BEIJING, Feb. 13 /Xinhua-PRNewswire-FirstCall/ -- Xinhua Finance
Media Limited ("XFMedia" or "the Company"; Nasdaq: XFML), a leading
media group in China, today announced its unaudited financial
results for the full year and fourth quarter ended December 31,
2007. Full Year 2007 Highlights The following is a summary of our
financial results for the full year ended Dec 31, 2007: Chart 1:
Summary of full year 2007 and 2006 results 12 months ended 12
months ended Growth In US millions Dec 31, 2007 Dec 31, 2006 % Net
revenue 134.8 59.0 129 % EBITDA* 43.2 15.3 182 % Net Income 28.0
3.3 738 % Adjusted net income* 37.9 9.2 310 % * Please refer to
Chart 19 for details of calculation of EBITDA and adjusted net
income. -- Excluding contribution of US$29.9 million from
acquisitions completed in 2007, net revenue for full year 2007 was
US$104.9 million, up 78% year-over-year. -- EBITDA (non-GAAP),
defined as earnings before interest expense, taxes, depreciation,
amortization of intangible assets and share-based compensation
expenses, for full year 2007 was $43.2 million, up 182% from $15.3
million in full year 2006. -- Net income for full year 2007 was
$28.0 million, up 738% from $3.3 million in full year 2006. --
Adjusted net income (non-GAAP), defined as net income before
amortization of intangible assets, imputed interest, share-based
compensation expenses and one time items, for full year 2007 was
$37.9 million, up 310% from $9.2 million in full year 2006. Net
income and adjusted net income per ADS and per share for the full
year 2007 are shown in the following table: Chart 2: Net income and
adjusted net income per ADS and per share for 2007 and 2006 12
months ended 12 months ended In US dollars Dec 31, 2007 Dec 31,
2006 Net income (loss) per ADS - basic 0.46 (0.17) Net income
(loss) per ADS - diluted 0.42 (0.17) Adjusted net income per ADS -
basic 0.63 0.07 Adjusted net income per ADS - diluted 0.56 0.07 Net
income (loss) per share - basic 0.23 (0.08) Net income (loss) per
share - diluted 0.21 (0.08) Adjusted net income per share - basic
0.31 0.04 Adjusted net income per share - diluted 0.28 0.04 Note:
Weighted average number of ADS - basic: 58.2 million (2006: 24.9
million); weighted average number of ADS - diluted: 68.2 million
(2006: 24.9 million); weighted average number of share - basic:
116.4 million (2006: 49.8 million); weighted average number of
share - diluted: 136.4 million (2006: 49.8 million). Fourth Quarter
2007 Highlights The following is a summary of our financial results
for the fourth quarter of 2007: Chart 3: Summary of 2006 fourth
quarter and 2007 fourth and third quarter results 3 months 3 months
3 months ended ended ended 07Q4 vs 07Q4 vs Dec 31, 2007 Dec 31, Sep
30, 2007 06Q4 07Q3 In US millions 2006 Growth % Growth % Net
revenue 48.5 24.1 40.7 101 % 19 % EBITDA* 13.4 7.5 14.7 79 % -9 %
Net income 4.2 3.1 9.0 34 % -54 % Adjusted net income* 9.7 5.6 13.6
75 % -28 % * Please refer to Chart 19 for details of calculation of
EBITDA and adjusted net income. -- Net revenue for the fourth
quarter of 2007 was $48.5 million, up 101% year-over-year from
$24.1 million in the fourth quarter of 2006 or up 19% sequentially
from $40.7 million in the third quarter of 2007. Excluding fourth
quarter contribution of $17.1 million from acquisitions completed
in 2007, net revenue was $31.4 million, up 30% year-over-year and
7% sequentially. -- EBITDA (non-GAAP), defined as earnings before
interest expense, taxes, depreciation, amortization of intangible
assets and share-based compensation expenses, for the fourth
quarter of 2007 was $13.4 million, up 79% year-over-year from $7.5
million in the fourth quarter of 2006 or down 9% sequentially from
$14.7 million in the third quarter of 2007. -- Net income for the
fourth quarter of 2007 was $4.2 million, up 34% year-over-year from
$3.1 million in the fourth quarter of 2006 or down 54% sequentially
from $9.0 million in the third quarter of 2007. -- Adjusted net
income (non-GAAP), defined as net income before amortization of
intangible assets, imputed interest, share-based compensation
expenses and one-time items, for the fourth quarter of 2007 was
$9.7 million, up 75% year-over-year from $5.6 million in the fourth
quarter of 2006 or down 28% sequentially from $13.6 million in the
third quarter of 2007. -- The sequential drop in EBITDA, Net Income
and Adjusted net income from 3rd quarter to 4th quarter 2007 was
mainly due to three reasons. The first reason is an increase in
expenditures to support key projects won in Advertising, Broadcast,
and Production. The second reason is an increase in administrative
costs, including higher legal and professional fees for
Sarbanes-Oxley implementation and higher than expected auditing
fees due to new acquisitions. The third main reason is an impact to
our Print Group due to a PRC policy reversal that affected our Hong
Kong-based advertising activities in newspapers and magazines in
the fourth quarter. Net income and adjusted net income per ADS and
per share for the fourth and third quarter 2007 are shown in the
following table: Chart 4: Net income and adjusted net income per
ADS and per share for fourth and third quarter of 2007 3 months
ended 3 months ended In US dollars Dec 31, 2007 Sep 30, 2007 Net
income per ADS - basic 0.06 0.14 Net income per ADS - diluted 0.06
0.13 Adjusted net income per ADS - basic 0.15 0.21 Adjusted net
income per ADS - diluted 0.14 0.19 Net income per share - basic
0.03 0.07 Net income per share - diluted 0.03 0.06 Adjusted net
income per share - basic 0.08 0.11 Adjusted net income per share -
diluted 0.07 0.10 Note: Weighted average number of ADS - basic:
64.8 million (3Q07: 63.5 million); weighted average number of ADS -
diluted: 72.1 million (3Q07: 71.1 million); weighted average number
