SHANGHAI, China, June 6 /Xinhua-PRNewswire/ -- Focus Media Holding Limited (Nasdaq: FMCN), China's leading multi-platform digital media company, today announced its unaudited financial results for the first quarter ended March 31, 2008.
Highlights for first quarter 2008:
-- Total GAAP revenues grew 214.7% year-over-year to $161.6 million.
Total GAAP revenues exclude $11.3 million of revenue from our mobile
handset advertising business which is classified as discontinued
operation.
-- GAAP net loss for the first quarter was $53.8 million or $0.42 per
fully diluted ADS. The GAAP net loss includes a non-recurring loss of
$79.3 million resulting from the restructuring of our mobile handset
advertising business.
-- 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 below and
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, amortization of acquired
intangible assets resulting from acquisitions and one-time charges
relating to our discontinued operations (non-GAAP) for the first
quarter was $44.8 million or $0.34 per fully diluted ADS.
-- In the first quarter of 2008, digital out-of-home advertising revenue
was $108.7 million, up 113.4% year-over-year.
-- Advertising service revenue from our commercial location network,
including revenue from our LCD display networks, outdoor digital and
non-digital billboard networks and movie theater advertising
network, grew 96.8% year-over-year to $62.3 million.
-- Advertising service revenue from our in-store network, including
revenues from CGEN Digital Media Company Limited ("CGEN"), was $17.3
million, an increase of 160.2% year-over-year. On January 2, 2008,
we completed the acquisition of CGEN, which has significantly
strengthened our market leadership in the in-store advertising
market.
-- Advertising service revenue from our in-elevator poster frame
network grew 130.3% year-over-year to $29.2 million
-- Internet advertising revenue was $49.6 million in the first quarter of
2008.
Dr. Tan Zhi, Chief Executive Officer of Focus Media said, "Our Q1 2008 results were affected by the restructuring of our wireless handset advertising business announced previously. Our digital out-of-home and Internet advertising businesses continued to perform strongly in the first quarter. The recent earthquake in Sichuan province will have a negative impact on our operations in the second quarter, especially to advertising revenues from our networks in the earthquake region, namely Chengdu and Chongqing. However, we believe such affect will be limited to the near term and we continue to look for a strong second-half in 2008."
First Quarter Financial Results
For the first quarter of 2008, Focus Media reported total revenues from continuing operations of $161.6 million, an increase of 214.7% compared to $51.3 million for the first quarter of 2007.
Our total digital out-of-home advertising revenue was $108.7 million in the first quarter of 2008, an increase of 113.4% from $51.0 million in the first quarter of 2007. In the first quarter of 2008, commercial location advertising revenue, outdoor LED and movie theatre advertising, was $62.3 million, contributing 57.3% of total digital out-of-home advertising revenue. Advertising service revenue from our in-store network was $17.3 million, or 15.9% 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 complexes was $29.2 million in the first quarter of 2008, or 26.8% of total digital out-of-home advertising revenue.
As of March 31, 2008, the total installed base of LCD displays and digital frames in our commercial location network was 119,240 nationwide, including 114,426 displays through our directly owned networks, and 4,814 displays through our regional distributors. The total number of displays installed in our in-store network including CGEN was 61,420 as of March 31, 2008. The total number of non-digital frames available for sale on our poster frame network was 225,473 as of March 31, 2008. In addition, as of March 31, 2008, we had 21,447 digital frames installed on our poster frame network.
Internet advertising service revenue was $49.6 million in the first quarter of 2008, lower than $57.2 million in the fourth quarter of 2008 due to seasonality, as the first quarter has historically been the Company's weakest quarter for advertising revenues.
Gross profit for the first quarter of 2008 was $65.5 million, representing an increase of 129.7% compared to $28.5 million in the first quarter of 2007. In the first quarter 2008, GAAP gross margin for the Company was 40.5%, as compared to 47.8% in the fourth quarter of 2007, mainly due to the contribution from the lower-margin Internet advertising operations. Excluding non-cash share-based compensation expense of $0.3 million and acquisition-related intangible asset amortization expense of $7.3 million in the cost of revenues, gross margin (non-GAAP) was 45.2% in the first quarter of 2008. In the first quarter of 2008, excluding non-cash share-based compensation expense and acquisition-related intangible asset amortization expense, digital out-of-home gross margin (non-GAAP) was 53.9%; Internet advertising gross margin (non-GAAP) was 26.3%.
