BEIJING, Aug. 18 /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 second quarter ended June 30, 2008. Second Quarter
2008 Highlights -- Strong year over year growth with 69% increase
in net revenue to US$48.9 million from US$29.0 million. -- Strong
year-over-year and sequential growth of 97% and 248% for adjusted
EBITDA. -- Adjusted net income per diluted ADS exceeding previous
guidance at $0.10. -- Company provides third quarter guidance and
raises full year guidance. "Despite a challenging operating
environment for the quarter, we are proud to announce adjusted EPS
expectations above our Q2 guidance," said Ms. Fredy Bush, XFMedia's
Chief Executive Officer. "The Broadcast Group continues to deliver
high margins, and we intend to further invest and expand the
television business with a particular focus on sports. We believe
this will be a significant driving force to our business over the
next several years," Ms. Bush added. "We expect our future growth
to be driven by the expansion of our media assets and distribution
channels, and the integration and coordination of such efforts
across our operating groups. Our television viewer demographics are
very strong and combined with our existing core competence, XFMedia
today is able to penetrate a significant group of households in
China, providing us with a strategic entry point to build on our
advertising revenue," Ms. Bush said. Second Quarter 2008 Financial
Results The following is a summary of our financial results for the
second quarter of 2008: Chart 1: Summary of financial results 3
months 3 months 3 months ended ended ended 08Q2 vs 08Q2 vs Jun 30,
Jun 30, Mar 31, 07Q2 08Q1 In US millions 2008 2007 2008 growth %
growth % Net revenue 48.9 29.0 36.7 69% 33% Adjusted EBITDA(1) 10.7
5.4 3.1 97% 248% Net income (loss)(2) 0.8 2.3 (8.3) -66% n/a Net
income (loss) per ADS - diluted(3) -- $0.03 $(0.13) -100% n/a
Adjusted net income(1) 7.6 6.3 1.4 22% 437% Adjusted net income per
ADS - diluted(3) $0.10 $0.09 $0.02 11% 400% 1. Please refer to
Chart 8 for a detailed calculation of adjusted EBITDA and adjusted
net income. 2. The year-on-year decrease in net income is primarily
due to an increase in net interest expenses, costs for
Sarbanes-Oxley compliance, and tax expenses. 3. Please refer to
Chart 9 for weighted average number of ADS on a diluted basis. For
computation of the net income per ADS and adjusted net income per
ADS and per share, dividends on convertible preference shares of
$0.2 million and $0.6 million in the first and second quarter of
2008 respectively were taken into account. Net Revenue Net revenue
for the second quarter of 2008 was $48.9 million, up 69% year-
over-year from $29.0 million in the second quarter of 2007, or up
33% sequentially from $36.7 million in the first quarter of 2008.
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
the second quarter of 2008. Chart 2: Revenue breakdown by type and
business group In US millions Advertising Broadcast Print Total Net
revenue: Advertising services 23.7 2.0 1.1 26.8 Content production
-- 2.9 -- 2.9 Advertising sales 6.2 9.1 3.8 19.1 Publishing
services -- -- 0.1 0.1 Total net revenue: 29.9 14.0 5.0 48.9
Advertising Group Net revenue for the Advertising Group for the
second quarter of 2008 was $29.9 million, up 79% year-over-year
from $16.7 million in the second quarter of 2007, or up 39%
sequentially from $21.5 million in the first quarter of 2008. Chart
3: Revenue breakdown of the Advertising Group 3 months 3 months 3
months ended 3 months ended In US ended Jun 30, Growth ended Mar
31, Growth millions Jun 30, 2008 2007 % Jun 30, 2008 2008 %
Advertising: Television -- 4.8 -100% -- -- N/A Print/Online 12.2
6.0 105% 12.2 6.4 90% Outdoor/Other 8.2 3.7 118% 8.2 6.5 27% BTL
Marketing 7.9 0.8 906% 7.9 7.4 6% Research 1.6 1.5 11% 1.6 1.2 32%
Subtotal: 29.9 16.8 79% 29.9 21.5 39% Broadcast Group Net revenue
for the Broadcast Group for the second quarter of 2008 was $14.0
million, up 92% year-over-year from $7.2 million in the second
quarter of 2007 or up 29% sequentially from $10.8 million in the
first quarter of 2008. Chart 4: Revenue breakdown of the Broadcast
Group 3 months 3 months 3 months ended 3 months ended In US ended
Jun 30, Growth ended Mar 31, Growth millions Jun 30, 2008 2007 %
Jun 30, 2008 2008 % Broadcast: Television 6.5 2.3 176% 6.5 5.8 12%
Radio 2.7 1.2 132% 2.7 1.6 70% Mobile(1) 2.5 0.7 266% 2.5 2.8 -12%
Production 2.3 3.0 -27% 2.3 0.6 291% Subtotal: 14.0 7.2 92% 14.0
10.8 29% 1. The quarter-on-quarter decrease of Mobile business is
mainly due to seasonality and industry environment. Print Group Net
revenue for the Print Group for the second quarter of 2008 was $5.0
million, up 1% year-over-year from the second quarter of 2007, or
up 14% sequentially from $4.4 million in the first quarter of 2008.
