omniture

Focus Media Reports Fourth Quarter and Full Year 2007 Results

Focus Media Holding Limited
2008-03-19 00:40 1206

Fourth Quarter Revenue Increased by 171.4% and Net Income Increased by 45.6% Year-over-year

SHANGHAI, China, March 19 /Xinhua-PRNewswire/ -- Focus Media Holding Limited (Nasdaq: FMCN), China’s largest digital media group, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2007.

Highlights for fourth quarter 2007:

-- Total revenues grew 171.4% year-over-year and 21.9% quarter-over-

quarter to $184.6 million.

-- Net income for the fourth quarter was $43.8 million or $0.34 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 and acquired intangible assets amortization

expense 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 and amortization of acquired intangible

assets resulting from acquisitions (non-GAAP) for the fourth quarter

was $68.0 million or $0.52 per fully diluted ADS, exceeding company

guidance of $62 million to $64 million.

-- In the fourth quarter of 2007, digital out-of-home advertising revenue

was $111.0 million, up 75.3% year-over-year, and 17.2% quarter-over-

quarter.

-- Advertising service revenue from our commercial location network,

including revenue from our LCD display networks, outdoor digital and

non-digital billboard networks (also referred to as our iStreet

Network) and movie theater advertising network, grew 75.9% year-

over-year and 13.6% quarter-over quarter to $73.4 million.

-- Advertising service revenue from our in-store network was $6.5

million, down 17.4% year-over-year and 8.6% quarter-over-quarter,

due to the relatively more competitive environment in our in-store

business, mainly from CGEN Technology Company Limited. On January 2,

2008, we closed the acquisition of CGEN and this transaction

strengthened our market leadership. The results for 2007 do not

include the results of CGEN.

-- Advertising service revenue from our in-elevator poster frame

network grew 126.4% year-over-year and 35.2% quarter-over-quarter to

$31.2 million

-- Mobile handset advertising revenue grew 355.8% year-over-year and 14.0%

quarter-over-quarter, to $16.0 million in the fourth quarter 2007.

-- Internet advertising revenue was $57.2 million in the fourth quarter of

2007, up 34.5% quarter-over-quarter.

Highlights for the full year 2007:

-- Total revenues were $506.6 million in 2007, up 139.1% as compared to

$211.9 million in 2006.

-- Operating income was $143.9 million in 2007, up 79.0% as compared to

$80.4 million in 2006.

-- Net income was $144.4 million in 2007, up 73.6% compared to $83.2

million in 2006. Net income excluding non-cash share-based

compensation expenses and amortization of intangible assets resulting

from acquisitions (non-GAAP) was $190.6 million in 2007, up 95.9%

compared to $97.3 million in 2006.

-- Fully diluted earnings per ADS for 2007 was $1.19, compared to $0.80

per ADS for 2006. Fully diluted earnings per ADS excluding non-cash

share-based compensation expenses and amortization of intangible assets

resulting from acquisitions (non-GAAP) was $1.57 in 2007, compared to

$0.93 in 2006.

Commenting on the fourth quarter and full year 2007 results, Executive Chairman Jason Jiang said, “Fourth quarter results far exceeded our own guidance. The upside was driven by robust growth in our in-elevator poster frame business resulting from digital Frame 2.0 upgrade, strong momentum in our mobile handset advertising business, and continued strength in our Internet advertising business. We also made improvements in our Internet advertising business model to increase the gross margin from 23.0% in the third quarter 2007 to 26.4% in the fourth quarter. The results demonstrated the strong leverage built into our business model as we move forward to become the largest digital media company in China. Based on our dialogs with our large advertising clients, we strongly believe the current growth momentum in the China advertising industry will continue after the 2008 Olympics, driven by increasing domestic consumer demand for goods and services as the Chinese economy continues to expand. Our strategy of building the largest life-style digital media platform will allow Focus Media to capture a relatively larger share of this growth. I am fully committed to building Focus Media to be one of the leading digital media companies in the world.”

Dr. Tan Zhi, CEO of Focus Media, said, “2008 will be another very exciting year for Focus Media. Built on the investments and acquisitions we made during 2007, we see very strong growth momentum in all our businesses. We will continue our prudent strategy to build the largest media organization in China.”

Fourth Quarter Financial Results

For the fourth quarter of 2007, Focus Media reported total revenues of $184.6 million, an increase of 171.4% compared to $68.0 million for the fourth quarter of 2006, and an increase of 21.9% compared to $151.4 million for the third quarter of 2007.

