VisionChina Media Announces Second Quarter 2008 Results and Raises Full-Year Guidance

2008-07-24 16:00:00

VisionChina Media Announces Second Quarter 2008 Results and Raises Full-Year Guidance

      Total Revenues in Second Quarter 2008 Grew 332.4% Year-Over-Year

     Net Income in Second Quarter 2008 Grew 56.7% Quarter-Over-Quarter



    BEIJING, July 24 /Xinhua-EMWNews/ -- 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 June 30, 2008.



    Second Quarter 2008 Highlights



    -- Total revenues in the second quarter of 2008 grew 332.4%

year-over-year and 48.8% quarter-over-quarter to $20.3 million, out of

which advertising service revenues grew 405.4% year-over-year and 52.4%

quarter-over-quarter to $20.2 million.



    -- Net income in the second quarter of 2008 was $8.5 million, an

increase of 56.7% from $5.4 million in the first quarter of 2008, and a

significant increase of 3,039.7% from $0.3 million in the second quarter of

2007.



    -- Gross profit in the second quarter of 2008 was $11.9 million, an

increase of 64.5% from $7.2 million in the first quarter of 2008 and a

significant increase of 775.5% from $1.4 million in the second quarter of

2007.



    -- Operating profit in the second quarter of 2008 was $7.8 million, an

increase of 71.1% from $4.5 million in the first quarter of 2008, and a

significant increase of 3,210.8% from $0.2 million in the second quarter of

2007.



    -- Fully diluted net income per share in the second quarter of 2008 was

$0.12 (each of our ADSs represents one common share) compared to $0.08 for

the first quarter of 2008.



    -- The Company had cash and cash equivalents of $124.2 million as of

June 30, 2008, a decrease of $9.6 million from $133.8 million as of March

31, 2008. The decrease is mainly due to deposits paid to secure exclusive

agency agreements in additional cities and deposits paid to acquire several

mobile television media planning agencies. As part of our ongoing growth

strategy, the Company has paid a total of $14.4 million in deposits for the

acquisitions of these television media planning agencies and the final

purchase considerations will be based on such agencies' operating results

over the next three years, as stipulated by the earned-out arrangements.

The purchase price allocation was preliminary as of June 30, 2008.



    -- As of June 30, 2008, the Company had installed 60,160 digital

displays on buses, subways trains and subway platforms, compared with

48,719 at the end of the first quarter of 2008.



    -- The number of cities covered by the Company's bus network increased

to 16 in the second quarter of 2008 to include Shenyang, the capital city

of Liaoning province. The number of cities covered by the Company's subway

network increased to three in the second quarter of 2008 to include digital

televisions on subway trains in Guangzhou as well as on the platforms that

service Guangzhou's subway systems.



    -- Network capacity, which is measured by total broadcasting hours,

reached 29,523 hours in the second quarter of 2008, compared to 25,980

hours in the first quarter of 2008 and 15,536 in the second quarter of

2007.



    -- On average, the Company sold 8.14 advertising minutes per

broadcasting hour in the second quarter of 2008, compared to 6.24

advertising minutes per broadcasting hour in the first quarter of 2008 and

6.59 advertising minutes per broadcasting hour in the second quarter of

2007. The Company lost a total of approximately 540 advertising hours,

equal to $2.6 million in lost revenue, in the weeks following the

earthquake in Sichuan province in China that occurred on May 12, 2008 due

to cancellation of all advertisements during a three day national mourning

period from May 19 though May 21, as well as broadcast and advertisement

disruption during the weeks following the earthquake. As the utilization of

the Company's network capacity was already relatively high in June 2008,

the ability to broadcast advertisements displaced by the earthquake was

limited.



    -- Average advertising service revenues per broadcasting hour grew

34.0% quarter-over-quarter to $661 per broadcasting hour from $493 per

broadcasting hour in the first quarter of 2008, compared to $240 in the

second quarter of 2007, primarily as a result of the implementation of our

rate card increase on May 1, 2008.



    Limin Li, VisionChina Media's chairman and chief executive officer,

commented, "We are pleased to announce a very successful quarter. Despite

the negative impact on our operations and sales over the few weeks

following the earthquake in Sichuan province in mid-May, we were able to

beat both our top- line and bottom-line guidance." Mr. Li continued, "I am

proud of all of our employees for their dedication and ability to achieve

extraordinary results in the face of such challenges."



