SHANGHAI, China, Nov. 10 /Xinhua-PRNewswire/ -- Focus Media Holding Limited (Nasdaq: FMCN), China's leading multi- platform digital media company, today announced its unaudited financial results for the third quarter ended September 30, 2008.
Highlights for third quarter 2008:
-- Total revenues grew 63.7% year-over-year and 6.2% quarter-over-quarter
to $224.8 million.
-- GAAP net income for the third quarter was $51.3 million or $0.38 per
fully diluted ADS.
-- Focus Media provides gross margin, operating margin, net income and
earnings per ADS on a non-GAAP basis that exclude non-cash share-based
compensation expense, acquired intangible assets amortization expense
and one-time items to enable investors to better assess the Company's
operating performance. The non-GAAP measures are described and are
reconciled to the corresponding GAAP measure in the section below
titled "Use of non-GAAP Financial Measures". Net income excluding non-
cash share-based compensation expenses and amortization of acquired
intangible assets resulting from acquisitions for the third quarter was
$71.4 million or $0.53 per fully diluted ADS, within previously
provided guidance of $70 million to $72million.
-- In the third quarter of 2008, digital out-of-home advertising revenue
was $153.8 million, up 62.4% year-over-year and 13.6% quarter-over-
quarter.
-- Advertising service revenue from our commercial location network
grew 44.1% year-over-year and 14.8% quarter-over-quarter to $93.1
million.
-- Advertising service revenue from our in-store network, including
revenues from CGEN Digital Media Company Limited ("CGEN"), was $16.8
million, an increase of 136.6% year-over-year and a slight decrease
from $17.0 million in the previous quarter, as we continued to make
efforts to optimize the combined in-store network coverage during
the post-acquisition integration of CGEN.
-- Advertising service revenue from our in-elevator poster frame
network grew 90.6% year-over-year and 17.8% quarter-over-quarter to
$44.0 million.
-- Internet advertising revenue was $70.8 million in the third quarter of
2008, an increase of 66.5% year-over-year but a decrease of 7.0%
quarter-over-quarter.
"We faced an extremely challenging advertising environment towards the end of the third quarter and in the fourth quarter. The recent global financial turmoil and slowdown in consumer demand in the US and European markets have had a significant negative impact on the Chinese economy as well as on the mindset of corporate decision makers in China. The macro headwind we are facing is the most severe in the modern history of the Chinese advertising industry. In particular, our Internet advertising business saw online advertising spending slowing after the Beijing Olympics. Our conservative fourth quarter guidance reflects our current business expectation in such a difficult market environment. In addition, during the integration of CGEN, although we have made meaningful progress in reducing the location cost of our in-store advertising business, in order to achieve profitability and future growth, we plan to further restructure CGEN's business in the fourth quarter. Management is in the process of evaluating the CGEN operation and therefore we expect to incur material one-time non-cash charges in the fourth quarter 2008 relating to any restructuring effort," said Dr. Tan Zhi, CEO of Focus Media. "However, based on our discussions with our major advertising clients, we continue to expect there to be overall advertising market growth in China in 2009, as the Chinese economy will nevertheless grow but at a slower pace relative to 2008 and Chinese urban consumers will continue to grow in numbers due to continuing urbanization in major metropolitan areas. We believe Focus Media is better positioned today than ever to face today's challenging macro backdrop. Looking forward to 2009, we will focus on building operating leverage and growing our free cash flow. We expect capital investment in our networks and our pace of acquisitions will slow down materially in 2009 as we are competitively well-positioned given the large and unparalleled scale of our existing nationwide digital media networks which we have built during the past few years. We expect to continue to gain market share as our advertising clients continue to reap the benefits from our highly efficient and effective nationwide digital advertising platforms."
Third Quarter Financial Results
For the third quarter of 2008, Focus Media reported total revenues from continuing operations of $224.8 million, an increase of 63.7% compared to $137.4 million for the third quarter of 2007, and an increase of 6.2% compared to $211.7 million for the second quarter of 2008.
