XFMedia Announces Financial Results for the Full Year and Fourth Quarter 2007
XFMedia Announces Financial Results for the Full Year and Fourth Quarter 2007
BEIJING, Feb. 13 /Xinhua-PRNewswire-FirstCall/ -- Xinhua Finance Media Limited ("XFMedia" or "the Company"; Nasdaq: XFML), a leading media group in China, today announced its unaudited financial results for the full year and fourth quarter ended December 31, 2007.
Full Year 2007 Highlights
The following is a summary of our financial results for the full year ended Dec 31, 2007:
Chart 1: Summary of full year 2007 and 2006 results 12 months ended 12 months ended Growth In US millions Dec 31, 2007 Dec 31, 2006 % Net revenue 134.8 59.0 129 % EBITDA* 43.2 15.3 182 % Net Income 28.0 3.3 738 % Adjusted net income* 37.9 9.2 310 % * Please refer to Chart 19 for details of calculation of EBITDA and adjusted net income. -- Excluding contribution of US$29.9 million from acquisitions completed in 2007, net revenue for full year 2007 was US$104.9 million, up 78% year-over-year. -- EBITDA (non-GAAP), defined as earnings before interest expense, taxes, depreciation, amortization of intangible assets and share-based compensation expenses, for full year 2007 was $43.2 million, up 182% from $15.3 million in full year 2006. -- Net income for full year 2007 was $28.0 million, up 738% from $3.3 million in full year 2006. -- Adjusted net income (non-GAAP), defined as net income before amortization of intangible assets, imputed interest, share-based compensation expenses and one time items, for full year 2007 was $37.9 million, up 310% from $9.2 million in full year 2006.
Net income and adjusted net income per ADS and per share for the full year 2007 are shown in the following table:
Chart 2: Net income and adjusted net income per ADS and per share for 2007 and 2006 12 months ended 12 months ended In US dollars Dec 31, 2007 Dec 31, 2006 Net income (loss) per ADS - basic 0.46 (0.17) Net income (loss) per ADS - diluted 0.42 (0.17) Adjusted net income per ADS - basic 0.63 0.07 Adjusted net income per ADS - diluted 0.56 0.07 Net income (loss) per share - basic 0.23 (0.08) Net income (loss) per share - diluted 0.21 (0.08) Adjusted net income per share - basic 0.31 0.04 Adjusted net income per share - diluted 0.28 0.04 Note: Weighted average number of ADS - basic: 58.2 million (2006: 24.9 million); weighted average number of ADS - diluted: 68.2 million (2006: 24.9 million); weighted average number of share - basic: 116.4 million (2006: 49.8 million); weighted average number of share - diluted: 136.4 million (2006: 49.8 million). Fourth Quarter 2007 Highlights
The following is a summary of our financial results for the fourth quarter of 2007:
Chart 3: Summary of 2006 fourth quarter and 2007 fourth and third quarter results 3 months 3 months 3 months ended ended ended 07Q4 vs 07Q4 vs Dec 31, 2007 Dec 31, Sep 30, 2007 06Q4 07Q3 In US millions 2006 Growth % Growth % Net revenue 48.5 24.1 40.7 101 % 19 % EBITDA* 13.4 7.5 14.7 79 % -9 % Net income 4.2 3.1 9.0 34 % -54 % Adjusted net income* 9.7 5.6 13.6 75 % -28 % * Please refer to Chart 19 for details of calculation of EBITDA and adjusted net income. -- Net revenue for the fourth quarter of 2007 was $48.5 million, up 101% year-over-year from $24.1 million in the fourth quarter of 2006 or up 19% sequentially from $40.7 million in the third quarter of 2007. Excluding fourth quarter contribution of $17.1 million from acquisitions completed in 2007, net revenue was $31.4 million, up 30% year-over-year and 7% sequentially. -- EBITDA (non-GAAP), defined as earnings before interest expense, taxes, depreciation, amortization of intangible assets and share-based compensation expenses, for the fourth quarter of 2007 was $13.4 million, up 79% year-over-year from $7.5 million in the fourth quarter of 2006 or down 9% sequentially from $14.7 million in the third quarter of 2007. -- Net income for the fourth quarter of 2007 was $4.2 million, up 34% year-over-year from $3.1 million in the fourth quarter of 2006 or down 54% sequentially from $9.0 million in the third quarter of 2007. -- Adjusted net income (non-GAAP), defined as net income before amortization of intangible assets, imputed interest, share-based compensation expenses and one-time items, for the fourth quarter of 2007 was $9.7 million, up 75% year-over-year from $5.6 million in the fourth quarter of 2006 or down 28% sequentially from $13.6 million in the third quarter of 2007. -- The sequential drop in EBITDA, Net Income and Adjusted net income from 3rd quarter to 4th quarter 2007 was mainly due to three reasons. The first reason is an increase in expenditures to support key projects won in Advertising, Broadcast, and Production. The second reason is an increase in administrative costs, including higher legal and professional fees for Sarbanes-Oxley implementation and higher than expected auditing fees due to new acquisitions. The third main reason is an impact to our Print Group due to a PRC policy reversal that affected our Hong Kong-based advertising activities in newspapers and magazines in the fourth quarter.
