Focus Media Holding's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Focus Media Holding Limited (FMCN)

Q2 2012 Earnings Call

August 22, 2012, 09:00 pm ET

Executives

Jing Lu - IR

Jason Jiang - Chairman & CEO

Kit Low - Executive Director & CFO

Analysts

Richard Ji - Morgan Stanley

Wallace Cheung - Credit Suisse

Presentation

Operator

Good afternoon. My name is Macy I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2012 Focus Media Holding Ltd earnings conference call. All lines have been placed on-mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I will now turn the call over to Jing Lu. Ma’am you may begin your conference.

Jing Lu

Thank you, operator. Welcome to Focus Media’s second quarter 2012 earnings conference call. Today, our management will discuss the company’s financial results for second quarter of 2012 and the business outlook for the third quarter of 2012.

With me here are Jason Jiang, Chairman and Chief Executive Officer and Mr. Kit Low, Chief Financial Officer and Executive Director. After management updates you on our second quarter 2012 operational and financial performance, we will open the call for questions. This is call is also broadcasted through Internet and available through our Investor Relations website, ir.focusmedia.cn.

Before we begin, I would like to remind you that during the course of this call, we will make forward-looking statements that are subject to risks and uncertainties. The statements include, but are not limited to statements regarding Focus Media’s business objectives and plans, the expectations of the development of our networks and our outlook for the third quarter of 2012 for example.

You can also identify forward-looking statements by terms such as will, expect, anticipate, future, intend, plans, believes, estimates and similar statements. The accuracy of these statements may be affected by a number of business risks and uncertainties that could cause our actual results to differ materially from those projected or anticipated.

These risks and uncertainties include, but are not limited to our limited operating history for our current operations and the short history of the new digital media sector, which may make it difficult for you to evaluate the viability and prospects of our business, the integration of acquired businesses, competition from present and future competitors in China’s growing advertising market and other risks outlined in our filings with the Securities and Exchange Commission, including our registration statement on Form F-1.

We do not undertake any obligation to update this forward-looking information except as required under applicable law.

Now I will turn the call over to our CFO Mr. Kit Low.

Kit Low

Thank you Jing and good morning everyone. Welcome to the Focus Media’s second quarter results conference call. In the second quarter of 2012 aggregate net revenue from the LCD display network, in-store network, poster frame network and movie theater network was $219.3 million, which exceeded by approximately 3% the mid-point of the company guidance range of $211 million to $213 million. This represented a year-on-year increase of 32% from $166.1 million for the second quarter of 2011 and a quarter-on-quarter increase of 19% from $184.3 million for the first quarter of 2012.

Net revenue from the traditional outdoor billboard network for the second quarter of 2012 was $13.7 million, meeting the guidance of $13 million to $15 million. This represented a year-on-year increase of 6% from $12.9 million for the second quarter of 2011.

Non-GAAP net income attributable to Focus Media was $81.9 million, exceeding the midpoint of the company guidance range of $78 million to $80 million by 4%, and representing a year-on-year increase of 30% from non-GAAP net income attributable to Focus Media of $62.9 million for the second quarter of 2011 and a quarter-on-quarter increase of 33% from non-GAAP net income attributable to Focus Media of $61.6 million for the first quarter of 2012.

Non-GAAP net income attributable to Focus Media per diluted ADS was $0.62, representing a year-on-year increase of 41% from $0.44 per diluted ADS for the second quarter of 2011 and a Q-on-Q increase of 35% from $0.46 per diluted ADS for the first quarter of 2012.

Net cash inflow from operating activities for the second quarter of 2012 after deducting the purchase of equipment and subsidiaries was $87.2 million, a year-on-year growth of 134% from $37.3 million for the second quarter of 2011 and a Q-on-Q growth of 126% from $38.5 million for the first quarter of 2012.

In the second quarter of 2012, we continue to see our year-on-year revenue growth mainly driven by strength of our poster frame network due to its exposure to promotional spending budget which tends to be less effective by macro economic uncertainty. We saw some improvement in year-on-year growth in LCD network in the second quarter 2012 as compared to the first quarter 2012, but still have not seen a return to normalization due to continued impact from cutbacks of branding budgets as a result of macroeconomic uncertainties.

Before I turn to third quarter 2012 guidance, I would like to update you on the payment of our announced recurring dividend payout. Based on the company 2011 non-GAAP net income of $284.1 million, a cash dividend of $0.0274 for ordinary shares or $0.137 per ADS was paid on April 16, 2012 to shareholders on record as of the close of business on March 30, 2012 and a cash dividend of $0.0272 per ordinary shares or $0.136 per ADS was paid on July 16, 2012 to shareholders of record as of the close of business on July 10, 2012. Meanwhile, the Board has approved a cash dividend of $0.0272 per ordinary share or $0.136 per ADS to be payable on October 16th to shareholders of record as of close of business on September 28, 2012.

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