XFMedia Announces Financial Results for the Second Quarter 2008

XFMedia Announces Financial Results for the Second Quarter 2008

BEIJING, Aug. 18 /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 second quarter ended June 30, 2008.

   Second Quarter 2008 Highlights    -- Strong year over year growth with 69% increase in net revenue to       US$48.9 million from US$29.0 million.    -- Strong year-over-year and sequential growth of 97% and 248% for       adjusted EBITDA.    -- Adjusted net income per diluted ADS exceeding previous guidance at       $0.10.    -- Company provides third quarter guidance and raises full year guidance.    

"Despite a challenging operating environment for the quarter, we are proud to announce adjusted EPS expectations above our Q2 guidance," said Ms. Fredy Bush, XFMedia's Chief Executive Officer.

"The Broadcast Group continues to deliver high margins, and we intend to further invest and expand the television business with a particular focus on sports. We believe this will be a significant driving force to our business over the next several years," Ms. Bush added.

"We expect our future growth to be driven by the expansion of our media assets and distribution channels, and the integration and coordination of such efforts across our operating groups. Our television viewer demographics are very strong and combined with our existing core competence, XFMedia today is able to penetrate a significant group of households in China, providing us with a strategic entry point to build on our advertising revenue," Ms. Bush said.

Second Quarter 2008 Financial Results

The following is a summary of our financial results for the second quarter of 2008:

   Chart 1: Summary of financial results                            3 months  3 months  3 months                             ended     ended   ended     08Q2 vs   08Q2 vs                            Jun 30,   Jun 30,  Mar 31,   07Q2      08Q1   In US millions            2008      2007    2008      growth %  growth %    Net revenue               48.9      29.0      36.7       69%      33%   Adjusted EBITDA(1)        10.7       5.4       3.1       97%     248%   Net income (loss)(2)       0.8       2.3      (8.3)     -66%      n/a   Net income (loss) per    ADS - diluted(3)           --     $0.03    $(0.13)    -100%      n/a   Adjusted net income(1)     7.6       6.3       1.4       22%     437%   Adjusted net income per    ADS - diluted(3)        $0.10     $0.09     $0.02       11%     400%      1. Please refer to Chart 8 for a detailed calculation of adjusted       EBITDA and adjusted net income.    2. The year-on-year decrease in net income is primarily due to an       increase in net interest expenses, costs for Sarbanes-Oxley       compliance, and tax expenses.    3. Please refer to Chart 9 for weighted average number of ADS on a       diluted basis. For computation of the net income per ADS and adjusted       net income per ADS and per share, dividends on convertible preference       shares of $0.2 million and $0.6 million in the first and second       quarter of 2008 respectively were taken into account.      Net Revenue  

Net revenue for the second quarter of 2008 was $48.9 million, up 69% year- over-year from $29.0 million in the second quarter of 2007, or up 33% sequentially from $36.7 million in the first quarter of 2008.

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 the second quarter of 2008.

   Chart 2: Revenue breakdown by type and business group    In US millions           Advertising    Broadcast      Print       Total    Net revenue:     Advertising services        23.7          2.0         1.1         26.8     Content production            --          2.9          --          2.9     Advertising sales            6.2          9.1         3.8         19.1     Publishing services           --           --         0.1          0.1   Total net revenue:            29.9         14.0         5.0         48.9      Advertising Group  

Net revenue for the Advertising Group for the second quarter of 2008 was $29.9 million, up 79% year-over-year from $16.7 million in the second quarter of 2007, or up 39% sequentially from $21.5 million in the first quarter of 2008.