In the first quarter of 2008, operating expenses totaled $39.2 million, including $3.3 million in acquired intangible asset amortization resulting from acquisitions and non-cash share-based compensation expense of $8.3 million. Selling and marketing expenses in the first quarter totaled $22.4 million, including $3.3 million in acquired intangible asset amortization and $4.6 million in share compensation expense. General and administrative expense in the first quarter was $18.6 million, including $3.7 million in share compensation expense. Our operating margin in the first quarter of 2008 was 16.3%. Excluding non-cash share-based compensation expense and acquired intangible asset amortization expense, our operating margin (non-GAAP) was 28.2% in the first quarter 2008 compared to 36.6% in the fourth quarter of 2007.
Total intangible amortization expense in the first quarter of 2008 resulting from historical acquisitions was $10.7 million. Non-cash share-based compensation expense was $8.6 million in the first quarter of 2008, or 5.3% of total revenues. Total income tax expense was $5.0 million.
In the first quarter of 2008, due to the restructuring of our mobile handset advertising business, we recorded a $79.3 million impairment charge to reduce the carrying value of the business to its estimated fair value less cost to sell and accrue for legal and contingent acquisition consideration payments. As a result, we incurred a GAAP loss for the first quarter of 2008 of $53.8 million, or $0.42 per fully diluted ADS. Net income excluding non-cash share-based compensation expense, acquired intangible assets amortization expense resulting from acquisitions and the non-recurring impairment charge resulted from the restructuring of mobile handset advertising business in the first quarter of 2008 (non-GAAP) was $44.8 million, or $0.34 per fully diluted ADS.
First quarter 2008 operating cash flow was $7.6 million. Day sales outstanding ("DSO") was 127 days in the first quarter mainly due to the consolidation of $40.7 million accounts receivables from CGEN at the end of Q1 2008 and longer receivable cycles of our Internet advertising business. As of March 31, 2008, the Company had cash and cash equivalents of $283.0 million.
BUSINESS OUTLOOK
Due to the impact of the recent earthquake in Sichuan province, our full year 2008 revenue guidance excluding discontinued wireless advertising operations is revised to be between $820 million to $850 million as compared to the previous guidance of between announced $860 million to $890 million, Full year 2008 net income from continued operations excluding share-based compensation expenses, amortization of intangible assets resulting from acquisitions and one-time non-recurring impairment charge resulted from the restructuring of mobile handset advertising business (non-GAAP) to be between US$240 million and US$260 million, or $1.76 to $1.91 per fully diluted ADS based on 136 million annual average total ADS equivalent shares outstanding, as compared to the previous guidance of between US$260 million and US$280 million.
The Company estimates its total revenues for the second quarter of 2008 will range from $190 million to $195 million. Second quarter 2008 net income excluding share-based compensation expenses and amortization of intangible assets resulting from acquisitions (non-GAAP) is expected to be between $54 million and $55 million or $0.40 to $0.41 per fully diluted ADS based on 133 million average total ADS equivalent shares outstanding.
ANNOUNCEMENTS
Focus Media will hold an Analyst Day meeting on Monday June 30, 2008 in its headquarter office: 29/F, No. 369 Jiangsu Road, Shanghai, PR China to provide general updates on the business. Presentations by Focus Media's management team are scheduled to begin at 1:00 p.m. and conclude by approximately 5:00 p.m. Beijing time.
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. Dollars in thousands, except percentages, share and per-share data)
(Unaudited)
