Exhibit 99.1
Focus Media Reports Second Quarter 2007 Results
Second Quarter Revenue Increased by 126.3% and Net Income Increased by 126.2% Year-over-year
SHANGHAI, China, September 27, 2007 – Focus Media Holding Limited (Nasdaq: FMCN), China’s largest digital media group, today announced its unaudited financial results for the second quarter ended June 30, 2007.
Highlights for Second Quarter 2007:
| | | | lTotal revenues grew 126.3% year-over-year and 97.5% quarter-over-quarter to $113.3 million. |
| | | | lNet income for the second quarter was $37.7 million, up 126.2% year-over-year and 131.5% quarter-over-quarter. Fully diluted net income per ADS for the second quarter of 2007 was $0.32. Focus Media also provides 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 to enable investors to better assess 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) for the second quarter was $45.3 million or $0.38 per fully diluted ADS. |
| | | | lAs our digital media offerings to our advertising clients continue to expand, we will be reporting our advertising service revenues under three separate lines going forward: Digital out-of-home which includes our commercial location network (which includes our Premier Office Building Channel A and other commercial location network channels, our outdoor LED network and our movie theater network), our in-store network and our in-elevator poster frame network; Mobile handset advertising; and Internet advertising. In the second quarter of 2007, digital out-of-home advertising revenue was $76.9 million. |
| | | | nAdvertising service revenue from our commercial location network, including revenue from our outdoor LED network (also referred to as our iStreet Network) and movie theater advertising network, grew 67.8% year-over-year and 61.4% quarter-over quarter to $51.1 million. |
| | | | nAdvertising service revenue from our in-store network grew 10.8% year-over-year and 9.1% quarter-over-quarter to $7.2 million. |
| | | | nAdvertising service revenue from our in-elevator poster frame network grew 89.7% year-over-year and 46.4% quarter-over-quarter to $18.5 million in the second quarter 2007. |
| | | | lMobile handset advertising revenue grew 253.8% year-over-year and 81.1% quarter-over-quarter, to $10.9 million in the second quarter 2007. |
| | | | lInternet advertising revenue, primarily from revenues following the acquisition of Allyes in the first quarter 2007, was $25.2 million in the second quarter of 2007. |
“We saw strong demand growth in the second quarter of 2007. In addition, upon the successful integration of Allyes, we have further expanded our ability to offer highly-effective cross-media solutions catering to the needs of our advertising clients. We believe Internet advertising will become another key growth driver for Focus Media in the future,” said Jason Jiang, CEO of Focus Media. “Among our media networks, the in-store business is characterized by relatively low margin and intense competition. Going forward, we will focus on market share expansion by investing aggressively to secure additional store locations throughout China. Recently, we have signed up RT-Mart, one of the leading hypermarket chains with more than 60 stores in major cities in China and a partner of Auchan Group in France. We believe, by developing the largest in-store digital advertising network in China, we will be able to offer the most attractive media solutions for our fast-moving-consumer-goods (FMCG) advertising clients.”
Second Quarter Financial Results
For the second quarter of 2007, Focus Media reported total revenues of $113.3 million, an increase of 126.3% compared to $50.1 million for the second quarter of 2006, and an increase of 97.5% compared to $57.3 million for the first quarter of 2007.
Our total digital out-of-home advertising revenue was $76.9 million in the second quarter of 2007, an increase of 64.4% from $46.8 million in the second quarter of 2006 and a sequential increase of 50.8% from $51.0 million in the first quarter of 2007. In the second quarter of 2007, commercial location advertising revenue was $51.1 million, contributing 66.4% of total digital out-of-home advertising revenue. Advertising service revenue from our in-store network was $7.2 million, or 9.4% of total digital out-of-home advertising revenue. Advertising service revenue from our poster frame network placed primarily in the elevators of residential complexes was $18.5 million in the second quarter of 2007, or 24.1% of total digital out-of-home advertising revenue.
Due to continuing expansion of our media offerings and strong demand from our customers, we have started to offer customized media solutions tailored to the needs of our large advertising clients. We have also extended the cycle time of our commercial location network in certain cities to more than 12 minutes. As a result, the number of 30-second equivalent time slots sold (“Slot Sold”) and average revenue per 30-second equivalent time slot (“ASP”) for our networks are no longer as representative. Therefore, going forward, we will no longer provide such data in our earning reports.