Our total digital out-of-home advertising revenue was $111.0 million in the fourth quarter of 2007, an increase of 75.3% from $63.3 million in the fourth quarter of 2006 and a sequential increase of 17.2% from $94.7 million in the third quarter of 2007. In the fourth quarter of 2007, commercial location advertising revenue, including new businesses such as outdoor LED and movie theatre advertising, was $73.4 million, contributing 66.1% of total digital out-of-home advertising revenue. Advertising service revenue from our in-store network was $6.5 million, or 5.8% 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 $31.2 million in the fourth quarter of 2007, or 28.1% of total digital

out-of-home advertising revenue.

As of December 31, 2007, the total installed base of LCD displays and digital frames in our commercial location network was 112,298 nationwide, including 107,533 displays through our directly owned networks, and 4,765 displays through our regional distributors. In the fourth quarter of 2007, we continued to expand the installed base of our hypermarkets network to 1,398 stores as of December 31, 2007. Our in-store network also covers 638 supermarkets and 2,027 convenience stores as of December 31, 2007. The number of displays installed in our in-store network increased to 49,452 as of December 31, 2007 compared to 43,315 as of September 30, 2007. The total number of non-digital frames available for sale on our poster frame network was 179,649 as of December 31, 2007. In addition, as of December 31, 2007, we had installed 10,819 digital frames on our poster frame network, mainly in Beijing, Shanghai, Guangzhou and Shenzhen.

Mobile Advertising Business

Advertising service revenue from Focus Media Wireless in the fourth quarter of 2007 was $16.0 million, up 355.8% from $3.5 million in the fourth quarter of 2006 and 14.0% from $14.0 million in the third quarter of 2007.

Internet Advertising Business

Internet advertising service revenue was $57.2 million in the fourth quarter of 2007, up 34.5% from $42.5 million in the third quarter of 2007. Digital marketing service accounted for 90% of the total Internet advertising revenue. Rich Media, pay-for-performance and technology solutions accounted for the remaining 10%.

Gross profit for the fourth quarter of 2007 was $87.4 million, representing an increase of 92.1% compared to $45.5 million for the corresponding period a year ago and a 13.4% increase compared to $77.1 million in the third quarter 2007. In the fourth quarter 2007, gross margin for the Company was 47.4%, as compared to 50.9% in the third quarter of 2007, mainly due to larger revenue contribution from our lower-gross-margin Internet advertising business and higher intangible amortization expenses resulting from acquisitions in our poster frame, mobile and Internet advertising businesses. Excluding non-cash share-based compensation expense of $0.1 million and acquisition-related intangible asset amortization expense of $10.8 million in the cost of revenues, gross margin (non-GAAP) was 53.3% in the fourth quarter of 2007 compared to 52.6% in the third quarter of 2007. In the fourth quarter of 2007, excluding non-cash share-based compensation expense and acquisition-related intangible asset amortization expense, digital

out-of-home gross margin (non-GAAP) increased to 65.9% from 64.2% in the third quarter of 2007 even though our in-store network gross margin decreased significantly due to intense price competition with CGEN during the quarter; mobile handset advertising gross margin (non-GAAP) was 50.1% compared to 57.3% in the third quarter of 2007 due to upfront investments in new WAP-based business initiatives; Internet advertising gross margin (non-GAAP) was 30.1% compared to 25.2% in the third quarter.

In the fourth quarter of 2007, operating expenses totaled $43.3 million, including $6.0 million in acquired intangible asset amortization resulting from acquisitions and non-cash share-based compensation expense of $7.2 million. Selling and marketing expenses in the fourth quarter totaled $27.8 million, including $6.0 million in acquired intangible asset amortization and $3.0 million in share compensation expense. General and administrative expense in the fourth quarter was $17.0 million, including $4.2 million in share compensation expense. Our operating margin in the fourth quarter of 2007 was 23.9%. Excluding non-cash share-based compensation expense and acquired intangible asset amortization expense, operating margin (non-GAAP) was 37.0% in the fourth quarter 2007 compared to 36.4% in the previous quarter.

Total intangible amortization expenses in the fourth quarter of 2007 resulting from historical acquisitions were $16.9 million. Non-cash stock compensation expenses were $7.3 million in the fourth quarter of 2007, or 4.0% of total revenues. Total income taxes were $5.9 million, including $4.2 million provision for uncertain tax positions under FIN 48.