The year-over- year decrease in the magazine group is mainly due to
the regulatory environment which causes delay in launch of certain
marketing events. Chart 5: Revenue breakdown of the Print Group 3
months 3 months 3 months 3 months ended ended ended ended In US Jun
30, Jun 30, Growth Jun 30, Mar 31, Growth millions 2008 2007 % 2008
2008 % Print: Newspaper 2.7 2.2 24% 2.7 2.3 15% Magazines 2.3 2.8
-17% 2.3 2.1 12% Subtotal: 5.0 5.0 1% 5.0 4.4 14% Gross Profit
Gross profit for the second quarter of 2008 was $21.1 million, up
80% year-over-year from $11.8 million in the second quarter of
2007, or up 61% sequentially from $13.1 million in the first
quarter of 2008. Adjusted gross profit (non-GAAP), defined as gross
profit before amortization of intangible assets from acquisitions,
for the second quarter of 2008 was $22.9 million, up 77%
year-over-year from $12.9 million in the second quarter of 2007 or
up 51% sequentially from $15.1 million in the first quarter of
2008. We provide adjusted gross profit to break out the
amortization of intangible assets from acquisitions charged within
the cost of revenue. Chart 6 provides a breakdown of adjusted gross
profit by business group. Chart 6: Reconciliation for adjusted
gross profit by business group In US millions Advertising Broadcast
Print Total Gross Profit 11.3 6.1 3.7 21.1 Amortization of
intangible assets from acquisitions(1) 0.2 1.4 0.2 1.8 Adjusted
gross profit 11.5 7.5 3.9 22.9 1. Amortization of intangible assets
from acquisitions includes assets such as client database, brand
names, and production inventory. Operating Expenses Operating
expenses for the second quarter of 2008 were $16.9 million, up 87%
year-over-year from $9.0 million in the second quarter of 2007 or
down 13% sequentially from $19.3 million in the first quarter of
2008. The year-on-year increase is mainly due to an increase in
selling and marketing expenses in line with increased revenue, and
costs for Sarbanes-Oxley compliance. Operating expenses were down
13% sequentially because share-based compensation expenses were
mainly accounted for in the first quarter of 2008. Total operating
expenses were composed of selling and marketing expenses and
general and administrative expenses. Selling and marketing expenses
for the second quarter of 2008 were $5.6 million, up 76%
year-over-year from $3.2 million in the second quarter of 2007, or
up 8% sequentially from $5.1 million in the first quarter of 2008.