Net income and adjusted net income per ADS and per share for the fourth and third quarter 2007 are shown in the following table:
Chart 4: Net income and adjusted net income per ADS and per share for fourth and third quarter of 2007 3 months ended 3 months ended In US dollars Dec 31, 2007 Sep 30, 2007 Net income per ADS - basic 0.06 0.14 Net income per ADS - diluted 0.06 0.13 Adjusted net income per ADS - basic 0.15 0.21 Adjusted net income per ADS - diluted 0.14 0.19 Net income per share - basic 0.03 0.07 Net income per share - diluted 0.03 0.06 Adjusted net income per share - basic 0.08 0.11 Adjusted net income per share - diluted 0.07 0.10 Note: Weighted average number of ADS - basic: 64.8 million (3Q07: 63.5 million); weighted average number of ADS - diluted: 72.1 million (3Q07: 71.1 million); weighted average number of share - basic: 129.6 million (3Q07: 126.9 million); weighted average number of share - diluted: 144.2 million (3Q07: 142.3 million).
"We are pleased to report strong financial results for the full year of 2007. This year, we have achieved a number of significant milestones. We successfully took the company public in March raising net proceeds of $200 million. We acquired key advertising assets which gave us market leadership positions in a number of key areas, such as online real estate advertising and imported spirits below-the-line marketing, which specifically target the upwardly mobile demographic," said Fredy Bush, XFMedia's CEO.
"We are well positioned to capture the largest segment of advertising dollars spent in China, which is in traditional media such as television, radio, newspapers, magazines, and outdoor advertising. Out of the $25 billion for China's advertising expenditure in 2007, 94% or $23 billion was estimated to be in traditional media, with $18 billion in television alone. We expect that this concentration is unlikely to change significantly over the coming years."
She added, "In 2008, our key areas of focus and opportunity will come from television, print and outdoor, where we derive some of our highest margins today. We will further strengthen our leadership position in China to capitalize on these opportunities and we look forward to our continued expansion."
Mr. Andrew Chang, CFO, also noted, "2007 has been a pivotal year for the Company from both an operational and financial standpoint. We have achieved year-on-year growth of 129% compared to full year 2006, or 78% excluding contribution from acquisitions completed in 2007. Along with continued expansion in 2008, we will be focused on integration of our businesses, Sarbanes-Oxley Act compliance, and diversifying the capital structure of the Company to support our development."
Full Year and Fourth Quarter 2007 Financial Results
Net revenue for full year 2007 was $134.8 million, up 129% from $59.0 million in full year 2006. Net revenue for the fourth quarter of 2007 was $48.5 million, up 101% year-over-year from $24.1 million in the fourth quarter of 2006 or up 19% sequentially from $40.7 million in the third quarter of 2007.
The following table summarizes revenue contributed from existing businesses and acquisitions made in 2007:
Chart 5: Summary of contributions from existing business and acquisitions 3 months 3 months 3 months 3 months 12 months ended ended ended ended ended In US Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, millions 2007 2007 2007 2007 2007 Net revenue: Existing business 16.6 27.5 29.4 31.4 104.9 Acquisitions -- 1.5 11.3 17.1 29.9 Total net revenue 16.6 29.0 40.7 48.5 134.8 Net Revenue by type and business group
The following is a summary of net revenue by business group reconciled to types of revenue provided in the accompanying consolidated financial statements for full year 2007:
Chart 6: Net revenue by types and business group for full year 2007 In US millions Advertising Broadcast Print Production Research Total Net revenue: Advertising services 66.0 9.9 5.7 -- 5.0 86.6 Content production -- -- -- 7.7 -- 7.7 Advertising sales 8.1 18.3 12.9 -- -- 39.3 Publishing services -- -- 1.2 -- -- 1.2 Total net revenue 74.1 28.2 19.8 7.7 5.0 134.8
The following is a summary of net revenue by business group reconciled to types of revenue provided in the accompanying consolidated financial statements for the fourth quarter of 2007:
Chart 7: Net revenue by types and business group for the fourth quarter of 2007 In US millions Advertising Broadcast Print Production Research Total Net revenue: Advertising services 24.7 5.5 1.1 -- 1.2 32.5 Content production -- -- -- 1.8 -- 1.8 Advertising sales 4.3 5.6 3.9 -- -- 13.8 Publishing services -- -- 0.4 -- -- 0.4 Total net revenue 29.0 11.1 5.4 1.8 1.2 48.5 Advertising Group
Net revenue for the Advertising Group for full year 2007 was $74.1 million, up 108% from $35.6 million in full year 2006. Net revenue for the Advertising Group for the fourth quarter of 2007 was $29.0 million, up 109% year-over-year from $13.8 million in the fourth quarter of 2006 or up 28% sequentially from $22.6 million in the third quarter of 2007.
