Total Revenues in First Quarter 2008 Grow 304.5% Year-Over-Year, Company Raises Annual Guidance
BEIJING, April 25 /Xinhua-PRNewswire/ -- VisionChina Media Inc. (the "Company") (Nasdaq: VISN), one of China's largest out-of home digital television advertising networks on mass transportation systems, today announced its financial results for the quarter ended March 31, 2008.
First Quarter 2008 Highlights
-- Total revenues in the first quarter of 2008 grew 304.5% year-over-year
and 13.5% quarter-over-quarter to $13.6 million, out of which
advertising services revenues grew 326.0% year-over-year and 13.2%
quarter-over-quarter to $13.2 million.
-- The number of cities covered by the Company's network increased to 15
in the first quarter of 2008. Taiyuan, capital city of Shanxi Province,
with a population of 3.4 million, was added to the network this quarter.
The Company's exclusive agreements in Ningbo and Chengdu became
effective on January 1, 2008.
-- Network capacity, which is measured by total broadcasting hours,
reached 25,980 hours in the first quarter of 2008, compared to 23,908
hours in the fourth quarter of 2007 and 16,212 in the first quarter of
2007.
-- On average, the Company sold 6.24 advertising minutes per broadcasting
hour in the first quarter of 2008, compared to 8.69 minutes per
broadcasting hour in the fourth quarter of 2007 and 3.81 minutes per
broadcasting hour in the first quarter of 2007. The decrease of minutes
sold per broadcasting hour from the fourth quarter 2007 to the first
quarter 2008 was due to expected seasonality in the first quarter.
Excluding the three new exclusive agency cities that were included in
the Company's network in the first quarter 2008, the Company sold 6.43
advertising minutes per broadcasting hour in the first quarter of 2008.
-- Average advertising service revenues per broadcasting hour grew 4.1%
quarter-over-quarter to $493 dollars per broadcasting hour from $474
per broadcasting hour in the fourth quarter of 2007, and compared to
$184 per broadcasting hour in the first quarter of 2007. This increase
was a result of the full implementation of the rate card increase in
November 2007. Excluding the three new exclusive agency cities that
were included in the Company's network in the first quarter 2008,
average advertising services revenues were $543 per broadcasting hour
in the first quarter 2008.
-- Gross profit in the first quarter 2008 was $7.2 million, a slight
decrease of 4.9% from $7.6 million in the fourth quarter of 2007, and a
significant increase of 1145.7% from the first quarter of 2007. The
decrease of gross profit in first quarter 2008 from the fourth quarter
2007 was primarily due to the increased media costs associated with the
three exclusive cities that were included in the Company's network in
first quarter 2008: Taiyuan, Chengdu and Ningbo, as well as costs
associated with deeper penetration into the other cities of the
Company's network.
-- As of March 31, 2008, the Company had installed 48,719 digital
displays on buses, subways trains and subway platforms, compared with
the 41,410 at the end of 2007.
-- Operating profit in the first quarter of 2008 was $4.5 million, a
decrease of 9.36% from $5.0 million in the fourth quarter of 2007, and
a significant turn-around compared to a net loss of $0.35 million in
the first quarter of 2007. The decrease of operating profit in the
first quarter 2008 from the fourth quarter 2007 was primarily due to
the costs associated with network expansion and increases in sales and
marketing expenses related to more head count associated with the
network expansion.
-- Net income in the first quarter of 2008 was $5.4 million, a decrease
of 5.42% from $5.7 million in the fourth quarter of 2007, and a
significant turn-around from a $0.36 million net loss in the first
quarter of 2007. Excluding the three new exclusive cities that were
included in the Company's network, net income for the first quarter
2008 was $5.5 million.
-- As a result of the forgoing, fully diluted net income per share in the
first quarter of 2008 was $0.08, (each of our ADSs represents one
common share) compared to $0.10 for the fourth quarter of 2007.
-- Free cash flow, defined as operating cash flow minus capital
expenditure became positive for the first time in the first quarter of
2008. Operating cash flow remained positive in the first quarter. The
Company had cash and cash equivalents of $133.8 million as of March 31,
2008.
Limin Li, VisionChina Media's chairman and chief executive officer, said, "We are very happy to announce our financial results that reflect another quarter of successful execution of our strategy. Despite an expected seasonally weak first quarter and severe snow storms that negatively affected businesses across China during the quarter, we continued to expand our network by entering into an exclusive agreement in Taiyuan. More recently, we entered into an exclusive agreement in Shenyang, and expanded our network in Guangzhou to include the subway system in that city. Furthermore, we have also recently signed additional exclusive agency agreements in Wuhan, Dalian and Changchun, existing cities in our network, to further expand our reach within those cities. China's mass transportation systems are used by a large portion of the population, and as ever greater audiences gather in front of our screens, it has become increasingly apparent to advertisers that the importance of these audiences cannot be ignored."