As of June 30, 2007, the total installed base of displays in our commercial location network was 89,687 nationwide, including 85,010 displays through our directly owned networks, and 4,677 displays through our regional distributors. In the second quarter of 2007, we continued to expand the installed base of our hypermarkets to 1,205 stores from 1,196 hypermarkets as of March 31, 2007. The installed base of supermarkets and convenience stores was 734 and 2,056, respectively, as of June 30, 2007. The number of displays installed in our in-store network increased to 41,322 as of June 30, 2007 compared to 40,736 as of March 31, 2007. The total number of frames available for sale was 161,435 as of June 30, 2007, as compared to 124,542 as of March 31, 2007. As of August 30, 2007, we had installed 6,796 digital 2.0 frames, mainly in Beijing, Shanghai, Guangzhou and Shenzhen.
Mobile Advertising Business
Advertising service revenue from Focus Media Wireless in the second quarter of 2007 was $10.9 million, up 253.8% from $3.1 million in the second quarter of 2006 and 81.1% from $6.0 million in the first quarter of 2007.
Internet Advertising Business
Advertising service revenue from Allyes was $25.2 million in the second quarter of 2007. Digital marketing service, digital marketing technology and digital performance media contributed 90.0%, 3.4%, 6.6% respectively to the total Internet advertising revenue.
Gross profit for the second quarter of 2007 was $61.8 million, representing an increase of 117.2% compared to $28.5 million for the corresponding period a year ago and a 94.8% increase compared to $31.8 million in the first quarter 2007. In the second quarter 2007, gross margin for our digital out-of-home business was 63.1%. Within the digital out-of-home business, commercial location network gross margin was 65.0%, in-store network gross margin was 28.4%, and the poster frame network gross margin was 71.6%. The gross margin for our mobile advertising business was 58.0%. The gross margin for our Internet advertising business was 27.1% in the second quarter 2007. Blended gross margin for the company for the second quarter was 54.6%, as compared to 56.9% in the second quarter of 2006, primarily due to the addition of the lower-margin Internet advertising business to our revenue mix.
In the second quarter of 2007, operating expenses totaled $23.7 million, including $0.8 million in acquired intangible asset amortization resulting from acquisitions and non-cash share-based compensation expense of $4.6 million. Operating expenses as a percentage of total revenues in the second quarter 2007 was 20.9%, as compared to 30.2% in the previous quarter. Selling and marketing expenses in the second quarter totaled $13.2 million including $2.0 million in share compensation expense, or 11.6% of total revenues. General and administrative expense in the second quarter was $11.6 million including $2.6 million in share-based compensation expense, or 10.3% of total revenues. Our operating margin in the second quarter of 2007 was 33.7%, up significantly from 25.2% in the first quarter 2007. Excluding non-cash share-based compensation expense and acquired intangible asset amortization expense, operating margin (non-GAAP) was 40.4% in the second quarter 2007.
Net income for the second quarter of 2007 was $37.7 million, an increase of 126.2% compared to $16.7 million for the same period in 2006. Fully diluted net income per ADS for the second quarter of 2007 was $0.32. Net income excluding non-cash share-based compensation expense and acquired intangible assets amortization expense resulting from acquisitions (non-GAAP) in the second quarter of 2007 was $45.3 million, or $0.38 per fully diluted ADS.
Other Recent Developments
On March 16, 2006, Shanghai Xicheng Cultural Dissemination Co.,Ltd, also referred to as CGEN, brought a suit against us in the Shanghai No. 1 Intermediate People’s Court on the grounds of unfair competition. On July 25, 2007, we received the civil judgment of first instance by the Shanghai No.1 Intermediate People’s Court which dismissed the lawsuit.
In September 2007, the Audit Committee completed its investigation into allegations made by U.S. counsel to an investor described as holding a short position in Focus Media shares. Based upon its review of the evidence, the audit committee concluded that nothing has come to its attention — apart from the initial allegations that gave rise to the investigation — that would cause the audit committee to believe that Focus Media made undisclosed rebate payments to a third party advertising agency through another advertising agency, namely, Everease. We concluded that Everease is a related party based upon information developed during the investigation. Based upon its review of the evidence, the audit committee concurred with our conclusion that Everease should be deemed a related party. Subsequently, the Company filed its delayed 2006 20-F annual report on September 25, 2007. Our 2006 annual report on form 20-F is available at the investor relations portion of our website (http://ir.focusmedia.cn).
BUSINESS OUTLOOK
The Company estimates its total revenues for the third quarter of 2007 will range from $132 million to $135 million. Third quarter 2007 net income excluding share-based compensation expense and intangible assets amortization expense resulting from acquisitions (non-GAAP) is expected to be between $52 million and $54 million or $0.41 to $0.43 per fully diluted ADS based on 126 million total ADS equivalent average shares outstanding. Due to higher-than-expected growth in our Internet advertising business, the company also raises its total revenues estimates for full year 2007 to a range of $440 million to $450 million, as compared to the previously announced range of $390 million to $400 million.
