Charm Communications Inc. (CHRM)

Q2 2010 Earnings Call

July 28, 2010 08:00 am ET

Executives

Henry Fraser - IR

He Dang - Chairman and CEO

Bao Li - CEO of Shangxing Media

Wei Zhou - CFO

Analysts

James Marsh - Piper Jaffray

Paul Keung - Oppenheimer

Presentation

Operator

Hello and thank you for standing by for 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 Charm Communications earnings conference call for the second fiscal quarter which ended June 30, 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 and Chairman Mr. Dang, followed by the company’s Chief Financial Officer Wei Zhou who will provide the 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 discussion 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 laws. Also, please note that some of the information that we discuss include non-GAAP financial measures as defined in regulation G. the most directly comparable US GAAP financial measures and information reconciling these non-GAAP financial measures shown as financial results prepared in accordance with US GAAP are included in Charm's earnings release which is being posted on the company’s IR website at ir.charmgroup.cn.

As a reminder, this conference is been recorded. In addition, a web cast of this conference call will be available on Charm's investor relation website. I will now turn the call over to Charm Communications' Founder, Chairman and CEO, Mr. Dang.

He Dang

[Foreign language]

Henry Fraser

Hello and welcome to our second quarter 2010 earnings conference call. Q2 still continues strong organic growth throughout our business as we consolidated our leading position in China’s fast growing advertising market with key hires.

He Dang

[Foreign language]

Henry Fraser

The total achievements in context, advertising in China continues to outperform as companies benefits from continued macro strength and raising Chinese domestic consumption. As you may know, according to recent CTR statistics, the advertising market in China grew at 22% during the first quarter of 2010 and we saw this momentum carrying into the second quarter.

He Dang

[Foreign language]

Henry Fraser

Charm occupies an enviable position in this exciting market. We have many of China’s top brands as loyal clients act as premium media resources and the team of industry veterans. The key to our future success is to continue to integrate these advantages and build out a platform that offers clients a seamless service. As before, we are seeing increasing demand for advertising positions which can be rolled out over a range of traditional and new media types. Clients are becoming increasingly aware that they need to be reaching out to customers in many different ways, and looking for an advertising partner which can effectively target different groups with the consistent message. I certainly believe that we are that partner.

He Dang

[Foreign Language]

Henry Fraser

I would like to take you through three core business segments and give some updates on our progress.

He Dang

[Foreign Language]

Henry Fraser

Charm Advertising’s agency business performed exceptionally year-on-year, driven by growth in a number of advertising trends and the average spending. In particular several of our key client wins for 2010, such as the Guangdong Development Bank and Harbin Pharmaceutical ramped up their spending in the second quarter. We made progress with the leading emerging brands, winning new clients but to outdoor gear manufacturer, more or like outdoor and business jet service provider, Capital Airlines.

We also received a larger than expected boost from clients advertising during World Cup matches, which contributed advertising turnover of nearly $18 million. Charm’s clients, including Snowbeer, (inaudible) and China Telecom accounted for 10.6% of the total World Cup in-match advertising clients on CCTV.

He Dang

[Foreign language]

Henry Fraser

We made several inputs in the wins in our creative services business over the quarter, what was notable among them was the Agriculture Bank of China, the first IPO national branding campaign. We won this plan the most creative project in the pitch with other global brands such as Ogilvy and Leo Burnett. Our pitch stood out because through our years of cooperation with the Agriculture Bank of China, we best understand its strategy envisioned in China’s domestic market.

Working with brands of this caliber testifies to our presence in the market, and also it demonstrates the strength of our integrated offering.

He Dang

[Foreign language]

Henry Fraser

I am also pleased to report that the billion joint venture with Aegis is making good progress. We recently pitched successfully for a full media account Toto, a Japanese company that produces bathroom fixtures. We also worked with (inaudible) a Chinese sports apparel manufacturer to design the successful interactive outdoor campaign during the World Cup. Both of the wins demonstrated the added value we can bring by working together with an international 4A company, and I look forward to bringing you more news in this front.

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