of share - basic: 129.6 million (3Q07: 126.9 million); weighted
average number of share - diluted: 144.2 million (3Q07: 142.3
million). "We are pleased to report strong financial results for
the full year of 2007. This year, we have achieved a number of
significant milestones. We successfully took the company public in
March raising net proceeds of $200 million. We acquired key
advertising assets which gave us market leadership positions in a
number of key areas, such as online real estate advertising and
imported spirits below-the-line marketing, which specifically
target the upwardly mobile demographic," said Fredy Bush, XFMedia's
CEO. "We are well positioned to capture the largest segment of
advertising dollars spent in China, which is in traditional media
such as television, radio, newspapers, magazines, and outdoor
advertising. Out of the $25 billion for China's advertising
expenditure in 2007, 94% or $23 billion was estimated to be in
traditional media, with $18 billion in television alone. We expect
that this concentration is unlikely to change significantly over
the coming years." She added, "In 2008, our key areas of focus and
opportunity will come from television, print and outdoor, where we
derive some of our highest margins today. We will further
strengthen our leadership position in China to capitalize on these
opportunities and we look forward to our continued expansion." Mr.
Andrew Chang, CFO, also noted, "2007 has been a pivotal year for
the Company from both an operational and financial standpoint. We
have achieved year-on-year growth of 129% compared to full year
2006, or 78% excluding contribution from acquisitions completed in
2007. Along with continued expansion in 2008, we will be focused on
integration of our businesses, Sarbanes-Oxley Act compliance, and
diversifying the capital structure of the Company to support our
development." Full Year and Fourth Quarter 2007 Financial Results
Net revenue for full year 2007 was $134.8 million, up 129% from
$59.0 million in full year 2006. Net revenue for the fourth quarter
of 2007 was $48.5 million, up 101% year-over-year from $24.1
million in the fourth quarter of 2006 or up 19% sequentially from
$40.7 million in the third quarter of 2007. The following table
summarizes revenue contributed from existing businesses and
acquisitions made in 2007: Chart 5: Summary of contributions from
existing business and acquisitions 3 months 3 months 3 months 3
months 12 months ended ended ended ended ended In US Mar 31, Jun
30, Sep 30, Dec 31, Dec 31, millions 2007 2007 2007 2007 2007 Net
revenue: Existing business 16.6 27.5 29.4 31.4 104.9 Acquisitions
-- 1.5 11.3 17.1 29.9 Total net revenue 16.6 29.0 40.7 48.5 134.8
Net Revenue by type and business group The following is a summary
of net revenue by business group reconciled to types of revenue
provided in the accompanying consolidated financial statements for
full year 2007: Chart 6: Net revenue by types and business group
for full year 2007 In US millions Advertising Broadcast Print
Production Research Total Net revenue: Advertising services 66.0
9.9 5.7 -- 5.0 86.6 Content production -- -- -- 7.7 -- 7.7
Advertising sales 8.1 18.3 12.9 -- -- 39.3 Publishing services --
-- 1.2 -- -- 1.2 Total net revenue 74.1 28.2 19.8 7.7 5.0 134.8 The
following is a summary of net revenue by business group reconciled
to types of revenue provided in the accompanying consolidated
financial statements for the fourth quarter of 2007: Chart 7: Net
revenue by types and business group for the fourth quarter of 2007
In US millions Advertising Broadcast Print Production Research
Total Net revenue: Advertising services 24.7 5.5 1.1 -- 1.2 32.5
Content production -- -- -- 1.8 -- 1.8 Advertising sales 4.3 5.6
3.9 -- -- 13.8 Publishing services -- -- 0.4 -- -- 0.4 Total net
revenue 29.0 11.1 5.4 1.8 1.2 48.5 Advertising Group Net revenue
for the Advertising Group for full year 2007 was $74.1 million, up
108% from $35.6 million in full year 2006. Net revenue for the
Advertising Group for the fourth quarter of 2007 was $29.0 million,
up 109% year-over-year from $13.8 million in the fourth quarter of
2006 or up 28% sequentially from $22.6 million in the third quarter
of 2007. We completed the acquisition of JCBN Company Limited
("JCBN") on November 27, 2007. JCBN contributed $1.1 million in
post-acquisition net revenue for the full year and fourth quarter
of 2007. The acquisition of JCBN strengthens XFMedia's advertising
capabilities in Shanghai and Southern China, and increases our
expertise in online real-estate advertising and Below-the-Line
("BTL") marketing in high-end imported spirits. Chart 8: Revenue
breakdown of the Advertising Group 12 months 12 months 3 months 3
months ended ended ended ended Dec 31, Dec 31, Growth Dec 31, Dec
31, Growth In US millions 2007 2006 % 2007 2006 % Advertising:
Television 14.1 8.5 67 % 4.6 2.5 80 % Outdoor/Other 17.0 11.3 50 %
6.1 4.5 34 % Print/Online 33.1 15.8 109 % 12.8 6.8 89 % BTL
Marketing 9.9 -- -- 5.5 -- -- Subtotal: 74.1 35.6 108 % 29.0 13.8
109 % 3 months ended 3 months ended Growth In US millions Dec 31,
2007 Sep 30, 2007 % Advertising: Television 4.6 3.8 22 %
Outdoor/Other 6.1 5.7 7 % Print/Online 12.8 9.5 35 % BTL Marketing
5.5 3.6 51 % Subtotal: 29.0 22.6 28 % Note: For full year 2007,
year on year growth was 108%, or 55% excluding contribution from
acquisitions completed in 2007. Broadcast Group Net revenue for the
Broadcast Group for full year 2007 was $28.2 million, up 1914% from
$1.4 million in full year 2006. Net revenue for the Broadcast Group
for the fourth quarter of 2007 was $11.1 million, up 814%
year-over-year from $1.2 million in the fourth quarter of 2006 or
up 28% sequentially from $8.7 million in the third quarter of 2007.