We completed the acquisition of JCBN Company Limited ("JCBN") on November 27, 2007. JCBN contributed $1.1 million in post-acquisition net revenue for the full year and fourth quarter of 2007. The acquisition of JCBN strengthens XFMedia's advertising capabilities in Shanghai and Southern China, and increases our expertise in online real-estate advertising and Below-the-Line ("BTL") marketing in high-end imported spirits.
Chart 8: Revenue breakdown of the Advertising Group 12 months 12 months 3 months 3 months ended ended ended ended Dec 31, Dec 31, Growth Dec 31, Dec 31, Growth In US millions 2007 2006 % 2007 2006 % Advertising: Television 14.1 8.5 67 % 4.6 2.5 80 % Outdoor/Other 17.0 11.3 50 % 6.1 4.5 34 % Print/Online 33.1 15.8 109 % 12.8 6.8 89 % BTL Marketing 9.9 -- -- 5.5 -- -- Subtotal: 74.1 35.6 108 % 29.0 13.8 109 % 3 months ended 3 months ended Growth In US millions Dec 31, 2007 Sep 30, 2007 % Advertising: Television 4.6 3.8 22 % Outdoor/Other 6.1 5.7 7 % Print/Online 12.8 9.5 35 % BTL Marketing 5.5 3.6 51 % Subtotal: 29.0 22.6 28 % Note: For full year 2007, year on year growth was 108%, or 55% excluding contribution from acquisitions completed in 2007. Broadcast Group
Net revenue for the Broadcast Group for full year 2007 was $28.2 million, up 1914% from $1.4 million in full year 2006. Net revenue for the Broadcast Group for the fourth quarter of 2007 was $11.1 million, up 814% year-over-year from $1.2 million in the fourth quarter of 2006 or up 28% sequentially from $8.7 million in the third quarter of 2007.
Chart 9: Revenue breakdown of the Broadcast Group 12 months 12 months 3 months 3 months ended ended ended ended Dec 31, Dec 31, Growth Dec 31, Dec 31, Growth In US millions 2007 2006 % 2007 2006 % Broadcast: Television 13.3 0.9 1447 % 3.7 0.7 447 % Radio 5.6 0.5 930 % 2.1 0.5 290 % Mobile 9.3 -- -- 5.3 -- -- Subtotal: 28.2 1.4 1914 % 11.1 1.2 814 % 3 months 3 months ended ended Growth In US millions Dec 31, 2007 Sep 30, 2007 % Broadcast: Television 3.7 3.5 7 % Radio 2.1 1.9 13 % Mobile 5.3 3.3 59 % Subtotal: 11.1 8.7 28 % Note: For full year 2007, year on year growth was 1914%, or 1133% excluding contribution from acquisitions completed in 2007. Print Group
Net revenue for the Print Group for full year 2007 was $19.8 million, up 45% from $13.6 million in full year 2006. Net revenue for the Print Group for the fourth quarter of 2007 was $5.4 million, down 2% year-over-year from $5.5
million in the fourth quarter of 2006 or down 9% sequentially from $6.0 million in the third quarter of 2007.
The year-over-year and sequential decrease was mainly due to a policy reversal in the fourth quarter. In August 2007, the PRC government announced that a new PRC regulation allowing certain Chinese citizens to invest directly in Hong Kong's capital markets would soon take effect. As a result, certain clients of our Print Group had scheduled advertising and marketing activities for the fourth quarter. In October 2007, the PRC government announced that the enactment of the regulation would be delayed, which led to the cancellation of these advertising and marketing activities.
Chart 10: Revenue breakdown of the Print Group 12 12 3 3 months months months months ended ended ended ended In US Dec 31, Dec 31, Growth Dec 31, Dec 31, Growth millions 2007 2006 % 2007 2006 % Print: Newspaper 9.3 4.6 101 % 2.6 2.4 11 % Magazines 10.5 9.0 17 % 2.8 3.1 (11)% Subtotal: 19.8 13.6 45 % 5.4 5.5 (2)% 3 months ended 3 months ended In US millions Dec 31, 2007 Sep 30, 2007 Growth % Print: Newspaper 2.6 2.6 4 % Magazines 2.8 3.4 (18)% Subtotal: 5.4 6.0 (9)% Production Group
Net revenue for the Production Group for full year 2007 was $7.7 million, up 17% from $6.5 million in full year 2006. Net revenue for the Production Group for the fourth quarter of 2007 was $1.8 million, down 27% year-over-year from $2.4 million in the fourth quarter of 2006 or down 14% sequentially from $2.1 million in the third quarter of 2007. The year-over-year and sequential decrease was primarily due to seasonality of distribution of TV drama series.
