Exhibit 99.1
Focus Media Reports Third Quarter 2006 Results
Revenue Increased by 213.7% and Net Income Increased by 278.6% Year-over-year
SHANGHAI, China, November 20, 2006 – Focus Media Holding Limited (Nasdaq: FMCN), China’s largest out-of-home multi-platform life-style media company,today announced its unaudited financial results for the third quarter endedSeptember 30, 2006.
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| Highlights: | |
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| l | | Total revenues grew 213.7% year-over-year and 20.8% quarter-over-quarter to $61.1 million. |
| | | | lNet income for the quarter was $27.0 million compared to $7.1 million for the three months ended September 30, 2005, growing by 278.6% year-over-year. Focus Media also provides an operating margin, net income and earnings per ADS on a non-GAAP basis that exclude non-cash share-based compensation expense and acquired intangible assets amortization expense for investor’s better assessment of the Company’s operating performance. The non-GAAP measures are described below and reconciled to the corresponding GAAP measure in the section below titled “Use of non-GAAP Financial Measures”. Net income, excluding non-cash share-based compensation expenses and amortization of acquired intangible assets resulting from acquisitions (non-GAAP) was $30.2 million. |
| | | | lOur Commercial Location Network |
| | | | nAdvertising service revenue from our commercial location network, including revenue from our outdoor LED network and pre-movie advertising network, grew 125.2% year-over-year and 25.3% quarter-over-quarter to $38.9 million. |
| | | | nFor our Premier Office Building Channel A (“Premier Channel A”), which consists primarily of the office building locations on Focus Media’s commercial location network prior to the Target Media acquisition: Average advertising revenue per 30-second equivalent time slot (“ASP”) in Focus Media’s Tier-I Cities (Beijing, Shanghai, Guangzhou and Shenzhen) increased 3.9% to $12,797 in the third quarter from $12,320 in the second quarter of 2006. During the third quarter of 2006, in addition to Tier-I cities, three of our Tier-II Cities (all non-Tier-I cities in which Focus Media operates directly or through regional distributors) have reached full capacity utilization. The ASP for those seven cities at full capacity utilization (including the four Tier-I cities) increased to $8,302 in the third quarter from $8,115 in the previous quarter. The number of 30-second equivalent time slots available for sale (“Network Capacity”) also increased by 38.6% to 15,679 due to the expansion of our Premier Channel A network into an additional 14 cities in China. |
| | | | nDuring the third quarter 2006, we made significant progress in increasing sales in the Office Building Channel B, which primarily consists of LCD screens acquired in the Target Media acquisition. Revenue from Office Building B in the third quarter increased by 96.8% compared to the previous quarter while ASP of Office Building Channel B increased by 37.3% from the level in the second quarter 2006. |
| | | | nAdvertising service revenue from our in-store network grew 300.1% year-over-year and 10.8% sequentially by quarter to $7.3 million in the third quarter of 2006. |
| | | | nThe total number of hypermarkets covered by our in-store network by the end of September 30, 2006 increased to 899, as compared to 872 on June 30, 2006. At this time, substantially all of the revenue from our In-store Network is derived from our LCD network in hypermarkets. The installed base of supermarkets and convenience stores was 1,049 and 1,946 respectively, as of September 30, 2006. |
| | | | lOur In-elevator Poster Frame Network |
| | | | nAdvertising service revenue from our in-elevator poster frame network was $11.3 million in the third quarter 2006, up 15.3% from $9.8 million in the second quarter of 2006. |
| | | | nThe total number of frames available for sale was 95,878 as of September 30, 2006, as compared to 82,200 as of June 30, 2006. |
| | | | nAdvertising service revenue from Focus Media Wireless was $3.5 million in the third quarter 2006, up 14.3% from $3.1 million in the second quarter 2006. Gross margin increased to 40.6% in the third quarter 2006 from 26.0% in the second quarter 2006 as we successfully increased our advertising sales mix to non-MVAS (Mobile Value-added Service Provider) advertisers. |
Commenting on the third quarter results, Chief Executive Officer Jason Jiang said, “We are pleased to report another record quarterly results for Focus Media. We continue to see strong demand growth for all of our media platforms. In addition to continuing the expansion of our business outside of the four Tier-I cities, we have made significant progress in improving the sales of our sub-channels. For example, revenue from our Office Building Channel B nearly doubled during the third quarter while its ASP increased 37.3% sequentially. Moreover, we see some advertisers successfully marketing their products and services through Focus Media’s multiple media platforms (e.g. LCD plus outdoor LED plus wireless) based on their demographic-specific marketing strategy. We believe that our multiple-media demographic-specific solution will help advertisers achieve higher media effectiveness in terms of reach and recall.”
Financial Results
For the third quarter of 2006, Focus Media reported total revenues of $61.1 million, an increase of 213.7% compared to $19.5 million for the third quarter of 2005 and an increase of 20.8% compared to $50.6 million for the second quarter of 2006.
Commercial Location Network
For the commercial location network, advertising service revenue was $38.9 million in the third quarter of 2006, an increase of 125.2% from $17.3 million in the third quarter of 2005 and an increase of 25.3% sequentially from $31.1 million in the previous quarter.