Net income for the fourth quarter of 2007 was $43.8 million, an increase of 45.6% compared to $30.1 million for the same period in 2006. Fully diluted net income per ADS for the fourth quarter of 2007 was $0.34. Net income excluding non-cash share-based compensation expense and acquired intangible assets amortization expense resulting from acquisitions (non-GAAP) in the fourth quarter of 2007 was $68.0 million, or $0.52 per fully diluted ADS.

Fourth quarter 2007 operating cash flow was $65.4 million. Day sales outstanding (“DSO”) was 88 days in the fourth quarter. As of December 31, 2007, the Company had cash and cash equivalents of $450.4 million.

Full Year 2007 Results

For the full year 2007, Focus Media reported total revenues of $506.6 million, an increase of 139.1% compared to $211.9 million in 2006.

Full year net income in 2007 was $144.4 million, up 73.6% compared with $83.2 million in 2006. Net income in 2007 excluding non-cash share-based compensation expenses and amortization of intangible assets resulting from acquisitions (non-GAAP) was $190.6 million compared to $97.3 million in 2006.

By the end of December 31, 2007, the Company has 5,175 employees.

Other Recent Developments

Focus Media continues to strengthen our product offerings in our digital out-of-home advertising business. In December 2007, we launched the first large-size LED digital outdoor billboard, a 1500 square foot LED digital billboard on a boat navigating roundtrip along the bund area in Shanghai.

Also in January 2008, we closed the acquisition of CGEN Technology Company Limited, a leading operator of in-store digital advertising network in China. With this acquisition, Focus Media has significantly expanded coverage of its digital advertising displays in large chain stores in China.

In March 2008, Dr. Tan Zhi was appointed as Chief Executive Officer of Focus Media. Jason Jiang will remain as Executive Chairman of Focus Media and will continue to spend full-time at Focus Media and be in charge of Focus Media’s Internet advertising, mobile handset advertising and other emerging new media opportunities.

BUSINESS OUTLOOK

Based on organic growth, the Company estimates its total revenues for full year 2008 to range from $900 million to $930 million, of which digital

out-of-home is expected to contribute approximately 63%, Internet advertising is expected to contribute approximately 31%, and mobile handset advertising is expected to contribute approximately 6%. Net income of full year 2008 excluding share-based compensation expenses and amortization of intangible assets resulting from acquisitions (non-GAAP) is expected to be between $280 million to $300 million, taking into consideration a 15% effective income tax rate after certain government tax incentives and rebates, or $2.06 to $2.21 per fully diluted ADS based on 136 million annual average total ADS equivalent shares outstanding. In accordance with SFAS No. 123R, the Company estimates total share-based compensation expenses in 2008 will be approximately $35 million based on stock options that have been granted as of February 28, 2008. The Company expects approximately $50 million in acquisition-related intangible amortization expenses in 2008 including CGEN acquisition, subject to the finalization of the purchase price allocation for recent acquisitions.

The Company expects its capital expenditure for 2008 to be approximately $50 million, mainly for the digital Frame 2.0 upgrade and expansion in both of our residential and commercial networks and digital LED investment in our outdoor LED business.

The Company estimates its total revenues for the first quarter of 2008 will range from $160 million to $165 million. First quarter 2008 net income excluding share-based compensation expenses and amortization of intangible assets resulting from acquisitions (non-GAAP) is expected to be between $44 million and $45 million or $0.33 to $0.34 per fully diluted ADS based on 133 million average total ADS equivalent shares outstanding.

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)

3 months ended 3 months ended

December 31, 2007 September 30, 2007

GAAP Non- GAAP Non-

GAAP adjustments GAAP GAAP adjustments GAAP

(a) (b) (a) (b)

Gross profit

Commercial

location

network 47,356 126 3,089 50,571 41,764 288 566 42,618

In-store

network (981) -- -- (981) 1,255 -- -- 1,255

Poster

frame

network 19,773 -- 3,830 23,603 16,407 -- 571 16,978

Digital

out-of-home 66,148 126 6,919 73,193 59,426 288 1,137 60,851

Mobile Handset

Advertising

Network 6,269 -- 1,741 8,010 7,880 -- 163 8,043

Internet

Advertising 15,076 -- 2,165 17,241 9,793 -- 926 10,719

Others (63) -- -- (63) (4) -- -- (4)