Mr. Li continued, "We've added an additional 88 professionals to our sales and marketing force this past quarter, enhancing our team's ability to initiate and secure contracts with advertisers. There is already a great deal of demand in the market, especially with the upcoming Olympics scheduled to air on our screens on Beijing's buses and subways. I'm proud of what we have accomplished so far and confident about our future."
Dina Liu, VisionChina Media's chief financial officer, added, "This was another strong quarter for us. We fully implemented our rate card increase in November 2007 and are proud to announce another rate card increase that will take effect on May 1, 2008. We have been implementing our expansion plans as we expected, and we continue to explore complementary acquisition opportunities. This quarter closed with escalating top line growth and a strong, liquid balance sheet."
First Quarter 2008 Results
VisionChina Media's total revenues were $13.6 million in the first quarter of 2008, an increase of 304.5% compared to $3.4 million in the first quarter of 2007 and an increase of 13.5% compared to $12.0 million in the fourth quarter of 2007.
Advertising service revenues were $13.2 million in the first quarter of 2008, an increase of 326.0% compared to $3.11 million in the first quarter of 2007 and an increase of 13.2% compared to $11.7 million in the fourth quarter of 2007. Total broadcasting hours reached 25,980 in the first quarter of 2008 compared to 23,908 in the fourth quarter of 2007. Average advertising revenues per broadcasting hour were $493 in the first quarter of 2008 compared to $474 in the fourth quarter of 2007. On average, the Company sold 6.24 advertising minutes per broadcasting hour in the first quarter of 2008 compared to 8.69 advertising minutes per broadcasting hour in the fourth quarter of 2007. Up to March 31, 2008, more than 380 advertisers had purchased advertising time on the Company's network either directly or through an advertising agent.
Media cost, the most significant component of advertising service cost of revenues, was $4.7 million in the first quarter of 2008, representing 77.3% of total advertising service costs, compared to $3.2 million or 77.6% of total advertising service costs in the fourth quarter of 2007.
Gross profit in the first quarter of 2008 was $7.2 million, a decrease of 4.9% from $7.6 million in the fourth quarter of 2007, and an increase of 1145.7% from a $0.60 million in the first quarter of 2007. The decrease of gross profit in the first quarter 2008 from the fourth quarter 2007 was primarily due to the increased media costs associated with the three new exclusive cities that were included in the Company's network: Taiyuan, Chengdu and Ningbo. Advertising service gross margin was 54.3% in the first quarter of 2008, compared to 64.8% in the fourth quarter of 2007. The advertising equipment gross margin in the fourth quarter of 2007 was 15.4%, compared to 17.3% in the first quarter of 2008. Excluding the three new exclusive cities, the average advertising services revenues were $543 per broadcasting hour.
Selling and marketing expenses were $1.6 million in the first quarter of 2008, an increase of 815.4% compared to $0.2 million in the first quarter of 2007, and an increase of 73.6% compared to $0.90 million in the fourth quarter of 2007, primarily due to payroll costs associated with an expanding sales force and the commissions sales people receive as a result of the sales they make. Selling and marketing expenses represented 12.2% of the Company's advertising service revenues in the first quarter of 2008 compared to 8.0% in the fourth quarter of 2007.
General and administrative expenses were $0.80 million in the first quarter of 2008, an increase of 47.6% compared to $0.60 million in the first quarter of 2007, and a decrease of 31.8% compared to $1.2 million in the fourth quarter of 2007.
Losses from equity method investments amounted to $0.3 million in the first quarter of 2008, compared to a $0.2 million loss in the first quarter of 2007, and a $0.5 million loss in the fourth quarter of 2007.
Operating profit was $4.5 million in the first quarter of 2008, a decrease of 9.36% from $5.0 million in the fourth quarter of 2007, and a significant turn-around from the $0.3 million operating loss in the first quarter of 2007. The decrease of operating profit in first quarter 2008 from the fourth quarter 2007 was primarily due to the costs associated with network expansion and increases in sales and marketing expenses related to increased head count associated with this expansion.
In the first quarter of 2008, the Company recorded a deferred tax expense of $0.04 million. The Company is a certified "Cultural Enterprise" and therefore benefits from full tax exemption from 2005 through 2008. The Company expects it will be subject to a corporate income tax rate of 15% from 2009.