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 non-GAAP earnings per fully diluted ADS, all excluding non-cash share-based compensation and acquired intangible asset amortization expense resulting from acquisitions. The Company believes that these non-GAAP financial measures 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 ended March 31 2007, and the three- and six-month periods ended June 30, 2006 and 2007, in the attached financial information.
The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of Focus Media 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.
1
Focus Media Holding Ltd.
Reconciliation of Non-GAAP to GAAP
(U.S. Dollar in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | Six months ended |
| | | 2007-6-30 | | 2006-6-30 | | 2007-3-31 | | 2007-6-30 | | 2006-6-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
GAAP net income attributable to shareholders | | $ | 37,715 | | | $ | 16,671 | | | $ | 16,292 | | | $ | 54,007 | | | $ | 26,104 | |
| Amortization of acquired intangible assets | | | 2,672 | | | | 1,494 | | | | 1,932 | | | | 4,604 | | | | 2,493 | |
| Share-based compensation | | | 4,919 | | | | 1,897 | | | | 4,517 | | | | 9,436 | | | | 3,363 | |
| | | | | | | | | | | | | | | | | | | | | |
Non-GAAP net income | | $ | 45,306 | | | $ | 20,062 | | | $ | 22,741 | | | $ | 68,047 | | | $ | 31,960 | |
| | | | | | | | | | | | | | | | | | | | | |
| GAAP income per ADS — basic | | $ | 0.33 | | | $ | 0.16 | | | $ | 0.15 | | | $ | 0.48 | | | $ | 0.27 | |
| | | | | | | | | | | | | | | | | | | | | |
| GAAP income per ADS — diluted | | $ | 0.32 | | | $ | 0.16 | | | $ | 0.15 | | | $ | 0.47 | | | $ | 0.26 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-GAAP income per ADS — basic | | $ | 0.39 | | | $ | 0.20 | | | $ | 0.21 | | | $ | 0.61 | | | $ | 0.34 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-GAAP income per ADS — diluted | | $ | 0.38 | | | $ | 0.19 | | | $ | 0.21 | | | $ | 0.59 | | | $ | 0.32 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in calculating basic GAAP /Non-GAAP income per ADS | | | 115,701,382 | | | | 101,826,234 | | | | 107,179,635 | | | | 112,102,181 | | | | 94,735,718 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in calculating diluted GAAP / Non-GAAP income per ADS | | | 119,385,064 | | | | 106,547,388 | | | | 110,390,777 | | | | 115,473,182 | | | | 99,135,414 | |
| | | | | | | | | | | | | | | | | | | | | |
GAAP income from operations | | $ | 38,164 | | | $ | 16,938 | | | $ | 14,444 | | | $ | 52,608 | | | $ | 26,131 | |
| Amortization of acquired intangible assets | | | 2,672 | | | | 1,494 | | | | 1,932 | | | | 4,604 | | | | 2,493 | |
| Share-based compensation | | | 4,919 | | | | 1,897 | | | | 4,517 | | | | 9,436 | | | | 3,363 | |
| | | | | | | | | | | | | | | | | | | | | |
Non-GAAP income from operations | | $ | 45,755 | | | $ | 20,329 | | | $ | 20,893 | | | $ | 66,648 | | | $ | 31,987 | |
| | | | | | | | | | | | | | | | | | | | | |
Non-GAAP operating margin | | | 40.4 | % | | | 40.6 | % | | | 36.4 | % | | | 39.1 | % | | | 38.4 | % |
| | | | | | | | | | | | | | | | | | | | | |
TODAY’S CONFERENCE CALL
Focus Media will host a conference call to discuss the second quarter 2007 financial results and third quarter 2007 business outlook at 9:00 p.m. U.S. Eastern Time on September 27, 2007 (6:00 p.m. U.S. Pacific Time on September 27, 2007; 9:00 a.m. Beijing/Hong Kong time on September 28, 2007). The dial-in details for the live conference call are: U.S. Toll Free Number +1-866-700-7477, Hong Kong dial-in number +852-3002-1672, International dial-in number +1-617-213-8840; Pass code 81045580.