1. Reconciliation of GAAP gross profit, gross margin to Non-GAAP gross profit and gross margin.
3 months ended March 31, 2008
GAAP (a) (b) Non-GAAP
Gross profit
Commercial location network 35,732 304 1,817 37,853
In-store network 28 -- 857 885
Poster frame network 17,533 -- 2,348 19,881
Digital out-of-home 53,293 304 5,022 58,619
Mobile Handset Advertising Network (492) -- 145 (347)
Internet Advertising 10,872 -- 2,164 13,036
Others 1,787 -- -- 1,787
Total 65,460 304 7,331 73,095
Gross margin
Commercial location network 57.4% 0.5% 2.9% 60.8%
In-store network 0.2% 0.0% 5.0% 5.1%
Poster frame network 60.1% 0.0% 8.0% 68.1%
Digital out-of-home 49.0% 0.3% 4.6% 53.9%
Mobile Handset Advertising Network (298.2%) 0.0% 87.9% (210.2%)
Internet Advertising 21.9% 0.0% 4.4% 26.3%
Others 57.8% 0.0% 0.0% 57.8%
Total 40.5% 0.2% 4.5% 45.2%
3 months ended December 31, 2007
GAAP (a) (b) Non-GAAP
Gross profit
Commercial location network 47,356 126 3,089 50,571
In-store network (981) -- -- (981)
Poster frame network 19,773 -- 3,830 23,603
Digital out-of-home 66,148 126 6,919 73,193
Mobile Handset Advertising Network (566) -- -- (566)
Internet Advertising 15,076 -- 2,165 17,241
Others (63) -- -- (63)
Total 80,595 126 9,084 89,805
Gross margin
Commercial location network 64.5% 0.2% 4.2% 68.9%
In-store network (15.2%) 0.0% 0.0% (15.2%)
Poster frame network 63.4% 0.0% 12.3% 75.7%
Digital out-of-home 59.6% 0.1% 6.2% 65.9%
Mobile Handset Advertising Network (379.9%) 0.0% 0.0% (379.9%)
Internet Advertising 26.4% 0.0% 3.8% 30.1%
Others (20.3%) 0.0% 0.0% (20.3%)
Total 47.8% 0.1% 5.4% 53.2%
(a) To adjust share-based compensation expenses
(b) To adjust amortization of acquisition related intangible assets
2. Reconciliation of net income, earnings per share and operating margin from GAAP to Non-GAAP:
Three months ended
2008-3-31 2007-3-31 2007-12-31
GAAP net income / (loss)
attributable to shareholders $(53,810) $16,292 $43,816
Amortization of acquired
intangible assets 10,680 1,932 16,862
Share-based compensation 8,624 4,517 7,338
Loss from impairment of
discontinued operations (Note 8) 79,322 -- --
Non-GAAP net income $44,816 $22,741 $68,016
GAAP income/(loss) per ADS - basic $(0.42) $0.15 $0.35
GAAP income/(loss) per ADS – diluted $(0.42) $0.15 $0.34
Non-GAAP income per ADS - basic $0.35 $0.21 $0.54
Non-GAAP income per ADS - diluted $0.34 $0.21 $0.52
Shares used in calculating diluted
GAAP / Non-GAAP income per ADS 128,049,333 107,179,635 125,710,757
Shares used in calculating diluted
GAAP / Non-GAAP income per ADS 131,394,654 110,390,777 129,831,533
GAAP income from operations $26,310 $11,836 $40,583
Amortization of acquired
intangible assets 10,680 1,637 13,879
Share-based compensation 8,624 4,517 7,338
Non-GAAP income from operations $45,614 $17,990 $61,880
Non-GAAP operating margin 28.2 % 35.0 % 36.6 %
TODAY’S CONFERENCE CALL
The Company will host a conference call to discuss the first quarter 2008 results at 9:00 p.m. U.S. Eastern Time on June 5, 2008 (6:00 p.m. U.S. Pacific Time on June 5, 2008 and 9:00 a.m. Beijing/Hong Kong Time on June 6, 2008). The dial-in details for the live conference call are set forth below: U.S. Toll Free Number +1-800-638-5439, Hong Kong dial-in number +852-3002-1672, International dial-in number +1-617-614-3945; Pass code: 25224862.
A replay of the call will be available from June 5, 2008 until June 12, 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 22983881.
