an income of
$0.9 million in 2022 to a loss of $0.8 million. The nominal value of OTC
stock call options sold increased from $10.9 million in 2022 to $181.5
million in 2023. Total revenue-generating OTC stock options trading
client accounts was 37 accounts as of December 31, 2023.
-- Futures and Securities Brokerage Services. Revenues from futures and
securities brokerage services decreased by 21.7% from $3.3 million in
2022 to $2.6 million in 2023, primarily as a result of a decrease in the
number of executed futures contracts from 1,298,452 lots in 2022 to
913,583 lots in 2023.
-- Others. Other income increased by $1.7 million from $0.6 million in
2022, to $2.3 million in 2023. The increase in other income was
primarily attributed to the increase in insurance brokerage commission
of $0.7 million, foreign currency exchange gain of $0.3 million and a
decrease in trading losses from exchange-traded stock of $1.1 million,
partially offset by the decrease in MetaWords NFTs sale of $0.4 million
generated in 2022.
EXPENSES
Our total expenses decreased by 14.6% from $31.5 million for the year ended December 31, 2022 to $26.9 million for the year ended December 31, 2023, primarily due to a decrease in research and development expenses and impairment of fixed assets, partially offset by increases in compensation expenses, service fees, marketing expenses, and a decrease in the gain from change in fair value of warrants liabilities.
-- Commission and fees expenses increased by $0.2 million from $3.2 million
in 2022 to $3.4 million in 2023, primarily due to an increase of $0.8
million in our insurance brokerage commission expenses, partially offset
by a decrease of $0.6 million in our futures brokerage commission
expenses.
-- Compensation expenses increased by 13.2% from $3.6 million in 2022 to
$4.1 million in 2023, primarily due to the increase in the headcount and
the discretionary bonus paid out in the second half of 2023.
-- Communication and technology expenses slightly decreased from $3.4
million in 2022 to $3.1 million in 2023.
-- General and administrative expenses increased by 16.6% from $1.2 million
in 2022 to $1.4 million in 2023, as a result of a recovery in normal
business travels and activities.
-- Professional fees slightly decreased by 8.3% from $3.7 million in 2022
to $3.4 million in 2023, primarily due to the decrease in the
professional services acquired for the metaverse and NFT businesses in
2023.
-- Service fees for independent contractors and consultants increased by
20.2% from $2.0 million in 2022 to $2.4 million in 2023, as a result of
an increased number of contracted service providers needed due to the
rapid growth of our OTC stock options trading business.
-- Research and development expenses were $7.1 thousand in 2023, compared
with $4.7 million incurred in connection with developing and enhancing
the Company's Metaverse project in the prior year.
-- Interest expenses increased slightly to $2.4 million in 2023 from $2.3
million in 2022, as a result of the increase in the interest rates
charged by our TRS trading service business partners.
-- Occupancy expenses were $0.8 million in 2023, remaining comparable to
the prior year.
-- Marketing expenses increased by 12.1% from $3.7 million in 2022 to $4.2
million in 2023, mainly due to marketing expenses incurred to maintain
existing customers and develop new customers, and promote our businesses
and branding activities.
-- Depreciation expenses decreased by 11.7% from $2.0 million in 2022 to
$1.8 million in 2023, mainly attributable to the full impairment of
mining equipment in the second quarter of 2022.
-- Impairment of fixed assets was nil in 2023, compared to $1.7 million
resulting from the full impairment of mining equipment in 2022.
-- Impairment of cryptocurrencies was nil in 2023, compared to $0.3 million
resulting from the impairment charges of the BNB and wBNB tokens in
2022.
-- The gain from the change in fair value of the outstanding Public and
Private Warrants was $0.6 million in 2023, compared to a gain of $1.3
million in 2022.
-- Other expenses increased from $32.4 thousand for the year ended December
31, 2022 to $430.2 thousand for the year ended December 31, 2023.
INCOME TAX EXPENSES
Income tax expenses decreased from $3.4 thousand for the year ended December 31, 2022 to $1.1 thousand for the year ended December 31, 2023.
NET (LOSS) INCOME
As a result of the above, net loss was $5.8 million for the year ended December 31, 2023, compared to a net loss of $34.0 million for the year ended December 31, 2022. Diluted net loss attributable to LGHL ordinary shareholders per ADS was $5.94 for the year ended December 31, 2023, compared to a diluted net loss attributable to LGHL ordinary shareholders per ADS of $34.97([3]) for the year ended December 31, 2022. Each ADS represents fifty Class A ordinary shares.