General and administrative expenses for the second quarter of 2008
were $11.3 million, up 94% year-over-year from $5.8 million in the
second quarter of 2007, or down 20% sequentially from $14.1 million
in the first quarter of 2008. Adjusted EBITDA (non-GAAP) Adjusted
EBITDA (non-GAAP), defined as earnings before one time items, other
income, interest income and expense, taxes, depreciation,
amortization of intangible assets from acquisitions and share-based
compensation expenses, for the second quarter of 2008 was $10.7
million, up 97% year-over-year from $5.4 million in the second
quarter of 2007, or up 248% sequentially from $3.1 million in the
first quarter of 2008. For a reconciliation to adjusted EBITDA from
income from operations, refer to Chart 8. Chart 7: Adjusted EBITDA
by business group In US millions Advertising Broadcast Print Total
Adjusted EBITDA by business group 8.4 4.8 2.6 15.8 Less: net head
office expenses (5.1) Adjusted EBITDA 10.7 Net Income and Adjusted
Net Income (non-GAAP) Net income for the second quarter of 2008 was
$0.8 million, down 66% year- over-year from $2.3 million in the
second quarter of 2007, or up sequentially from a net loss of $8.3
million in the first quarter of 2008. The primary reasons for the
year-on-year decline are an increase in net interest expenses,
costs for Sarbanes-Oxley compliance, and tax expenses. Adjusted net
income (non-GAAP), defined as net income before one-time items,
amortization of intangible assets from acquisitions, share-based
compensation expenses and imputed interest, for the second quarter
of 2008 was $7.6 million, up 22% year-over-year from $6.3 million
in the second quarter of 2007 or up 437% sequentially from $1.4
million in the first quarter of 2008. For a reconciliation from net
income to adjusted net income, please refer to Chart 8. Outlook for
third quarter and full year of 2008 XFMedia estimates its net
revenue for the third quarter of 2008 will range from $52 million
to $54 million. Third quarter adjusted net income per ADS is
estimated to range from $0.11 to $0.12 per diluted ADS. XFMedia is
raising its estimate of net revenue for full year 2008 to range
from $198 million to $208 million, from previously forecasted range
of $195 million to $205 million. Adjusted net income per ADS for
full year 2008 is estimated to range from $0.33 to $0.35 per
diluted ADS, from previously forecasted range of $0.31 to $0.33 per
diluted ADS. This forecast reflects XFMedia's current and
preliminary view, which is subject to change. Other Corporate
Developments Over the second quarter of 2008, the Company continued
to implement its share buyback program, buying back 691,327 ADSs
for $2.0 million. These shares will be canceled in accordance with
Cayman company law. Conference Call Information Following the
earnings announcement, XFMedia's senior management will host a
conference call on August 18, 2008 at 8:00pm (New York) / August
19, 2008 at 8:00am (Beijing) to review the results and discuss
recent business activities. Interested parties may dial into the
conference call at: (US) +1 800 510 0178 or +1 617 614 3450 (UK)
+44 207 365 8426 (Asia Pacific) +852 3002 1672 Passcode: XFML A
telephone replay will be available two hours after the call for one
week at: (US Toll Free) +1 888 286 8010 (International) +1 617 801
6888 Passcode: 51232173 A real-time webcast and replay will be also
available at: http://www.xfmedia.cn/earnings-webcast 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 synergistic business groups, Broadcast,
Print, and Advertising, 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.xfmedia.cn/ . 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 third quarter and full year 2008 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 annual report on
Form F-20-F and other documents 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 gross
profit, adjusted EBITDA and adjusted net income. XFMedia has
adopted these measures "adjusted gross profit", defined as gross
profit excluding amortization of intangible assets from
acquisitions, "adjusted EBITDA", by defining adjusted EBITDA as
earnings before one time items, other income, interest income and
expense, taxes, depreciation, amortization of intangible assets
from acquisitions and share-based compensation expenses, and
"adjusted net income", by defining adjusted net income as net
income before amortization of intangible assets from acquisitions,
imputed interest, share-based compensation expenses and one-time
items. 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 8 of this release. XFMedia believes these non-GAAP
financial measures are useful to management and investors in
assessing the performance of the Company and assist 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 gross profit,
adjusted 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 8: Reconciliation of
