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China MediaExpress Holdings, Inc. (CCME) Announces 2009 Fourth Quarter and Year-End Financial Results

Mar. 23, 2010 (Business Wire) — China MediaExpress Holdings, Inc. (NYSE Amex: CCME) (“CME” or “Company”), China’s largest television advertising operator on inter-city express buses, today announced financial results for the fourth quarter and year ended December 31, 2009.

Financial Highlights – Fourth Quarter 2009 vs. Fourth Quarter 2008

  • Revenue increased by 90.6% to $32.0 million in the fourth quarter of 2009 as compared to $16.8 million in the same quarter of 2008;
  • Gross margin for fourth quarter was 68.9%;
  • Income from operation increased by 104.7% to $19.5 million in the fourth quarter of 2009 as compared to $9.5 million in the same quarter of 2008; and
  • Net income increased by 99.6% to $14.3 million in the fourth quarter of 2009 compared to $7.2 million in the same quarter of 2008.

Financial Highlights – Full Year 2009 vs. Full Year 2008

  • Revenue increased 52.3% to $95.9 million in 2009 as compared to $63.0 million in 2008;
  • Gross margin for year ended December 31, 2009 was 65.7%;
  • Income from operation increased by 61.3% to $56.6 million in 2009 as compared to $35.1 million in 2008;
  • Net income increased by 58.2% to $41.7 million in 2009 as compared to $26.4 million in 2008; and
  • As of December 31, 2009, the Company had $57.2 million in cash.

Zheng Cheng, CME’s Founder and CEO, commented, “2009 has been an exciting and eventful year for our Company. We started the year as a privately-held business and concluded as a publicly owned company trading on the NYSE Amex. Since our inception in 2003, we have been working hard to successfully grow CME to a multi-million dollar company and to become the market leader in the express bus advertising industry in China. 2009 was the best year in our history as we continued the rapid organic growth of our business by: signing new contracts with additional bus operators partners, both in the areas where we have a strong presence and in new areas as well; entering into exclusive agreements with several operators of airport express buses, broadening our revenue sources to further augment our potential revenue growth through providing additional advertising channels to advertisers and new services to passengers such as the broadcast of the embedded advertisements which are displayed during the broadcasting of the content; and exploring a number of avenues to further grow our market share and geographic coverage through possible acquisitions.”

Discussing 2009 fourth quarter and year-end results, Mr. Cheng noted, “As expected, our fourth quarter was the strongest quarter of the year. Our revenue for the quarter grew by 22.3%, 67.4% and 70.2% compared to the third, second and first quarters of 2009, respectively. Also net income for the quarter increased by 22.7%, 72.8% and 92.0% compared to the third, second and first quarters of 2009, respectively.

He added, “Our network has grown with the signing of several new agreements with bus operators. As of today, our network includes 49 bus operator partners, up from 46 at the end of November; these agreements run from three to eight years. The total number of buses equipped with our television systems is now over 21,000, increasing approximately by more than 1,000 buses since the end of November.”

Mr. Cheng continued, “Our successful platform, the large and growing network of bus operators partners, the wide geographic coverage and our competitive advertising rates, continue to attract a large number of international and national brands to our advertising network. More than 450 advertisers have purchased time on our network either through advertising agents or directly from us. Our growing clientele includes local brand names as well as well-known international and national brands such as Coca Cola, Pepsi, Wahaha, KFC, Siemens, Hitachi, Haier, China Telecom, China Mobile, Nokia, China Post, Procter & Gamble, Bank of China, China Constructing Bank and China Pacific Life Insurance.

“In addition, we plan to further broaden our revenue sources by providing additional advertising channels to our clients and new services to passengers. These additional revenue sources include: a) separately packaging advertising time slots on airport shuttle buses and tour buses which should generate higher revenue, b) displaying soft advertisements packaged as entertainment content, c) establishing stationary advertising media at inter-city express bus terminals to complement our main business, and d) offering new services to advertisers and passengers by featuring hotels, spa resorts, local restaurants on our network along with relevant contact information of service providers and charge advertising fees.