Our total digital out-of-home advertising revenue was $153.8 million in the third quarter of 2008, an increase of 62.4% from $94.7 million in the third quarter of 2007, and a sequential increase of 13.6% from $135.4 million in the second quarter of 2008. In the third quarter of 2008, commercial location advertising revenue was $93.1 million, contributing 60.5% of total digital out-of-home advertising revenue. Advertising service revenue from our in-store network was $16.8 million, or 10.9% of total digital out-of-home advertising revenue. Advertising service revenue from our in-elevator poster frame network placed primarily in the elevators of residential buildings was $44.0 million in the third quarter of 2008, or 28.6% of total digital out-of-home advertising revenue.
As of September 30, 2008, the total installed base of LCD displays and digital frames in our commercial location network was 120,131 nationwide, including 114,300 displays through our directly owned networks, and 5,831 displays through our regional distributors. The total number of displays installed in our in-store network including CGEN was 56,614 as of September 30, 2008, decreasing slightly from 58,493 as of June 30, 2008 due to our continuing effort to optimize the combined in-store network coverage during the integration of CGEN following our acquisition in early January. The total number of non-digital frames available for sale on our in-elevator poster frame network was 273,813 as of September 30, 2008. In addition, as of September 30, 2008, we had 29,546 digital frames installed in our poster frame network.
Internet advertising service revenue was $70.8 million in the third quarter of 2008, an increase of 66.5% compared to $42.5 million for the third quarter of 2007, and a decrease of 7.0% compared to $76.1 million for the second quarter of 2008.
Gross profit for the third quarter of 2008 was $109.7 million, representing an increase of 58.5% compared to $69.2 million in the third quarter of 2007 and a 22.7% increase compared to $89.4 million in the second quarter of 2008. In the third quarter 2008, GAAP gross margin for the company was 48.8%, increasing from 42.2% in the second quarter of 2008. Excluding non-cash share-based compensation expense of $0.4 million and acquisition-related intangible asset amortization expense of $6.1 million in the cost of revenues, gross margin (non-GAAP) was 51.7% in the third quarter of 2008. In the third quarter of 2008, excluding non-cash share-based compensation expense and acquisition-related intangible asset amortization expense, our digital out-of-home gross margin (non-GAAP) improved to 64.7% from 56.4% in the second quarter of 2008, and our Internet advertising gross margin (non-GAAP) dropped to 23.7% from 26.9% in the previous quarter.
In the third quarter of 2008, operating expenses totaled $52.7 million, including $3.2 million in acquired intangible asset amortization resulting from acquisitions and non-cash share-based compensation expense of $10.4 million. Selling and marketing expenses in the third quarter totaled $28.4million, including $3.2 million in acquired intangible asset amortization and $4.7 million in share-based compensation expense. General and administrative expense in the third quarter was $26.4 million, including $5.7 million in share-based compensation expense. Our operating margin in the third quarter of 2008 was 25.4% compared to 20.4% in the previous quarter. Excluding non-cash share-based compensation expense and acquired intangible asset amortization expense, our operating margin (non-GAAP) was 34.3% in the third quarter of 2008 compared to 30.3% in the second quarter of 2008.
Total intangible amortization expense in the third quarter of 2008 resulting from historical acquisitions was $9.3 million. Non-cash share-based compensation expense was $10.8 million in the third quarter of 2008. Total income tax expense was $8.4 million.
Net income for the third quarter of 2008 was $51.3 million. Net income excluding non-cash share-based compensation expense and acquired intangible assets amortization expense resulting from acquisitions in the third quarter of 2008 (non-GAAP) was $71.4 million, or $0.53 per fully diluted ADS.