The total number of displays installed on our commercial location network in our directly operated cities was 68,723 as of September 30, 2006 while the number of displays in networks operated by our regional distributors was 5,290 as of September 30, 2006.
For our Premier Channel A, which consists primarily of the office building locations on Focus Media’s commercial location network prior to the Target Media acquisition, the total number of 30-second equivalent time slots sold (“Slots Sold”) in the third quarter of 2006 was 6,111, as compared to 5,369 in the previous quarter, while the number of 30-second equivalent time slots available for sale (“Network Capacity”) increased to 15,679 in the third quarter from 11,314 in the second quarter of 2006 due to network expansion into 14 additional cities. Slots sold in Tier-I Cities increased to 1,232 in the third quarter 2006 from 1,158 in the second quarter 2006, which implies a sell-out rate, or Slots Sold expressed as a percentage of Network Capacity, of 98.8% in the third quarter 2006. ASP in the Tier-I Cities continued to increase sequentially by 3.9% to $12,797 from $12,320 in the second quarter of 2006. During the third quarter of 2006, in addition to Tier-I cities, three of our Tier-II Cities have reached full capacity utilization. The ASP for those seven cities at full capacity utilization (including the four Tier-I cities) increased to $8,302 in the third quarter from $8,115 in the previous quarter. In other Tier-II Cities, we focus our effort on continuing increasing the network sell-out rate towards full-capacity utilization in each of those networks. Slots sold in Tier-II Cities increased 15.9% to 4,879 in the third quarter 2006 from 4,211 in the second quarter 2006, which implies a sell-out rate of 33.8% based on the increased capacity. The average ASP from all Tier-II Cities was $1,950 in the third quarter as we continue our expansion into less populated Tier-II cities where the local advertising rates per slot are lower than that of Tier-I Cities. The Premier Channel A accounted for approximately 66% of total commercial location advertising service revenues in the quarter while other channels (Office Building Channel B, Elite Channel, Travel Channel, Fashion Channel, Healthcare Channel and IT Mall Channel), our outdoor LED network and pre-movie advertising business contributed the remaining 34%.
In-store Network
Advertising service revenue from our in-store network in the third quarter 2006 was $7.3 million, up 10.8% from $6.5 million in the second quarter of 2006 and 300.1% from $1.8 million in the third quarter 2005. In the third quarter 2006, we further expanded the installed base of our hypermarkets to 899 stores from 872 hypermarkets at the end of second quarter. The installed base of supermarkets and convenience stores was 1,049 and 1,946 respectively, as of September 30, 2006. The number of displays installed in our in-store network increased to 36,387 as of September 30, 2006 compared to 35,511 as of June 30, 2006.
For the in-store network, the total number of 30-second equivalent time slots (on a per week per store basis) sold in the third quarter of 2006 was 90,647, as compared to 87,450 in the previous quarter. The number of 30-second equivalent time slots available for sale, or network capacity, was 273,909, as compared to 261,360 in the previous quarter. The network sell-out rate was 33.1%, relatively flat compared to the previous quarter due to the increased capacity. Average advertising revenue per 30-second equivalent time slot per week per store was $80 for the in-store network in third quarter of 2006, up from $75 in second quarter of 2006.
Poster Frame Network
Advertising service revenue from our poster frame network placed primarily in the elevators of residential complexes was $11.3 million in the third quarter of 2006, up 15.3% from $9.8 million in the second quarter of 2006. The total number of frames available for sale was 95,878 as of September 30, 2006, as compared to 82,200 as of June 30, 2006. The number of frame slots (on a monthly basis) sold in the third quarter increase 3.6% to 160,437, as compared to 154,793 in the previous quarter. The network capacity calculated based on the number of frame slots (on a monthly basis) available for sale in the third quarter of 2006 was 267,603, as compared to 243,959 in the previous quarter. The network sell-out rate was 60.0%, as compared to 63.5% in the second quarter of 2006 due to larger network capacity. Average advertising revenue per frame slot was $70 per month in the third quarter of 2006 as compared to $63 per month in the second quarter of 2006.
Advertising on Wireless Network
Advertising service revenue from Focus Media Wireless in the third quarter of 2006 was $3.5 million, up 14.3% from $3.1 million in the second quarter of 2006.
In the third quarter of 2006, for our commercial location and in-store businesses, we added approximately 291 new advertising clients, bringing the cumulative number of advertisers on the Focus Media commercial location network and in-store network to over 2,500. In addition, over 1,000 advertisers cumulatively purchased frame advertising on our poster frame network as of the end of third quarter 2006.
‘We continue to see strong leverage in our business model,” said Daniel Wu, Chief Financial Officer, “the gross margin has improved significantly to 65.3% in the third quarter. Gross margin for the wireless business increased to 40.6% from 26.0% in the previous quarter as we have successful changed the wireless business model from pure MVAS-based advertising to serving more traditional advertisers directly. While continuing our focus on cost optimization, we will further look for opportunities to expand our media coverage of Chinese urban consumers through earning-accretive acquisitions. For example, we have successfully expanded our Poster Frame Network into four new cities through earning-accretive acquisitions recently. We believe there are many similar opportunities in other major cities in China.”