Chart 9: Revenue breakdown of the Broadcast Group 12 months 12
months 3 months 3 months ended ended ended ended Dec 31, Dec 31,
Growth Dec 31, Dec 31, Growth In US millions 2007 2006 % 2007 2006
% Broadcast: Television 13.3 0.9 1447 % 3.7 0.7 447 % Radio 5.6 0.5
930 % 2.1 0.5 290 % Mobile 9.3 -- -- 5.3 -- -- Subtotal: 28.2 1.4
1914 % 11.1 1.2 814 % 3 months 3 months ended ended Growth In US
millions Dec 31, 2007 Sep 30, 2007 % Broadcast: Television 3.7 3.5
7 % Radio 2.1 1.9 13 % Mobile 5.3 3.3 59 % Subtotal: 11.1 8.7 28 %
Note: For full year 2007, year on year growth was 1914%, or 1133%
excluding contribution from acquisitions completed in 2007. Print
Group Net revenue for the Print Group for full year 2007 was $19.8
million, up 45% from $13.6 million in full year 2006. Net revenue
for the Print Group for the fourth quarter of 2007 was $5.4
million, down 2% year-over-year from $5.5 million in the fourth
quarter of 2006 or down 9% sequentially from $6.0 million in the
third quarter of 2007. The year-over-year and sequential decrease
was mainly due to a policy reversal in the fourth quarter. In
August 2007, the PRC government announced that a new PRC regulation
allowing certain Chinese citizens to invest directly in Hong Kong's
capital markets would soon take effect. As a result, certain
clients of our Print Group had scheduled advertising and marketing
activities for the fourth quarter. In October 2007, the PRC
government announced that the enactment of the regulation would be
delayed, which led to the cancellation of these advertising and
marketing activities. Chart 10: Revenue breakdown of the Print
Group 12 12 3 3 months months months months ended ended ended ended
In US Dec 31, Dec 31, Growth Dec 31, Dec 31, Growth millions 2007
2006 % 2007 2006 % Print: Newspaper 9.3 4.6 101 % 2.6 2.4 11 %
Magazines 10.5 9.0 17 % 2.8 3.1 (11)% Subtotal: 19.8 13.6 45 % 5.4
5.5 (2)% 3 months ended 3 months ended In US millions Dec 31, 2007
Sep 30, 2007 Growth % Print: Newspaper 2.6 2.6 4 % Magazines 2.8
3.4 (18)% Subtotal: 5.4 6.0 (9)% Production Group Net revenue for
the Production Group for full year 2007 was $7.7 million, up 17%
from $6.5 million in full year 2006. Net revenue for the Production
Group for the fourth quarter of 2007 was $1.8 million, down 27%
year-over-year from $2.4 million in the fourth quarter of 2006 or
down 14% sequentially from $2.1 million in the third quarter of
2007. The year-over-year and sequential decrease was primarily due
to seasonality of distribution of TV drama series. Research Group
Net revenue for the Research Group for full year 2007 was $5.0
million, up 180% from $1.8 million in full year 2006. The increase
was due to full year revenue contribution in 2007 of the research
business which was acquired in August 2006. Net revenue for the
Research Group for the fourth quarter of 2007 was $1.2 million, up
8% year-over-year from $1.1 million in the fourth quarter of 2006
or down 19% sequentially from $1.4 million in the third quarter of
2007. The sequential decrease was primarily due to seasonality.
Cost of Revenue Cost of revenue for full year 2007 was $82.1
million, up 143% from $33.8 million in full year 2006. Adjusted
cost of revenue (non-GAAP), defined as cost of revenue before
amortization of intangible assets, was $70.6 million, up 121% from
$31.9 million in full year 2006. Cost of revenue for the fourth
quarter of 2007 was $29.9 million, up 134% year-over-year from
$12.8 million in the fourth quarter of 2006 or up 28% sequentially
from $23.3 million in the third quarter of 2007. Adjusted cost of
revenue (non-GAAP), for the fourth quarter of 2007 was $26.8
million, up 124% year-over-year from $12.0 million in the fourth
quarter of 2006 or up 31% sequentially from $20.4 million in the
third quarter of 2007. Chart 11: Reconciliation for adjusted cost
of revenue by business group for full year 2007 In US millions
Advertising Broadcast Print Production Research Total Cost of
revenue 50.8 20.3 4.6 3.7 2.7 82.1 Amortization of intangible