Third quarter 2008 operating cash flow was $35.4 million. Our capital expenditure was $17.0 million, mostly for the purchase of digital frames. Day sales outstanding ("DSO") was 134 days in the third quarter. As of September 30, 2008, the company had cash and cash equivalents of $373.1 million. As of November 10, 2008, the company had repurchased approximately 1.6 million Focus Media ADRs in the open market under our previously announced share repurchase program.
BUSINESS OUTLOOK
The Company estimates its total net revenues for the fourth quarter of 2008 will range from $190 million to $200 million. Fourth quarter 2008 net income excluding share-based compensation expenses and amortization of intangible assets resulting from acquisitions (non-GAAP) is expected to be between $60 million and $61 million or $0.45 to $0.46 per fully diluted ADS based on 134 million average total ADS-equivalent-shares outstanding, excluding any potential one-time charges relating to the restructuring of CGEN.
USE OF NON-GAAP FINANCIAL MEASURES
In addition to Focus Media's consolidated financial results under GAAP, the Company also provides non-GAAP financial measures, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per fully diluted ADS, all excluding non-cash share-based compensation and acquired intangible asset amortization expense resulting from acquisitions. The Company believes that these non-GAAP financial measures provide investors with another method for assessing Focus Media's operating results in a manner that is focused on the performance of its ongoing operations. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP results with non-GAAP results in the attached financial information.
The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of Focus Media and when planning and forecasting future periods. The Company computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliation between these financial measures.
Focus Media Holding Ltd.
Reconciliation of GAAP to Non-GAAP
(U.S. Dollar in thousands, except share data)
(Unaudited)
1. Reconciliation of GAAP gross profit and gross margin to non-GAAP gross
profit and gross margin.
Three months ended Three months ended
September 30, 2008 June 30, 2008
GAAP (a) (b) Non-GAAP GAAP (a) (b) Non-GAAP
Gross profit
Commercial
location 62,764 438 1,855 65,057 50,658 420 1,900 52,978
network
In-store network 3,667 -- 897 4,564 (1,408) -- 882 (526)
In-elevator -- --
poster 27,195 2,618 29,813 21,647 2,348 23,995
frame network
Digital
out-of-home 93,626 438 5,370 99,434 70,897 420 5,130 76,447
Internet --
Advertising 16,061 690 16,751 -- 2,044 20,510
Others 12 -- -- 12 18,4669 -- -- 9
Total 109,699 438 6,060 116,197 89,372 420 7,174 96,966
Gross margin
Commercial
location 67.4% 0.5% 2.0% 69.9% 62.5% 0.5% 2.3% 65.3%
network
In-store network 21.9% 0.0% 5.4% 27.3% (8.3%) 0.0% 5.2% (3.1%)
In-elevator
poster 61.9% 0.0% 6.0% 67.9% 58.0% 0.0% 6.3% 64.3%
frame network
Digital
out-of-home 60.9% 0.3% 3.5% 64.7% 52.3% 0.3% 3.8% 56.4%
Internet
Advertising 22.7% 0.0% 1.0% 23.7% 24.3% 0.0% 2.7% 26.9%
Others 5.1% 0.0% 0.0% 5.1% 5.3% 0.0% 0.0% 5.3%
Total 48.8% 0.2% 2.7% 51.7% 42.2% 0.2% 3.4% 45.8%
(a) To adjust for share-based compensation expenses
(b) To adjust for amortization of acquisition-related intangible assets
2. Reconciliation of net income, earnings per ADS and operating margin
from GAAP to non-GAAP:
Three months ended Nine months ended
2008-9-30 2007-9-30 2008-6-30 2008-9-30 2007-9-30
GAAP net
income
attributable
to
shareholders $51,349 $46,613 $36,132 $33,671 $100,620
Amortization
of acquired
intangible
assets 9,262 3,287 10,428 30,370 7,891
Share-based
compensation 10,810 4,679 10,421 29,855 14,115
Net loss from
discontinued
operations -- -- 561 79,883 --
Non-GAAP net
income $71,421 $54,579 $57,542 $173,779 $122,626
GAAP income
per ADS
- basic $0.39 $0.38 $0.29 $0.26 $0.87