Gross profit for the third quarter of 2006 was $39.9 million, representing an increase of 242.7% compared to $11.6 million for the corresponding period a year ago and a 33.9% increase compared to $29.8 million in the second quarter 2006. Gross margin for the third quarter was 65.3%, up from 58.9% in the previous quarter. For the commercial location network (including our outdoor LED network and pre-movie advertising business), gross margin was 71.4% in the third quarter 2006, improving significantly from 63.8% in the second quarter of 2006 as we continue to increase the sell-out rate of our media inventories while focusing on cost optimization. For the in-store network, gross margin was 36.4% in the third quarter of 2006, increasing from 32.9% in the second quarter of 2006. For the poster frame network, gross margin was 70.7% in the third quarter of 2006, as compared to 71.2% in the second quarter of 2006. For Focus Media wireless, gross margin was 40.6% in the third quarter of 2006, up significantly from 26.0% in the second quarter of 2006 as we successfully increased our advertising sales mix to non-MVAS (Mobile Value-added Service Provider) advertisers.
In the third-quarter of 2006, operating expenses totaled $14.0 million, including $1.6 million in acquired intangible asset amortization resulting from acquisitions and non-cash share-based compensation expense of $1.6 million. Operating expenses as a percentage of total revenues in the third quarter was 23.0%, as compared to 25.9% in the previous quarter. Selling and marketing expenses in the third quarter totaled $6.5 million or 10.6% of total revenues. General and administrative expense in the third quarter was $6.0 million or 9.8% of total revenues. As a result, operating margin in the third quarter of 2006 was 42.3%, up from 33.0% in the second quarter of 2006. Excluding non-cash share-based compensation expense and acquired intangible asset amortization expense, operating margin (non-GAAP) was 47.4% in the third quarter 2006.
Net income for the third quarter of 2006 was $27.0 million, an increase of 278.6% compared to $7.1 million for the same period in 2005. Fully diluted net income per ADS for the third quarter of 2006 was $0.49. Net income excluding non-cash share-based compensation expenses and amortization of acquired intangible assets resulting from acquisitions (non-GAAP) in the third quarter of 2006 was $30.2 million, or $0.55 per fully diluted ADS.
In the third quarter of 2006, cash flow from operating activities was $28.8 million, increasing 128.6% from $12.6 million in the previous quarter. Total depreciation expense was $3.7 million. Day Sales Outstanding (“DSO”) was 75 days. As of September 30, 2006, the company had a cash and bank balance and investment in available-for-sale securities of $130.0 million.
Other Recent Developments
In the third quarter, we completed the acquisition of Appreciate Capital Limited (''ACL’’). ACL’s network was renamed as Focus Media’s ''movie theatre network’’ and will initially be included in the commercial location network when compiling financial results. Our movie theatre network currently covers over 120 movie theatres throughout China, which represents approximately 85% of the theatre ticket revenue in China. ACL has the right to three minutes of screen-time prior to each showing of the movie, and sells that screen time to advertisers in 30-second or shorter time slots.
Recently, we have signed agreements to acquire approximately 22,700 frames in Nanjing, Suzhou, Changzhou, Wuhan, Dalian and Shenyang, which will be added to our Poster Frame Network. We expect those acquisitions to close before December 31, 2006.
We are on schedule in expanding our street-side outdoor LED network in prime commercial and shopping areas (“iStreet Network”) in Shanghai. We expect the number of the LED screens in our iStreet Network to double from the current level to approximately 200 units by the end of 2006. We look to build similar networks in other major metropolitan areas in China in 2007.
BUSINESS OUTLOOK
The company estimates its total revenues for the fourth quarter of 2006 to range from $67 million to $69 million. Fourth quarter 2006 net income excluding share-based compensation expenses and amortization of acquired intangible assets resulting from acquisitions (non-GAAP) is expected to be between $34 million and $35 million or $0.62 to $0.64 per fully diluted ADS based on 55 million total ADS equivalent shares outstanding.
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USE OF NON-GAAP FINANCIAL MEASURES
In addition to Focus Media’s consolidated financial results under GAAP, the company also provides non-GAAP financial measures, including non-GAAP operating margin, non-GAAP net income and earning per fully diluted ADS, all excluding non-cash share-based compensation and amortization of acquired intangible assets resulting from acquisitions. The company believes that the non-GAAP financial measures will provide investors with another method for assessing Focus Media’s operating results in a manner that is focused on the performance of its ongoing operations. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP results with non-GAAP results for the three-month periods of 2005 and 2006, respectively, in the attached financial statements.
The company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of Focus Media’s liquidity and when planning and forecasting future periods. The company computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliation between these financial measures.
Focus Media Holding Ltd.