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 March 31, 2008, Focus Media’s digital out-of-home advertising network had approximately 119,200 LCD display in its commercial location network, approximately 61,400 LCD displays in its in-store network and 246,900 advertising in-elevator poster frames, installed in over 90 cities throughout China, and approximately 200 outdoor LED billboard displays in Shanghai. 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)
2008-3-31 2007-12-31
ASSETS
Current assets
Cash and cash equivalents $282,953 $450,416
Investment in equity securities 128,550 90,145
Accounts receivables, net 251,774 206,102
Inventories 2,023 1,654
Prepaid expenses and other
current assets 23,608 58,885
Deposit paid for acquisition
of subsidiaries 49,730 40,402
Amount due from related parties 3,825 5,092
Rental deposits 34,763 28,763
Total assets of discontinued operations 17,512 --
Total current assets $794,738 $881,459
Rental deposits 6,582 5,302
Equipment, net 129,483 95,478
Acquired intangible assets, net 197,083 155,717
Goodwill 1,048,516 943,398
Other long term assets 43,801 58,183
Total assets $2,220,203 $2,139,537
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short term debt $370 $--
Accounts payable 69,903 50,379
Accrued expenses and other
current liabilities 207,509 190,313
Income taxes payable 24,666 21,391
Amount due to related parties 14,260 12,977
Deferred tax liabilities 14,625 1,227
Total liabilities of
discontinued operations 35,592 --
Total current liabilities $366,925 $276,287
Deferred tax liabilities 10,140 6,393
Total liabilities $377,065 $282,680
Minority interests 2,083 1,913
Shareholders’ equity
Ordinary shares 32 32
Additional paid in capital 1,594,706 1,581,580
Retained earnings 182,908 236,718
Accumulated other comprehensive income 63,409 36,614
Total shareholders’ equity $1,841,055 $1,854,944
Total liabilities and
shareholders’ equity $2,220,203 $2,139,537
FOCUS MEDIA HOLDING LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. Dollars in thousands, except share data)
Three months ended
2008-3-31 2007-3-31 2007-12-31
Gross revenues (note 4):
Digital out-of-home:
Commercial locations $67,957 $34,918 $80,128
In-store network 19,077 7,326 7,150
In-elevator poster frame network 31,841 13,854 34,079
Mobile handset advertising 174 -- 156
Internet advertising 51,450 -- 59,318
Other revenue 3,090 381 310
Total gross revenues 173,589 56,479 181,141
Less: Sales taxes 12,026 5,147 12,434
Total revenues 161,563 51,332 168,707
Cost of revenues (note 5):
Digital out-of-home
Commercial locations 26,558 12,898 26,034
In-store network 17,243 5,027 7,456
In-elevator poster frame network 11,646 4,746 11,419
Mobile handset advertising 657 -- 715
Internet advertising 38,696 -- 42,115
Total advertising service costs 94,800 22,671 87,739
Other costs 1,303 165 373
Total cost of revenues 96,103 22,836 88,112
Gross profit 65,460 28,496 80,595
Operating expenses:
General and administrative (note 5) 18,568 8,578 16,593
Selling and marketing (note 5) 22,412 9,338 24,956
Other operating (income)/
expenses, net (1,830) (1,256) (1,537)
Total operating expenses 39,150 16,660 40,012
Income from operations 26,310 11,836 40,583
Interest income, net 2,347 2,716 3,492
Other income (expenses), net 223 70 2,702
Income before tax and minority interests 28,880 14,622 46,777
Income tax expense
- Current 5,749 965 4,754
- Deferred (713) (125) (267)
Total income taxes 5,036 840 4,487
Income before minority interests 23,844 13,782 42,290
Minority Interests 198 (31) 713
Net income from continued operations 23,646 13,813 41,577
(Net loss)/income from
discontinued operations (76,852) 2,607 3,401
Income tax 604 128 1,162
Net income/(loss) from discontinued
operations (77,456) 2,479 2,239
Net income/(loss) attributed to
shareholders (53,810) 16,292 43,816
Income from continued
operations – basic $0.18 $0.13 $0.33
Income from continued
operations – diluted $0.18 $0.13 $0.32
Income from discontinued
operations - basic $(0.60) $0.00 $0.02
Income from discontinued
operations - diluted $(0.60) $0.00 $0.02
Income per ADS - basic $(0.42) $0.13 $0.35
Income per ADS - diluted $(0.42) $0.13 $0.34
Shares used in calculating basic
income per ADS 128,049,333 107,179,635 125,710,757
Shares used in calculating diluted
income per ADS 131,394,654 110,390,777 129,831,533
FOCUS MEDIA HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(U.S. Dollars in thousands)
2008-3-31 2007-3-31 2007-12-31
Operating activities:
Net income/(loss) $(53,810) $16,292 $43,816
Adjustments to reconcile net
