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Charm Communications' CEO Discusses Q2 2012 Results - Earnings Call Transcript

[Foreign Language]

This softness in advertising demand combined with the previously imposed satellite TV regulations negatively impacted our Principal Media business. Although, we have partially mitigated the principal risk by taking on less media inventory at the beginning of the year, the performances of the inventory under contracts are below where they were last year and we expect this trend to continue in the second half of this year.

Nonetheless, we saw margin improvements in the second quarter, especially as sales our newly acquired assets ramped up and we will continue to push our sales efforts to minimize the inventory risk for the rest of this year. Looking longer term, we continue to search for attractive assets and looks to develop a more sustainable business model with our media partners.

[Foreign Language]

I would like to highlight the senior hires we have added to our executive management team over the past few quarters. With Mr. Tony Yu, joining as CTO in the fourth quarter of 2011 and Mr. Bao Li, joining as President of our Shangxing Media business in the first quarter of this year.

And continue to strengthen our agency business we brought in Ms. Cathy Chen to serve as President of our Agency Business Units, including Charm Advertising, Charm Interactive, and Charm Click.

Cathy has extensive management and marketing experience, excuse me, experience with Fortune 100 companies, and in her new role, she will lead our overall agency business. We welcome her to our team and our confidence that our continued investments in talent and infrastructure will help us to build the advertising platform to sustain our growth.

[Foreign Language]

Moving on now to our operating highlights for the second quarter.

[Foreign Language]

Our advertising agency revenues grew a robust 58.8% year-over-year, substantially outpacing the upper mentions 20.6% in billings growth. This is due to an increase revenue extraction rate of 5.7% in the second quarter of 2012, compared to 4.4% in the second quarter of 2011, which reflects our ability to deliver integrated advertising solutions to our clients.

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