    "In the second quarter of 2008, we were able to continue expanding our

network coverage, following our carefully-structured growth plan," Mr. Li

reported. "We entered into an exclusive contract in Shenyang, Liaoning

province to operate on public buses and expanded our position in Guangzhou

to include subway trains as well as subway platforms. I am also extremely

pleased to announce that we recently expanded into Shanghai, covering the

platforms of two subway lines in the city's metro system. Our entrance into

Shanghai is a significant milestone as it marks VisionChina Media's

penetration into every Tier I city in China. Tier I cities, Beijing,

Guangzhou, Shanghai and Shenzhen, together account for over 60% of

advertising spending in China. We will continue to strengthen our position

and increase our penetration in these prosperous markets as we continue to

build up our sales and marketing teams to capture the fast-paced growth in

advertising spending in China."



    Dina Liu, VisionChina Media's chief financial officer, added, "This was

another strong quarter for us. We saw impressive growth in our top and

bottom- lines and continued to increase sales even as we increased our

prices. I am confident in VisionChina's ability to weather any storm. Our

diverse base of customers from a broad range of nondiscretionary industries

increases the stability of our business. Entry into Shanghai, China's

largest advertising market, completes our mission to become a premier

national network with a strong and scalable business model."



    Second Quarter 2008 Results



    VisionChina Media's total revenues were $20.3 million in the second

quarter of 2008, an increase of 48.8% compared to $13.6 million in the

first quarter of 2008 and an increase of 332.4% compared to $4.7 million in

the second quarter of 2007.



    Advertising service revenues were $20.2 million in the second quarter

of 2008, an increase of 52.4% compared to $13.2 million in the first

quarter of 2008 and an increase of 405.4% compared to $4.0 million in the

second quarter of 2007. Total broadcasting hours reached 29,523 in the

second quarter of 2008 compared to 25,980 in the first quarter of 2008.

Average advertising revenues per broadcasting hour were $661 in the second

quarter of 2008 compared to $493 in the first quarter of 2008. On average,

the Company sold 8.14 advertising minutes per broadcasting hour in the

second quarter of 2008 compared to 6.24 advertising minutes per

broadcasting hour in the first quarter of 2008. As of



    June 30, 2008, 594 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 $6.2 million in the second quarter of 2008, representing

75.0% of total advertising service costs, compared to $4.7 million, or

77.3% of total advertising service costs, in the first quarter of 2008.



    Gross profit in the second quarter of 2008 was $11.9 million, an

increase of 64.5% compared to $7.2 million in the first quarter of 2008 and

a significant increase of 775.5% compared to $1.4 million in the second

quarter of 2007. Advertising service gross margin was 59.1% in the second

quarter of 2008, compared to 54.3% in the first quarter of 2008. The

advertising equipment gross margin in the second quarter of 2008 was 13.0%,

compared to 17.3% in the first quarter of 2008.



    Selling and marketing expenses were $3.0 million in the second quarter

of 2008, an increase of 84.4% compared to $1.6 million in the first quarter

of 2008, and an increase of 832.3% compared to $0.3 million in the second

quarter of 2007, primarily due to an increase in the sales and marketing

team which grew to 276 employees as of June 30, 2008, up from 208 employees

as of March 31, 2008. Selling and marketing expenses represented 14.8% of

the Company's advertising service revenues in the second quarter of 2008

compared to 12.2% in the first quarter of 2008.



    General and administrative expenses were $1.0 million in the second

quarter of 2008, an increase of 21.3% compared to $0.8 million in the first

quarter of 2008, and an increase of 91.2% compared to $0.5 million in the

second quarter of 2007.



    Losses from equity method investments amounted to $0.2 million in the

second quarter of 2008, compared to a $0.3 million loss in the first

quarter of 2008, and a $0.3 million loss in the second quarter of 2007.



    Operating profit was $7.8 million in the second quarter of 2008, an

increase of 71.1% from $4.5 million in the first quarter of 2008, and a

significant increase of 3,210.8% from $0.2 million in the second quarter of

2007.



    In the second quarter of 2008, the Company recorded a tax expense of

$0.03 million. The Company is a certified "Cultural Enterprise" and

therefore benefits from full tax exemption from 2005 through 2008. The

Company expects that it will be subject to an effective PRC tax rate of 15%

starting in 2009.