   Chart 3: Revenue breakdown of the Advertising Group                              3 months                        3 months                  3 months    ended             3 months     ended   In US           ended     Jun 30,   Growth    ended       Mar 31,  Growth    millions    Jun 30, 2008   2007       %   Jun 30, 2008    2008      %    Advertising:     Television          --       4.8   -100%         --        --     N/A     Print/Online      12.2       6.0    105%       12.2       6.4     90%     Outdoor/Other      8.2       3.7    118%        8.2       6.5     27%     BTL Marketing      7.9       0.8    906%        7.9       7.4      6%     Research           1.6       1.5     11%        1.6       1.2     32%       Subtotal:       29.9      16.8     79%       29.9      21.5     39%      Broadcast Group  

Net revenue for the Broadcast Group for the second quarter of 2008 was $14.0 million, up 92% year-over-year from $7.2 million in the second quarter of 2007 or up 29% sequentially from $10.8 million in the first quarter of 2008.

   Chart 4: Revenue breakdown of the Broadcast Group                              3 months                      3 months                  3 months    ended             3 months    ended   In US           ended     Jun 30,   Growth    ended     Mar 31,   Growth    millions    Jun 30, 2008   2007       %   Jun 30, 2008   2008       %    Broadcast:     Television         6.5       2.3    176%        6.5       5.8     12%     Radio              2.7       1.2    132%        2.7       1.6     70%     Mobile(1)          2.5       0.7    266%        2.5       2.8    -12%     Production         2.3       3.0    -27%        2.3       0.6    291%   Subtotal:           14.0       7.2     92%       14.0      10.8     29%     1. The quarter-on-quarter decrease of Mobile business is mainly due      to seasonality and industry environment.      Print Group  

Net revenue for the Print Group for the second quarter of 2008 was $5.0 million, up 1% year-over-year from the second quarter of 2007, or up 14% sequentially from $4.4 million in the first quarter of 2008. The year-over- year decrease in the magazine group is mainly due to the regulatory environment which causes delay in launch of certain marketing events.

   Chart 5: Revenue breakdown of the Print Group                 3 months     3 months         3 months    3 months                ended         ended             ended       ended   In US        Jun 30,      Jun 30,  Growth   Jun 30,     Mar 31,   Growth    millions    2008           2007      %      2008        2008        %    Print:     Newspaper      2.7        2.2      24%       2.7         2.3     15%     Magazines      2.3        2.8     -17%       2.3         2.1     12%   Subtotal:        5.0        5.0       1%       5.0         4.4     14%      Gross Profit  

Gross profit for the second quarter of 2008 was $21.1 million, up 80% year-over-year from $11.8 million in the second quarter of 2007, or up 61% sequentially from $13.1 million in the first quarter of 2008. Adjusted gross profit (non-GAAP), defined as gross profit before amortization of intangible assets from acquisitions, for the second quarter of 2008 was $22.9 million, up 77% year-over-year from $12.9 million in the second quarter of 2007 or up 51% sequentially from $15.1 million in the first quarter of 2008. We provide adjusted gross profit to break out the amortization of intangible assets from acquisitions charged within the cost of revenue. Chart 6 provides a breakdown of adjusted gross profit by business group.

   Chart 6: Reconciliation for adjusted gross profit by business group    In US millions               Advertising  Broadcast  Print    Total    Gross Profit                     11.3        6.1       3.7     21.1   Amortization of intangible    assets from acquisitions(1)      0.2        1.4       0.2      1.8   Adjusted gross profit            11.5        7.5       3.9     22.9     1. Amortization of intangible assets from acquisitions includes assets      such as client database, brand names, and production inventory.      Operating Expenses  

Operating expenses for the second quarter of 2008 were $16.9 million, up 87% year-over-year from $9.0 million in the second quarter of 2007 or down 13% sequentially from $19.3 million in the first quarter of 2008. The year-on-year increase is mainly due to an increase in selling and marketing expenses in line with increased revenue, and costs for Sarbanes-Oxley compliance. Operating expenses were down 13% sequentially because share-based compensation expenses were mainly accounted for in the first quarter of 2008.