A replay of the call will be available from September 27, 2007 until October 4, 2007 (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 34979673. 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 the largest digital media group in China, leading China’s digital out-of-home, mobile advertising and internet advertising markets. Based on audience-centric approach, Focus Media provides targeted advertising channels, powered by a broad portfolio of LCD, digital frame, wireless, internet and other new media technologies, which cover specific demographic groups and their daily activities, from office buildings to retail chain stores, residential buildings, shopping malls, golf country clubs, airports, and airport transit buses in China. As of June 30, 2007, Focus Media digital out-of-home had approximately 131,000 LCD display units and 161,400 advertising poster frames, installed in over 90 cities throughout China and 200 outdoor LED displays in Shanghai. Over 4,000 international and domestic advertisers have placed advertisements through our digital out-of-home advertising networks as of June 30, 2007. For more information about Focus Media, please visit our website at 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-1, F-3, F-6 and 20-F, 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)
| | | | | | | | | |
| | | 2007-6-30 | | 2006-12-31 |
| ASSETS | | | | | | | | |
| Current assets | | | | | | | | |
| Cash and cash equivalents | | $ | 187,592 | | | $ | 164,611 | |
| Investment in debt securities | | | 41,317 | | | | — | |
| Accounts receivables, net | | | 119,118 | | | | 61,614 | |
| Inventories | | | 2,339 | | | | 519 | |
| Prepaid expenses and other current assets | | | 15,788 | | | | 5,199 | |
| Deposits paid for acquisition of subsidiaries | | | 31,873 | | | | 3,526 | |
| Amount due from related parties | | | 6,832 | | | | 7,853 | |
| Rental deposits | | | 23,365 | | | | — | |
Total current assets | | $ | 428,224 | | | $ | 243,322 | |
| | | | | | | | | |
| Rental Deposits | | | — | | | | 11,833 | |
| Equipment, net | | | 81,229 | | | | 70,250 | |
| Acquired intangible assets, net | | | 73,009 | | | | 34,717 | |
| Goodwill | | | 924,202 | | | | 739,744 | |
| Other long term assets | | | 20,305 | | | | 6,376 | |
Total assets | | $ | 1,526,969 | | | $ | 1,106,242 | |
| | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) | | | | | | | | |
Current liabilities | | | | | | | | |
| Short term debt | | $ | 394 | | | $ | 2,769 | |
| Accounts payable | | | 32,502 | | | | 5,987 | |
| Accrued expenses and other current liabilities | | | 65,179 | | | | 38,674 | |
| Income taxes payable | | | 10,841 | | | | 4,060 | |
| Amount due to related parties | | | 3,055 | | | | 347 | |
| Deferred tax liabilities) | | | 1,098 | | | | — | |
Total current liabilities | | $ | 113,069 | | | $ | 51,837 | |
| | | | | | | | | |
| Deferred tax liabilities | | | 6,132 | | | | 3,303 | |
| | | | | | | | | |
Total liabilities | | $ | 119,201 | | | $ | 55,140 | |
| | | | | | | | | |
Minority interests | | | 447 | | | | 358 | |
Shareholders’ equity | | | | | | | | |
| Ordinary shares | | | 31 | | | | 27 | |
| Additional paid in capital | | | 1,242,817 | | | | 709,196 | |
| Acquisition consideration to be issued | | | — | | | | 237,879 | |
| Retained earnings | | | 148,734 | | | | 96,195 | |
| Accumulated other comprehensive income | | | 15,739 | | | | 7,447 | |
| Total shareholders’ equity | | $ | 1,407,321 | | | $ | 1,050,744 | |
| | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 1,526,969 | | | $ | 1,106,242 | |
| | | | | | | | | |
3
FOCUS MEDIA HOLDING LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. Dollar in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | Six months ended |
| | | 2007-6-30 | | 2006-6-30 | | 2007-3-31 | | 2007-6-30 | | 2006-6-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
Gross revenues (note 3): | | | | | | | | | | | | | | | | | | | | |
| Digital out-of-home | | | | | | | | | | | | | | | | | | | | |
| Commercial Locations | | $ | 55,368 | | | $ | 33,406 | | | $ | 34,918 | | | $ | 90,286 | | | $ | 56,868 | |
| In-store network | | | 7,998 | | | | 7,235 | | | | 7,326 | | | | 15,324 | | | | 13,053 | |