Total 87,430 126 10,825 98,381 77,095 288 2,226 79,609

Gross margin

Commercial

location

network 64.5% 0.2% 4.2% 68.9% 64.7% 0.4% 0.9% 66.0%

In-store

network -15.2% 0.0% 0.0% -15.2% 17.7% 0.0% 0.0% 17.7%

Poster frame

network 63.4% 0.0% 12.3% 75.7% 71.1% 0.0% 2.5% 73.6%

Digital

out-of-home 59.6% 0.1% 6.2% 65.9% 62.7% 0.3% 1.2% 64.2%

Mobile Handset

Advertising

Network 39.2% 0.0% 10.9% 50.1% 56.2% 0.0% 1.2% 57.3%

Internet

Advertising 26.4% 0.0% 3.8% 30.1% 23.0% 0.0% 2.2% 25.2%

Others -20.3% 0.0% 0.0% -20.3% -3.4% -3.4%

Total 47.4% 0.1% 5.9% 53.3% 50.9% 0.2% 1.5% 52.6%

(a) To adjust share-based compensation expenses

(b) To adjust amortization of acquisition related intangible assets

Three months ended Year ended

2007-12-31 2006-12-31 2007-9-30 2007-12-31 2006-12-31

GAAP net income

attributable to

shareholders $43,816 $30,088 $46,613 $144,436 $83,197

Amortization of

acquired

intangible

assets 16,862 1,704 3,287 24,753 5,774

Share-based

compensation 7,338 3,436 4,679 21,453 8,368

Non-GAAP net

income $68,016 $35,228 $54,579 $190,642 $97,339

GAAP income per

ADS - basic $0.35 $0.28 $0.38 $1.22 $0.82

GAAP income per

ADS - diluted $0.34 $0.27 $0.37 $1.19 $0.80

Non-GAAP income

per ADS

- basic $0.54 $0.33 $0.45 $1.61 $0.96

Non-GAAP income

per ADS

- diluted $0.52 $0.32 $0.43 $1.57 $0.93

Shares used in

calculating

basic GAAP/

Non-GAAP

income per

ADS 125,710,757 106,528,150 122,250,042 118,077,479 101,082,216

Shares used in

calculating

diluted GAAP/

Non-GAAP

income per

ADS 129,831,533 109,915,074 126,370,818 121,665,290 104,307,276

GAAP income

from

operations $44,125 $28,409 $47,122 $143,855 $80,378

Amortization

of acquired

intangible

assets 16,862 1,704 3,287 24,753 5,774

Share-based

compensation 7,338 3,436 4,679 21,453 8,368

Non-GAAP

income from

operations $68,325 $33,549 $55,088 $190,061 $94,520

Non-GAAP

operating

margin 37.0% 49.3% 36.4% 37.5% 44.6%

TODAY’S CONFERENCE CALL

The Company will host a conference call to discuss the fourth quarter and full year 2007 results at 9:00 p.m. U.S. Eastern Time on March 18, 2008 (6:00 p.m. U.S. Pacific Time on March 18, 2008 and 9:00 a.m. Beijing/Hong Kong Time on March 19, 2008). The dial-in details for the live conference call are set forth below: U.S. Toll Free Number +1-800-237-9752, Hong Kong dial-in number +852-3002-1672, International dial-in number +1-617-847-8706; Pass code: 38373357.

A replay of the call will be available from March 18, 2008 until March 25, 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 52636178.

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 December 31, 2007, Focus Media’s digital out-of-home advertising network had approximately 112,298 LCD display in its commercial location network, approximately 49,452 LCD displays in its in-store network and 179,649 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.

For more information, please contact:

Investor and Media contact:

Jie Chen

Tel: +86-21-3212-4661 x6607

Email: ir@focusmedia.cn

Focus Media Holding Limited

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. Dollars in thousands)