assets from acquisitions (0.8) (4.4) (0.6) -- -- (5.8) Amortization
of intangible assets from long-term contracts -- (4.8) (0.9) -- --
(5.7) Adjusted cost of revenue 50.0 11.1 3.1 3.7 2.7 70.6 Chart 12:
Reconciliation for adjusted cost of revenue by business group for
the fourth quarter of 2007 In US millions Advertising Broadcast
Print Production Research Total Cost of revenue 20.0 7.5 1.1 0.8
0.5 29.9 Amortization of intangible assets from acquisitions (0.3)
(1.5) (0.2) -- -- (2.0) Amortization of intangible assets from
long-term contracts -- (1.0) (0.1) -- -- (1.1) Adjusted cost of
revenue 19.7 5.0 0.8 0.8 0.5 26.8 Operating Expenses Operating
expenses for full year 2007 were $39.2 million, up 117% from $18.1
million in full year 2006. Operating expenses for the fourth
quarter of 2007 were $12.5 million, up 86% year-over-year from $6.7
million in the fourth quarter of 2006 or up 13% sequentially from
$11.1 million in the third quarter of 2007. Total operating
expenses were composed of selling and marketing expenses and
general and administrative expenses. Selling and marketing expenses
for full year 2007 were $14.9 million, up 182% from $5.3 million in
full year 2006. Selling and marketing expenses for the fourth
quarter of 2007 were $5.8 million, up 199% year-over-year from $1.9
million in the fourth quarter of 2006 or up 34% sequentially from
$4.3 million in the third quarter of 2007. General and
administrative expenses for full year 2007 were $24.3 million, up
90% from $12.8 million in full year 2006. General and
administrative expenses for the fourth quarter of 2007 were $6.7
million, up 40% year-over- year from $4.8 million in the fourth
quarter of 2006 or down 1% sequentially from $6.8 million in the
third quarter of 2007. Included in the general and administrative
expenses for the full year and fourth quarter 2007 were share-
based compensation expenses of $3.1 million and $0.6 million,
respectively. EBITDA (non-GAAP) EBITDA (non-GAAP), defined as
earnings before interest expense, taxes, depreciation, amortization
of intangible assets and share-based compensation expenses, for
full year 2007 was $43.2 million, up 182% from $15.3 million in
full year 2006. Chart 13: EBITDA by business group for full year
2007 In US millions Advertising Broadcast Print Production Research
Total EBITDA by business group 18.0 13.0 11.0 3.0 1.2 46.2 Less:
net head office expenses (3.0) EBITDA 43.2 Chart 14: Reconciliation
of income from operations to EBITDA for full year 2007 and 2006 12
months 12 months ended ended In US millions Dec 31, 2007 Dec 31,
2006 Income from operations 15.8 7.1 Interest income 6.3 1.7 Other
income, net 1.7 -- Depreciation 1.8 0.6 Amortization of intangible
assets from acquisitions 8.9 3.1 Amortization of intangible assets
from long-term contracts 5.6 0.4 Share-based compensation expenses
3.1 2.4 EBITDA 43.2 15.3 EBITDA for the fourth quarter of 2007 was
$13.4 million, up 79% year-over- year from $7.5 million in the
fourth quarter of 2006 or down 9% sequentially from $14.7 million
in the third quarter of 2007. Chart 15: EBITDA by business group
for the fourth quarter of 2007 In US millions Advertising Broadcast
Print Production Research Total EBITDA by business group 7.1 4.9
2.9 0.8 0.2 15.9 Less: net head office expenses (2.5) EBITDA 13.4
Chart 16: Reconciliation from income from operations to EBITDA for
the fourth and third quarter of 2007 3 months ended 3 months ended
In US millions Dec 31, 2007 Sep 30, 2007 Income from operations 6.0
6.2 Interest income 1.5 2.4 Other income, net 0.8 0.7 Depreciation
0.6 0.6 Amortization of intangible assets from acquisitions 2.7 3.1
Amortization of intangible assets from long-term contracts 1.2 1.2
Share-based compensation expenses 0.6 0.5 EBITDA 13.4 14.7 The
sequential drop in EBITDA from 3rd quarter to 4th quarter 2007 was
mainly due to three reasons. The first reason is an increase in
expenditures to support key projects won in Advertising, Broadcast,
and Production. The second reason is an increase in administrative