Net income was $5.4 million in the first quarter of 2008, a decrease of 5.4% from $5.7 million in the fourth quarter of 2007, and a significant turn-around from the $0.36 million net loss in the first quarter of 2007. Fully diluted net income per share for the first quarter of 2008 was $0.08. Excluding incremental costs, the Company's first quarter net income, excluding share-based compensation expenses (non-GAAP) was $5.6 million. Excluding the three new exclusive agency cities that were included into the Company's network in the first quarter 2008, net income (non-GAAP) for the first quarter was $5.5 million.
With the exclusive agency agreement in the city of Taiyuan, capital city of Shanxi Province, entered into in the first quarter of 2008 and the exclusive agency agreements in Ningbo and Chengdu having become effective on January 1, 2008, the number of cities covered by the VisionChina Media's network increased to 15 in the first quarter of 2008.
As of March 31, 2008, the Company had 48,719 digital displays in their network, compared to 41,410 as of December 31, 2007. Free cash flow for the first quarter of 2008 was positive for the first time. As of March 31 2008, the Company had cash and cash equivalents of $133.8 million compared to $131.1 million at the end of the fourth quarter of 2007.
As of March 31, 2008, the Company had 346 employees, compared to 216 employees as of December 31, 2007, of which 208 employees are sales and marketing personnel, compared to 120 as of December 31, 2007.
Other Recent Developments
Effective May 1, 2008, the Company will announce a new rate card that will apply to eight of the cities in the Company's network. The new rate card is expected to increase VisionChina Media's revenue significantly.
On April 18, 2008, VisionChina Media entered into a three-year exclusive agency agreement with Guangzhou Metro TV Media Company to expand the network in Guangzhou to include the subway system. The agreement grants VisionChina Media the exclusive right to operate digital television advertising on all subways in the city of Guangzhou as well as on the platforms that service the subway system. So far, 2,700 screens have been installed on Guangzhou's subway system and another 500 are scheduled to be installed by the end of 2008. These new screens complement the five large LED screens that VisionChina Media already operates at the major intersection platforms of the Guangzhou subway system.
In March 2008, VisionChina Media entered into an exclusive agency agreement with Liaoning Beidou Xingkong Digital TV media Co., Ltd (Beidou Media), to operate mobile digital television and advertising on all public buses covered by the Beidou Media network in the city of Shenyang, the capital city of Liaoning Province, for three years beginning April 1, 2008.
In March 2008, VisionChina Media signed six-year exclusive agency agreements in the cities of Wuhan, Dalian and Changchun, cities in the existing network of VisionChina Media. The new agreements are exclusive and allow us to lock up revenue capacity in these cities by paying a fixed rental fee.
Business Outlook
The Company estimates its total revenues for the second quarter of 2008 will range from $19.2 million to $20.2 million, out of which advertising service revenues is expected to be between $19.0 to $20.0 million. Second quarter 2008 net income excluding share-based compensation expenses (non-GAAP) is expected to be between $6.2 million and $7.0 million.
The Company has increased estimates and expects that total revenues for full year 2008 will range from $98 million to $102 million. Net income for full year 2008, excluding share-based compensation expenses (non-GAAP), is expected to be between $40 million to $42 million.
The Company bases these estimates on a foreign exchange rate of RMB 6.9895 to US$1.00.
Dial-in details for the earnings conference call are as follows:
US Toll Free: +1-866-713-8564
Hong Kong: +852-3002-1672
International: +1-617-597-5312
Passcode for all regions: VisionChina Earnings Call
A replay of the conference call may be accessed by phone at the following numbers until May 1, 2008.
US Toll Free: +1-888-286-8010
International: +1-617-801-6888
Passcode: 47582768
Additionally, a live and archived webcast of this conference call will be available on the Investor Relations section of VisionChina's website at http://www.visionchina.cn .
About VisionChina Media, Inc.
VisionChina Media Inc. (Nasdaq: VISN) operates an out-of-home advertising network on mass transportation systems, including buses and subways that reach over 26 million viewers each day in China, according to CTR Market Research. As of March 31, 2007, VisionChina's advertising network included over 48,719 digital television displays on mass transportation systems in 15 of China's most affluent cities, including Beijing, Guangzhou and Shenzhen. VisionChina has the unique ability to deliver real-time, location-specific broadcasting, including news, stock quotes, weather and traffic reports and other entertainment programming. For more information, please visit http://www.visionchina.cn .