    Net income was $8.5 million in the second quarter of 2008, an increase

of 56.7% from $5.4 million in the first quarter of 2008, and a significant

increase of 3,039.7% from $0.3 million in the second quarter of 2007. Fully

diluted net income per share for the second quarter of 2008 was $0.12. The

Company's second quarter net income, excluding share-based compensation

expenses (non-GAAP) was $8.9 million.



    As of June 30, 2008, the Company had 60,160 digital television displays

in its network, compared to 48,719 as of March 31, 2008. The Company had

cash and cash equivalents of $124.2 million as of June 30, 2008. In the

second quarter of 2008, depreciation and amortization was $0.7 million and

capital expenditures were $1.4 million.



    As of June 30, 2008, the Company had 437 employees, compared to 346

employees as of March 31, 2008, of which 276 employees are sales and

marketing personnel, compared to 208 as of March 31, 2008.



    Other Recent Developments



    VisionChina Media has entered into an exclusive contract, effective on

July 1, 2008, with Shanghai Shentong Metro Asset Operation and Management

Corporation, the asset management arm of Shanghai Metro, to act as the

exclusive advertising agent for two of Shanghai's subway lines. The

addition of Shanghai to VisionChina Media's network increases the Company's

coverage to 17 of China's economically prosperous cities. Shanghai is

ranked first among Chinese cities in terms of GDP and disposable income per

capita. Shanghai attracts a large portion of the total advertising spending

in China.



    On July 1, 2008, the Company significantly increased the rate card for

all advertising time on screens in subway platforms for Shenzhen as well as

on the five large-size screens in Guangzhou subway platforms.



    In May, VisionChina Media and CTR Market Research, the largest media

and market research company in China, agreed to jointly develop the first

media evaluation standard for China's mass transit mobile TV. China has

experienced rapid growth in the mass transit mobile TV market, but the

industry lacks a standardized and authoritative audience measurement index

which advertisers and media owners may use to judge the efficacy and value

of advertisements placed on mobile TV network on public transit systems.

The creation of third party evaluation standards will provide criteria to

compare mass transit mobile TV with traditional TV, which is expected to

help raise the status of the emergent mass transit mobile TV industry.



    VisionChina Media has been categorized by the Beijing Olympic

Organizing Committee as a "Class B" medium. In an effort to ensure that

Olympic sponsors reap the full rewards of their sponsorship entitlements,

the Committee recently differentiated between which media platforms can

display advertisements from non-Olympic Sponsors in cities hosting Olympic

events during the 2008 Beijing Olympics. "Class A" media are only allowed

to display advertisements of official Olympic sponsors, whereas "Class B"

media are allowed to display advertisements from both Olympic sponsors and

non-Olympic sponsors which are not direct competitors of Olympic sponsors.

As a "Class B" medium, VisionChina Media's Beijing network is not

restricted to displaying advertisements of Olympic sponsor companies.



    Business Outlook



    The Company estimates its total revenues for the third quarter of 2008

will range from $34.0 million to $36.0 million, out of which advertising

service revenues is expected to be between $33.8 million to $35.8 million.

Third quarter 2008 net income excluding share-based compensation expenses

(non-GAAP) is expected to be between $15.0 million and $17.0 million.



    The Company has increased its full-year estimates of results of

operations and expects that total revenues for full year 2008 will range

from $101.0 million to $105.0 million. Net income for full year 2008,

excluding share- based compensation expenses (non-GAAP), is expected to be

between $44.0 million to $48.0 million.



    The Company bases these estimates on a foreign exchange rate of RMB

6.8591 per US$1.00.




Dial-in details for the earnings conference call are as follows: US Toll Free: +1-866-713-8563 Hong Kong: +852-3002-1672 International: +1-617-597-5311 Passcode for all regions: VisionChina Earnings Call A replay of the conference call may be accessed by phone at the following numbers until July 31, 2008.
US Toll Free: +1-888-286-8010 International: +1-617-801-6888 Passcode: 30106904 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 (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 June 30, 2008, VisionChina's advertising network included

over 60,160 digital television displays on mass transportation systems in

16 of China's economically prosperous cities, including Beijing, Guangzhou

and Shenzhen. VisionChina Media has the 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 Media'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. The company

believes that the non-GAAP financial measures provide investors with

another method for assessing VisionChina 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. The company believes