Reconciliation of Non-GAAP to GAAP
(U.S. Dollar in thousands, except share data)
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| | | Three months ended | | Nine months ended |
| | | 2006-9-30 | | 2005-9-30 | | 2006-6-30 | | 2006-9-30 | | 2005-9-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
GAAP net income attributable to shareholders | | $ | 27,005 | | | $ | 7,132 | | | $ | 16,671 | | | $ | 53,109 | | | $ | 14,122 | |
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| Amortization of acquired intangible assets | | | 1,577 | | | | 120 | | | | 1,494 | | | | 4,070 | | | | 310 | |
| Share-based compensation | | | 1,569 | | | | 100 | | | | 1,897 | | | | 4,932 | | | | 646 | |
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Non-GAAP net income | | $ | 30,151 | | | $ | 7,352 | | | $ | 20,062 | | | $ | 62,111 | | | $ | 15,078 | |
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| GAAP income per ADS — basic | | $ | 0.51 | | | $ | 0.20 | | | $ | 0.33 | | | $ | 1.08 | | | $ | 0.67 | |
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| GAAP income per ADS — diluted | | $ | 0.49 | | | $ | 0.19 | | | $ | 0.31 | | | $ | 1.04 | | | $ | 0.59 | |
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| Non-GAAP income per ADS — basic | | $ | 0.57 | | | $ | 0.21 | | | $ | 0.39 | | | $ | 1.26 | | | $ | 0.72 | |
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| Non-GAAP income per ADS — diluted | | $ | 0.55 | | | $ | 0.19 | | | $ | 0.38 | | | $ | 1.21 | | | $ | 0.63 | |
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| Shares used in calculating basic GAAP /Non-GAAP income per ADS | | | 52,556,597 | | | | 34,929,638 | | | | 50,913,117 | | | | 49,116,445 | | | | 21,037,782 | |
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| Shares used in calculating diluted GAAP / Non-GAAP income per ADS | | | 54,646,585 | | | | 37,950,853 | | | | 53,273,694 | | | | 51,187,666 | | | | 23,820,661 | |
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GAAP income from operations | | $ | 25,833 25,833 | | | $ | 6,472 | | | $ | 16,666 | | | $ | 51,548 | | | $ | 13,887 | |
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| Amortization of acquired intangible assets | | | 1,577 | | | | 120 | | | | 1,494 | | | | 4,070 | | | | 310 | |
| Share-based compensation | | | 1,569 | | | | 100 | | | | 1,897 | | | | 4,932 | | | | 646 | |
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Non-GAAP income from operations | | $ | 28,979 28,979 | | | $ | 6,692 | | | $ | 20,057 | | | $ | 60,550 | | | $ | 14,843 | |
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Non-GAAP operating margin | | | 47.4 | % | | | 34.4 | % | | | 39.7 | % | | | 41.8 | % | | | 34.0 | % |
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TODAY’S CONFERENCE CALL
Focus Media will host a conference call to discuss the third-quarter 2006 financial results and forth-quarter 2006 business outlook at 8:00 p.m. U.S. Eastern Time on November 20, 2006 (5:00 p.m. U.S. Pacific Time on November 20, 2006; 9:00 a.m. Beijing/Hong Kong time on November 21, 2006). The dial-in details for the live conference call are: U.S. Toll Free Number +1- 866-713-8310, Hong Kong dial-in number +852-3002-1672, International dial-in number +1-617-597-5308; Pass code 27364874.
A replay of the call will be available from November 20, 2006 until November 27, 2006 (U.S. Eastern Time). The dial-in details for the replay are: U.S. Toll Free Number +1-888-286-8010; international dial-in number +1-617-801-6888; pass code 93026263. A webcast of this call will also be available live and archived on Focus Media’s website at ir.focusmedia.cn.
ABOUT FOCUS MEDIA HOLDING LIMITED
Focus Media Holding Limited (Nasdaq: FMCN) is China’s leading out-of-home multi-platform life-style media company, which operates the largest out-of-home advertising network in China using audiovisual flat-panel displays. Based on an audience-centric approach, Focus Media provides targeted advertising channels which cover specific demographics groups and their daily activities, from office buildings to retail chain stores, residential building, shopping malls, golf country clubs, airports, and airport transit buses. As of September 30, 2006, Focus Media had approximately 74,000 display units in our commercial location network, 36,000 display units in our in-store network, 95,000 advertising poster frames installed throughout China and 80 outdoor LED displays in Shanghai. Over 2,500 international and domestic advertisers had placed advertisements through our networks as of September 30, 2006. For more information about Focus Media, please visit our website ir.focusmedia.cn.