income/(loss) to net cash
provided by operating activities:
Minority interest 198 (31) 713
Impairment provisions 79,322 -- --
Bad debt provision 1,415 796 920
Share based compensation 8,624 4,517 7,338
Depreciation and amortization 6,481 3,838 6,223
Amortization of acquired
intangible assets 10,680 1,932 16,862
Changes in assets and
liabilities, net of effects of
acquisitions (45,294) (3,369) (10,435)
Net cash provided by
operating activities $7,616 $23,975 $65,437
Investing activities:
Purchase of equipment and other
long term assets (18,795) (6,633) (18,852)
Acquisition of an intangible asset (1,767) -- --
Purchase of subsidiaries, net of
cash acquired (84,989) (52,260) (34,041)
Deposits paid to acquire
subsidiaries (13,369) (20,069) (15,796)
Issuance of loan receivables -- -- (30,000)
Purchases of available-for-sale
securities (37,688) (21,980) (38,632)
Net cash used in investing
activities $(156,608) $(100,942) $(137,321)
Financing activities:
Proceeds from issuance of
ordinary shares, net of
issuance costs 4,503 117,195 326,272
Proceeds from short-term debts 370 -- --
Capital injection from minority
shareholders 214 97 --
Repayment of short-term debts (30,041) (3,115) --
Net cash provided by/(used in)
financing activities $(24,954) $114,177 $326,272
Effect of exchange rate changes 19,498 2,742 5,785
Net (decrease) increase in cash
and cash equivalents $(154,448) $39,952 $260,173
Cash and cash equivalents,
beginning of period 450,416 164,611 190,243
Cash and cash equivalents,
end of period $295,968 $204,563 $450,416
Supplemental disclosure of cash
flow information:
Income taxes paid $1,790 $280 $211
Interest paid $-- $-- $8
Supplemental disclosure of
non-cash investing activity:
Acquisition of subsidiaries:
Value of ordinary share
consideration $-- $154,281 $--
Accounts payable $25,247 $3,892 $16,935
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 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 = RMB7.019 on March 31, 2008 for balance sheet accounts which dominated in RMB.
Note 3: Following the restructuring of our mobile handset advertising business, we have disposed of, or have determined we will dispose of, 10 subsidiaries, which were mainly focusing on the push-based mobile advertising business. Each of these subsidiaries represented a component of an entity as defined by SFAS No.144 “Accounting for the impairment or Disposal of Long-lived Assets”. As such, we have classified these subsidiaries as a discontinued operation for all periods presented. Revenue related to discontinued operations was approximately $11.3 million, $6.0 million and $15.8 million for each of the three months ended March 31, 2008, 2007 and December 31, 2007, respectively.
Note 4: Details of net revenues are as follows (U.S. Dollars in thousands):
Three months ended
2008-3-31 2007-3-31 2007-12-31
Gross Advertising Service Revenue:
Digital out-of-home:
Commercial locations
- Unrelated parties $67,580 $32,413 $80,021
- Related parties 377 2,505 107
Total Commercial Locations 67,957 34,918 80,128
In-store Network
- Unrelated parties 19,077 6,011 7,150
- Related parties -- 1,315 --
Total in-store network 19,077 7,326 7,150
In-elevator Poster Frame Network
- Unrelated parties 31,841 13,845 34,025
- Related parties -- 9 54
Total In-elevator Poster Frame Network 31,841 13,854 34,079
Mobile handset advertising
- Unrelated parties 174 -- 156
- Related parties -- -- --
Total mobile handset advertising 174 -- 156
Internet advertising
- Unrelated parties 51,079 -- 58,965
- Related parties 371 -- 353
Total internet advertising 51,450 -- 59,318
Gross Advertising Services Revenue: 170,499 56,098 180,831
Less: Sales taxes:
Digital out-of-home:
Commercial locations: 5,667 3,274 6,738
In-store Network 1,806 688 675
In-elevator Poster Frame Network 2,662 1,185 2,887
Mobile handset advertising 9 -- 7
Internet advertising 1,882 -- 2,127
Total sales taxes: 12,026 5,147 12,434
Net Advertising Service Revenue 158,473 50,951 168,397
Add: Other revenue: 3,090 381 310
Net revenues: $161,563 $51,332 $168,707
Note 5: Share-based compensation expense is comprised of the following (U.S. Dollars in thousands):
Three months ended
2008-3-31 2007-3-31 2007-12-31
Cost of revenues $304 $281 $126
Selling and marketing 4,577 2,061 3,005
General and administrative 3,743 2,175 4,207
Sub-total $8,624 $4,517 $7,338
Note 6: The Company has performed preliminary purchase price allocation on their 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 7: 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 haven been adjusted to reflect the conversion.