GAAP income
per ADS
- diluted $0.38 $0.37 $0.28 $0.25 $0.84
Non-GAAP
income
per ADS
- basic $0.54 $0.45 $0.45 $1.33 $1.06
Non-GAAP
income
per ADS
- diluted $0.53 $0.43 $0.44 $1.31 $1.03
Shares used
in
calculating
basic GAAP/
Non-GAAP
income per
ADS 131,541,174 122,250,042 128,339,961 130,363,120 115,883,549
Shares used
in
calculating
diluted GAAP/
Non-GAAP
income per
ADS 133,729,070 126,370,818 130,776,141 133,048,034 119,471,360
GAAP income
from
operations $57,048 $40,830 $43,290 $126,648 $85,184
Amortization
of acquired
intangible
assets 9,262 3,125 10,428 30,370 7,891
Share-based
compensation 10,810 4,679 10,421 29,855 14,115
Non-GAAP
income from
operations $77,120 $48,634 $64,139 $186,873 $107,190
Non-GAAP
operating
margin 34.3% 35.4% 30.3% 31.2% 36.8%
TODAY'S CONFERENCE CALL
The Company will host a conference call to discuss the Third quarter 2008 results at 8:00 p.m. U.S. Eastern Time on November 10, 2008 (5:00 p.m. U.S. Pacific Time on November 10, 2008 and 9:00 a.m. Beijing/Hong Kong Time on November 11, 2008). The dial-in details for the live conference call are set forth below: U.S. Toll Free Number +1- 866-713-8307, Hong Kong dial-in number +852-3002-1672, International dial-in number +1-617-597-5307; Pass code: 55654163.
A replay of the call will be available from November 11, 2008 until November 18, 2008 (US Eastern Time). The dial-in details for the replay are set forth below: U.S. Toll Free Number +1-888-286-8010, International dial-in number +1-617-801-6888; Pass code 45158411. Additionally, a live and archived web cast of this call will be available on the Focus Media web site at http://ir.focusmedia.cn .
ABOUT FOCUS MEDIA HOLDING LIMITED
Focus Media Holding Limited (Nasdaq: FMCN) is China's leading
multi- platform digital media company, operating the largest out-of-home advertising network in China using audiovisual digital displays, based on the number of locations and number of flat-panel television displays in our network, and is also a leading provider of mobile handset advertising and Internet marketing solutions in China. Through Focus Media's multi-platform digital advertising network, the company reaches urban consumers at strategic locations and point-of-interests over a number of media formats, including audiovisual television displays in buildings and stores, advertising poster frames and other new and innovative media, such as outdoor light-emitting diode or LED digital billboard, mobile handset advertising networks and Internet advertising platforms. As of September 30, 2008, Focus Media's digital out-of-home advertising network had approximately 120,000 LCD display and digital frames in its commercial location network, approximately 56,000 LCD displays in its in-store network and approximately 300,000 advertising
in-elevator poster and digital frames, installed in over 90 cities throughout China, and approximately 250 outdoor LED billboard displays in Shanghai and Beijing. For more information about Focus Media, please visit our website at http://ir.focusmedia.cn .
SAFE HARBOR: FORWARD-LOOKING STATEMENTS
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the Business Outlook section and quotations from management in this press release, as well as Focus Media's strategic and operational plans, contain forward-looking statements. Focus Media may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 20-F and 6-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Focus Media's beliefs and expectations, are forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks outlined in Focus Media's filings with the U.S. Securities and Exchange Commission, including its registration statements on Form F-1, F-3, F-6 and 20-F, in each case as amended. Focus Media does not undertake any obligation to update any
forward-looking statement, except as required under applicable law.