Research Group
Net revenue for the Research Group for full year 2007 was $5.0 million, up 180% from $1.8 million in full year 2006. The increase was due to full year revenue contribution in 2007 of the research business which was acquired in August 2006. Net revenue for the Research Group for the fourth quarter of 2007 was $1.2 million, up 8% year-over-year from $1.1 million in the fourth quarter of 2006 or down 19% sequentially from $1.4 million in the third quarter of 2007. The sequential decrease was primarily due to seasonality.
Cost of Revenue
Cost of revenue for full year 2007 was $82.1 million, up 143% from $33.8 million in full year 2006. Adjusted cost of revenue (non-GAAP), defined as cost of revenue before amortization of intangible assets, was $70.6 million, up 121% from $31.9 million in full year 2006. Cost of revenue for the fourth quarter of 2007 was $29.9 million, up 134% year-over-year from $12.8 million in the fourth quarter of 2006 or up 28% sequentially from $23.3 million in the third quarter of 2007. Adjusted cost of revenue (non-GAAP), for the fourth quarter of 2007 was $26.8 million, up 124% year-over-year from $12.0 million in the fourth quarter of 2006 or up 31% sequentially from $20.4 million in the third quarter of 2007.
Chart 11: Reconciliation for adjusted cost of revenue by business group for full year 2007 In US millions Advertising Broadcast Print Production Research Total Cost of revenue 50.8 20.3 4.6 3.7 2.7 82.1 Amortization of intangible assets from acquisitions (0.8) (4.4) (0.6) -- -- (5.8) Amortization of intangible assets from long-term contracts -- (4.8) (0.9) -- -- (5.7) Adjusted cost of revenue 50.0 11.1 3.1 3.7 2.7 70.6 Chart 12: Reconciliation for adjusted cost of revenue by business group for the fourth quarter of 2007 In US millions Advertising Broadcast Print Production Research Total Cost of revenue 20.0 7.5 1.1 0.8 0.5 29.9 Amortization of intangible assets from acquisitions (0.3) (1.5) (0.2) -- -- (2.0) Amortization of intangible assets from long-term contracts -- (1.0) (0.1) -- -- (1.1) Adjusted cost of revenue 19.7 5.0 0.8 0.8 0.5 26.8 Operating Expenses
Operating expenses for full year 2007 were $39.2 million, up 117% from $18.1 million in full year 2006. Operating expenses for the fourth quarter of 2007 were $12.5 million, up 86% year-over-year from $6.7 million in the fourth quarter of 2006 or up 13% sequentially from $11.1 million in the third quarter of 2007.
Total operating expenses were composed of selling and marketing expenses and general and administrative expenses. Selling and marketing expenses for full year 2007 were $14.9 million, up 182% from $5.3 million in full year 2006. Selling and marketing expenses for the fourth quarter of 2007 were $5.8 million, up 199% year-over-year from $1.9 million in the fourth quarter of 2006 or up 34% sequentially from $4.3 million in the third quarter of 2007.
General and administrative expenses for full year 2007 were $24.3 million, up 90% from $12.8 million in full year 2006. General and administrative expenses for the fourth quarter of 2007 were $6.7 million, up 40% year-over- year from $4.8 million in the fourth quarter of 2006 or down 1% sequentially from $6.8 million in the third quarter of 2007. Included in the general and administrative expenses for the full year and fourth quarter 2007 were share- based compensation expenses of $3.1 million and $0.6 million, respectively.
EBITDA (non-GAAP)
EBITDA (non-GAAP), defined as earnings before interest expense, taxes, depreciation, amortization of intangible assets and share-based compensation expenses, for full year 2007 was $43.2 million, up 182% from $15.3 million in full year 2006.
Chart 13: EBITDA by business group for full year 2007 In US millions Advertising Broadcast Print Production Research Total EBITDA by business group 18.0 13.0 11.0 3.0 1.2 46.2 Less: net head office expenses (3.0) EBITDA 43.2 Chart 14: Reconciliation of income from operations to EBITDA for full year 2007 and 2006 12 months 12 months ended ended In US millions Dec 31, 2007 Dec 31, 2006 Income from operations 15.8 7.1 Interest income 6.3 1.7 Other income, net 1.7 -- Depreciation 1.8 0.6 Amortization of intangible assets from acquisitions 8.9 3.1 Amortization of intangible assets from long-term contracts 5.6 0.4 Share-based compensation expenses 3.1 2.4 EBITDA 43.2 15.3
EBITDA for the fourth quarter of 2007 was $13.4 million, up 79% year-over- year from $7.5 million in the fourth quarter of 2006 or down 9% sequentially from $14.7 million in the third quarter of 2007.