costs, including higher legal and professional fees for
Sarbanes-Oxley implementation and higher than expected auditing
fees due to new acquisitions. The third main reason is an impact to
our Print Group due to a PRC policy reversal that affected our Hong
Kong-based advertising activities in newspapers and magazines in
the fourth quarter. Net Income and Adjusted Net Income (non-GAAP)
Net income for full year 2007 was $28.0 million, up 738% from $3.3
million in full year 2006. Net income for the fourth quarter of
2007 was 4.2 million, up 34% year-over-year from $3.1 million in
the fourth quarter of 2006 or down 54% sequentially from $9.0
million in the third quarter of 2007. Adjusted net income
(non-GAAP), defined as net income before amortization of intangible
assets, imputed interest, share-based compensation expenses and one
time items, for full year 2007 was $37.9 million, up 310% from $9.2
million in full year 2006. Chart 17: Reconciliation from net income
to adjusted net income for full year 2007 and 2006 12 months ended
12 months ended In US millions Dec 31, 2007 Dec 31, 2006 Net income
28.0 3.3 One time items (13.6) -- Amortization of intangible assets
from acquisitions 8.9 3.1 Amortization of intangible assets from
long-term contracts 5.6 0.4 Share-based compensation expenses 3.1
2.4 Imputed interest 5.9 -- Adjusted net income 37.9 9.2 Adjusted
net income (non-GAAP) for the fourth quarter of 2007 was $9.7
million, up 75% year-over-year from $5.6 million in the fourth
quarter of 2006 or down 28% sequentially from $13.6 million in the
third quarter of 2007. Chart 18: Reconciliation from net income to
adjusted net income for fourth and third quarter 2007 3 months
ended 3 months ended In US millions Dec 31, 2007 Sep 30, 2007 Net
income 4.2 9.0 One time items -- (1.3) Amortization of intangible
assets from acquisitions 2.7 3.1 Amortization of intangible assets
from long-term contracts 1.2 1.2 Share-based compensation expenses
0.6 0.5 Imputed interest 1.0 1.1 Adjusted net income 9.7 13.6 The
sequential drop in Net Income and Adjusted Net Income from 3rd
quarter to 4th quarter 2007 was mainly due to three reasons. The
first reason is an increase in expenditures to support key projects
won in Advertising, Broadcast, and Production. The second reason is
an increase in administrative costs, including higher legal and
professional fees for Sarbanes-Oxley implementation and higher than
expected auditing fees due to new acquisitions. The third main
reason is an impact to our Print Group due to a PRC policy reversal
that affected our Hong Kong-based advertising activities in
newspapers and magazines in the fourth quarter. Recent Development
On January 23, 2008 our Board approved the grant of up to 5,588,000
shares (equivalent to 2,794,000 ADS) to certain executives and
employees of the Company over the next three years, subject to
meeting certain performance targets. Outlook for 2008 XFMedia
estimates its total revenue for full year 2008 to range from US$190
to 200 million. First quarter revenue is expected to be US$25 to 30
million. This forecast reflects XFMedia's current and preliminary
view, which is subject to change. Conference Call Information
Following the earnings announcement, XFMedia's senior management
will host a conference call on February 13, 2008 at 7:00pm (New
York) / February 14, 2008 at 8:00am (Beijing) to review the results
and discuss recent business activities. Interested parties may dial
into the conference call at: (US) +1-480-629- 1990, (UK)
+44-20-8515-2301, (Asia Pacific) +852-3009-5027 A telephone replay
will be available shortly after the call for one week at: (US)
+1-303-590-3030 (Passcode: 3837590#), (UK) +44-207-154-2833
(Passcode: 3837590#), (Asia Pacific) +852-2287-4304 (Passcode:
138110#) A real-time webcast and replay will be also available at:
http://www.xinhuafinancemedia.com/earnings About XFMedia Xinhua
Finance Media ("XFMedia"; Nasdaq: XFML) is a leading media group in
China with nationwide access to the upwardly mobile demographic.