| In-elevator Poster Frame Network | | | 20,347 | | | | 10,736 | | | | 13,854 | | | | 34,201 | | | | 17,394 | |
| Mobile handset advertising | | | 11,268 | | | | 3,365 | | | | 6,020 | | | | 17,288 | | | | 3,365 | |
| Internet advertising | | | 26,418 | | | | — | | | | — | | | | 26,418 | | | | — | |
| Other revenue | | | 305 | | | | 233 | | | | 381 | | | | 686 | | | | 690 | |
| | | | | | | | | | | | | | | | | | | | | |
Total gross revenues | | | 121,704 | | | | 54,975 | | | | 62,499 | | | | 184,203 | | | | 91,370 | |
| Less: Sales taxes | | | 8,429 | | | | 4,912 | | | | 5,159 | | | | 13,588 | | | | 8,109 | |
Total revenues | | | 113,275 | | | | 50,063 | | | | 57,340 | | | | 170,615 | | | | 83,261 | |
Cost of revenues (note 4): | | | | | | | | | | | | | | | | | | | | |
| Digital out-of-home | | | | | | | | | | | | | | | | | | | | |
| Commercial locations | | | 17,868 | | | | 11,487 | | | | 12,898 | | | | 30,766 | | | | 19,713 | |
| In-store Network | | | 5,187 | | | | 4,394 | | | | 5,027 | | | | 10,214 | | | | 8,367 | |
| In-elevator Poster Frame Network | | | 5,265 | | | | 3,222 | | | | 4,746 | | | | 10,011 | | | | 6,014 | |
| Mobile handset advertising | | | 4,569 | | | | 2,405 | | | | 2,754 | | | | 7,323 | | | | 2,405 | |
| Internet advertising | | | 18,405 | | | | — | | | | — | | | | 18,405 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
Total advertising service costs | | | 51,294 | | | | 21,508 | | | | 25,425 | | | | 76,719 | | | | 36,499 | |
| Other costs | | | 138 | | | | 80 | | | | 165 | | | | 303 | | | | 312 | |
Total cost of revenues | | | 51,432 | | | | 21,588 | | | | 25,590 | | | | 77,022 | | | | 36,811 | |
Gross profit | | | 61,843 | | | | 28,475 | | | | 31,750 | | | | 93,593 | | | | 46,450 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | |
| General and administrative (note 4) | | | 11,646 | | | | 6,298 | | | | 8,683 | | | | 20,329 | | | | 10,693 | |
| Selling and marketing (note 4) | | | 13,154 | | | | 5,376 | | | | 9,886 | | | | 23,040 | | | | 9,783 | |
| Other operating income | | | (1,121 | ) | | | (137 | ) | | | (1,263 | ) | | | (2,384 | ) | | | (157 | ) |
Total operating expenses | | | 23,679 | | | | 11,537 | | | | 17,306 | | | | 40,985 | | | | 20,319 | |
| | | | | | | | | | | | | | | | | | | | | |
Income from operations | | | 38,164 | | | | 16,938 | | | | 14,444 | | | | 52,608 | | | | 26,131 | |
| Interest income, net | | | 1,870 | | | | 605 | | | | 2,693 | | | | 4,563 | | | | 1,493 | |
| Other income (expenses), net | | | 12 | | | | (408 | ) | | | 92 | | | | 104 | | | | (479 | ) |
Income before tax and minority interests | | | 40,046 | | | | 17,135 | | | | 17,229 | | | | 57,275 | | | | 27,145 | |
| Income tax expense | | | | | | | | | | | | | | | | | | | | |
| - Current | | | 2,683 | | | | 553 | | | | 1,101 | | | | 3,784 | | | | 618 | |
| - Deferred | | | (365 | ) | | | (180 | ) | | | (133 | ) | | | (498 | ) | | | 372 | |
| Total income taxes | | | 2,318 | | | | 373 | | | | 968 | | | | 3,286 | | | | 990 | |
| | | | | | | | | | | | | | | | | | | | | |
Income before minority interests | | | 37,728 | | | | 16,762 | | | | 16,261 | | | | 53,989 | | | | 26,155 | |
| Minority Interests | | | 13 | | | | 91 | | | | (31 | ) | | | (18 | ) | | | 51 | |
| | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 37,715 | | | $ | 16,671 | | | $ | 16,292 | | | $ | 54,007 | | | $ | 26,104 | |
| Income per ADS — basic | | $ | 0.33 | | | $ | 0.16 | | | $ | 0.15 | | | $ | 0.48 | | | $ | 0.27 | |
| | | | | | | | | | | | | | | | | | | | | |
| Income per ADS — diluted | | $ | 0.32 | | | $ | 0.16 | | | $ | 0.15 | | | $ | 0.47 | | | $ | 0.26 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in calculating basic income per ADS | | | 115,701,282 | | | | 101,826,234 | | | | 107,179,635 | | | | 112,102,181 | | | | 94,735,718 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in calculating diluted income per ADS | | | 119,385,064 | | | | 106,547,388 | | | | 110,390,777 | | | | 115,473,182 | | | | 99,135,414 | |
| | | | | | | | | | | | | | | | | | | | | |
FOCUS MEDIA HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(U.S. Dollar in thousands)
| | | | | | | | | | | | | | | | | |
| | | Three months ended | | Six months ended |
| | | 2007-6-30 | | 2006-6-30 | | 2007-6-30 | | 2006-6-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