SAFE HARBOR: FORWARD-LOOKING STATEMENTS
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 Business Outlook section and quotations from management in this press release, as well as Focus Media’s strategic and operational plans, contain forward-looking statements. Focus Media may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 20-F and 6-K., 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 Focus Media’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks outlined in Focus Media’s filings with the U.S. Securities and Exchange Commission, including its registration statements on Form F-1and F-3, in each case as amended. Focus Media does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
Investor and Media contact:
Jie Chen
Tel: +86 21 32124661*6607
Email: ir@focusmedia.cn
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FOCUS MEDIA HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars in thousands)
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| | | 2006-9-30 | | 2005-12-31 |
| | | (unaudited) | | (audited) |
ASSETS | | | | | | | | |
Current assets | | | | | | | | |
| Cash and cash equivalents | | $ | 95,109 | | | $ | 36,653 | |
| Investment in available-for-sale securities | | | 34,935 | | | | 34,836 | |
| Accounts receivables, net | | | 58,577 | | | | 22,235 | |
| Inventories | | | 979 | | | | 480 | |
| Prepaid expenses and other current assets | | | 5,236 | | | | 45,364 | |
| Amount due from related parties | | | 3,672 | | | | 2,073 | |
Total current assets | | $ | 198,508 | | | $ | 141,641 | |
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| Rental Deposits | | | 11,811 | | | | 11,819 | |
| Deposit paid for acquisition of equipment | | | 3,683 | | | | | |
| Equipment, net | | | 68,609 | | | | 43,695 | |
| Acquired intangible assets, net | | | 29,668 | | | | 1,158 | |
| Goodwill | | | 499,261 | | | | 13,298 | |
| Long term investments | | | 63 | | | | — | |
| Other long term assets | | | 530 | | | | — | |
| Deferred tax assets | | | 564 | | | | 743 | |
Total assets | | $ | 812,697 | | | $ | 212,354 | |
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LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) | | | | | | | | |
Current liabilities | | | | | | | | |
| Short term bank loans | | $ | — | | | $ | 991 | |
| Other short term loans | | | 3,076 | | | | — | |
| Accounts payable | | | 4,456 | | | | 5,848 | |
| Accrued expenses and other current liabilities | | | 29,371 | | | | 11,747 | |
| Income taxes payable | | | 2,627 | | | | 2,108 | |
Total current liabilities | | $ | 39,530 | | | $ | 20,694 | |
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Minority interest | | | 379 | | | | 246 | |
Shareholders’ equity | | | | | | | | |
| Ordinary shares | | | 27 | | | | 19 | |
| Additional paid in capital | | | 702,152 | | | | 177,420 | |
| Deferred compensation charge | | | — | | | | (247 | ) |
| Retained earnings | | | 66,105 | | | | 12,997 | |
| Accumulated other comprehensive income | | | 4,504 | | | | 1,225 | |
| Total shareholders’ equity | | $ | 772,788 | | | $ | 191,414 | |
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Total liabilities and shareholders’ equity | | $ | 812,697 | | | $ | 212,354 | |
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FOCUS MEDIA HOLDING LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. Dollar in thousands, except share data)
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| | | Three months ended | | Nine months ended |
| | | 2006-9-30 | | 2005-9-30 | | 2006-6-30 | | 2006-9-30 | | 2005-9-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
Gross revenues (note 3): | | | | | | | | | | | | | | | | | | | | |
| - Commercial Locations | | $ | 42,992 | | | $ | 19,056 | | | $ | 34,023 | | | $ | 100,569 | | | $ | 44,823 | |
| - In-store Network | | | 8,017 | | | | 2,001 | | | | 7,242 | | | | 21,077 | | | | 2,374 | |
| - In-elevator Poster Frame Network | | | 12,386 | | | | — | | | | 10,752 | | | | 29,796 | | | | — | |
| - Mobile Handset Advertising network | | | 3,801 | | | | — | | | | 3,365 | | | | 7,166 | | | | — | |
| Advertising Equipment Revenue | | | 90 | | | | 366 | | | | 106 | | | | 500 | | | | 772 | |
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Total gross revenues | | $ | 67,286 | | | $ | 21,423 | | | $ | 55,488 | | | $ | 159,108 | | | $ | 47,969 | |
| Less: Sales taxes | | | 6,213 | | | | 1,957 | | | | 4,912 | | | | 14,322 | | | | 4,345 | |
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Total net revenues | | $ | 61,073 | | | $ | 19,466 | | | $ | 50,576 | | | $ | 144,786 | | | $ | 43,624 | |
Cost of revenues: | | | | | | | | | | | | | | | | | | | | |
