Focus Media Reports Q2 2010 Results

Shanghai: Focus Media Holding Limited (Nasdaq: FMCN), China’s leading digital media group,has announced its unaudited financial results for the second quarter ended June 30, 2010.

Jason Jiang, the Chairman and the Chief Executive Officer of the Company said, “The first half of 2010 has seen a broad based recovery of the advertising market from the first half of 2009. According to Nielsen Research, the Chinese advertising market grew 15% year on year during the first half of 2010. The Company managed to grow the core business 24% year over year during the same period, indicating that we continue to gain market share in the Chinese advertising market. We are confident that as we further stabilize and strengthen our core business, we can strive to continue our market share gain in the second half of 2010.”

Kit Low, the Chief Financial Officer of the Company added, “In the second quarter of 2010, the Company achieved aggregate net revenue year on year growth in our LCD display, in-store and poster frame business of 22%, and quarter on quarter growth of 31%. GAAP net income and Non-GAAP net income for the second quarter of 2010 are $25.3 million and $44.3 million, respectively. The Company has improved its free cash flow generation, defined as operating plus investing cash flows, as compared to the first quarter of 2010. In the second quarter of 2010, the Company generated a net cash flow from operating cash flow and investing cash flow of $26.6 million. We will continue our focus to improve our free cash flow generation going forward.”

Advertising net revenue from the LCD display network was $72.5 million for the second quarter of 2010, representing an increase of 44% from $50.2 million for the first quarter of 2010 and an increase of 34% from $54.3 million for the second quarter of 2009.

Advertising net revenue from the poster frame network was $25.2 million for the second quarter of 2010, representing a slight increase of 2% from $24.8 million for the first quarter of 2010 and a slight decrease of 5% from $26.5 million for the second quarter of 2009.

Advertising net revenue from the in-store network was $10.9 million for the second quarter of 2010, increasing by 42% from $7.7 million from the first quarter of 2010 and by 21% from $9.0 million for the second quarter of 2009.

As of June 30, 2010, the total installed base of LCD displays in our LCD display network was 142,305 nationwide, including 137,071 displays through our directly owned networks, and 5,234 displays through our regional distributors, as compared to total LCD displays of 132,485 as of March 31, 2010. The total number of non-digital frames available for sale in our poster frame network was 238,689 as of June 30, 2010, as compared to 235,160 as of March 31, 2010. In addition, as of June 30, 2010, we had 35,835 digital frames installed in our poster frame network, as compared to 35,599 as of March 31, 2010. The total number of displays installed in our in-store network was 45,686 as of June 30, 2010, as compared to 40,848 as of March 31, 2010.

Internet advertising service net revenue was $35.7 million in the second quarter of 2010, increasing by 27% from $28.1 million for the first quarter of 2010 and by 43% from $25.0 million for the second quarter of 2009.

Advertising net revenue from the traditional outdoor billboard network and movie theater was $13.9 million for the second quarter of 2010, on par with $14.1 million for the first quarter of 2010 but decreasing by 6% from $14.8 million for the second quarter of 2009, primarily due to lower seasonal revenue from the movie theater network.

Non-GAAP gross profit from the LCD display network for the second quarter of 2010 was $59.3 million, representing an increase of 63% from $36.3 million for the first quarter of 2010 and an increase of 34% from $44.3 million for the second quarter of 2009.

Non-GAAP gross profit from the poster frame network for the second quarter of 2010 was $7.6 million, representing a decrease of 5% from $8.0 million for the first quarter of 2010, and a decrease of 44% from $13.6 million for the second quarter of 2009.

Non-GAAP gross profit from the in-store network for the second quarter of 2010 was $4.7 million, representing an increase of 96% from $2.4 million for the first quarter of 2010 and an increase of 62% from $2.9 million for the second quarter of 2009.

Non-GAAP gross profit from our Internet advertising services for the second quarter of 2010 was $10.1 million, representing an increase of 77%, from $5.7 million for the first quarter of 2010 and an increase of 166% from $3.8 million for the second quarter of 2009.

Non-GAAP gross profit from the traditional outdoor billboard network and movie theater network for the second quarter of 2010 was $3.5 million, representing a 26% decline, from $4.7 million for the first quarter of 2010 and from $4.7 million for the second quarter of 2009.

Non-GAAP operating expense for the second quarter of 2010 was $34.9 million, an increase of 22% from $28.7 million for the first quarter of 2010 and a decline of 11% from $39.1 million for the second quarter of 2009 primarily due to higher sales and marketing costs (resulted from higher advertising revenue).

Provision for income tax for the second quarter of 2010 was $5.7 million, which benefited from a downward adjustment of approximately $1.8 million from the first quarter of 2010 as the Company completed the application process and commenced the public announcement in the second quarter for High/New Technology Enterprise (“HNTE”) for one of its subsidiaries.

Net cash provided by operating activities for the second quarter of 2010 was $37.8 million.

Net cash used in investing activities for the second quarter was $11.2 million. In the second quarter of 2010, the Company incurred capital expenditures of $3.8 million and earn-out payments of $7.3 million.

Net cash used in financing activities for the second quarter was $39.3 million. In the second quarter of 2010, the Company transferred the cash deposit of $43.0 million to a broker for share repurchase, of which $36.7 million has been spent to repurchase the shares of the Company with the remaining $6.3 million for future share repurchase.

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