Operating activities: | | | | | | | | | | | | | | | | |
| Net income | | $ | 37,715 | | | $ | 16,671 | | | $ | 54,007 | | | $ | 26,104 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | | | | |
| Minority interest | | | 13 | | | | 91 | | | | (18 | ) | | | 51 | |
| Bad debt provision | | | 1,620 | | | | 575 | | | | 2,416 | | | | 770 | |
| Share based compensation | | | 4,919 | | | | 1,896 | | | | 9,436 | | | | 3,363 | |
| Depreciation and amortization | | | 4,269 | | | | 3,523 | | | | 8,108 | | | | 6,131 | |
| Amortization of acquired intangible assets | | | 2,672 | | | | 1,493 | | | | 4,604 | | | | 2,492 | |
| Changes in assets and liabilities, net of effects of acquisitions | | | (21,754 | ) | | | (11,622 | ) | | | (21,983 | ) | | | (21,518 | ) |
| | | | | | | | | | | | | | | | | |
Net cash provided by operating activities | | | 29,454 | | | | 12,627 | | | | 56,570 | | | | 17,393 | |
Investing activities: | | | | | | | | | | | | | | | | |
| Purchase of equipment and other long term assets | | | (15,274 | ) | | | (3,254 | ) | | | (25,265 | ) | | | (11,608 | ) |
| Acquisition of an intangible asset | | | (105 | ) | | | — | | | | (105 | ) | | | — | |
| Purchase of subsidiaries, net of cash acquired | | | (4,514 | ) | | | (29,341 | ) | | | (56,774 | ) | | | (87,060 | ) |
| Deposits paid to acquire subsidiaries | | | (15,198 | ) | | | — | | | | (35,268 | ) | | | — | |
| Investment in debt securities | | | (18,735 | ) | | | — | | | | (40,715 | ) | | | — | |
| | | | | | | | | | | | | | | | | |
Net cash used in investing activities | | | (53,826 | ) | | | (32,595 | ) | | | (158,127 | ) | | | (98,668 | ) |
Financing activities: | | | | | | | | | | | | | | | | |
| Proceeds from issuance of ordinary shares, net of issuance costs. | | | 3,063 | | | | 83,015 | | | | 120,258 | | | | 148,680 | |
| Proceeds from short-term bank loans | | | — | | | | 23,351 | | | | — | | | | 24,598 | |
| Capital injection from minority shareholders | | | — | | | | — | | | | 97 | | | | 250 | |
| Repayment of short-term bank loans | | | (656 | ) | | | (1,247 | ) | | | (656 | ) | | | (2,239 | ) |
| Repayment of short-term other loans | | | — | | | | (3,734 | ) | | | (3,115 | ) | | | (3,813 | ) |
| | | | | | | | | | | | | | | | | |
Net cash provided by financing activities | | | 2,407 | | | | 101,385 | | | | 116,584 | | | | 167,476 | |
| Effect of exchange rate changes | | | 4,994 | | | | (596 | ) | | | 7,955 | | | | (170 | ) |
| | | | | | | | | | | | | | | | | |
Net (decrease) increase in cash and cash equivalents | | | (16,971 | ) | | | 80,821 | | | | 22,982 | | | | 86,031 | |
| Cash and cash equivalents, beginning of period | | | 204,563 | | | | 41,863 | | | | 164,610 | | | | 36,653 | |
| | | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of period | | | 187,592 | | | | 122,684 | | | | 187,592 | | | | 122,684 | |
| | | | | | | | | | | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | | | | | | | | | | | |
| Income taxes paid | | | 297 | | | | 114 | | | | 577 | | | | 114 | |
| | | | | | | | | | | | | | | | | |
| Interest paid | | | — | | | | 13 | | | | — | | | | 26 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Supplemental disclosure of non-cash investing activity: | | | | | | | | | | | | | | | | |
| Acquisition of subsidiaries: | | | | | | | | | | | | | | | | |
| Value of ordinary share consideration | | $ | 11,769 | | | $ | 79,874 | | | $ | 166,050 | | | $ | 365,665 | |
| Accounts payable | | $ | 1,129 | | | $ | 27,318 | | | $ | 1,129 | | | $ | 27,318 | |
| | | | | | | | | | | | | | | | | |
Notes:
| | | |
| Note 1: | | 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. |
| Note 2: | | The conversion of Renminbi (“RMB”) amounts into USD amounts is based on the rate of USD1 = RMB7.6155 on June 30, 2007. |
| Note 3: | | Details of net revenues are as follows (U.S. Dollars in thousands): |
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | Six months ended |
| | | 2007-6-30 | | 2006-6-30 | | 2007-3-31 | | 2007-6-30 | | 2006-6-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
Gross Advertising Service Revenue: | | | | | | | | | | | | | | | | | | | | |
Digital out-of-home: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Commercial locations | | | | | | | | | | | | | | | | | | | | |