Total operating expenses were composed of selling and marketing expenses and general and administrative expenses. Selling and marketing expenses for the second quarter of 2008 were $5.6 million, up 76% year-over-year from $3.2 million in the second quarter of 2007, or up 8% sequentially from $5.1 million in the first quarter of 2008.

General and administrative expenses for the second quarter of 2008 were $11.3 million, up 94% year-over-year from $5.8 million in the second quarter of 2007, or down 20% sequentially from $14.1 million in the first quarter of 2008.

Adjusted EBITDA (non-GAAP)

Adjusted EBITDA (non-GAAP), defined as earnings before one time items, other income, interest income and expense, taxes, depreciation, amortization of intangible assets from acquisitions and share-based compensation expenses, for the second quarter of 2008 was $10.7 million, up 97% year-over-year from $5.4 million in the second quarter of 2007, or up 248% sequentially from $3.1 million in the first quarter of 2008. For a reconciliation to adjusted EBITDA from income from operations, refer to Chart 8.

   Chart 7: Adjusted EBITDA by business group    In US millions              Advertising   Broadcast     Print      Total    Adjusted EBITDA by business    group                             8.4        4.8        2.6        15.8   Less: net head office expenses                                      (5.1)    Adjusted EBITDA                                                     10.7      Net Income and Adjusted Net Income (non-GAAP)  

Net income for the second quarter of 2008 was $0.8 million, down 66% year- over-year from $2.3 million in the second quarter of 2007, or up sequentially from a net loss of $8.3 million in the first quarter of 2008. The primary reasons for the year-on-year decline are an increase in net interest expenses, costs for Sarbanes-Oxley compliance, and tax expenses.

Adjusted net income (non-GAAP), defined as net income before one-time items, amortization of intangible assets from acquisitions, share-based compensation expenses and imputed interest, for the second quarter of 2008 was $7.6 million, up 22% year-over-year from $6.3 million in the second quarter of 2007 or up 437% sequentially from $1.4 million in the first quarter of 2008. For a reconciliation from net income to adjusted net income, please refer to Chart 8.

Outlook for third quarter and full year of 2008

XFMedia estimates its net revenue for the third quarter of 2008 will range from $52 million to $54 million. Third quarter adjusted net income per ADS is estimated to range from $0.11 to $0.12 per diluted ADS.

XFMedia is raising its estimate of net revenue for full year 2008 to range from $198 million to $208 million, from previously forecasted range of $195 million to $205 million. Adjusted net income per ADS for full year 2008 is estimated to range from $0.33 to $0.35 per diluted ADS, from previously forecasted range of $0.31 to $0.33 per diluted ADS.

This forecast reflects XFMedia's current and preliminary view, which is subject to change.

Other Corporate Developments

Over the second quarter of 2008, the Company continued to implement its share buyback program, buying back 691,327 ADSs for $2.0 million. These shares will be canceled in accordance with Cayman company law.

Conference Call Information

Following the earnings announcement, XFMedia's senior management will host a conference call on August 18, 2008 at 8:00pm (New York) / August 19, 2008 at 8:00am (Beijing) to review the results and discuss recent business activities.

   Interested parties may dial into the conference call at:     (US) +1 800 510 0178 or +1 617 614 3450    (UK) +44 207 365 8426    (Asia Pacific) +852 3002 1672    Passcode: XFML   

A telephone replay will be available two hours after the call for one week at:

    (US Toll Free) +1 888 286 8010    (International) +1 617 801 6888    Passcode: 51232173   

A real-time webcast and replay will be also available at: http://www.xfmedia.cn/earnings-webcast

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 synergistic business groups, Broadcast, Print, and Advertising, 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.xfmedia.cn/ .