that both management and investors benefit from referring to these non-GAAP

financial measures in assessing the performance of VisionChina Media'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 and its annual report on Form 20-F. 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) June 30, March 31, December 31, ASSETS 2008 2008 2007 (Unaudited) (Unaudited) (Note 1) Current Assets: Cash and cash equivalents 124,168,704 133,800,325 131,139,659 Accounts receivable, net 19,832,753 12,513,750 13,256,450 Amounts due from related parties 4,213,491 4,242,166 3,632,864 Prepaid expense and other current assets 14,763,519 10,610,582 9,683,059 Deferred tax assets 279,285 304,950 332,386 Total current assets 163,257,752 161,471,773 158,044,418 Non-current Assets: Fixed assets, net 9,771,198 8,677,599 7,709,204 Investments under equity method 6,684,371 6,710,352 6,714,853 Other investments 2,263,890 2,214,524 2,128,732 Long-term prepaid expenses 705,485 699,087 703,069 Long term prepayments and deposits 16,537,272 1,711,352 -- Intangible assets 10,568,461 -- -- Total non-current assets 46,530,677 20,012,914 17,255,858 TOTAL ASSETS 209,788,429 181,484,687 175,300,276 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable 3,771,974 3,837,967 4,236,695 Amounts due to related parties 410,242 267,175 327,532 Accrued expenses and other current liabilities 5,848,321 3,576,757 6,054,552 Total current liabilities 10,030,537 7,681,899 10,618,779 Non-current Liabilities: Contingent Consideration 8,677,700 -- -- Deferred tax liabilities 2,218,766 -- -- Total non-current liabilities 10,896,466 -- -- Total liabilities 20,927,003 7,681,899 10,618,779 Minority Interest 612,009 633,907 652,678 Shareholders' equity Common shares 6,920 6,839 6,839 Additional paid-in capital 167,604,519 163,981,497 163,820,443 Accumulated profit/(deficit) 10,615,387 2,121,488 -3,300,654 Accumulated other comprehensive income 10,022,591 7,059,057 3,502,191 Total shareholders' equity 188,249,417 173,168,881 164,028,819 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 209,788,429 181,484,687 175,300,276 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 USD thousand, except number of shares and per share data) For three months ended June 30, March 31, June 30, 2008 2008 2007 (Unaudited) (Unaudited) (Unaudited) Revenues: Advertising revenue 20,165 13,229 3,990 Equipment revenue 124 403 702 Total revenues 20,289 13,632 4,692 Cost of revenues Advertising cost -8,257 -6,050 -2,757 Equipment cost -108 -333 -573 Total costs of revenues -8,365 -6,383 -3,330 Gross profit 11,924 7,249 1,362 Operating expenses: Selling and marketing -2,987 -1,620 -320 General and administrative -991 -817 -518 Total operating expenses -3,978 -2,437 -838 Loss from equity method investees -173 -269 -289 Operating profit 7,773 4,543 235 Interest income 733 918 44 Other expenses -2 -17 -8 Net income before income taxes 8,504 5,444 271 Income taxes -32 -41 -- Net income after income taxes 8,472 5,403 271 Minority interest 22 19 -- Net income 8,494 5,422 271 Deemed dividend on convertible redeemable preferred shares -- -- -1,537 Net income(loss) attributable to holders of common shares 8,494 5,422 -1,266 Net income (loss) per share: Basic 0.12 0.08 -0.06 Diluted 0.12 0.08 0.01 Shares used in computation of net income (loss) per share: Basic 68,888,659 68,387,019 22,000,000 Diluted 72,115,604 70,897,070 22,000,000 Share-based compensation expenses during the related periods included in: Cost of revenues -9 -11 -7 Selling and marketing expenses -347 -136 -41 General and administrative expenses -37 -18 -11 Selected Operating Data 2Q08 1Q08 2Q07 Total broadcasting hours 29,523 25,980 15,536 Advertising minutes per broadcasting hour 8.14 6.24(1) 6.59 Total advertising minutes sold 240,317 162,115 102,382 Average advertising service revenue per broadcasting hour (US$) 661 493(2) 240 Total digital television displays in the network 60,160 48,719 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 For investor and media inquiries, please contact: In China: Investor Relations Department, VisionChina Media, Inc. Tel: +86-755-8831-8683 Email: ir@visionchina.cn Mrs. Helen Plummer Ogilvy Financial, Beijing Tel: +86-10-8520-3090 Email: helen.plummer@ogilvy.com In the United States: Mr. Jeremy Bridgman Ogilvy Financial, New York Tel: +1-212-880-5363 Email: jeremy.bridgman@ogilvypr.com

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