2007-12-31 2006-12-31

ASSETS

Current assets

Cash and cash equivalents $450,416 $164,611

Investment in equity securities 90,145 --

Accounts receivables, net 206,102 61,614

Inventories 1,654 519

Prepaid expenses and other current

assets 62,193 5,199

Deposit paid for acquisition of

subsidiaries 37,094 3,526

Amount due from related parties 4,510 7,853

Rental deposits 28,763 --

Total current assets $880,877 $243,322

Rental deposits 5,302 11,833

Equipment, net 95,478 70,250

Acquired intangible assets, net 155,717 34,717

Goodwill 943,398 739,744

Other long term assets 58,184 6,376

Total assets $2,138,956 $1,106,242

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Short term debt $-- $2,769

Accounts payable 50,379 5,987

Accrued expenses and other current

liabilities 190,313 38,674

Income taxes payable 18,947 4,060

Amount due to related parties 12,395 347

Deferred tax liabilities 1,227 --

Total current liabilities $273,261 $51,837

Deferred tax liabilities 6,393 3,303

Total liabilities $279,654 $55,140

Minority interests 1,913 358

Shareholders’ equity

Ordinary shares 32 27

Additional paid in capital 1,581,580 709,196

Acquisition consideration to be --

issued 237,879

Retained earnings 239,163 96,195

Accumulated other comprehensive

income 36,614 7,447

Total shareholders’ equity $1,857,389 $1,050,744

Total liabilities and shareholders’

equity $2,138,956 $1,106,242

Focus Media Holding Limited

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. Dollar in thousands, except share data)

Three months ended Year ended

2007-12-31 2006-12-31 2007-9-30 2007-12-31 2006-12-31

Gross revenues

(note 3):

Digital

out-of-home

Commercial

locations $80,128 $46,253 $70,173 $240,587 $145,702

In-store

network 7,150 8,655 7,813 30,287 29,710

In-elevator

poster

frame

network 34,079 15,113 25,121 93,401 44,893

Mobile

handset

advertising 16,606 3,714 14,627 48,521 10,880

Internet

advertising 59,318 -- 44,234 129,970 --

Other revenue 310 1,152 117 1,113 1,932

Total gross

revenues 197,591 74,887 162,085 543,879 233,117

Less: Sales

taxes 13,039 6,891 10,693 37,320 21,212

Total revenues 184,552 67,996 151,392 506,559 211,905

Cost of revenues

(note 4):

Digital

out-of-home

Commercial

locations 26,034 11,719 22,825 79,625 42,836

In-store

network 7,456 5,123 5,832 23,502 18,106

In-elevator

poster

frame

network 11,419 3,851 6,656 28,086 13,621

Mobile

handset

advertising 9,725 1,428 6,145 23,193 6,052

Internet

advertising 42,115 -- 32,718 93,238 --

Total advertising

service costs 96,749 22,121 74,176 247,644 80,615

Other costs 373 373 121 797 765

Total cost of

revenues 97,122 22,494 74,297 248,441 81,380

Gross profit 87,430 45,502 77,095 258,118 130,525

Operating expenses:

General and

administrative

(note 4) 17,032 9,074 12,095 49,456 25,723

Selling and

marketing

(note 4) 27,810 9,195 19,081 69,931 25,762

Other operating

income (1,537) (1,176) (1,203) (5,124) (1,338)

Total operating

expenses 43,305 17,093 29,973 114,263 50,147

Income from

operations 44,125 28,409 47,122 143,855 80,378

Interest income,

net 3,530 1,692 1,595 9,752 4,255

Other income

(expenses), net 2,523 367 5 2,568 (287)

Income before tax

and minority

interests 50,178 30,468 48,722 156,175 84,346

Income tax

expense

- Current 5,916 623 2,063 11,763 1,107

- Deferred (267) (252) 46 (719) (63)

Total income

taxes 5,649 371 2,109 11,044 1,044

Income before

minority

interests 44,529 30,097 46,613 145,131 83,302

Minority

Interests 713 9 -- 695 105

Net income 43,816 $30,088 $46,613 $144,436 $83,197

Income per ADS

- basic $0.35 $0.28 $0.38 $1.22 $0.82

Income per ADS

- diluted $0.34 $0.27 $0.37 $1.19 $0.80

Shares used in

calculating

basic income

per ADS 125,710,757 106,528,150 122,250,042 118,077,479 101,082,216

Shares used

in calculating

diluted income

per ADS 129,831,533 109,915,074 126,370,818 121,665,290 104,307,276

Focus Media Holding Limited

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS

(U.S. Dollar in thousands)

Three months ended Year ended

2007-12-31 2006-12-31 2007-12-31 2006-12-31

Operating activities:

Net income $43,816 $30,088 $144,436 $83,197

Adjustments to reconcile

net income to net cash

provided by operating

activities:

Minority interest 713 9 695 105

Bad debt provision 920 447 3,655 1,845

Share based compensation 7,338 3,436 21,453 8,368

Depreciation and amortization 6,223 3,893 19,444 13,737

Amortization of acquired

intangible assets 16,862 1,704 24,753 5,774

Changes in assets and

liabilities, net of effects

of acquisitions (10,435) 7,543 (51,591) (19,671)

Net cash provided by

operating activities $65,437 $47,120 $162,845 $93,355

Investing activities:

Purchase of equipment and

other long term assets (18,852) (9,574) (55,776) (22,878)

Acquisition of an

intangible asset -- (6,403) (105) (6,403)

Purchase of subsidiaries,

net of cash acquired (34,041) (1,455) (88,481) (124,063)

Deposits paid to acquire

subsidiaries (15,796) (691) (106,068) (3,710)

Issuance of loan receivables (30,000) -- -- --

Sales /(purchase) of

available-for-sale securities (38,632) 35,000 (88,178) 35,000

Disposal of an investment -- 60 -- 60

Net cash used in investing

activities $(137,321) $16,937 $(338,608) $(121,994)

Financing activities:

Proceeds from issuance of

ordinary shares, net of

issuance costs 326,272 3,609 447,005 157,998

Proceeds from short-term debts -- -- -- 24,598

Capital injection from minority

shareholders -- 77 137 326

Repayment of short-term debts -- -- (4,166) (29,402)

Net cash provided by financing

activities $326,272 $3,686 $442,976 $153,520

Effect of exchange rate

changes 5,785 1,759 18,592 3,077

Net (decrease) increase in

cash and cash equivalents $260,173 $69,502 $285,805 $127,958

Cash and cash equivalents,

beginning of period 190,243 95,109 164,611 36,653

Cash and cash equivalents,

end of period $450,416 $164,611 $450,416 $164,611

Supplemental disclosure of

cash flow information:

Income taxes paid $211 $124 $1,247 $154

Interest paid $8 $-- $14 $245

Supplemental disclosure of

non-cash investing activity:

Acquisition of subsidiaries:

Value of ordinary share

consideration $-- $-- $166,050 $365,660

Accounts payable $16,935 $4,507 $16,935 $4,507

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 = RMB7.3046 on December 28, 2007.

Note 3: Details of net revenues are as follows (U.S. Dollars in thousands):

Three months ended Year ended

2007-12-31 2006-12-31 2007-9-30 2007-12-31 2006-12-31

Gross Advertising

Service Revenue:

Digital out-of-home:

Commercial locations

- Unrelated

parties 80,021 $42,671 $70,091 238,119 $130,258

- Related parties 107 3,582 82 2,468 15,444

Total Commercial

Locations 80,128 46,253 70,173 240,587 145,702

In-store Network

- Unrelated

parties 7,150 7,713 7,813 28,986 25,330

- Related parties -- 942 -- 1,301 4,380

Total in-store

network 7,150 8,655 7,813 30,287 29,710

In-elevator Poster

Frame Network

- Unrelated

parties 34,025 15,113 25,029 93,157 44,893

- Related parties 54 -- 92 244 --

Total In-elevator

Poster Frame

Network 34,079 15,113 25,121 93,401 44,893

Mobile handset

advertising

- Unrelated

parties 16,606 3,714 14,592 48,407 10,880

- Related parties -- -- 35 114 --

Total mobile handset

advertising 16,606 3,714 14,627 48,521 10,880

Internet advertising

- Unrelated

parties 58,965 -- 43,552 128,830 --

- Related parties 353 -- 682 1,140 --

Total internet

advertising 59,318 -- 44,234 129,970 --

Gross Advertising

Services Revenue: 197,281 73,735 161,968 542,766 231,185

Less: Sales taxes:

Digital out-of-home:

Commercial

locations: 6,738 4,529 5,584 19,904 13,641

In-store Network 675 819 726 2,843 2,803

In-elevator Poster

Frame Network 2,887 1,338 2,058 7,929 3,989

Mobile handset

advertising 612 205 602 1,612 779

Internet advertising 2,127 -- 1,723 5,032 --

Total sales taxes: 13,039 6,891 10,693 37,320 21,212

Net Advertising

Service Revenue 184,242 66,844 151,275 505,446 209,973

Add: Other revenue: 310 1,152 117 1,113 1,932

Net revenues: $184,552 $67,996 $151,392 $506,559 $211,905

Note 4: Share based compensations included under SFAS 123R are as follows

(U.S. Dollars in thousands):

Three months ended Year ended

2007-12-31 2006-12-31 2007-9-30 2007-12-31 2006-12-31

Cost of revenues $126 $147 $288 $979 $147

Selling and

marketing 3,005 1,202 2,017 9,524 2,090

General and

administrative 4,207 2,087 2,374 10,950 6,131

Sub-total $7,338 $3,436 $4,679 $21,453 $8,368

Note 5: The Company has performed preliminary purchase price allocation on

their acquisition made in 2007 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: The 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.