| Net advertising service cost | | | | | | | | | | | | | | | | | | | | |
| - Commercial Locations | | | 11,125 | | | | 4,943 | | | | 11,244 | | | | 30,404 | | | | 12,198 | |
| - In-store Network | | | 4,616 | | | | 2,606 | | | | 4,394 | | | | 12,983 | | | | 3,971 | |
| - In-elevator Poster Frame Network | | | 3,301 | | | | — | | | | 2,815 | | | | 8,513 | | | | — | |
| - Mobile Handset Advertising network | | | 2,088 | | | | — | | | | 2,275 | | | | 4,363 | | | | — | |
| Advertising Equipment Cost | | | 80 | | | | 285 | | | | 80 | | | | 392 | | | | 545 | |
Total cost of revenues | | | 21,210 | | | | 7,834 | | | | 20,808 | | | | 56,655 | | | | 16,714 | |
Gross profit | | | 39,863 | | | | 11,632 | | | | 29,768 | | | | 88,131 | | | | 26,910 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | |
| General and administrative (note 4) | | | 5,956 | | | | 2,337 | | | | 6,298 | | | | 16,649 | | | | 6,564 | |
| Selling and marketing (note 4) | | | 6,497 | | | | 2,703 | | | | 5,310 | | | | 15,864 | | | | 6,149 | |
| Amortization of acquired intangible assets | | | 1,577 | | | | 120 | | | | 1,494 | | | | 4,070 | | | | 310 | |
| Total operating expenses | | | 14,030 | | | | 5,160 | | | | 13,102 | | | | 36,583 | | | | 13,023 | |
| | | | | | | | | | | | | | | | | | | | | |
Income from operations | | | 25,833 | | | | 6,472 | | | | 16,666 | | | | 51,548 | | | | 13,887 | |
| Interest income, net | | | 1,070 | | | | 791 | | | | 605 | | | | 2,561 | | | | 822 | |
| Other income (expenses), net | | | (170 | ) | | | 8 | | | | (136 | ) | | | (231 | ) | | | 10 | |
Income before tax and minority interests | | | 26,733 | | | | 7,271 | | | | 17,135 | | | | 53,878 | | | | 14,719 | |
| Income tax expense | | | | | | | | | | | | | | | | | | | | |
| - Current | | | (134 | ) | | | 312 | | | | 553 | | | | 484 | | | | 757 | |
| - Deferred | | | (183 | ) | | | (225 | ) | | | (180 | ) | | | 189 | | | | (267 | ) |
| Total income taxes | | | (317 | ) | | | 87 | | | | 373 | | | | 673 | | | | 490 | |
| | | | | | | | | | | | | | | | | | | | | |
Income before minority interests | | | 27,050 | | | | 7,184 | | | | 16,762 | | | | 53,205 | | | | 14,229 | |
| Minority Interests | | | 45 | | | | 52 | | | | 91 | | | | 96 | | | | 107 | |
| | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 27,005 | | | $ | 7,132 | | | $ | 16,671 | | | $ | 53,109 | | | $ | 14,122 | |
| Income per ADS — basic | | $ | 0.51 | | | $ | 0.20 | | | $ | 0.33 | | | $ | 1.08 | | | $ | 0.67 | |
| | | | | | | | | | | | | | | | | | | | | |
| Income per ADS — diluted | | $ | 0.49 | | | $ | 0.19 | | | $ | 0.31 | | | $ | 1.04 | | | $ | 0.59 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in calculating basic income per ADS | | | 52,556,597 | | | | 34,929,638 | | | | 50,913,117 | | | | 49,116,445 | | | | 21,037,782 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in calculating diluted income per ADS | | | 54,646,585 | | | | 37,950,853 | | | | 53,273,694 | | | | 51,187,666 | | | | 23,820,661 | |
| | | | | | | | | | | | | | | | | | | | | |
3
FOCUS MEDIA HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(U.S. Dollar in thousands)
| | | | | | | | | | | | | | | | | |
| | | Three months ended | | Nine months ended |
| | | 2006-9-30 | | 2005-9-30 | | 2006-9-30 | | 2005-9-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
| | | | | | | | | | | | | | | | | |
| Operating activities: | | | | | | | | | | | | | | | | |
| Net income | | $ | 27,005 | | | $ | 7,132 | | | $ | 53,109 | | | $ | 14,122 | |
| | | | | | | | | | | | | | | | | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | | | | | | | | | | | | |
| Minority interest | | | 45 | | | | 52 | | | | 96 | | | | 107 | |
| Bad debt provision | | | 627 | | | | (86 | ) | | | 1,397 | | | | 255 | |
| Share based compensation | | | 1,569 | | | | 100 | | | | 4,932 | | | | 646 | |
| Depreciation | | | 3,714 | | | | 1,341 | | | | 9,844 | | | | 2,736 | |
| Amortization of acquired intangible assets | | | 1,577 | | | | 120 | | | | 4,070 | | | | 310 | |
| Investment income | | | — | | | | (28 | ) | | | — | | | | — | |
| Loss on disposal of equipment | | | — | | | | — | | | | 159 | | | | — | |
| Changes in assets and liabilities, net of effects of acquisitions | | | (5,695 | ) | | | (8,923 | ) | | | (27,373 | ) | | | (15,960 | ) |
| Net cash provided by (used in) operating activities | | $ | 28,842 | | | $ | (292 | ) | | | 46,234 | | | $ | 2,216 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Investing activities: | | | | | | | | | | | | | | | | |
| Purchase of equipment | | | (1,696 | ) | | | (9,701 | ) | | | (13,304 | ) | | | (24,307 | ) |
| Purchase of subsidiaries, net of cash acquired | | | (38,568 | ) | | | (317 | ) | | | (125,627 | ) | | | (4,437 | ) |
