VisionChina Media, Inc. (VISN) Q2 2012 Earnings Call August 20, 2012 8:00 p.m. EDT Executives Colin Wang – IR Director Limin Li – Chairman and CEO Stanley Wang – SVP of Finance Analysts Dick Wei – JPMorgan Wei Fang – CLSA Presentation Operator Good evening and thank you for standing by for VisionChina Media's second quarter 2012 earnings conference call.
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As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on VisionChina Media’s Investor Relations website at www.visionchina.cn.I will now turn the call over to our CEO, Mr. Li. Limin Li [Interpreted]. Hello, everyone, and thank you for joining us today. China's continuing macroeconomic uncertainty resulted in the second quarter of 2012 being more challenging than previously anticipated. The company saw a year-over-year decrease in revenue with advertising service revenue totaling USD28.1 million in the second quarter of 2012. Fast-growing media costs, especially media costs in those cities related to previous acquisition, weighed heavily on us in previous quarters. But in the second quarter, we pursued [a greater] media platform resource optimization initiatives and cost control plans. We actively negotiated with various radio and broadcasting viewers and subway and bus companies to lower our media costs, and strategically withdraw from those cities with unreasonably high costs, while being mindful to fulfill advertisers' placement requests and protect our media value. Given our industry-leading position, longstanding relationships with local media network partners and our commitment to the industry, our local partners were highly cooperative with our cost control efforts. Thus far, we have already successfully lowered media costs in one city and we're continuing to make strides in additional cities by implementing effective cost control initiatives. In May, we hosted a group of CPC Central Standing Committee and government officials led by senior CPC official Li Changchun. He holds VisionChina Media's distinctive business model in high regard for the way that it combines technology and culture, its ability to deliver social and economic value to radio and broadcasting viewers, subway and bus companies, and advertisers and the public, and its central role in improving the dissemination and overall impact of out-of-home media in China. After the visit, Mr. Li Changchun instructed local governments to provide greater support for VisionChina Media in the form of lower media costs, public service advertisement subsidies, and support to funding for the industry.
Apart from continuing the implementation of our proven cost control initiatives, we are also deepening our penetration into tier 3 and tier 4 cities, which will allow us to expand our media coverage and underpin our ability to support multinational and domestic brands in their product promotions and sales in those regions without increasing any fixed media costs. We expect our series of media resource optimization initiatives and cost control plans will result in a more favorable cost structure and improve our operational efficiency and gross margin.As you already know, the 2012 Olympic Games celebrated its grand opening in July in London, and VisionChina Media as the only outdoor extension of traditional TV in China again demonstrated its dissemination power and advertising value to the world. We were excited to see VisionChina Media's social influence during large events such as the Olympics, as reflected by the gathering of large crowds around the television installed on buses, subways and platforms. The premium visual experience and live Olympic coverage delivered by VisionChina Media offer a compelling real-time alternative to mobile internet options. Advertisers once again valued our special Olympic programs and recognized the ability of our platform to attract consumer attention and promote their brands, further affirming VisionChina Media's commercial value. The Olympics once again highlighted our company's advantage of providing tailor-made program and reinforced our ability to take advantage of events and programs and assemble interesting content that drive viewer engagement. To maintain the quality of our programs after the Olympics, in addition to further strengthening our cooperation in programming quality and innovative competency with various traditional satellite TV stations well-known for their resources and experience, we will also invite some of the most creative talents in the traditional TV industry and the senior sales person of one of the top satellite TV stations in China to join our company in the third quarter to further leverage the traditional TV advertising market and broaden our business cooperation with leading satellite TV stations to solidify our market leadership in the mobile TV industry and create new revenue growth opportunities. Read the rest of this transcript for free on seekingalpha.com