Note 8: The $79.3 million impairment charge resulting from wireless handset advertising business restructuring includes 1) impairment loss of acquired intangibles and goodwill of $14.4 million and $23.2 million, respectively; 2) contingent purchase consideration and legal cost accrual of $19.1 million; and 3) $22.6 million loss from write-down the carry amount of the discontinued operations other than acquired intangibles and goodwill to its fair value.
Focus Media Holding Ltd.
Reconciliation of GAAP to Non-GAAP
(U.S. Dollars in thousands, except percentages, share and per-share data)
(Unaudited)
1. Reconciliation of GAAP gross profit, gross margin to Non-GAAP gross profit and gross margin.
3 months ended March 31, 2008
GAAP (a) (b) Non-GAAP
Gross profit
Commercial location network 35,732 304 1,817 37,853
In-store network 28 -- 857 885
Poster frame network 17,533 -- 2,348 19,881
Digital out-of-home 53,293 304 5,022 58,619
Mobile Handset Advertising Network (492) -- 145 (347)
Internet Advertising 10,872 -- 2,164 13,036
Others 1,787 -- -- 1,787
Total 65,460 304 7,331 73,095
Gross margin
Commercial location network 57.4% 0.5% 2.9% 60.8%
In-store network 0.2% 0.0% 5.0% 5.1%
Poster frame network 60.1% 0.0% 8.0% 68.1%
Digital out-of-home 49.0% 0.3% 4.6% 53.9%
Mobile Handset Advertising Network (298.2%) 0.0% 87.9% (210.2%)
Internet Advertising 21.9% 0.0% 4.4% 26.3%
Others 57.8% 0.0% 0.0% 57.8%
Total 40.5% 0.2% 4.5% 45.2%
3 months ended December 31, 2007
GAAP (a) (b) Non-GAAP
Gross profit
Commercial location network 47,356 126 3,089 50,571
In-store network (981) -- -- (981)
Poster frame network 19,773 -- 3,830 23,603
Digital out-of-home 66,148 126 6,919 73,193
Mobile Handset Advertising Network (566) -- -- (566)
Internet Advertising 15,076 -- 2,165 17,241
Others (63) -- -- (63)
Total 80,595 126 9,084 89,805
Gross margin
Commercial location network 64.5% 0.2% 4.2% 68.9%
In-store network (15.2%) 0.0% 0.0% (15.2%)
Poster frame network 63.4% 0.0% 12.3% 75.7%
Digital out-of-home 59.6% 0.1% 6.2% 65.9%
Mobile Handset Advertising Network (379.9%) 0.0% 0.0% (379.9%)
Internet Advertising 26.4% 0.0% 3.8% 30.1%
Others (20.3%) 0.0% 0.0% (20.3%)
Total 47.8% 0.1% 5.4% 53.2%
(a) To adjust share-based compensation expenses
(b) To adjust amortization of acquisition related intangible assets
2. Reconciliation of net income, earnings per share and operating margin from GAAP to Non-GAAP:
Three months ended
2008-3-31 2007-3-31 2007-12-31
GAAP net income / (loss)
attributable to shareholders $(53,810) $16,292 $43,816
Amortization of acquired
intangible assets 10,680 1,932 16,862
Share-based compensation 8,624 4,517 7,338
Loss from impairment of
discontinued operations (Note 8) 79,322 -- --
Non-GAAP net income $44,816 $22,741 $68,016
GAAP income/(loss) per ADS - basic $(0.42) $0.15 $0.35
GAAP income/(loss) per ADS – diluted $(0.42) $0.15 $0.34
Non-GAAP income per ADS - basic $0.35 $0.21 $0.54
Non-GAAP income per ADS - diluted $0.34 $0.21 $0.52
Shares used in calculating diluted
GAAP / Non-GAAP income per ADS 128,049,333 107,179,635 125,710,757
Shares used in calculating diluted
GAAP / Non-GAAP income per ADS 131,394,654 110,390,777 129,831,533
GAAP income from operations $26,310 $11,836 $40,583
Amortization of acquired
intangible assets 10,680 1,637 13,879
Share-based compensation 8,624 4,517 7,338
Non-GAAP income from operations $45,614 $17,990 $61,880
Non-GAAP operating margin 28.2 % 35.0 % 36.6 %