Through its five synergistic business groups, Advertising,
Broadcast, Print, Production and Research, XFMedia offers a total
solution empowering clients at every stage of the media process and
connecting them with their target audience. Its unique platform
covers a wide range of media assets, including television, radio,
newspaper, magazine, outdoor, online and other media assets.
Headquartered in Beijing, the company has offices and affiliates in
major cities of China including Beijing, Shanghai, Guangzhou,
Shenzhen and Hong Kong. For more information, please visit
http://www.xinhuafinancemedia.com/ . Safe Harbor 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 outlook
for fourth quarter and full year 2007 and quotations from
management in this announcement, as well as XFMedia's strategic and
operational plans, contain forward-looking statements. XFMedia may
also make written or oral forward-looking statements in its
periodic reports to the U.S. Securities and Exchange Commission, 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 XFMedia's beliefs and
expectations, are forward-looking statements. Forward-looking
statements involve inherent risks and uncertainties. A number of
factors could cause actual results to differ materially from those
contained in any forward- looking statement, including but not
limited to the following: our growth strategies; our future
business development, results of operations and financial
condition; our ability to attract and retain customers; competition
in the Chinese advertising and media market; changes in our
revenues and certain cost or expense items as a percentage of our
revenues; the outcome of ongoing, or any future, litigation or
arbitration, including those relating to copyright and other
intellectual property rights; the expected growth of the Chinese
advertising and media market; and Chinese governmental policies
relating to advertising and media. Further information regarding
these and other risks is included in our registration statement on
Form F-1, as amended, filed with the Securities and Exchange
Commission. XFMedia does not undertake any obligation to update any
forward-looking statement, except as required under applicable law.
Non-GAAP Financial Measures To supplement XFMedia's consolidated
financial results under U.S. GAAP, XFMedia also provides the
following non-GAAP financial measures: adjusted cost of revenue,
EBITDA and adjusted net income. XFMedia believes that these non-
GAAP financial measures provide investors with another method for
assessing XFMedia's underlying operational and financial
performance. These non-GAAP financial measures are not intended to
be considered in isolation or as a substitute for the financial
results under U.S. GAAP. For more information on these non-GAAP
financial measures, please refer to Chart 19 of this release. To
provide investors with a better understanding of our underlying
operational and financial performance, starting from this quarter,
XFMedia has changed the methodology of presenting "adjusted net
income", by defining adjusted net income as net income excluding
amortization of intangible assets, imputed interest, share-based
compensation and one-time items. XFMedia believes these non-GAAP
financial measures are useful to management and investors in
assessing the performance of the Company and assists management in
its financial and operational decision making. A limitation of
using non-GAAP measures which exclude share-based compensation
expenses is that share-based compensation expenses have been and
will continue to be a significant recurring expense in our
business. A limitation of using non-GAAP adjusted cost of revenue,
EBITDA and adjusted net income is that they do not include all
items that impact our net income for the period. Management
compensates for these limitations by providing specific information
regarding the GAAP amounts excluded from each non-GAAP measure. The
accompanying tables have more details on the reconciliations
between GAAP financial measures that are most directly comparable
to non-GAAP financial measures. The following is a reconciliation
of our non-GAAP financial results: Chart 19: Reconciliation of
non-GAAP financial results 3 3 3 12 12 months months months months
months ended ended ended ended ended Dec 31, Dec 31, Sep 30, Dec
31, Dec 31, In US millions 2007 2006 2007 2007 2006 Income from
operations 6.0 4.6 6.2 15.8 7.1 Interest income(1) 1.5 0.4 2.4 6.3
1.7 Other income, net 0.8 (0.3) 0.7 1.7 - Depreciation 0.6 0.3 0.6
1.8 0.6 Amortization of intangible assets from acquisitions 2.7 1.1
3.1 8.9 3.1 Amortization of intangible assets from long-term
contracts 1.2 0.2 1.2 5.6 0.4 Share-based compensation expenses 0.6
1.2 0.5 3.1 2.4 EBITDA 13.4 7.5 14.7 43.2 15.3 Net income 4.2 3.1
9.0 28.0 3.3 One time items(2)(3) -- -- (1.3) (13.6) --