Focus Media Holding Limited
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars in thousands)
2008-9-30 2007-12-31
ASSETS
Current assets
Cash and cash equivalents $373,172 $450,416
Investment in equity securities
and bank notes 7,707 90,145
Accounts receivables, net 346,341 206,102
Inventories 1,551 1,654
Prepaid expenses and other current
assets 23,101 58,885
Deposit paid for acquisition of
subsidiaries 33,142 40,402
Amount due from related parties 13,895 5,092
Rental deposits 36,679 28,763
Total current assets $835,588 $881,459
Rental deposits 5,511 5,302
Equipment, net 165,981 95,478
Acquired intangible assets, net 177,827 155,717
Goodwill 1,142,151 943,398
Other long term assets 44,175 58,183
Total assets $2,371,233 $2,139,537
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $102,243 $50,379
Accrued expenses and other current
liabilities 157,305 190,313
Income taxes payable 34,591 21,391
Amount due to related parties 21,710 12,977
Deferred tax liabilities 14,163 1,227
Total liabilities of discontinued
operations 7,581 --
Total current liabilities $337,593 $276,287
Deferred tax liabilities 19,421 6,393
Total liabilities $357,014 $282,680
Minority interests 4,282 1,913
Shareholders' equity
Ordinary shares 32 32
Additional paid in capital 1,692,529 1,581,580
Treasury stock (29,998) --
Retained earnings 270,390 236,718
Accumulated other comprehensive
income 76,984 36,614
Total shareholders' equity $2,009,937 $1,854,944
Total liabilities and shareholders'
equity $2,371,233 $2,139,537
Focus Media Holding Limited
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. Dollar in thousands, except share data)
Three months ended Nine months ended
2008-9-30 2007-9-30 2008-6-30 2008-9-30 2007-9-30
Gross revenues
(note 3):
Digital
out-of-home:
Commercial
Locations $101,556 $70,173 $87,110 $256,797 $160,459
In-store
network 18,513 7,813 18,797 56,387 23,137
In-elevator
poster
frame
network 48,187 25,121 40,763 120,791 59,322
Internet
Advertising 73,253 44,234 78,858 203,561 70,652
Other revenue 234 117 171 3,495 803
Total gross
Revenues 241,743 147,458 225,699 641,031 314,373
Less: Sales
Taxes 16,930 10,091 13,956 42,912 23,281
Total
revenues 224,813 137,367 211,743 598,119 291,092
Cost of
revenues
(note 4):
Digital
out-of-home
Commercial
locations 30,323 22,825 30,456 87,994 53,778
In-store
network 13,098 5,832 18,428 48,769 16,046
In-elevator
poster
frame
network 16,766 6,656 15,666 44,078 16,667
Internet
advertising 54,705 32,718 57,659 151,060 51,123
Total
advertising
service costs 114,892 68,031 122,209 331,901 137,614
Other costs 222 121 162 1,687 424
Total cost
of revenues 115,114 68,152 122,371 333,588 138,038
Gross profit 109,699 69,215 89,372 264,531 153,054
Operating
expenses:
General and
administrative
(note 4) 26,436 11,329 20,702 65,706 31,197
Selling and
marketing
(note 4) 28,353 18,091 27,392 78,157 40,085
Other
operating
(income)/
expenses,
net (2,138) (1,035) (2,012) (5,980) (3,412)
Total
operating
expenses 52,651 28,385 46,082 137,883 67,870
Income from
operations 57,048 40,830 43,290 126,648 85,184
Interest
income,
net 1,747 1,542 1,150 5,244 6,192
Other
income
(expenses),
net 1,858 (76) 2,017 4,098 (61)
Income before
tax and
minority
interests 60,653 42,296 46,457 135,990 91,315
Income tax
expense
- Current 11,918 1,755 9,647 27,314 5,192
- Deferred (3,514) 46 (882) (5,109) (579)
Total income
taxes 8,404 1,801 8,765 22,205 4,613
Income before
minority
interests 52,249 40,495 37,692 113,785 86,702
Minority
Interests 900 -- 999 2,097 (18)
Net income
from
continued
operations 51,349 40,495 36,693 111,688 86,720
(Net loss)
/income
from
discontinued
operations -- 6,426 (616) (77,468) 14,682
