Charm Communications Inc. (
Q4 2011 Earnings Conference Call
March 6, 2012 8:00 AM ET
Nicholas Manganaro – Ogilvy Financial
He Dang – Chairman and Chief Executive Officer
Wei Zhou – Chief Financial Officer
James Marsh – Piper Jaffray
Chow Wang – Merrill Lynch
Amanda Chin – Credit Suisse
Dick Wei – JP Morgan
Tak Chung – George Y. Yiangou
Nancy Yang – Mirae Asset
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Hello and thank you for standing by for Charm Communication’s 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 this time.
I would now like to turn the meeting over to your host for today’s conference, Mr. Nicholas Manganaro from Ogilvy Financial.
Hello everyone and welcome to Charm Communications earnings conference call for the fourth quarter and fiscal year ended December 31, 2011. The company’s earnings results were released yesterday and are available on the company’s IR website at ir.charmgroup.cn 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 as well as guidance for the first quarter of 2012. 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 expectation.
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 directly 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 ir.charmgroup.cn. 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.
[Interpreted] Hello everyone and welcome to our fourth quarter and full year 2011 earnings conference call. We were able to carry the momentum of our IPO in 2010 and deliver record setting results in our first full year as a publicly listed company. The overall scale of our business is measured by total advertising turnover or billings grew 37% to $875 million for the full year of 2011. A rate of growth of more than 2.5 times that of China’s overall advertising market. Moreover, we gained additional market share and further enhanced our position as China’s largest domestic advertising agency.
What I’m most excited about however is that we significantly expanded our integrated communication capabilities in the digital space. Where advertising turnover grew 6 folds compared to 2010. I’m also happy to announce that our net income grew at a healthy 25% to $48 million for the full year. As a result of this strong performance and to share our success with our shareholders, our Board of Directors have approved to payout 26% of our net income approximately $12.5 million of cash dividend. Going forward our board will continue to evaluate the possibility of future dividends based on our long-term capital requirements.
Looking at the overall advertising market we are seeing softness in the first quarter of this year due to seasonality punctuated by earlier than usual Chinese New Year in addition to other macroeconomic uncertainties. Another macro factor significantly impacting our business is the regulatory changes on satellite TV content and advertising time. The new regulations put to effect on January 1 and have slowed the rapid growth in the satellite TV sector, which we have (Inaudible) over the past few years.
Nonetheless with the Chinese government recently announcing the GDPs growth target of 7.5% for 2012 we still expect the overall advertising markets to grow in the low teens for 2012 or approximately 1.5 times that of GDP growth with the Olympics being a key catalyst in the second half of the year.
Charm had a strong start to 2012 with success at the Annual CCTV Primetime auction in November where we ranked number one in terms of the total amount of advertising spent on behalf of our clients for the ninth consecutive year. CCTV continues to be the leading television advertising platform that brands turn to when looking to reach the national audience in China.
Our expertise with respect to the CCTV will remain our core competitive strength as no other agency understands or leverages CCTV media better than Charm. We’ve been able to build on a solid foundation to establish our fully integrated advertising platform over the past five years. Our non-CCTV advertising turnover has increased from practically nil in 2006 to over 40% in 2011.
Looking ahead we will continue to execute on our long-term strategy of providing the whole service integrated advertising platform with a particular focus on the fast growing market. In 2012, we plan to invest more aggressively in new talent and infrastructure especially in continuing to build out our presence in the digital advertising space, which we see as the key growth driver going forward. We are confident our overall strategy will position us well for long-term growth.