“We remain focused on improving our profit margins by attracting more direct advertising clients. As a result, at the end of 2009 direct clients accounted for 21% of our net revenues, as compared to only 2% at the end of 2008 and 16% at the end of the 2009 third quarter. Our goal is for direct advertising clients to represent approximately 35% our net revenue mix by the end of 2010.”

Jacky Lam, CME’s Chief Financial Officer stated, “In 2009, CME generated approximately $46.2 million of cash from operating activities, of which $16.4 million were generated in the fourth quarter. Our cash position remains very strong and as of December 31, 2009, we had $57.2 million of cash.”

Mr. Lam continued, “In January 2010, we completed two important transactions for our Company. The first transaction was a $30 million private investment from Starr International Company, Inc. (“Starr International”), involving newly issued shares of CME Series A Convertible Preferred Stock and CME common stock purchase warrants. We are very pleased that Starr International, a respected investment firm with a significant presence in China and the US, has shown great confidence in our growth prospects and has become one of our major investors.

“The second transaction was the completion of the exercise and redemption of all of our outstanding public warrants, which brought CME net proceeds (after deducting the amounts paid to the original shareholders of CME) of approximately $26 million. Through the redemption we simplified our complicated capital structure, increased the public float, and made CME more attractive to a larger number of institutional investors. In addition, we eliminated the warrant overhang, removed the associated downward pressure on our stock price and the trading volatility associated with arbitrage.”

Mr. Lam added, “As a result of the above two transactions and the settlement of $10 million promissory note due to the CME original shareholders, as of today, we have over $100 million in cash, to fund our business expansion plans, including internal expansion initiatives and potential mergers and acquisitions of local companies capable of delivering customized, time-specific and local-oriented content.”

Pursuant to the earn-out provisions of the share exchange agreement (“Share Exchange Agreement”) entered into in connection with the Company’s initial business combination with TM Entertainment and Media, CME anticipates issuing the original founding shareholders of the Company 1,000,000 common shares. This earn-out issuance is a result of the Company achieving its 2009 adjusted net income (as defined in the Share Exchange Agreement) of $42 million.

Announces 2010 Guidance

Based on the current customer base, geographic coverage, network of express buses and existing revenue streams, CME’s management projects that its 2010 net income (non-GAAP which is before share based compensation or fair value adjustments for the Company’s financial instruments), will be in the range of $71 million to $75 million. These projections exclude the impact of any possible acquisitions, additional of new buses and new investments in other media projects in 2010.”

Mr. Cheng concluded, “We believe that our Company is well positioned to further benefit from the rapid growth in the advertising spending in China, the second largest advertising market in Asia, and one of the largest and fastest growing markets in the world. We are very proud of our success and are confident that our Company has a bright future.”

Conference Call

CME’s Founder & CEO, Zheng Cheng and CFO, Jacky Lam will host a conference call for investors today, March 23, 2010, at 8:00 pm ET. Interested parties may participate in the call by dialing (877) 241-7870 (US & Canada) and (281) 312-0045 (International); please call in 10 minutes before the conference call is scheduled to begin and ask for the China MediaExpress conference call. After opening remarks, there will be a question and answer period. The conference call will also be broadcast live over the Internet. To listen to the live call, please go to www.ccme.tv or http://investor.shareholder.com/media/eventdetail.cfm?eventid=77777&CompanyID=ABEA-3WTP6Z&e=1&mediaKey=761A92FA0816E8EB83B4B0EA40CA8AAC. Please go to the website at least 15 minutes early to register, and download and install any necessary audio software. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days at CME’s website. We suggest listeners use Microsoft Explorer as their browser.

About CME

CME, through contractual arrangements with Fujian Fenzhong, a variable interest entity of the Company, operates the largest television advertising network on inter-city express buses in China. While CME has no direct equity ownership in Fujian Fenzhong, through the contractual agreements CME indirectly control the operation of Fujian Fenzhong and receives the economic benefits of Fujian Fenzhong’s operations. Fujian Fenzhong generates revenue by selling advertisements on its network of television displays installed on over 21,000 express buses originating in fourteen of China’s most prosperous regions, including the five municipalities of Beijing, Shanghai, Guangzhou, Tianjin and Chongqing and nine economically prosperous provinces, namely Guangdong, Jiangsu, Fujian, Sichuan, Hebei, Anhui, Hubei, Shandong and Shanxi which generate more than half of China’s GDP.