NON-GAAP FINANCIAL RESULTS
Non-GAAP net loss, which excludes change in fair value of warrant liabilities, stock-based compensation expenses, amortization of debt discounts, depreciation expenses and impairment of fixed assets was $1.8 million for the year ended December 31, 2023, compared to non-GAAP net loss of $27.1 million for the year ended December 31, 2022. Non-GAAP diluted net loss per ADS was $0.75 for the year of 2023, compared to non-GAAP diluted net loss per ADS of $29.52([4]) in the prior year period.
LIQUIDITY
As of December 31, 2023, the Company's cash and restricted cash were $31.1 million, compared to $14.4 million as of December 31, 2022. Net cash provided by operating activities was $13.4 million. Net cash provided by investing activities was $1.4 million. Net cash provided by financing activities was $1.7 million.
Non-GAAP Financial Measures
This press release includes reconciliations of the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the U.S. ("GAAP") to non-GAAP financial measures. The Company's calculation of Non-GAAP (loss) income (net loss or income before change in fair value of warrant liabilities, stock-based compensation, amortization of debt discounts, depreciation expenses and impairment of fixed assets) and Non-GAAP EPS differs from EPS based on net (loss) income because it does not include change in fair value of warrant liabilities, stock-based compensation, amortization of debt discounts, depreciation expenses and impairment of fixed assets, which are non-cash charges. The Company believes that these measures help the management identify underlying trends in the Company's business that could otherwise be distorted by the effect of certain expenses that the Company includes in net loss. The Company believes that these measures provide useful information about its operating results, enhance the overall understanding of its past performance and future prospects, and allow for greater comparability with respect to key metrics used by its management in its financial and operational decision-making.
For more information on the non-GAAP financial measures, please see the table, titled "Unaudited Reconciliations of Non-GAAP and GAAP Financial Results," set forth at the end of this press release.
About Lion
Lion Group Holding Ltd. (Nasdaq: LGHL) operates an all-in-one, state-of-the-art trading platform that offers a wide spectrum of products and services, including (i) total return service (TRS) trading, (ii) contract-for-difference (CFD) trading, (iii) Hong Kong-based Over-The-Counter ("OTC") stock options trading business, and (iv) futures and securities brokerage. In addition, Lion owns a professional and experienced SPAC sponsorship team to become a leader in the SPAC arena, helping guide private companies through their listing journey. Additional information may be found at http://ir.liongrouphl.com.
Forward-Looking Statements
This press release contains, "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. 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. 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. These forward-looking statements include, but are not limited to, statements about: Lion's goals and strategies; our ability to retain and increase the number of users, members and advertising customers, and expand its service offerings; Lion's future business development, financial condition and results of operations; expected changes in Lion's revenues, costs or expenditures; the impact of COVID-19; competition in the industry; relevant government policies and regulations relating to our industry; general economic and business conditions globally and in China; and assumptions underlying or related to any of the foregoing. Lion cautions that the foregoing list of factors is not exclusive. 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. Additional information concerning these and other factors that may impact our expectations and projections can be found in Lion's periodic filings with the SEC, including Lion's Annual Report on Form 20-F for the fiscal year ended December 31, 2022. Lion's SEC filings are available publicly on the SEC's website at www.sec.gov.