Chart 15: EBITDA by business group for the fourth quarter of 2007 In US millions Advertising Broadcast Print Production Research Total EBITDA by business group 7.1 4.9 2.9 0.8 0.2 15.9 Less: net head office expenses (2.5) EBITDA 13.4 Chart 16: Reconciliation from income from operations to EBITDA for the fourth and third quarter of 2007 3 months ended 3 months ended In US millions Dec 31, 2007 Sep 30, 2007 Income from operations 6.0 6.2 Interest income 1.5 2.4 Other income, net 0.8 0.7 Depreciation 0.6 0.6 Amortization of intangible assets from acquisitions 2.7 3.1 Amortization of intangible assets from long-term contracts 1.2 1.2 Share-based compensation expenses 0.6 0.5 EBITDA 13.4 14.7
The sequential drop in EBITDA from 3rd quarter to 4th quarter 2007 was mainly due to three reasons. The first reason is an increase in expenditures to support key projects won in Advertising, Broadcast, and Production. The second reason is an increase in administrative costs, including higher legal and professional fees for Sarbanes-Oxley implementation and higher than expected auditing fees due to new acquisitions. The third main reason is an impact to our Print Group due to a PRC policy reversal that affected our Hong Kong-based advertising activities in newspapers and magazines in the fourth quarter.
Net Income and Adjusted Net Income (non-GAAP)
Net income for full year 2007 was $28.0 million, up 738% from $3.3 million in full year 2006. Net income for the fourth quarter of 2007 was 4.2 million, up 34% year-over-year from $3.1 million in the fourth quarter of 2006 or down 54% sequentially from $9.0 million in the third quarter of 2007.
Adjusted net income (non-GAAP), defined as net income before amortization of intangible assets, imputed interest, share-based compensation expenses and one time items, for full year 2007 was $37.9 million, up 310% from $9.2 million in full year 2006.
Chart 17: Reconciliation from net income to adjusted net income for full year 2007 and 2006 12 months ended 12 months ended In US millions Dec 31, 2007 Dec 31, 2006 Net income 28.0 3.3 One time items (13.6) -- Amortization of intangible assets from acquisitions 8.9 3.1 Amortization of intangible assets from long-term contracts 5.6 0.4 Share-based compensation expenses 3.1 2.4 Imputed interest 5.9 -- Adjusted net income 37.9 9.2
Adjusted net income (non-GAAP) for the fourth quarter of 2007 was $9.7 million, up 75% year-over-year from $5.6 million in the fourth quarter of 2006 or down 28% sequentially from $13.6 million in the third quarter of 2007.
Chart 18: Reconciliation from net income to adjusted net income for fourth and third quarter 2007 3 months ended 3 months ended In US millions Dec 31, 2007 Sep 30, 2007 Net income 4.2 9.0 One time items -- (1.3) Amortization of intangible assets from acquisitions 2.7 3.1 Amortization of intangible assets from long-term contracts 1.2 1.2 Share-based compensation expenses 0.6 0.5 Imputed interest 1.0 1.1 Adjusted net income 9.7 13.6
The sequential drop in Net Income and Adjusted Net Income from 3rd quarter to 4th quarter 2007 was mainly due to three reasons. The first reason is an increase in expenditures to support key projects won in Advertising, Broadcast, and Production. The second reason is an increase in administrative costs, including higher legal and professional fees for Sarbanes-Oxley implementation and higher than expected auditing fees due to new acquisitions. The third main reason is an impact to our Print Group due to a PRC policy reversal that affected our Hong Kong-based advertising activities in newspapers and magazines in the fourth quarter.
Recent Development
On January 23, 2008 our Board approved the grant of up to 5,588,000 shares (equivalent to 2,794,000 ADS) to certain executives and employees of the
Company over the next three years, subject to meeting certain performance targets.
Outlook for 2008
XFMedia estimates its total revenue for full year 2008 to range from US$190 to 200 million. First quarter revenue is expected to be US$25 to 30 million. This forecast reflects XFMedia's current and preliminary view, which is subject to change.
Conference Call Information
Following the earnings announcement, XFMedia's senior management will host a conference call on February 13, 2008 at 7:00pm (New York) / February 14, 2008 at 8:00am (Beijing) to review the results and discuss recent business activities.