CME completed a share exchange with Hong Kong Mandefu Holdings Limited (“HKMDF”) on October 15, 2009. The share exchange represents a reverse acquisition involving a public blank cheque company and has been accounted for financial reporting purposes as the issuance of shares by HKMDF in exchange for the assets and liabilities of the Company, accompanied by a recapitalization. As a result of the share exchange, HKMDF will be the continuing entity for financial reporting purposes, and will be deemed to be the accounting acquirer. Accordingly, the accompanying consolidated financial information of the Company prior to the share exchange reflects the results, assets and liabilities of HKMDF whereas the assets and liabilities are recorded at their carrying amounts. In addition, HKMDF’s shares and earnings per share have been restated retroactively to reflect the share exchange ratio as at the date of the share exchange in a manner similar to a recapitalization.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”), as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about:

  • The Company’s goals and strategies;
  • The Company’s future prospects and market acceptance of its advertising network;
  • The Company’s future business development, financial condition and results of operations;
  • Projected changes in revenue, costs, expense items, profits, earnings, and other estimated financial information;
  • The Company’s ability to manage the growth of its existing advertising network on inter-city express buses and expansion to prospective advertising network on high speed railways;
  • Trends and competition in the out-of-home advertising media market in China;
  • Changes in general economic and business conditions in China; and
  • Chinese laws, regulation and policies, including those applicable to the advertising industry.
CHINA MEDIAEXPRESS HOLDING INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands of US dollars, except for number of shares and per share data)

For the three months ended

December 31,

For the year ended

December 31,

2009 2008 2009 2008
(Unaudited) (Unaudited) (Unaudited)
Revenue $ 31,951 $ 16,766 $ 95,934 $ 62,999
Cost of revenue (9,945 ) (6,706 ) (32,937 ) (25,065 )
Gross profit 22,006 10,060 62,997 37,934
Operating expenses:
Selling expenses (1,611 ) (272 ) (3,508 ) (1,095 )
Administrative expenses (905 ) (266 ) (2,846 ) (1,718 )
Total operating expenses (2,516 ) (538 ) (6,354 ) (2,813 )
Income from operation 19,490 9,522 56,643 35,121
Interest income 43 23 113 100
Income before income tax expense 19,533 9,545 56,756 35,221
Income tax expense (5,222 ) (2,376 ) (15,045 ) (8,854 )
Net income $ 14,311 $ 7,169 $ 41,711 $ 26,367
Earnings per share:
Basic $ 0.61 $ 0.34 $ 1.93 $ 1.26
Diluted $ 0.49 $ 0.34 $ 1.81 $ 1.26
Weighted average number of ordinary shares used in calculating:
Basic 23,541,995 20,915,000 21,587,953 20,915,000
Diluted 29,136,748 20,915,000 22,998,138 20,915,000
CHINA MEDIAEXPRESS HOLDING INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of US dollars)

December 31,

2009

December 31,

2008

ASSETS (Unaudited)
Current assets:
Cash $ 57,151 $ 29,997
Accounts receivable 12,569 6,065
Prepaid expenses and other current assets 251 59
Total current assets $ 69,971 $ 36,121
Non-current assets:
Property and equipment, net $ 11,065 $ 11,417
Deferred tax assets 1,943 1,578
Total non-current assets 13,008 12,995
TOTAL ASSETS $ 82,979 $ 49,116
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 2,179 $ 1,565
Amounts due to related parties 13,315 798
Payables for acquisitions of equipment 2,071 1,072
Income tax payable 5,765 3,072
Accrued expenses and other current liabilities 4,144 1,301
Accrued concession fees – current 1,134
Total current liabilities $ 28,608 $ 7,808
Non-current liabilities:
Accrued severance payment $ $ 307
Accrued concession fees – non-current 6,639 6,005
Total non-current liabilities $ 6,639 $ 6,312
Total liabilities $ 35,247 $ 14,120
Total shareholders’ equity $ 47,732 $ 34,996
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 82,979 $ 49,116
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Tuesday, March 23rd, 2010 Uncategorized
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