Charm Communications, Inc. (



Q4 2010 Earnings Call Transcript

February 24, 2011 08:00 AM ET


Justin Raybeck (ph) – IR

He Dang – Chairman and CEO

Wei Zhou – CFO


Wallace Cheung – Credit Suisse

James Marsh – Piper Jaffray

Ian Whittaker – Liberum Capital



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Hello and thank you for standing by for Charm Communications Earnings Conference Call. At this time all participants are in a listen only mode. After management’s prepared remarks there will be a question-and-answer session. Today’s conference is being recorded. If you have any objections you may disconnect at any time.

I’ll now like to turn the meeting over to your host for today’s conference, Mr. Justin Raybeck (ph) from Ogilvy Financial. Please proceed.

Justin Raybeck

Hello everyone and welcome to Charm Communications earnings conference call for the fourth fiscal quarter which ended December 31, 2010. The company’s earnings results were released yesterday and are available on the company’s IR website at as well as on newswire services.

Today you will hear opening remarks from Charm’s Founder and Chairman, Mr. Dang followed by the company’s Chief Financial Officer, Wei Zhou, who will provide a financial overview and guidance for the fourth quarter. After their prepared remarks, they will be available to answer your questions.

Before we continue, please note that the discussion today will contain certain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.

Charm does not assume any obligation to update any forward-looking statements except as required under applicable law. Also, please note that some of the information to be discussed includes non-GAAP financial measures as defined in Regulation G. The most direct comparable U.S. GAAP financial measures and information reconciling these non-GAAP financial measures, the Charm’s financial results prepared in accordance with U.S. GAAP are included in Charm’s earnings release which has been posted on the company’s IR website at

As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Charm’s Investor Relations website.

I will now turn the call over to Charm Communications Founder, Chairman and CEO, Mr. Dang.

He Dang

[Interpreted] Hello, and welcome to our fourth quarter 2010 earnings conference call. With outstanding performance from each of our business units in a strong macro advertising environment we are pleased to announce record revenues and net income in the fourth quarter and for our first fiscal year at the listed company.

And in increasingly sophisticated advertising market clients are gradually turning away from the single media solutions to an integrated media solution. Anticipating this trend Charm made investments in 2008 and 2009 in satellite television and in staff and infrastructure to upgrade our integrated communications capabilities. We believe much of our success in 2010 can be attributed to these investments which helped Charm evolve into a more diversified media platform that saw 40% of our NC revenues coming from placements are Non CCTV media, and 60% of our principal media revenue coming from Non CCTV media.

We also experienced a robust advertising market in the fourth quarter, where we saw a combination of the usual fourth quarter seasonal momentum accompanied by strong demands from advertisers for both traditional TV advertising and for premium advertising resources.

For the full year 2010, CCR estimated that the overall Chinese advertising market growth rate again outpace GDP with market growth of 15% versus GDP growth of 10%. Television remained the most dominant advertising medium with approximately 70% market share while the Internet was the fastest growing advertising medium with annual growth rate of over 40%.

The advertising market is expected continue growing faster than GDP as China’s total advertising spent to GDP ratio remains at 0.5% compared to 1% as spent to GDP ratio in the developed markets like the U.S., UK and Hong Kong.

The reserves of China’s advertising market, Charm continued to capture a higher market share in 2010. Total customer advertising spending placed through or with Charm increased 70% from $375 million in 2009 to $637 million in 2010.

Our goal is to become the leading integrated advertising in media group in China and in 2010, we also continued to execute our strategy to achieve this goal and providing our clients with the best integrated advertising campaign, utilizing our unique creative in media resources.

We integrated Charm advertising spent in creative design with Digiums (ph) full media planning and buying for (inaudible) national brand campaign.

We integrated traditional TV advertising on CCTV in Tainjin satellite with search engine marketing and online video placement for Baiyao pharmaceuticals, (inaudible) calcium coke campaign.

We integrated branded contacts for a 11-week reality show on Shanghai Dragon TV with the full outdoor in bay branch campaign for Huaxia Banks, Huaxia FMEs start campaign. This campaign helps Huaxia Bank which is only the 10th largest bank in China in terms of asset size to be named by Fords magazine as the top 50 brand in China.

We successfully integrated campaigns and simplified our unique business model which allows us to capitalize on our partnerships with premium TV channels and media groups to expand our service offerings to our clients.

Moving on to highlights of our operations, we continued to execute on our strategy in the fourth quarter, winning new clients and making key investments in media resources and service capabilities.

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