China New Media Q3 YOY revenues at $5.4 million

Dalian (China): China New Media Corp. (OTCBB: CMDI) (the “Company”), China’s fast-growing advertising media company with current outdoor media network located in Dalian, Shenyang, Tianjin and Shanghai, today announced financial results for the three and nine months ended March 31, 2011.

Revenue for the three months ended March 31, 2011 totaled $5.4 million, an increase of 31.2% compared to $4.1 million for the same period in 2010. Revenue growth was driven by a 71.9% increase in the outdoor billboard advertising platform which accounted for 34.9% of total revenue during the quarter. The billboard advertising platform has presented a significant growth opportunity with attractive profit margins. The outdoor billboard platform is established in Dalian, Shenyang, Tianjin and Shanghai and going forward the Company will continue to establish their presence in these markets.

Street fixture and display networks revenue increased 20.5% year-over-year, city transit system display networks 22.4% and city navigator 27.4%. Geographically for the third quarter of fiscal 2011, revenue in Dalian, Shenyang, Tianjin and Shanghai accounted for 92.2%, 2.1%, 1% and 4.7% of total revenue. These results compare to 93.8%, 6.2%, 0% and 0% for the same period in 2010.

“The 31% revenue growth during the quarter was driven by new technology advertising platforms and our entrance into new markets. Revenue growth in our outdoor billboard platform grew 71.9% and accounted to 34.9% of total revenue compared to 26.6% the prior year. The outdoor advertising industry is demanding new and innovative technology such as our billboards and City Navigator kiosks to grab the attention of the consumer. As a result we were able to generate revenue in two new markets during the quarter as compared to the previous year, Tianjin and Shanghai. As a one stop shop, once we enter these new markets and establish our brand, we are able to leverage our other platforms such as the street fixture, display networks and city transit system displays, and further have a margin recovery as the new market gains sales momentum,” James Wang, Chairman and Chief Executive Officer of China New Media, said.

Cost of sales for the three months ended March 31, 2011 totaled $2.3 million, an increase of 53% compared to $1.5 million for the three months ended March 31, 2010. The increase in cost of sales resulted primarily from the increased revenue during the quarter. As a percentage of revenue for the 2011 and 2010 fiscal third quarter cost of revenue was 43.4% and 37.2% respectively.

Gross profit for the three months ended March 31, 2011 totaled $3.1 million, an increase of 18.3% compared to $2.6 million for the three months ended March 31, 2010. The increase in gross profit was in line with revenue growth as the Company secured more advertising contracts during the period. Gross profit margin was 56.6% and 62.8% for the three months ended March 31, 2011 and 2010, respectively. The decrease in gross profit margin was mainly due to the increase in raw material cost, the increase in depreciation expense as the Company added more fixed assets and the start-up cost in newer developed markets.

Selling, general and administrative expenses totaled $1.0 million and $0.6 million for the three months ended March 31, 2011 and 2010, respectively. The increase was consistent with growth in revenue and was primarily attributed to an increase in the payroll and other administrative related costs.

Net income for the three months ended March 31, 2011 totaled $1.4 million increasing slightly as compared to $1.4 million for the three months ended March 31, 2010. Basic and diluted earnings per share for the three months ended March 31, 2011 were $0.05 based on 27.6 million basic and diluted shares versus basic and diluted earnings per share of $0.05 for the three months ended March 31, 2010 based on 27.5 million basic and 26.9 million diluted shares outstanding.

Revenue for the nine months ended December 31, 2011 totaled $14.6 million, an increase of 28.8% compared to $11.3 million for the same period in 2010. Outdoor billboard revenue for the fiscal 2011 first nine months increased 86.1% year-over-year, street fixture and display networks 17.4%, city transit system display networks 12.3% and city navigator 52.5%. During the period more desirable locations in Dalian, Shenyang and Shanghai for advertising platforms were obtained, new media platforms were created and efforts in expanding the current client base all contributing to financial growth.

Cost of sales for the nine months ended March 31, 2011 totaled $6.3 million, an increase of 42.5%, compared to $4.4 million for the nine months ended March 31, 2010, mainly attributable to the increase in revenue during the period.

Gross profit for the nine months ended March 31, 2011 totaled $8.3 million, an increase of 20% compared to $6.9 million for the same period the prior year. Gross profit margin was 56.7%, as compared to 60.9% for the same period the prior year. Gross profit increased year-over-year for two main reasons. First, the Company was successful in securing more popular advertising locations resulting in increased brand awareness for customers. Second, revenue increased in lower operating cost and more profitable platforms such as large-screen LED billboards.

Net income for the nine months ended March 31, 2011 totaled $3.8 million, an increase of 5.2% compared to $3.6 million for the same period in the prior year. Basic and diluted earnings per share for the nine months ended March 31, 2011 were $0.14 based on 27.6 million basic and diluted shares versus basic and diluted earnings per share of $0.13 for the nine months ended March 31, 2010 based on 26.9 million basic and 27.8 million diluted shares outstanding.

As of March 31, 2011, China New Media had approximately $1.6 million in cash and cash equivalents. As of March 31, 2011, total current assets and total assets were $10.5 million and $34.8 million, respectively. During the same period, total current liabilities and total liabilities were $16.1 million and $16.6 million, respectively. Shareholder’s equity increased 34.7% to $34.8 million for the nine months ended March 31, 2011, compared to $25.6 million for the year ended June 30, 2010.

James Wang concluded, “Our motto is ‘Build a New Urban Home’. This means that we not only provide clients with a broad array of advertising platforms, but also the city with scenery and modern convenience to enhance its development and economy. This is what we strive for every day. Today we manage 19 billboards and 52 Citi Navigator kiosks across four cities, Dalian, Shenyang, Shanghai and Tianjin. Last month we announced the construction of a 400 square meter grid-type billboard in Dalian City. Construction has gone according to plan and is anticipated to be completed at the end of this month with revenue generation of approximately RMB 1.2 million beginning in June 2011. Going forward we will continue to evaluate opportunities and work with local government authorities to add on additional platforms.”

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