Use of Non-GAAP Financial Measures
In addition to VisionChina's consolidated financial results under GAAP, the company also provides non-GAAP financial measures, including non-GAAP net income, excluding non-cash share-based compensation and revenue and expenses related to certain exclusive arrangements. The company believes that the non-GAAP financial measures provide investors with another method for assessing VisionChina'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. The company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of VisionChina's liquidity and when planning and forecasting future periods.
Safe Harbor Statement
This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in 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 quotations from management in this press release contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, including its registration statement on Form F-1. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
VISIONCHINA MEDIA INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in U.S. dollars, except number of shares and per share data)
ASSETS March 31, December 31,
2008 2007
(Unaudited) (Note 1)
Current Assets:
Cash and cash equivalents 133,800,325 131,139,659
Accounts receivable, net 12,513,750 13,256,450
Amounts due from related parties 4,242,166 3,632,864
Prepaid expense and other current
assets 10,610,582 9,683,059
Deferred tax assets, net 304,950 332,386
Total current assets 161,471,773 158,044,418
Non-current Assets:
Fixed assets, net 8,677,599 7,709,204
Investments under equity method 6,710,352 6,714,853
Other investments 2,214,524 2,128,732
Long-term prepaid expenses 699,087 703,069
Deposits for acquisition of
businesses 1,711,352 --
Total non-current assets 20,012,914 17,255,858
TOTAL ASSETS 181,484,687 175,300,276
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable 3,837,967 4,236,695
Amounts due to related parties 267,175 327,532
Accrued expenses and other current
liabilities 3,576,757 6,054,552
Total current liabilities 7,681,899 10,618,779
Minority Interest 633,907 652,678
Shareholders' equity
Common shares 6,839 6,839
Additional paid-in capital 163,981,497 163,820,443
Accumulated profit/(deficit) 2,121,488 (3,300,654)
Accumulated other comprehensive
income 7,059,057 3,502,191
Total shareholders' equity 173,168,881 164,028,819
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 181,484,687 175,300,276
Note 1: Information extracted from the audited financial statements
included in the 2007 Form 20-F of the Company filed on April 3,
2008.
VISIONCHINA MEDIA INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in U.S. dollars thousand, except number of shares and per share data)
For three months ended
March 31, December March 31,
2008 31, 2007 2007
(Unaudited) (Unaudited) (Unaudited)
Revenues:
Advertising revenue 13,229 11,687 3,105
Equipment revenue 403 325 265
Total revenues 13,632 12,012 3,370
Cost of revenues
Advertising cost (6,050) (4,111) (2,569)
Equipment cost (333) (275) (219)
Total costs of revenues (6,383) (4,386) (2,788)
Gross profit 7,249 7,626 582
Operating expenses:
Selling and marketing (1,620) (934) (177)
General and administrative (817) (1,198) (553)
Total operating expenses (2,437) (2,132) (730)
Loss from equity method investees (269) (482) (202)
Operating profit (loss) 4,543 5,012 (350)
Interest income 918 409 14
Other expenses (17) (32) (27)
Net income (loss) before income
taxes 5,444 5,389 (363)
Income taxes (41) 332 --
Net income(loss) after income taxes 5,403 5,721 (363)
Minority interest 19 11 --
Net income (loss) 5,422 5,732 (363)
Deemed dividend on convertible
redeemable preferred shares -- (2,037) (542)
Net income(loss) attributable to
holders of common shares -- 3,695 (905)
Net income (loss) per share:
Basic 0.08 0.11 (0.04)
Diluted 0.08 0.10 (0.02)
Shares used in computation of
net income (loss) per share:
Basic 68,387,019 32,749,732 22,000,000
Diluted 70,897,070 59,532,622 22,000,000
Share-based compensation
expenses during the related
periods included in:
Cost of revenues (11) (11) (7)
Selling and marketing expenses (136) (69) (3)
General and administrative
expenses (18) (19) (7)
VISIONCHINA MEDIA INC.
SELECTED OPERATING DATA
1Q08 4Q07 1Q07
Total broadcasting hours 25,980 23,908 16,212
Advertising minutes per broadcasting
hour 6.24(1) 8.69 3.81
Average advertising service revenue
per broadcasting hour (US$) 493(2) 474 184
Notes:
(1) Excluding the three new exclusive agency agreements that the company
entered into in the first quarter, advertising minutes per
broadcasting hour is 6.43
(2) Excluding the three new exclusive agency agreements that the company
entered into in the first quarter, advertising services revenues
should have been $543 per broadcasting hour