non-GAAP financial results 3 months 3 months 3 months ended ended
ended Jun 30, Jun 30, Mar 31, In US millions 2008 2007 2008 Income
(loss) from operations 4.3 2.8 (6.2) One time items(1) 0.6 -- --
Depreciation 0.6 0.3 0.8 Amortization of intangible assets from
acquisitions 3.4 1.8 3.6 Share-based compensation expenses 1.8 0.5
4.9 Adjusted EBITDA 10.7 5.4 3.1 Net income (loss) 0.8 2.3 (8.3)
One time items(1) 0.6 -- -- Amortization of intangible assets from
acquisitions 3.4 1.8 3.6 Share-based compensation expenses 1.8 0.5
4.9 Imputed interest 1.0 1.7 1.2 Adjusted net income 7.6 6.3 1.4 1.
There is a one-time adjustment of $0.6 million, representing legal
fees for class action lawsuit. Net income and adjusted net income
per ADS and per share are as follows: Chart 9: Net income and
adjusted net income per ADS and per share(1) 3 months ended 3
months ended 3 months ended Jun 30, 2008 Jun 30, 2007 Mar 31, 2008
Net income (loss) per ADS - basic -- $0.04 $(0.13) Net income
(loss) per ADS - diluted -- $0.03 $(0.13) Weighted average number
of ADS - basic 67.5 million 63.1 million 65.6 million Weighted
average number of ADS - diluted 73.5 million 72.5 million 65.6
million Adjusted net income per ADS - basic $0.10 $0.10 $0.02
Adjusted net income per ADS - diluted $0.10 $0.09 $0.02 Weighted
average number of ADS - basic 67.5 million 63.1 million 65.6
million Weighted average number of ADS - diluted 73.5 million 72.5
million 72.3 million 1. For computation of the net income per ADS
and adjusted net income per ADS and per share, dividends on
convertible preference shares of $0.2 million and $0.6 million in
the first and second quarter of 2008 respectively were taken into
account. Condensed Consolidated Balance Sheets (In U.S. dollars)
Jun 30,2008 Dec 31,2007 Unaudited (Note 1) Assets Current assets:
Cash 57,073,797 44,436,087 Restricted cash (Note 2) 51,704,000
47,252,191 Principal protected note (Note 3) 24,958,793 -- Accounts
receivable (Note 4) 50,117,879 45,706,766 Prepaid program expenses
2,415,444 5,389,250 Other current assets 21,143,068 16,272,798
Total current assets 207,412,981 159,057,092 Content production
deposit and cost, net 6,945,869 8,855,896 Property and equipment,
net 9,059,701 9,191,959 Intangible assets, net (Note 5) 224,998,272
233,505,913 Goodwill 245,491,520 180,125,488 Investment 500,000
500,000 Principal protected note (Note 3) -- 24,909,929 Deposits
for acquisition of subsidiaries -- 25,634,000 Other long-term asset
10,007,561 9,021,936 Total assets 704,415,904 650,802,213
Liabilities, mezzanine equity and shareholders' equity Current
liabilities: Bank borrowings 39,565,977 33,780,188 Bank overdrafts
757,918 960,157 Other current liabilities 65,140,537 44,473,366
Total current liabilities 105,464,432 79,213,711 Deferred tax
liabilities 36,035,746 37,741,579 Long term payables, non-current
portion 59,491,532 65,150,610 Total liabilities 200,991,710
182,105,900 Minority Interests 2,612,648 2,060,745 Mezzanine
equity: Series B convertible preferred shares (par value $0.001;
300,000 shares authorized, issued and outstanding as of June 30,
2008) 29,450,000 -- Shareholders' equity: Class A common shares and
nonvested shares (par value $0.001; 143,822,874 as of December 31,
2007 and June 30, 2008 shares authorized; 90,061,269 as of December
31, 2007 and 93,942,703 as of June 30, 2008 shares issued and
outstanding) 93,943 90,061 Class B common shares (par value $0.001;
50,054,619 as of December 31, 2007 and June 30, 2008 shares
authorized; 50,054,618 as of December 31, 2007 and as of June 30,
2008 shares issued and outstanding) 7,442 7,442 Additional paid-in
capital 448,473,469 439,516,974 Retained earnings 15,586,362
23,903,560 Accumulated other comprehensive income 7,200,330
3,117,531 Total shareholders' equity 471,361,546 466,635,568 Total
liabilities, mezzanine equity and shareholders' equity 704,415,904
650,802,213 Condensed Consolidated Statements of Operations 3
months ended 3 months ended 3 months ended (in U.S. Dollars) Jun
30, 2008 Jun 30, 2007 Mar 31, 2008 Unaudited Unaudited Unaudited