Interested parties may dial into the conference call at: (US) +1-480-629- 1990, (UK) +44-20-8515-2301, (Asia Pacific) +852-3009-5027
A telephone replay will be available shortly after the call for one week at: (US) +1-303-590-3030 (Passcode: 3837590#), (UK) +44-207-154-2833 (Passcode: 3837590#), (Asia Pacific) +852-2287-4304 (Passcode: 138110#)
A real-time webcast and replay will be also available at: http://www.xinhuafinancemedia.com/earnings
About XFMedia
Xinhua Finance Media ("XFMedia"; Nasdaq: XFML) is a leading media group in China with nationwide access to the upwardly mobile demographic. Through its five synergistic business groups, Advertising, Broadcast, Print, Production and Research, XFMedia offers a total solution empowering clients at every stage of the media process and connecting them with their target audience. Its unique platform covers a wide range of media assets, including television, radio, newspaper, magazine, outdoor, online and other media assets.
Headquartered in Beijing, the company has offices and affiliates in major cities of China including Beijing, Shanghai, Guangzhou, Shenzhen and Hong Kong. For more information, please visit http://www.xinhuafinancemedia.com/ .
Safe Harbor
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the outlook for fourth quarter and full year 2007 and quotations from management in this announcement, as well as XFMedia's strategic and operational plans, contain forward-looking statements. XFMedia may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about XFMedia's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward- looking statement, including but not limited to the following: our growth strategies; our future business development, results of operations and financial condition; our ability to attract and retain customers; competition in the Chinese advertising and media market; changes in our revenues and certain cost or expense items as a percentage of our revenues; the outcome of ongoing, or any future, litigation or arbitration, including those relating to copyright and other intellectual property rights; the expected growth of the Chinese advertising and media market; and Chinese governmental policies relating to advertising and media. Further information regarding these and other risks is included in our registration statement on Form F-1, as amended, filed with the Securities and Exchange Commission. XFMedia does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
Non-GAAP Financial Measures
To supplement XFMedia's consolidated financial results under U.S. GAAP, XFMedia also provides the following non-GAAP financial measures: adjusted cost of revenue, EBITDA and adjusted net income. XFMedia believes that these non- GAAP financial measures provide investors with another method for assessing XFMedia's underlying operational and financial performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial results under U.S. GAAP. For more information on these non-GAAP financial measures, please refer to Chart 19 of this release. To provide investors with a better understanding of our underlying operational and financial performance, starting from this quarter, XFMedia has changed the methodology of presenting "adjusted net income", by defining adjusted net income as net income excluding amortization of intangible assets, imputed interest, share-based compensation and one-time items.
XFMedia believes these non-GAAP financial measures are useful to management and investors in assessing the performance of the Company and assists management in its financial and operational decision making. A limitation of using non-GAAP measures which exclude share-based compensation expenses is that share-based compensation expenses have been and will continue to be a significant recurring expense in our business. A limitation of using non-GAAP adjusted cost of revenue, EBITDA and adjusted net income is that they do not include all items that impact our net income for the period. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.
The following is a reconciliation of our non-GAAP financial results: Chart 19: Reconciliation of non-GAAP financial results 3 3 3 12 12 months months months months months ended ended ended ended ended Dec 31, Dec 31, Sep 30, Dec 31, Dec 31, In US millions 2007 2006 2007 2007 2006 Income from operations 6.0 4.6 6.2 15.8 7.1 Interest income(1) 1.5 0.4 2.4 6.3 1.7 Other income, net 0.8 (0.3) 0.7 1.7 - Depreciation 0.6 0.3 0.6 1.8 0.6 Amortization of intangible assets from acquisitions 2.7 1.1 3.1 8.9 3.1 Amortization of intangible assets from long-term contracts 1.2 0.2 1.2 5.6 0.4 Share-based compensation expenses 0.6 1.2 0.5 3.1 2.4 EBITDA 13.4 7.5 14.7 43.2 15.3 Net income 4.2 3.1 9.0 28.0 3.3 One time items(2)(3) -- -- (1.3) (13.6) -- Amortization of intangible assets from acquisitions 2.7 1.1 3.1 8.9 3.1 Amortization of intangible assets from long-term contracts 