Income tax -- 308 (55) 549 782
Net income/(loss)
from
discontinued
operations -- 6,118 (561) (78,017) 13,900
Net income/(loss)
attributed
to shareholders $51,349 $46,613 $36,132 $33,671 $100,620
Income from
continued
operations
- basic $0.39 $0.33 $0.29 $0.86 $0.75
Income from
continued
operations
- diluted $0.38 $0.32 $0.28 $0.84 $0.73
Income from
discontinued
operations
- basic $-- $0.05 $-- $(0.60) $0.12
Income from
discontinued
operations
- diluted $-- $0.05 $-- $(0.59) $0.12
Income per ADS
- basic $0.39 $0.38 $0.29 $0.26 $0.87
Income per ADS
- diluted $0.38 $0.37 $0.28 $0.25 $0.84
Shares used in
calculating
basic
income per
ADS 131,541,174 122,250,042 128,339,961 130,363,120 115,883,549
Shares used
in
calculating
diluted
income
per ADS 133,729,070 126,370,818 130,776,141 133,048,034 119,471,360
Focus Media Holding Limited
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(U.S. Dollar in thousands)
Three months ended Nine months ended
2008-9-30 2007-9-30 2008-9-30 2007-9-30
Operating activities:
Net income $51,349 $46,613 $33,671 $100,620
Adjustments to
reconcile net
income/(loss) to
net cash
provided by
operating
activities:
Minority interest 900 -- 2,097 (18)
Impairment
provisions
for discontinued
operations -- -- 77,054 --
Bad debt provision 5,923 320 9,357 2,736
Share based
compensation 10,810 4,679 29,855 14,115
Depreciation and
amortization 8,150 5,114 21,713 13,222
Amortization of
acquired
intangible
assets 9,262 3,287 30,370 7,891
Loss on disposal of
equipments 405 -- 405 --
Changes in assets and
liabilities,
net of effects
of acquisitions (51,381) (19,174) (116,209) (41,157)
Net cash provided
by operating
activities $35,418 $40,839 $88,313 $97,409
Investing activities:
Purchase of equipment
and other long
term assets (17,028) (11,659) (65,770) (36,924)
Acquisition of an
intangible asset -- -- (1,767) (105)
Purchase of
subsidiaries, net
of cash acquired (14,429) 2,334 (118,573) (54,440)
Investment in a
joint venture (2,970) -- (2,970) --
Disposal of
subsidiaries -- -- (11,694) --
Deposits paid to
acquire
subsidiaries (901) (25,004) (14,270) (60,272)
Sales /(purchase) of
equity securities
and bank notes 39,025 (8,830) 83,765 (49,545)
Net cash provided/
(used) in investing
activities $3,697 $(43,159) $(131,279) $(201,286)
Financing activities:
Proceeds from issuance
of ordinary shares,
net of issuance
costs 1,822 475 9,168 120,733
Proceeds from
short-term debts -- -- 370 --
Repurchase of ordinary
shares (29,998) -- (29,998) --
Capital injection
from minority
shareholders -- 40 214 137
Repayment of short-term
debts -- (394) (30,412) (4,165)
Net cash provided
by/(used in)
financing activities $(28,176) $121 $(50,658) $116,705
Effect of exchange
rate changes 717 4,850 16,380 12,805
Net (decrease) increase
in cash and cash
equivalents $11,656 $2,651 $(77,244) $25,633
Cash and cash
equivalents,
beginning of period 361,516 187,592 450,416 164,610
Cash and cash
equivalents, end
of period $373,172 $190,243 $373,172 $190,243
Supplemental disclosure
of cash flow
information:
Income taxes paid $6,037 $461 $14,984 $1,038
Interest paid $-- $6 $-- $6
Supplemental disclosure
of non-cash investing
activity:
Acquisition of
subsidiaries:
Value of ordinary
share
consideration $-- $-- $71,927 $166,050
Accounts payable $14,777 $6,143 $14,777 $6,143
Notes:
Note 1: Basic income per ADS is computed by dividing income attributable
to holders of ordinary shares by the weighted average number of
ADS equivalent outstanding during the year/period. Diluted income
per ADS reflects the potential dilution that could occur if
securities or other contracts to issue ADS were exercised or
converted into ADS.
