Charm Communications Inc. (CHRM)

F1Q10 Earnings Call

May 27, 2010 8:00 AM EST

Executives

Henry Fraser – IR

Dang – Founder, Chairman, and CEO

Wei Zhou – CFO

Analysts

Wallace Cheung – Credit Suisse

Paul Keung – Oppenheimer

James Marsh – Piper Jaffray

Presentation

Operator

Hello and thank you for standing by for the Charm Communications Earnings Conference Call. At this time, all participants are in 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, Henry Fraser from Brunswick Group.

Henry Fraser

Hello, everyone, and welcome to the Charm Communications earnings conference call for the first fiscal quarter which ended March 31 st, 2010. 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, Chairman, and CEO, Mr. Dang, followed by the company’s Chief Financial Officer, Wei Zhou, who will give you overview of the company’s strategy and progress and provide a financial overview and guidance for the second quarter. After their prepared remarks, they will be available to answer your questions.

Before we continue, please note that the discussions today will contain certain forward-looking statements made under the Safe Harbor Provisions of the US 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 rules.

Also please note that some of the information we discuss includes non-GAAP financial measures as defined in Regulation G. Most directly comparable US GAAP financial measures and information reconciling these non-GAAP financial measures to Charm’s financial results prepared in accordance with US GAAP are included in Charm’s earnings release which has been posted on the company’s IR website.

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.

Dang

Hello, everyone, and thank you for joining us on our first earnings call since our public listing on NASDAQ earlier this month, a great lead towards realizing our vision of becoming China’s first world-class integrated advertising and media group, well positioned in China, one of the world’s largest advertising market. We have confident in the future post-IPO developments of Charm. The first quarter was very exciting for us. We added to our base of blue-chip clients with a number of significant wins including Guangdong Development Bank, Subaru and Harbin Pharmaceutical.

To give you some industry context, according to CTR statistics, China’s advertising market increased by 22% in the first quarter of 2010 against the backdrop of China’s sustained economic growth, initiatives to boost consumer spending and continued heavy government investments in infrastructure. Consumption in China is on the raise and Chinese companies are spending more marketing dollars. The ability to provide fully integrated advertising services is increasingly valued by class and the need for them to build trusted national brands has never been higher.

Today, Charm, is a leading advertising and media group in China and we are actively extending our leadership in China’s increasingly market driven advertising industry. The cornerstone of our strategy is our diversified business model that allows us to provide clients with integrated solutions which (inaudible) in the range of Charm’s co-advertising service capability to provide a one-stop shop.

I would like to take you through how we’re able to do this for our clients. Through Charm Advertising, our core advertising agency business, we have long been a leader among domestic TV ad agencies. We are also the number one agent in terms of total ad placement on CCTV, the most prestigious TV platform in China, and the one most attractive to blue-chip companies. This advantage sets us apart from our competitors and helps us to continue to attract China’s leading companies to our platform.

We’ve been able to successfully build a large and loyal customer base that has a 100 blue-chip cool clients by combining international standards, local expertise, and total dedication to client service that’s unique in this market in which domestic advertisement represents about 70% of the market share. Behind our success is top industry talent and we’ve always emphasized the training and retention, a key to building a true service culture.

Since 2008, we have been developing Shangxing Media, MIM or principal media which invests in high-quality TV advertising resources including top satellite TV channels and programs on CCTV. Through these resources, we are able to provide clients tailor made commercials and branded content targeting specific programs on these channels. This has the dual advantage of maximizing the commercial value for the media owners in providing our clients with differentiated market solutions.

Satellite TV is an effective, but cost efficient alternative as compared to CCTV, making it another powerful TV advertising platform to give smaller brands national access and larger brands the ability to target specific regions. Today, we have two satellite channels and the nationwide sales network to help bring our customer base to these channels. Additionally, we also have exclusive advertising rights to four television programs from CCTV 1, CCTV 2, and CCTV 3.

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