Contacts
Lion Group Holding
Tel: +852 2820 9011
Email: ir@liongrouphl.com
ICR, LLC
William Zima
Tel: +1 203 682 8233
Email: ir@liongrouphl.com
New York
Skyline Corporate Communications Group, LLC
Scott Powell, President
Tel: (646) 893-5835
Email: info@skylineccg.com
LION GROUP HOLDING LTD
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in dollar amount)
Year Ended December 31,
2023 2022
Revenues (losses)
Insurance brokerage commissions $
1,169,306 $
455,394
Securities brokerage commissions and fees 2,732,846 3,412,644
Market making commissions and fees 3,121,661 781,878
Interest income 2,424,676 3,229,716
Trading gains (loss) 10,479,504 (11,467,969)
Other income 1,163,251 1,118,244
21,091,244 (2,470,093)
Expenses and others
Commissions and fees 3,418,398 3,198,934
Compensation and benefits 4,099,852 3,620,506
Occupancy 870,254 826,254
Communication and technology 3,059,462 3,392,794
Cost of crypto mining
General and administrative 1,432,148 1,228,572
Professional fees 3,407,365 3,716,839
Research and development 7,115 4,693,995
Services fees 2,352,832 1,956,785
Interest 2,413,102 2,334,598
Depreciation and amortization 1,795,011 2,032,386
Marketing 4,196,795 3,743,567
Impairment of fixed assets 1,690,028
Impairment of cryptocurrencies 293,619
Change in fair value of warrant liabilities (565,313) (1,260,354)
Other operating 430,214 32,406
26,917,235 31,500,929
Loss before income taxes (5,825,991) (33,971,022)
Income tax expense (1,058) (3,419)
Net loss $
(5,827,049) $
(33,974,441)
Net loss attributable to non-controlling interests (568,041) (2,411,158)
Net (loss) gain attributable to LGHL $
(5,259,008) $
(31,563,283)
Deemed dividend on the effect of the down round features (6,112,000)
Deemed dividend on the effect of the warrant modification (3,086,000)
Dividends and deemed dividends on preferred shares (595,208)
Net loss attributable to LGHL ordinary shareholders $
(14,457,008) $
(32,158,491)
Loss per share for both Class A and Class B ordinary shares
- basic and diluted (i) $
(0.12) $
(0.70)
Loss per ADS
- basic and diluted (i) $
(5.94) $
(34.97)
Weighted average Class A ordinary shares outstanding
- basic and diluted (i) 108,269,640 40,438,604
Weighted average Class B ordinary shares outstanding
- basic and diluted (i) 13,478,813 5,535,888
LION GROUP HOLDING LTD
CONSOLIDATED BALANCE SHEETS
(in dollar amount)
December 31,
2023 2022
Assets
Current Assets
Cash and cash equivalents $
28,953,780 $11,159,610
Restricted cash-bank balances held on behalf of customers 2,142,615 3,242,989
Securities owned, at fair value 4,522,805 11,104,047
Receivables from broker-dealers and clearing organizations 13,852,846 33,342,254
Short-term loans receivable 7,126,021
Other receivables 60,413 534,437
Derivative assets, at fair value 1,801,095
Prepaids, deposits and other 2,095,800 2,534,684
Total current assets 53,429,354 69,044,042
Long term investment 1,436,142
Fixed assets, net 19,844,396 13,786,344
Right-of-use assets 593,678 1,160,563
Other assets 677,158 1,207,293
Total Assets $
74,544,586 $86,634,384
Liabilities and Stockholders' Equity
Liabilities
Current Liabilities
Payables to customers $22,518,927 $23,829,192
Payables to broker-dealers and clearing organizations 15,089,756 24,963,524
Accrued expenses and other payables 2,198,697 1,923,305
Derivative liabilities, at fair value 3,009,166
Embedded derivative liabilities 878,420 2,292,056
Short-term borrowings 110,000 110,000
Lease liability - current 537,440 601,531
Due to director 146,671
Total current liabilities 44,342,406 53,866,279
Lease liability - noncurrent 83,480 618,705
Convertible debentures 1,597,404 4,061,735
Warrant liabilities 109,687 675,000
Total Liabilities 46,132,977 59,221,719
Commitments and Contingencies
Stockholders' Equity
Preferred shares, $0.0001 par value, 2,500,000,000 shares authorized
Class A ordinary shares, $0.0001 par value, 40,000,000,000 shares
authorized, 179,250,754 and 48,761,596 shares issued and outstanding
at December 31, 2023 and 2022, respectively (i) 17,925 4,876
Class B ordinary shares, $0.0001 par value, 7,500,000,000 shares
authorized, 23,843,096 and 9,843,096 shares issued and outstanding
at December 31, 2023 and 2022, respectively (i) 2,384 984
Additional paid in capital 71,532,253 63,660,939
Accumulated deficit (39,751,871) (34,492,863)
Accumulated other comprehensive income (losses) (268,562) (303,213)
Total LGHL shareholders' equity 31,532,129 28,870,723
Non-controlling interest (3,120,520) (1,458,058)
Total shareholders' equity 28,411,609 27,412,665
Total Liabilities and Stockholders' Equity $74,544,586 $86,634,384
(i) On July 3, 2023, LGHL announced that it plans to change its American depositary share ("ADS") to ordinary share ("Share") ratio from one (1) ADS representing one (1) Share to one (1) ADS representing fifty (50) Shares. The change in the ADS ratio was effective on July 13, 2023. For LGHL's ADS holders, the change in the ADS ratio had the same effect as a one-for-fifty reverse ADS split. The ADS ratio change has no impact on LGHL's underlying Shares. Loss per ADS for all periods presented had been retrospectively adjusted accordingly.