| - Unrelated parties | | $ | 55,321 | | | $ | 30,564 | | | $ | 32,413 | | | $ | 87,734 | | | $ | 50,586 | |
| - Related parties | | | 47 | | | | 2,842 | | | | 2,505 | | | | 2,552 | | | | 6,382 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Commercial Locations | | | 55,368 | | | | 33,406 | | | | 34,918 | | | | 90,286 | | | | 56,868 | |
In-store Network | | | | | | | | | | | | | | | | | | | | |
| - Unrelated parties | | | 7,998 | | | | 6,146 | | | | 6,011 | | | | 14,009 | | | | 11,007 | |
| - Related parties | | | — | | | | 1,089 | | | | 1,315 | | | | 1,315 | | | | 2,046 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total in-store network | | | 7,998 | | | | 7,235 | | | | 7,326 | | | | 15,324 | | | | 13,053 | |
In-elevator Poster Frame Network | | | | | | | | | | | | | | | | | | | | |
| - Unrelated parties | | | 20,249 | | | | 10,736 | | | | 13,854 | | | | 34,103 | | | | 17,394 | |
| - Related parties | | | 98 | | | | — | | | | — | | | | 98 | | | | — | |
| Total In-elevator Poster Frame Network | | | 20,347 | | | | 10,736 | | | | 13,854 | | | | 34,201 | | | | 17,394 | |
Mobile handset advertising | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| - Unrelated parties | | | 11,179 | | | | 3,365 | | | | 6,020 | | | | 17,199 | | | | 3,365 | |
| - Related parties | | | 89 | | | | — | | | | — | | | | 89 | | | | — | |
Total mobile handset advertising | | | 11,268 | | | | 3,365 | | | | 6,020 | | | | 17,288 | | | | 3,365 | |
Internet advertising | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| - Unrelated parties | | | 26,088 | | | | — | | | | — | | | | 26,088 | | | | — | |
| - Related parties | | | 330 | | | | — | | | | — | | | | 330 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
Total internet advertising | | | 26,418 | | | | — | | | | — | | | | 26,418 | | | | — | |
Gross Advertising Services Revenue: | | | 121,399 | | | | 54,742 | | | | 62,118 | | | | 183,517 | | | | 90,680 | |
| Less: Sales taxes: | | | | | | | | | | | | | | | | | | | | |
Commercial locations: | | | 4,308 | | | | 2,968 | | | | 3,274 | | | | 7,582 | | | | 5,050 | |
In-store Network | | | 754 | | | | 697 | | | | 688 | | | | 1,442 | | | | 1,221 | |
In-elevator Poster Frame Network | | | 1,799 | | | | 958 | | | | 1,185 | | | | 2,984 | | | | 1,549 | |
| | | | | | | | | | | | | | | | | | | | | |
| Digital out-of-home | | | 6,861 | | | | 4,623 | | | | 5,147 | | | | 12,008 | | | | 7,820 | |
| Mobile handset advertising | | | 386 | | | | 289 | | | | 12 | | | | 398 | | | | 289 | |
| Internet advertising | | | 1,182 | | | | — | | | | — | | | | 1,182 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
Total sales taxes: | | | 8,429 | | | | 4,912 | | | | 5,159 | | | | 13,588 | | | | 8,109 | |
Net Advertising Service Revenue | | | 112,970 | | | | 49,830 | | | | 56,959 | | | | 169,929 | | | | 82,571 | |
| Add: Other revenue: | | | 305 | | | | 233 | | | | 381 | | | | 686 | | | | 690 | |
| | | | | | | | | | | | | | | | | | | | | |
Net revenues: | | $ | 113,275 | | | $ | 50,063 | | | $ | 57,340 | | | $ | 170,615 | | | $ | 83,261 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Note 4: Share based compensations included under SFAS 123R are as follows (U.S. Dollars in thousands): |
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | Six months ended |
| | | 2007-6-30 | | 2006-6-30 | | 2007-3-31 | | 2007-6-30 | | 2006-6-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
| Cost of revenues | | $ | 284 | | | $ | — | | | $ | 281 | | | $ | 565 | | | $ | — | |
| Selling and marketing | | | 2,084 | | | | 341 | | | | 2,061 | | | | 4,145 | | | | 678 | |
| General and administrative | | | 2,551 | | | | 1,556 | | | | 2,175 | | | | 4,726 | | | | 2,685 | |
| | | | | | | | | | | | | | | | | | | | | |
Sub-total | | $ | 4,919 | | | $ | 1,897 | | | $ | 4,517 | | | $ | 9,436 | | | $ | 3,363 | |
| | | | | | | | | | | | | | | | | | | | | |
Note 5: The Company has performed preliminary purchase price allocation on their acquisition made in the third and fourth quarters of 2006 and the first two quarters of 2007 based on an internal valuation performed by management. The purchase price allocation will be finalized once the independent valuation analysis is completed.