Amortization of intangible assets from acquisitions 2.7 1.1 3.1 8.9
3.1 Amortization of intangible assets from long-term contracts 1.2
0.2 1.2 5.6 0.4 Share-based compensation 0.6 1.2 0.5 3.1 2.4
expenses Imputed interest 1.0 -- 1.1 5.9 -- Adjusted net income 9.7
5.6 13.6 37.9 9.2 (1) Historically, the Company has included
interest income in line with the methodology employed by the
Company's parent. Beginning in 1Q08, interest income will no longer
be included in the calculation of EBITDA. (2) We changed the
methodology for presenting adjusted net income in 3Q07 by including
one-time items such that it is consistent with full year
presentation. There is a one-time adjustment of $1.3 million,
representing reversal of the imputed interest taken in the first
half of 2007 (the imputed interest for the first quarter and second
quarter of 2007 were $0.6 million and $0.6 million respectively) as
a result of clarification of terms of one of our exclusive radio
advertising agreements. (3) The one time item of $12.3 million in
2007 represents deferred tax effect arising from the reduction of
income tax rate from 33% to 25%, which became effective on January
1, 2008, for all domestic companies and foreign invested
enterprises in the People's Republic of China. Condensed
Consolidated Balance Sheets (In U.S. dollars) Dec 31,2007 Dec
31,2006 Unaudited (Note 1) Assets Current assets: Cash 44,436,087
36,353,547 Restricted cash (Note 2) 47,252,191 12,579,822 Accounts
receivable (Note 3) 45,706,766 17,403,632 Prepaid program expenses
5,389,250 8,597,935 Other current assets 16,272,798 22,114,480
Total current assets 159,057,092 97,049,416 Content production
deposit and cost, net 8,855,896 5,854,271 Property and equipment,
net 9,191,959 4,367,329 Intangible assets, net (Note 4) 233,505,913
176,201,528 Goodwill 180,125,488 83,670,010 Investment 500,000
500,000 Marketable securities (Note 5) 24,909,929 -- Deposits for
acquisition of subsidiaries 25,634,000 29,246,500 Deposits for
acquisition of intangible asset -- 2,561,246 Other long-term asset
9,021,936 -- Total assets 650,802,213 399,450,300 Liabilities and
shareholders' equity Current liabilities: Bank borrowings
33,780,188 11,218,256 Bank overdrafts 960,157 -- Other current
liabilities 40,542,213 163,848,633 Total current liabilities
75,282,558 175,066,889 Deferred tax liabilities 37,741,579
41,168,035 Convertible loan -- 14,017,289 Long term payables,
non-current portion 69,081,763 64,937,958 Total liabilities
182,105,900 295,190,171 Minority Interests 2,060,745 3,010,407
Shareholders' equity: Class A common shares and nonvested shares
(par value $0.001; 69,035,751 as of December 31, 2006 and
143,822,874 as of December 31, 2007 shares authorized; 32,011,154
as of December 31, 2006 and 90,061,269 as of December 31, 2007
shares issued and outstanding) 90,061 32,011 Class B common shares
(par value $0.001; 50,054,619 as of December 31, 2006 and December
31, 2007 shares authorized; 50,054,618 as of December 31, 2006 and
December 31, 2007 shares issued and outstanding) 7,442 7,442
Convertible preferred shares (par value $0.001;15,600,000 as of
December 31, 2006 shares authorized; 15,585,254 as of December 31,
2006 shares issued and outstanding and nil as of December 31, 2007
shares issued and outstanding) -- 15,585 Additional paid-in capital
439,516,974 103,155,391 Retained earnings (deficits) 23,903,560
(2,797,112) Accumulated other comprehensive income 3,117,531
836,405 Total shareholders' equity 466,635,568 101,249,722 Total
650,802,213 399,450,300 Condensed Consolidated Statements of
Operations 3 months 3 months 3 months 12 months 12 months ended
ended ended ended ended Dec 31, Dec 31, Sep 30, Dec 31, Dec 31, (in
U.S. Dollars) 2007 2006 2007 2007 2006 Unaudited Unaudited
Unaudited Unaudited Unaudited Net revenues: Advertising services
32,427,419 18,226,917 26,012,979 86,681,143 44,861,952 Content
production 1,776,291 2,432,740 2,073,675 7,680,580 6,545,148
Advertising sales 13,834,490 3,292,596 12,346,672 39,281,540
6,691,543 Publishing services 436,503 143,827 291,072 1,195,427
867,789 Total net revenues 48,474,703 24,096,080 40,724,398
134,838,690 58,966,432 Cost of revenues: Advertising services
22,137,944 10,280,107 16,509,981 58,047,996 27,653,769 Content
production 593,496 915,137 1,504,931 3,707,062 2,829,311
Advertising sales 6,922,148 1,453,113 5,048,937 19,490,013
1,912,260 Publishing services 238,480 131,709 283,714 854,020
1,386,162 Total cost of revenues 29,892,068 12,780,066 23,347,563
82,099,091 33,781,502 Operating expenses: Selling and distribution
5,794,457 1,939,847 4,337,558 14,876,682 5,276,751 General and
Administra- tive 6,740,401 4,797,476 6,791,370 24,348,827
12,840,202 Total operating expenses 12,534,858 6,737,323 11,128,928
39,225,509 18,116,953 Other operating income (Note 6) -- -- --
2,261,788 -- Income from operations 6,047,777 4,578,691 6,247,907