1.2 0.2 1.2 5.6 0.4 Share-based compensation 0.6 1.2 0.5 3.1 2.4 expenses Imputed interest 1.0 -- 1.1 5.9 -- Adjusted net income 9.7 5.6 13.6 37.9 9.2 (1) Historically, the Company has included interest income in line with the methodology employed by the Company's parent. Beginning in 1Q08, interest income will no longer be included in the calculation of EBITDA. (2) We changed the methodology for presenting adjusted net income in 3Q07 by including one-time items such that it is consistent with full year presentation. There is a one-time adjustment of $1.3 million, representing reversal of the imputed interest taken in the first half of 2007 (the imputed interest for the first quarter and second quarter of 2007 were $0.6 million and $0.6 million respectively) as a result of clarification of terms of one of our exclusive radio advertising agreements. (3) The one time item of $12.3 million in 2007 represents deferred tax effect arising from the reduction of income tax rate from 33% to 25%, which became effective on January 1, 2008, for all domestic companies and foreign invested enterprises in the People's Republic of China. Condensed Consolidated Balance Sheets (In U.S. dollars) Dec 31,2007 Dec 31,2006 Unaudited (Note 1) Assets Current assets: Cash 44,436,087 36,353,547 Restricted cash (Note 2) 47,252,191 12,579,822 Accounts receivable (Note 3) 45,706,766 17,403,632 Prepaid program expenses 5,389,250 8,597,935 Other current assets 16,272,798 22,114,480 Total current assets 159,057,092 97,049,416 Content production deposit and cost, net 8,855,896 5,854,271 Property and equipment, net 9,191,959 4,367,329 Intangible assets, net (Note 4) 233,505,913 176,201,528 Goodwill 180,125,488 83,670,010 Investment 500,000 500,000 Marketable securities (Note 5) 24,909,929 -- Deposits for acquisition of subsidiaries 25,634,000 29,246,500 Deposits for acquisition of intangible asset -- 2,561,246 Other long-term asset 9,021,936 -- Total assets 650,802,213 399,450,300 Liabilities and shareholders' equity Current liabilities: Bank borrowings 33,780,188 11,218,256 Bank overdrafts 960,157 -- Other current liabilities 40,542,213 163,848,633 Total current liabilities 75,282,558 175,066,889 Deferred tax liabilities 37,741,579 41,168,035 Convertible loan -- 14,017,289 Long term payables, non-current portion 69,081,763 64,937,958 Total liabilities 182,105,900 295,190,171 Minority Interests 2,060,745 3,010,407 Shareholders' equity: Class A common shares and nonvested shares (par value $0.001; 69,035,751 as of December 31, 2006 and 143,822,874 as of December 31, 2007 shares authorized; 32,011,154 as of December 31, 2006 and 90,061,269 as of December 31, 2007 shares issued and outstanding) 90,061 32,011 Class B common shares (par value $0.001; 50,054,619 as of December 31, 2006 and December 31, 2007 shares authorized; 50,054,618 as of December 31, 2006 and December 31, 2007 shares issued and outstanding) 7,442 7,442 Convertible preferred shares (par value $0.001;15,600,000 as of December 31, 2006 shares authorized; 15,585,254 as of December 31, 2006 shares issued and outstanding and nil as of December 31, 2007 shares issued and outstanding) -- 15,585 Additional paid-in capital 439,516,974 103,155,391 Retained earnings (deficits) 23,903,560 (2,797,112) Accumulated other comprehensive income 3,117,531 836,405 Total shareholders' equity 466,635,568 101,249,722 Total 650,802,213 399,450,300 Condensed Consolidated Statements of Operations 3 months 3 months 3 months 12 months 12 months ended ended ended ended ended Dec 31, Dec 31, Sep 30, Dec 31, Dec 31, (in U.S. Dollars) 2007 2006 2007 2007 2006 Unaudited Unaudited Unaudited Unaudited Unaudited Net revenues: Advertising services 32,427,419 18,226,917 26,012,979 86,681,143 44,861,952 Content production 1,776,291 2,432,740 2,073,675 7,680,580 6,545,148 Advertising sales 13,834,490 3,292,596 12,346,672 39,281,540 6,691,543 Publishing services 436,503 143,827 291,072 1,195,427 867,789 Total net revenues 48,474,703 24,096,080 40,724,398 134,838,690 58,966,432 Cost of revenues: Advertising services 22,137,944 10,280,107 16,509,981 58,047,996 27,653,769 Content production 593,496 915,137 1,504,931 3,707,062 2,829,311 Advertising sales 6,922,148 1,453,113 5,048,937 19,490,013 1,912,260 Publishing services 238,480 131,709 283,714 854,020 1,386,162 Total cost of revenues 29,892,068 12,780,066 23,347,563 82,099,091 33,781,502 Operating expenses: Selling and distribution 5,794,457 1,939,847 4,337,558 14,876,682 5,276,751 General and Administra- tive 6,740,401 4,797,476 6,791,370 24,348,827 12,840,202 Total operating expenses 12,534,858 6,737,323 11,128,928 39,225,509 18,116,953 Other operating income (Note 6) -- -- -- 2,261,788 -- Income from operations 6,047,777 4,578,691 6,247,907 15,775,878 7,067,977 Other income (expenses) (Note 7) (660,440) (807,068) 2,787,286 1,340,111 (897,651) Income before provision for income taxes and