Net revenue: Advertising services 26,852,171 19,165,786 21,176,603
Content production 2,888,164 3,050,899 573,453 Advertising sales
19,006,987 6,477,426 14,738,927 Publishing services 108,924 265,422
201,224 Total net revenue 48,856,246 28,959,533 36,690,207 Cost of
revenue: Advertising services 18,781,998 12,073,200 15,697,961
Content production 1,060,419 1,341,785 442,057 Advertising sales
7,644,880 3,613,015 7,152,328 Publishing services 254,844 180,902
294,292 Total cost of revenue 27,742,141 17,208,902 23,586,638
Operating expenses: Selling and 5,560,512 3,165,211 5,140,842
distribution General and administrative 11,301,796 5,828,831
14,137,279 Total operating expenses 16,862,308 8,994,042 19,278,121
Other operating income 7,220 -- -- Income (loss) from operations
4,259,017 2,756,589 (6,174,552) Other income (expenses) (Note 6)
(1,136,041) (70,368) (810,563) Income (loss) before provision for
income taxes and minority interest 3,122,976 2,686,221 (6,985,115)
Provision for income taxes (Note 7) 1,989,097 202,457 1,339,884 Net
income (loss) before minority interest 1,133,879 2,483,764
(8,324,999) Minority interest 370,913 229,355 (44,829) Net income
(loss) 762,966 2,254,409 (8,280,170) Dividend on convertible
preferred shares 600,000 -- 200,000 Net income (loss) attributable
to holders of common shares 162,966 2,254,409 (8,480,170) Net
income (loss) per share: Basic - Common Shares -- 0.02 (0.07) Basic
- American Depositary Shares -- 0.04 (0.13) Diluted - Common Shares
-- 0.02 (0.07) Diluted - American Depositary Shares -- 0.03 (0.13)
Condensed Consolidated Statements of Cash Flows 3 months 3 months
ended ended 3 months ended (in U.S. Dollars) Jun 30, 2008 Jun 30,
2007 Mar 31, 2008 Unaudited Unaudited Unaudited Net cash provided
by/(used in) operating activities 7,603,264 41,081 (1,554,573) Net
cash used in investing activities (19,234,247) (97,768,365)
(1,908,350) Net cash provided by/(used in) financing activities
(1,506,267) 2,660,996 26,418,367 Effect of exchange rate changes
666,271 546,121 2,153,245 Net increase/(decrease) in cash
(12,470,979) (94,520,167) 25,108,689 Cash, as at beginning of the
period 69,544,776 175,931,874 44,436,087 Cash, as at end of the
period 57,073,797 81,411,707 69,544,776 Notes to Financial
Information 1) 2007 condensed consolidated balance sheets
Information was extracted from the audited financial statements
included in Form 20-F of the Company filed with the Securities and
Exchange Commission on May 19, 2008. 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) Principal
protected note Principal protected note of $25.0 million represents
investment on 100% Principal Protection Barrier Notes due on
January 30, 2009. 4) Accounts receivables and debtors turnover
Debtors turnover for the first quarter of 2008 and second quarter
of 2008 were 113 days and 90 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. 5) Intangible assets Net book value for intangible assets
as of June 30, 2008 was $225.0 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 a $95.8 million advertising
license agreement for our TV business, a $71.1 million exclusive
advertising agreement for our newspaper business, and $9.3 million
of 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
2007 and hence the net book value for intangible assets is
preliminary and subject to revision once we complete the valuation
exercise. 6) Other income (expenses) Other income (expenses)
includes net interest income (expense) and net other income
(expense). 7) Provision for income taxes Provision for income taxes
includes deferred tax credits of $0.8 million and $1.0 million in
the first quarter of 2008 and second quarter of 2008, respectively.
For more information, please contact: Media Contact Ms. Joy Tsang
Tel: +86-21-6113-5999 Email: IR Contact Mr. Edward Liu Tel:
+86-21-6113-5978 Email: DATASOURCE: Xinhua Finance Media Limited
CONTACT: Media Contact: Joy Tsang at +86-21-6113-5999 or ; IR
Contact: Edward Liu at +86-21-6113-5978 or Web site:
http://www.xfmedia.cn/
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