15,775,878 7,067,977 Other income (expenses) (Note 7) (660,440)
(807,068) 2,787,286 1,340,111 (897,651) Income before provision for
income taxes and minority interest 5,387,337 3,771,623 9,035,193
17,115,989 6,170,326 Provision for income taxes (Note 8) 719,289
643,549 (232,016)(12,225,650) 1,069,537 Net income before minority
interest 4,668,048 3,128,074 9,267,209 29,341,639 5,100,789
Minority interest 510,928 27,012 229,467 1,302,634 1,704,287 Equity
in loss of an investment -- -- -- -- 52,211 Net income 4,157,120
3,101,062 9,037,742 28,039,005 3,344,291 Dividend on redeemable
convertible preferred shares -- 1,686,667 -- 1,338,333 7,492,301
Net income (loss) attributable to holders of common shares
4,157,120 1,414,395 9,037,742 26,700,672 (4,148,010) Net income per
share: Basic - Common shares 0.032 0.022 0.071 0.229 (0.083) Basic
- American Depositary Shares 0.064 0.043 0.142 0.459 (0.167)
Diluted - Common shares 0.029 0.022 0.064 0.208 (0.083) Diluted -
American Depositary Shares 0.058 0.043 0.127 0.415 (0.167)
Condensed Consolidated Statements of Cash Flows 3 months 3 months 3
months 12 months 12 months ended ended ended ended ended Dec 31,
Dec 31, Sep 30, Dec 31, Dec 31, (in U.S. Dollars) 2007 2006 2007
2007 2006 Unaudited Unaudited Unaudited Unaudited Unaudited Net
cash provided by/(used in) operating activities 14,696,170
(4,827,720) 1,550,989 20,293,223 (4,462,569) Net cash provided
by/(used in) investing activities (43,368,652) 38,702,512
(9,536,253)(164,921,628)(32,214,271) Net cash provided by/(used in)
financing activities (3,165,011)(10,114,980) 1,660,617 151,258,756
70,103,894 Effect of exchange rate changes 922,837 863,513 263,683
1,452,189 845,747 Net increase/ (decrease) in cash (30,914,656)
24,623,325 (6,060,964) 8,082,540 34,272,801 Cash, as at beginning
of the period 75,350,743 11,730,222 81,411,707 36,353,547 2,080,746
Cash, as at end of the period 44,436,087 36,353,547 75,350,743
44,436,087 36,353,547 Notes to Financial Information (1) 2006
condensed consolidated balance sheets Information was extracted
from the audited financial statements included in the prospectus on
Form-1 of the Company filed with the Securities and Exchange
Commission on March 8, 2007. (2) Restricted cash Restricted cash is
US dollar cash deposits pledged for the RMB loan facilities granted
by banks for RMB working capital purposes. (3) Accounts receivables
and debtors turnover Debtors turnover for the third quarter and
fourth quarter of 2007 were 92 days and 87 days respectively. Our
business groups generally granted 90 days to 180 days average
credit period to major customers, which is in line with the
industry practices in the PRC. (4) Intangible assets Net book value
for intangible assets as of December 31, 2007 was $233.5 million.
It mainly represents the fair value of the long term advertising
agreements for the Broadcast and Print Group. The net book value of
the intangible assets were primarily composed of $98.5 million
advertising license agreement for our TV business, $71.9 million
exclusive advertising agreement for our newspaper business, and
$7.7 million exclusive advertising agreements we entered for radio
advertising operations in Shanghai, Beijing and Guangdong. We are
in the process of obtaining third-party valuations of certain
identifiable intangible assets for the acquisitions we completed in
the third and fourth quarters and hence the net book value for
intangible assets is preliminary and subject to revision once we
complete the valuation exercise. (5) Marketable securities
Marketable securities of $24.9 million represents investment on
100% Principal Protection Barrier Notes due on January 30, 2009.
(6) Other operating income Other operating income of $2.3 million
represents reimbursement of IPO related expenses by Bank of New
York in the first quarter of 2007. Those expenses, all of which had
been recorded in the 2006 income statement as operating expenses
because they were not considered to be directly related to the sale
of securities, related primarily to audit fees and fees paid to
consultants during the listing process. (7) Other income (expense)
Other income (expense) includes net interest income (expense) and
net other income (expense). (8) Provision for income taxes
Provision for income taxes include deferred tax credits of $0.7
million and $1.0 million in the third quarter and fourth quarter of
2007. For more information, please contact: Media Contact Ms. Joy
Tsang Tel: +86-21-6113-5999 Email: IR Contact Ms. Jennifer Chan
Lyman Tel: +86-21-6113-5960 Email: DATASOURCE: Xinhua Finance Media
Limited CONTACT: China: Joy Tsang of Xinhua Finance Media,
+86-21-6113-5999, or mobile, +86-136-2179-1577, or ; IR Contact:
Jennifer Chan Lyman, +86-21-6113-5960 or Web Site:
http://www.xinhuafinancemedia.com/
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