| Investment in available-for-sale securities | | | — | | | | (35,000 | ) | | | — | | | | (34,951 | ) |
| Net cash used in investing activities | | $ | (40,264 | ) | | $ | (45,018 | ) | | $ | (138,931 | ) | | $ | (63,695 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Financing activities: | | | | | | | | | | | | | | | | |
| Proceeds from issuance of ordinary shares, net of issuance costs | | | 5,710 | | | | 118,847 | | | | 154,390 | | | | 118,847 | |
| Proceeds from short-term bank loans | | | — | | | | 3,089 | | | | 24,598 | | | | 3,089 | |
| Capital injection from minority shareholders | | | — | | | | 3 | | | | 249 | | | | 3 | |
| Repayment of short-term bank loans | | | (23,351 | ) | | | — | | | | (25,589 | ) | | | — | |
| Repayment of short-term other loans | | | — | | | | — | | | | (3,813 | ) | | | — | |
| Net cash (used in) provided by financing activities | | $ | (17,641 | ) | | $ | 121,939 | | | $ | 149,835 | | | $ | 121,939 | |
| | | | | | | | | | | | | | | | | |
| Effect of exchange rate changes | | | 1,488 | | | | 700 | | | | 1,318 | | | | 845 | |
| | | | | | | | | | | | | | | | | |
| Net (decrease) increase in cash and cash equivalents. | | | (27,575 | ) | | | 77,329 | | | | 58,456 | | | | 61,305 | |
| Cash and cash equivalents, beginning of period | | | 122,684 | | | | 6,645 | | | | 36,653 | | | | 22,669 | |
| | | | | | | | | | | | | | | | | |
| Cash and cash equivalents, end of period | | $ | 95,109 | | | $ | 83,974 | | | $ | 95,109 | | | $ | 83,974 | |
| | | | | | | | | | | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | | | | | | | | | | | |
| Income taxes paid | | $ | 12 | | | $ | — | | | $ | 30 | | | $ | — | |
| Interest paid | | $ | 218 | | | $ | 2 | | | $ | 245 | | | $ | 2 | |
4
| | | | | | | | | | | | | | | |
| | | Three months ended | | Nine months ended |
| | | 2006-9-30 | | 2005-9-30 | | 2006-9-30 | | 2005-9-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Supplemental disclosure of non-cash investing activity: | |
| |
| |
| |
|
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Acquisition of subsidiaries: | |
| |
| |
| |
|
| | | | | | | | | | | | | | | |
| Value of ordinary share consideration. | | $ | — | | | $— | | $ | 365,660 | | | $ | — | |
| | | | | | | | | | | | | | | |
| Accounts payable. | | | (29,938 | ) | | — | | | 277 | | | | 1,160 | |
| | | | | | | | | | | | | | | |
Notes:
| | | |
Note 1:
Note 2:
Note 3: | | Basic income per ADS is computed by dividing income attributable to holders of ordinary shares by the weighted
average number of ADS outstanding during the year/period. Diluted income per ADS reflects the potential dilution
that could occur if securities or other contracts to issue ADS were exercised or converted into ADS.
The conversion of Renminbi (“RMB”) amounts into USD amounts is based on the rate of USD1 = RMB7.9087 on September
30, 2006.
Details of net revenues are as follows (U.S. Dollars in thousands): |
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | Nine months ended |
| | | 2006-9-30 | | 2005-9-30 | | 2006-6-30 | | 2006-9-30 | | 2005-9-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
| | | | | | | | | | | | | | | | | | | | | |
| Gross Advertising Service Revenue: | | | | | | | | | | | | | | | | | | | | |
Commercial Locations | | | | | | | | | | | | | | | | | | | | |
| - Unrelated parties | | $ | 40,179 | | | $ | 18,019 | | | $ | 32,331 | | | $ | 93,710 | | | $ | 40,953 | |
| - Related parties | | | 2,813 | | | | 1,037 | | | | 1,692 | | | | 6,859 | | | | 3,870 | |
| Total Commercial Locations | | | 42,992 | | | | 19,056 | | | | 34,023 | | | | 100,569 | | | | 44,823 | |
| | | | | | | | | | | | | | | | | | | | | |
In-store Network | | | | | | | | | | | | | | | | | | | | |
| - Unrelated parties | | | 7,146 | | | | 2,001 | | | | 6,661 | | | | 19,023 | | | | 2,374 | |
| - Related parties | | | 871 | | | | — | | | | 581 | | | | 2,054 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
| Total in-store network | | | 8,017 | | | | 2,001 | | | | 7,242 | | | | 21,077 | | | | 2,374 | |
| | | | | | | | | | | | | | | | | | | | | |
In-elevator Poster Frame Network | | | | | | | | | | | | | | | | | | | | |
| - Unrelated parties | | | 12,386 | | | | — | | | | 10,752 | | | | 29,796 | | | | — | |
| Total In-elevator Poster Frame Network | | | 12,386 | | | | — | | | | 10,752 | | | | 29,796 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
Mobile Handset Advertising Network | | | | | | | | | | | | | | | | | | | | |
| - Unrelated parties | | | 3,801 | | | | — | | | | 3,365 | | | | 7,166 | | | | — | |
| Total Mobile Handset Advertising Network | | | 3,801 | | | | — | | | | 3,365 | | | | 7,166 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