Note 2: The conversion of Renminbi ("RMB") amounts into USD amounts is
based on the rate of USD1 = RMB6.8183 on September 30, 2008 for
balance sheet accounts denominated in RMB, and at the average rate
of USD1 = RMB 6.85292 for profit and loss accounts denominated in
RMB.
Note 3: Details of net revenues are as follows (U.S. Dollars in thousands):
Three months ended Nine months ended
2008-9-30 2007-9-30 2008-6-30 2008-9-30 2007-9-30
Gross revenues
(note 4):
Gross Advertising
Service Revenue:
Digital
out-of-home:
Commercial
locations
- Unrelated
parties $100,318 $70,091 $86,452 $254,524 $157,825
- Related
parties 1,238 82 658 2,273 2,634
Total Commercial
Locations 101,556 70,173 87,110 256,797 160,459
In-store Network
- Unrelated
parties 18,513 7,813 18,797 56,387 21,822
- Related
parties -- -- -- -- 1,315
Total in-store
network 18,513 7,813 18,797 56,387 23,137
In-elevator
Poster
Frame
Network
- Unrelated
parties 48,172 25,029 40,763 120,776 59,132
- Related
parties 15 92 -- 15 190
Total In-elevator
Poster
Frame Network 48,187 25,121 40,763 120,791 59,322
Internet
advertising
- Unrelated
parties 71,616 43,552 77,394 200,089 69,640
- Related
parties 1,637 682 1,464 3,472 1,012
Total internet
advertising 73,253 44,234 78,858 203,561 70,652
Gross Advertising
Services Revenue: 241,509 147,341 225,528 637,536 313,570
Less: Sales taxes:
Digital
out-of-home:
Commercial
locations: 8,469 5,584 5,996 20,141 13,166
In-store Network 1,748 726 1,777 5,331 2,168
In-elevator Poster
Frame Network 4,226 2,058 3,450 10,338 5,042
Internet
advertising 2,487 1,723 2,733 7,102 2,905
Total sales taxes: 16,930 10,091 13,956 42,912 23,281
Net Advertising
Service
Revenue 224,579 137,250 211,572 594,624 290,289
Add: Other
revenue: 234 117 171 3,495 803
Net revenues: $224,813 $137,367 $211,743 $598,119 $291,092
Note 4: Share-based compensation expense is comprised of the following
(U.S. Dollars in thousands):
Three months ended Nine months ended
2008-9-30 2007-9-30 2008-6-30 2008-9-30 2007-9-30
Cost of revenues $438 $288 $420 $1,162 $853
Selling and
marketing 4,706 2,374 4,573 13,856 6,519
General and
administrative 5,666 2,017 5,428 14,837 6,743
Sub-total $10,810 $4,679 $10,421 $29,855 $14,115
Note 5: The Company has performed a preliminary purchase price allocation
on its acquisition of CGEN, which occurred in the first quarter of
2008 based on an internal valuation performed by management. The
purchase price allocation will be finalized once management has
assessed the pending results of independent third party valuations.
Note 6: Earnings per ADS is based on the new conversion ratio of 1 ADS to
5 ordinary shares, effective as of April 11, 2007. The comparative
numbers have been retroactively adjusted to reflect the conversion.
