VisionChina Media Advertising Service Revenues Grow 77.9%

VisionChina Media Inc. (the “Company”) (Nasdaq: VISN), one of China’s largest out-of-home digital television advertising networks on mass transportation systems, has announced its financial results for the third quarter ended September 30, 2008.

VisionChina Media’s total revenues were $35.9 million in the third quarter of 2008, an increase of 77.0% compared to $20.3 million in the second quarter of 2008 and an increase of 285.7% compared to $9.3 million in the third quarter of 2007.

Media cost, the most significant component of advertising service cost of revenues, was $8.5 million in the third quarter of 2008, representing 72.9% of total advertising service costs, compared to $6.2 million, or 75.0% of total advertising service costs, in the second quarter of 2008.

Gross profit in the third quarter of 2008 was $24.2 million, an increase of 102.7% compared to $11.9 million in the second quarter of 2008 and a significant increase of 345.2% compared to $5.4 million in the third quarter of 2007. Advertising service gross margin was 67.4% in the third quarter of 2008, compared to 59.1% in the second quarter of 2008.

Selling and marketing expenses were $5.3 million in the third quarter of 2008, an increase of 78.9% compared to $3.0 million in the second quarter of 2008, and a significant increase of 643.9% compared to $0.7 million in the third quarter of 2007. The quarter-over-quarter increase was primarily due to an increase in the sales and marketing team headcount, which grew to 303 employees as of September 30, 2008, up from 276 employees as of June 30, 2008. Selling and marketing expenses represented 14.9% of the Company’s advertising service revenues in the third quarter of 2008 compared to 14.8% in the second quarter of 2008.

General and administrative expenses were $1.5 million in the third quarter of 2008, an increase of 53.2% compared to $1.0 million in the second quarter of 2008, and an increase of 123.3% compared to $0.7 million in the third quarter of 2007.

Losses from equity method investments amounted to $0.04 million in the third quarter of 2008, compared to a $0.2 million loss in the second quarter of 2008, and a $0.3 million loss in the third quarter of 2007.

Operating profit was $17.3 million in the third quarter of 2008, an increase of 122.2% from $7.8 million in the second quarter of 2008, and a significant increase of 361.6% from $3.7 million in the third quarter of 2007.

In the third quarter of 2008, the Company recorded a deferred 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 $18.1 million in the third quarter of 2008, an increase of 112.8% from $8.5 million in the second quarter of 2008, and a significant increase of 381.5% from $3.8 million in the third quarter of 2007. Fully diluted net income per share for the third quarter of 2008 was $0.25. The Company’s third quarter net income, excluding share-based compensation expenses (non-GAAP) was $18.5 million. Strong revenues and well implemented cost control measures allowed the Company to beat the top-end of (non-GAAP) net income guidance by $1.5 million.

The Company had cash and cash equivalents of $141.0 million as of September 30, 2008, an increase of $16.8 million from $124.2 million as of June 30, 2008. The increase was mainly due to the $17.6 million in proceeds net of underwriting commissions net proceeds from the follow-on offering of ADSs by the Company in August 2008. In the third quarter of 2008, depreciation and amortization was $1.1 million and capital expenditures were $0.7 million. The Company had net operating cash outflow totaling $3.8 million in the third quarter 2008, due to increasing accounts receivable as a result of accelerated growth.

In September, CTR Market Research released a report commissioned by VisionChina Media that provided the first ratings for mass transit based digital mobile television. The results showed that, for very low costs, mass transit mobile TV ratings are extremely high with advertisements, reaching more than 90% of the population in the cities in which VisionChina Media operates. The creation of third-party evaluation standards provides criteria to compare mass transit mobile TV with traditional TV, which is expected to help further raise the status of the emergent mass transit mobile TV industry.

In October, VisionChina Media signed an exclusive contract with Shanghai Shentong Metro Asset Operation and Management Corporation, the asset management arm of Shanghai Metro, to act as the exclusive advertising agent for Shanghai Metro Line 6. With the addition of this line, VisionChina Media now has the exclusive right to provide planning, production, sales and placement services to Shanghai Metro’s 556 digital screens installed on the platforms of three of Shanghai’s 11 subway lines. This new contract with Shanghai Metro enables VisionChina Media to expand its presence in Shanghai, where, according to the Shanghai municipal government, over 12 million people use public transportation daily.

A recent independent mass media access survey, also carried out by CTR, for the Olympic period determined that 24.9% of Chinese citizens said they mainly watched the Olympic Games on mass transit mobile TV during the Olympics, indicating that the mass transit mobile TV media has for the first time ranked among the top three media formats and is becoming more popular with the general public. In Beijing, this positioned mobile television as the second most popular method for audiences to view the Olympics, exceeded only by traditional in-home television.

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