Focus Media Holding Ltd.

Reconciliation of GAAP to Non-GAAP

(U.S. Dollar in thousands, except percentages, share and per-share data)

(Unaudited)

3 months ended 3 months ended

December 31, 2007 September 30, 2007

GAAP GAAP Non- GAAP GAAP Non-

adjustments GAAP adjustments GAAP

(a) (b) (a) (b)

Gross profit

Commercial

location

network 47,356 126 3,089 50,571 41,764 288 566 42,618

In-store

network (981) -- -- (981) 1,255 -- -- 1,255

Poster frame

network 19,773 -- 3,830 23,603 16,407 -- 571 16,978

Digital

out-of-home 66,148 126 6,919 73,193 59,426 288 1,137 60,851

Mobile Handset

Advertising

Network 6,269 -- 1,741 8,010 7,880 -- 163 8,043

Internet

Advertising 15,076 -- 2,165 17,241 9,793 -- 926 10,719

Others (63) -- -- (63) (4) -- -- (4)

Total 87,430 126 10,825 98,381 77,095 288 2,226 79,609

Gross margin

Commercial

location

network 64.5% 0.2% 4.2% 68.9% 64.7% 0.4% 0.9% 66.0%

In-store network -15.2% 0.0% 0.0% -15.2% 17.7% 0.0% 0.0% 17.7%

Poster frame

network 63.4% 0.0% 12.3% 75.7% 71.1% 0.0% 2.5% 73.6%

Digital

out-of-home 59.6% 0.1% 6.2% 65.9% 62.7% 0.3% 1.2% 64.2%

Mobile Handset

Advertising 39.2% 0.0% 10.9% 50.1% 56.2% 0.0% 1.2% 57.3%

Network

Internet

Advertising 26.4% 0.0% 3.8% 30.1% 23.0% 0.0% 2.2% 25.2%

Others -20.3% 0.0% 0.0% -20.3% -3.4% -3.4%

Total 47.4% 0.1% 5.9% 53.3% 50.9% 0.2% 1.5% 52.6%

(a) To adjust share-based compensation expenses

(b) To adjust amortization of acquisition related intangible assets

Three months ended Year ended

2007-12-31 2006-12-31 2007-9-30 2007-12-31 2006-12-31

GAAP net income

attributable to

shareholders $43,816 $30,088 $46,613 $144,436 $83,197

Amortization of

acquired

intangible

assets 16,862 1,704 3,287 24,753 5,774

Share-based

compensation 7,338 3,436 4,679 21,453 8,368

Non-GAAP net

income $68,016 $35,228 $54,579 $190,642 $97,339

GAAP income per

ADS - basic $0.35 $0.28 $0.38 $1.22 $0.82

GAAP income per

ADS - diluted $0.34 $0.27 $0.37 $1.19 $0.80

Non-GAAP

income per

ADS - basic $0.54 $0.33 $0.45 $1.61 $0.96

Non-GAAP

income per

ADS - diluted $0.52 $0.32 $0.43 $1.57 $0.93

Shares used in

calculating

basic GAAP/

Non-GAAP

income per

ADS 125,710,757 106,528,150 122,250,042 118,077,479 101,082,216

Shares used in

calculating

diluted GAAP/

Non-GAAP

income per

ADS 129,831,533 109,915,074 126,370,818 121,665,290 104,307,276

GAAP income

from

operations $44,125 $28,409 $47,122 $143,855 $80,378

Amortization

of acquired

intangible

assets 16,862 1,704 3,287 24,753 5,774

Share-based

compensation 7,338 3,436 4,679 21,453 8,368

Non-GAAP

income

from

operations $68,325 $33,549 $55,088 $190,061 $94,520

Non-GAAP

operating

margin 37.0% 49.3% 36.4% 37.5% 44.6%

Source: Focus Media Holding Limited
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