minority interest 5,387,337 3,771,623 9,035,193 17,115,989 6,170,326 Provision for income taxes (Note 8) 719,289 643,549 (232,016)(12,225,650) 1,069,537 Net income before minority interest 4,668,048 3,128,074 9,267,209 29,341,639 5,100,789 Minority interest 510,928 27,012 229,467 1,302,634 1,704,287 Equity in loss of an investment -- -- -- -- 52,211 Net income 4,157,120 3,101,062 9,037,742 28,039,005 3,344,291 Dividend on redeemable convertible preferred shares -- 1,686,667 -- 1,338,333 7,492,301 Net income (loss) attributable to holders of common shares 4,157,120 1,414,395 9,037,742 26,700,672 (4,148,010) Net income per share: Basic - Common shares 0.032 0.022 0.071 0.229 (0.083) Basic - American Depositary Shares 0.064 0.043 0.142 0.459 (0.167) Diluted - Common shares 0.029 0.022 0.064 0.208 (0.083) Diluted - American Depositary Shares 0.058 0.043 0.127 0.415 (0.167) Condensed Consolidated Statements of Cash Flows 3 months 3 months 3 months 12 months 12 months ended ended ended ended ended Dec 31, Dec 31, Sep 30, Dec 31, Dec 31, (in U.S. Dollars) 2007 2006 2007 2007 2006 Unaudited Unaudited Unaudited Unaudited Unaudited Net cash provided by/(used in) operating activities 14,696,170 (4,827,720) 1,550,989 20,293,223 (4,462,569) Net cash provided by/(used in) investing activities (43,368,652) 38,702,512 (9,536,253)(164,921,628)(32,214,271) Net cash provided by/(used in) financing activities (3,165,011)(10,114,980) 1,660,617 151,258,756 70,103,894 Effect of exchange rate changes 922,837 863,513 263,683 1,452,189 845,747 Net increase/ (decrease) in cash (30,914,656) 24,623,325 (6,060,964) 8,082,540 34,272,801 Cash, as at beginning of the period 75,350,743 11,730,222 81,411,707 36,353,547 2,080,746 Cash, as at end of the period 44,436,087 36,353,547 75,350,743 44,436,087 36,353,547 Notes to Financial Information (1) 2006 condensed consolidated balance sheets Information was extracted from the audited financial statements included in the prospectus on Form-1 of the Company filed with the Securities and Exchange Commission on March 8, 2007. (2) Restricted cash Restricted cash is US dollar cash deposits pledged for the RMB loan facilities granted by banks for RMB working capital purposes. (3) Accounts receivables and debtors turnover Debtors turnover for the third quarter and fourth quarter of 2007 were 92 days and 87 days respectively. Our business groups generally granted 90 days to 180 days average credit period to major customers, which is in line with the industry practices in the PRC. (4) Intangible assets Net book value for intangible assets as of December 31, 2007 was $233.5 million. It mainly represents the fair value of the long term advertising agreements for the Broadcast and Print Group. The net book value of the intangible assets were primarily composed of $98.5 million advertising license agreement for our TV business, $71.9 million exclusive advertising agreement for our newspaper business, and $7.7 million exclusive advertising agreements we entered for radio advertising operations in Shanghai, Beijing and Guangdong. We are in the process of obtaining third-party valuations of certain identifiable intangible assets for the acquisitions we completed in the third and fourth quarters and hence the net book value for intangible assets is preliminary and subject to revision once we complete the valuation exercise. (5) Marketable securities Marketable securities of $24.9 million represents investment on 100% Principal Protection Barrier Notes due on January 30, 2009. (6) Other operating income Other operating income of $2.3 million represents reimbursement of IPO related expenses by Bank of New York in the first quarter of 2007. Those expenses, all of which had been recorded in the 2006 income statement as operating expenses because they were not considered to be directly related to the sale of securities, related primarily to audit fees and fees paid to consultants during the listing process. (7) Other income (expense) Other income (expense) includes net interest income (expense) and net other income (expense). (8) Provision for income taxes Provision for income taxes include deferred tax credits of $0.7 million and $1.0 million in the third quarter and fourth quarter of 2007. For more information, please contact: Media Contact Ms. Joy Tsang Tel: +86-21-6113-5999 Email: joy.tsang@xinhuafinancemedia.com IR Contact Ms. Jennifer Chan Lyman Tel: +86-21-6113-5960 Email: jennifer.lyman@xinhuafinancemedia.com
Source: Xinhua Finance Media Limited
CONTACT: China: Joy Tsang of Xinhua Finance Media, +86-21-6113-5999, or
mobile, +86-136-2179-1577, or joy.tsang@xinhuafinancemedia.com; IR Contact:
Jennifer Chan Lyman, +86-21-6113-5960 or jennifer.lyman@xinhuafinancemedia.com
Web Site: http://www.xinhuafinancemedia.com/
Profile: International Entertainment
posted by EntertainmentNews @ 1:22 PM
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