Note 6: The earnings per ADS is based on the new conversion ratio of 1 ADS to 5 ordinary shares, effective as of April 11, 2007. The comparative numbers haven been adjusted to reflect the conversion.
4
Focus Media Holding Ltd.
Reconciliation of Non-GAAP to GAAP
(U.S. Dollar in thousands, except percentages, share and per-share data)
| | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | Six months ended |
| | | 2007-6-30 | | 2006-6-30 | | 2007-3-31 | | 2007-6-30 | | 2006-6-30 |
| | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) |
GAAP net income attributable to shareholders | | $ | 37,715 | | | $ | 16,671 | | | $ | 16,292 | | | $ | 54,007 | | | $ | 26,104 | |
| Amortization of acquired intangible assets | | | 2,672 | | | | 1,494 | | | | 1,932 | | | | 4,604 | | | | 2,493 | |
| Share-based compensation | | | 4,919 | | | | 1,897 | | | | 4,517 | | | | 9,436 | | | | 3,363 | |
| | | | | | | | | | | | | | | | | | | | | |
Non-GAAP net income | | $ | 45,306 | | | $ | 20,062 | | | $ | 22,741 | | | $ | 68,047 | | | $ | 31,960 | |
| | | | | | | | | | | | | | | | | | | | | |
| GAAP income per ADS — basic | | $ | 0.33 | | | $ | 0.16 | | | $ | 0.15 | | | $ | 0.48 | | | $ | 0.27 | |
| | | | | | | | | | | | | | | | | | | | | |
| GAAP income per ADS — diluted | | $ | 0.32 | | | $ | 0.16 | | | $ | 0.15 | | | $ | 0.47 | | | $ | 0.26 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-GAAP income per ADS — basic | | $ | 0.39 | | | $ | 0.20 | | | $ | 0.21 | | | $ | 0.61 | | | $ | 0.34 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-GAAP income per ADS — diluted | | $ | 0.38 | | | $ | 0.19 | | | $ | 0.21 | | | $ | 0.59 | | | $ | 0.32 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in calculating basic GAAP /Non-GAAP income per ADS | | | 115,701,382 | | | | 101,826,234 | | | | 107,179,635 | | | | 112,102,181 | | | | 94,735,718 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares used in calculating diluted GAAP / Non-GAAP income per ADS | | | 119,385,064 | | | | 106,547,388 | | | | 110,390,777 | | | | 115,473,182 | | | | 99,135,414 | |
| | | | | | | | | | | | | | | | | | | | | |
GAAP income from operations | | $ | 38,164 | | | $ | 16,938 | | | $ | 14,444 | | | $ | 52,608 | | | $ | 26,131 | |
| Amortization of acquired intangible assets | | | 2,672 | | | | 1,494 | | | | 1,932 | | | | 4,604 | | | | 2,493 | |
| Share-based compensation | | | 4,919 | | | | 1,897 | | | | 4,517 | | | | 9,436 | | | | 3,363 | |
| | | | | | | | | | | | | | | | | | | | | |
Non-GAAP income from operations | | $ | 45,755 | | | $ | 20,329 | | | $ | 20,893 | | | $ | 66,648 | | | $ | 31,987 | |
| | | | | | | | | | | | | | | | | | | | | |
Non-GAAP operating margin | | | 40.4 | % | | | 40.6 | % | | | 36.4 | % | | | 39.1 | % | | | 38.4 | % |
| | | | | | | | | | | | | | | | | | | | | |
5