LION GROUP HOLDING LTD
SUMMARY OF CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW DATA
(in dollar amount)
Year ended December 31,
2023 2022
Net cash provided by (used in) operating activities $
13,412,873 $
(3,940,552)
Net cash provided by (used in) investing activities 1,416,000 (7,093,339)
Net cash provided by financing activities 1,659,010 9,808,775
Effect of exchange rate changes on cash and restricted cash 205,913 (123,760)
Net increase (decrease) in cash and restricted cash 16,693,796 (1,348,876)
Cash and restricted cash at beginning of period 14,402,599 15,751,475
Cash and restricted cash at end of period $
31,096,395 $
14,402,599
LION GROUP HOLDING LTD
RECONCILIATIONS OF NON-GAAP AND GAAP FINANCIAL RESULTS
(in dollar amount)
US$ US$
Net (loss) income attributable to LGHL $(5,259,008) $(31,563,283)
Stock-based compensation 1,673,883 1,300,550
Amortization of debt discounts 522,319 658,680
Depreciation expenses 1,795,011 2,032,386
Impairment of fixed assets 1,690,028
Change in fair value of warrant liabilities (565,313) (1,260,354)
Non-GAAP (loss) income attributable to LGHL before $(1,833,108) $(27,141,993)
change in fair value of warrant liabilities, stock-based
compensation, amortization of debt discounts, depreciation
expenses and impairment of fixed assets
Non-GAAP (losses) earnings per share for both Class A and Class B
- basic $(0.02) $(0.59)
- diluted $(0.02) $(0.59)
Non-GAAP income (loss) per ADS
- basic $(0.75) $(29.52)
- diluted $(0.75) $(29.52)
Weighted average Class A ordinary shares outstanding
- basic and diluted 108,269,640 40,438,604
Weighted average Class B ordinary shares outstanding
- basic and diluted 13,478,813 5,535,888
Year ended December 31,
2023 2022
Basic Fully Basic Fully
Diluted Diluted
Earnings (Loss) attributable to LGHL per share for both Class (0.04) (0.04) (0.69) (0.69)
A and Class B
Stock-based compensation 0.01 0.01 0.03 0.03
Amortization of debt discounts 0.00 0.00 0.01 0.01
Depreciation expenses 0.01 0.01 0.04 0.04
Impairment of fixed assets 0.04 0.04
Change in fair value of warrant liabilities (0.00) (0.00) (0.03) (0.03)
Non-GAAP (losses) earnings per share for both Class A and (0.02) (0.02) (0.59) (0.59)
Class B (before change in fair value of warrant liabilities, stock-
based compensation, amortization of debt discounts, depreciation
expenses and impairment of fixed assets)
[1] OTC stock options trading is a new segment line added to provide better analysis of revenues due to the growing significance of OTC stock options trading to the Company's revenue. Prior periods in this report have also been reclassified to reflect these changes for comparison purposes. The reclassification has no effect on previously reported net assets or net income (loss).
[2] Foreign currency gains were significant in 2023, so the Company reclassified such amounts from expenses to Others in revenue. The reclassification has no effect on previously reported net assets or net income (loss).
[3] The Company implemented an ADS ratio change on July 13, 2023, from one (1) ADS representing one (1) ordinary share to one (1) ADS representing fifty (50) ordinary shares. The ADS ratio change has no impact on LGHL's underlying ordinary shares. Loss per ADS for the year ended December 31, 2023 and 2022 had been retrospectively adjusted accordingly.
[4] Non-GAAP diluted net loss per ADS for the year ended December 31, 2023 and 2022 had been retrospectively adjusted accordingly.
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SOURCE Lion Group Holding Ltd.