| Gross Advertising Services Revenue: | | | 67,196 | | | | 21,057 | | | | 55,382 | | | | 158,608 | | | | 47,197 | |
| Less: Sales taxes£º | | | | | | | | | | | | | | | | | | | | |
Commercial Locations | | | 4,063 | | | | 1,769 | | | | 2,959 | | | | 9,104 | | | | 4,123 | |
In-store Network | | | 763 | | | | 188 | | | | 697 | | | | 1,984 | | | | 222 | |
In-elevator Poster Frame Network | | | 1,102 | | | | — | | | | 967 | | | | 2,660 | | | | — | |
Mobile Handset Advertising Network | | | 285 | | | | — | | | | 289 | | | | 574 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
| Total sales taxes | | | 6,213 | | | | 1,957 | | | | 4,912 | | | | 14,322 | | | | 4,345 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Advertising Service Revenue | | | 60,983 | | | | 19,100 | | | | 50,470 | | | | 144,286 | | | | 42,852 | |
| Add: Advertising Equipment Revenue: | | | 90 | | | | 366 | | | | 106 | | | | 500 | | | | 772 | |
| | | | | | | | | | | | | | | | | | | | | |
Net revenues: | | $ | 61,073 | | | $ | 19,466 | | | $ | 50,576 | | | $ | 144,786 | | | $ | 43,624 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Note 4: Share based compensations included under SFAS 123R are as follows (U.S. Dollars in thousands): |
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | Nine months ended |
| | | 2006-9-30 | | 2005-9-30 | | 2006-6-30 | | 2006-9-30 | | 2005-9-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
| Selling and marketing | | $ | 210 | | | $ | 8 | | | $ | 341 | | | $ | 887 | | | $ | 36 | |
| General and administrative | | | 1,359 | | | | 92 | | | | 1,556 | | | | 4,045 | | | | 610 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 1,569 | | | $ | 100 | | | $ | 1,897 | | | $ | 4,932 | | | $ | 646 | |
| | | | | | | | | | | | | | | | | | | | | |
Note 5: The Company has performed preliminary purchase price allocation on their small acquisitions based on an internal valuation performed by management. The purchase price allocation will be revised once the independent valuation report is obtained.
5
Focus Media Holding Ltd.
Reconciliation of Non-GAAP to GAAP
(U.S. Dollar in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | Nine months ended |
| | | 2006-9-30 | | 2005-9-30 | | 2006-6-30 | | 2006-9-30 | | 2005-9-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
GAAP net income attributable to shareholders | | $ | 27,005 | | | $ | 7,132 | | | $ | 16,671 | | | $ | 53,109 | | | $ | 14,122 | |
| | | | | | | | | | | | | | | | | | | | | |
| Amortization of acquired intangible assets | | | 1,577 | | | | 120 | | | | 1,494 | | | | 4,070 | | | | 310 | |
| Share-based compensation | | | 1,569 | | | | 100 | | | | 1,897 | | | | 4,932 | | | | 646 | |
| | | | | | | | | | | | | | | | | | | | | |
Non-GAAP net income | | $ | 30,151 | | | $ | 7,352 | | | $ | 20,062 | | | $ | 62,111 | | | $ | 15,078 | |
| | | | | | | | | | | | | | | | | | | | | |
| GAAP income per ADS — basic | | $ | 0.51 | | | $ | 0.20 | | | $ | 0.33 | | | $ | 1.08 | | | $ | 0.67 | |
| | | | | | | | | | | | | | | | | | | | | |
| GAAP income per ADS — diluted | | $ | 0.49 | | | $ | 0.19 | | | $ | 0.31 | | | $ | 1.04 | | | $ | 0.59 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-GAAP income per ADS — basic | | $ | 0.57 | | | $ | 0.21 | | | $ | 0.39 | | | $ | 1.26 | | | $ | 0.72 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-GAAP income per ADS — diluted | | $ | 0.55 | | | $ | 0.19 | | | $ | 0.38 | | | $ | 1.21 | | | $ | 0.63 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in calculating basic GAAP /Non-GAAP income per ADS | | | 52,556,597 | | | | 34,929,638 | | | | 50,913,117 | | | | 49,116,445 | | | | 21,037,782 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in calculating diluted GAAP / Non-GAAP income per ADS | | | 54,646,585 | | | | 37,950,853 | | | | 53,273,694 | | | | 51,187,666 | | | | 23,820,661 | |
| | | | | | | | | | | | | | | | | | | | | |
GAAP income from operations | | $ | 25,833 | | | $ | 6,472 | | | $ | 16,666 | | | $ | 51,548 | | | $ | 13,887 | |
| | | | | | | | | | | | | | | | | | | | | |
| Amortization of acquired intangible assets | | | 1,577 | | | | 120 | | | | 1,494 | | | | 4,070 | | | | 310 | |
| Share-based compensation | | | 1,569 | | | | 100 | | | | 1,897 | | | | 4,932 | | | | 646 | |
| | | | | | | | | | | | | | | | | | | | | |
Non-GAAP income from operations | | $ | 28,979 | | | $ | 6,692 | | | $ | 20,057 | | | $ | 60,550 | | | $ | 14,843 | |
| | | | | | | | | | | | | | | | | | | | | |
Non-GAAP operating margin | | | 47.4 | % | | | 34.4 | % | | | 39.7 | % | | | 41.8 | % | | | 34.0 | % |
| | | | | | | | | | | | | | | | | | | | | |
6