Focus Media Holding Ltd.
Reconciliation of GAAP to Non-GAAP
(U.S. Dollar in thousands, except share data)
(Unaudited)
1. Reconciliation of GAAP gross profit and gross margin to non-GAAP gross
profit and gross margin.
Three months ended Three months ended
September 30, 2008 June 30, 2008
GAAP (a) (b) Non-GAAP GAAP (a) (b) Non-GAAP
Gross profit
Commercial
location 62,764 438 1,855 65,057 50,658 420 1,900 52,978
network
In-store network 3,667 -- 897 4,564 (1,408) -- 882 (526)
In-elevator -- --
poster 27,195 2,618 29,813 21,647 2,348 23,995
frame network
Digital
out-of-home 93,626 438 5,370 99,434 70,897 420 5,130 76,447
Internet --
Advertising 16,061 690 16,751 -- 2,044 20,510
Others 12 -- -- 12 18,4669 -- -- 9
Total 109,699 438 6,060 116,197 89,372 420 7,174 96,966
Gross margin
Commercial
location 67.4% 0.5% 2.0% 69.9% 62.5% 0.5% 2.3% 65.3%
network
In-store network 21.9% 0.0% 5.4% 27.3% (8.3%) 0.0% 5.2% (3.1%)
In-elevator
poster 61.9% 0.0% 6.0% 67.9% 58.0% 0.0% 6.3% 64.3%
frame network
Digital
out-of-home 60.9% 0.3% 3.5% 64.7% 52.3% 0.3% 3.8% 56.4%
Internet
Advertising 22.7% 0.0% 1.0% 23.7% 24.3% 0.0% 2.7% 26.9%
Others 5.1% 0.0% 0.0% 5.1% 5.3% 0.0% 0.0% 5.3%
Total 48.8% 0.2% 2.7% 51.7% 42.2% 0.2% 3.4% 45.8%
(a) To adjust for share-based compensation expenses
(b) To adjust for amortization of acquisition-related intangible assets
2. Reconciliation of net income, earnings per ADS and operating margin
from GAAP to non-GAAP:
Three months ended Nine months ended
2008-9-30 2007-9-30 2008-6-30 2008-9-30 2007-9-30
GAAP net
income
attributable
to
shareholders $51,349 $46,613 $36,132 $33,671 $100,620
Amortization
of acquired
intangible
assets 9,262 3,287 10,428 30,370 7,891
Share-based
compensation 10,810 4,679 10,421 29,855 14,115
Net loss from
discontinued
operations -- -- 561 79,883 --
Non-GAAP net
income $71,421 $54,579 $57,542 $173,779 $122,626
GAAP income
per ADS
- basic $0.39 $0.38 $0.29 $0.26 $0.87
GAAP income
per ADS
- diluted $0.38 $0.37 $0.28 $0.25 $0.84
Non-GAAP
income
per ADS
- basic $0.54 $0.45 $0.45 $1.33 $1.06
Non-GAAP
income
per ADS
- diluted $0.53 $0.43 $0.44 $1.31 $1.03
Shares used
in
calculating
basic GAAP/
Non-GAAP
income per
ADS 131,541,174 122,250,042 128,339,961 130,363,120 115,883,549
Shares used
in
calculating
diluted GAAP/
Non-GAAP
income per
ADS 133,729,070 126,370,818 130,776,141 133,048,034 119,471,360
GAAP income
from
operations $57,048 $40,830 $43,290 $126,648 $85,184
Amortization
of acquired
intangible
assets 9,262 3,125 10,428 30,370 7,891
Share-based
compensation 10,810 4,679 10,421 29,855 14,115
Non-GAAP
income from
operations $77,120 $48,634 $64,139 $186,873 $107,190
Non-GAAP
operating
margin 34.3% 35.4% 30.3% 31.2% 36.8%