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 third quarter and full year 2008 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 annual report on Form F-20-F and other documents 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 gross profit, adjusted EBITDA and adjusted net income. XFMedia has adopted these measures "adjusted gross profit", defined as gross profit excluding amortization of intangible assets from acquisitions, "adjusted EBITDA", by defining adjusted EBITDA as earnings before one time items, other income, interest income and expense, taxes, depreciation, amortization of intangible assets from acquisitions and share-based compensation expenses, and "adjusted net income", by defining adjusted net income as net income before amortization of intangible assets from acquisitions, imputed interest, share-based compensation expenses and one-time items.

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 8 of this release.

XFMedia believes these non-GAAP financial measures are useful to management and investors in assessing the performance of the Company and assist 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 gross profit, adjusted 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 8: Reconciliation of non-GAAP financial results                                                   3 months  3 months  3 months                                                  ended     ended     ended                                                  Jun 30,   Jun 30,   Mar 31,   In US millions                                   2008      2007      2008    Income (loss) from operations                    4.3       2.8      (6.2)   One time items(1)                                0.6        --        --   Depreciation                                     0.6       0.3       0.8   Amortization of intangible assets from    acquisitions                                    3.4       1.8       3.6   Share-based compensation expenses                1.8       0.5       4.9   Adjusted EBITDA                                 10.7       5.4       3.1      Net income (loss)                                0.8       2.3     (8.3)   One time items(1)                                0.6        --       --   Amortization of intangible assets from    acquisitions                                    3.4       1.8      3.6   Share-based compensation expenses                1.8       0.5      4.9   Imputed interest                                 1.0       1.7      1.2   Adjusted net income                              7.6       6.3      1.4     1. There is a one-time adjustment of $0.6 million, representing legal      fees for class action lawsuit.      Net income and adjusted net income per ADS and per share are as follows:      Chart 9: Net income and adjusted net income per ADS and per share(1)                               3 months ended 3 months ended   3 months ended                              Jun 30, 2008  Jun 30, 2007      Mar 31, 2008    Net income (loss) per ADS    - basic                             --           $0.04          $(0.13)   Net income (loss) per ADS    - diluted                           --           $0.03          $(0.13)   Weighted average number    of ADS - basic            67.5 million    63.1 million    65.6 million   Weighted average number    of ADS - diluted          73.5 million    72.5 million    65.6 million   Adjusted net income per    ADS - basic                      $0.10          $0.10            $0.02   Adjusted net income per    ADS - diluted                    $0.10          $0.09            $0.02   Weighted average number    of ADS - basic            67.5 million    63.1 million    65.6 million   Weighted average number    of ADS - diluted          73.5 million    72.5 million    72.3 million     1. For computation of the net income per ADS and adjusted net income      per ADS and per share, dividends on convertible preference shares of      $0.2 million and $0.6 million in the first and second quarter of 2008     respectively were taken into account.      Condensed Consolidated Balance Sheets     (In U.S. dollars)                              Jun 30,2008   Dec 31,2007                                                   Unaudited       (Note 1)   Assets   Current assets:      Cash                                         57,073,797    44,436,087      Restricted cash (Note 2)                     51,704,000    47,252,191      Principal protected note (Note 3)            24,958,793            --      Accounts receivable (Note 4)                 50,117,879    45,706,766      Prepaid program expenses                      2,415,444     5,389,250      Other current assets                         21,143,068    16,272,798   Total current assets                           207,412,981   159,057,092   Content production deposit and cost, net         6,945,869     8,855,896   Property and equipment, net                      9,059,701     9,191,959   Intangible assets, net (Note 5)                224,998,272   233,505,913   Goodwill                                       245,491,520   180,125,488   Investment                                         500,000       500,000   Principal protected note (Note 3)                       --    24,909,929   Deposits for acquisition of subsidiaries                --    25,634,000   Other long-term asset                           10,007,561     9,021,936   Total assets                                   704,415,904   650,802,213    Liabilities, mezzanine equity and    shareholders' equity   Current liabilities:      Bank borrowings                              39,565,977    33,780,188      Bank overdrafts                                 757,918       960,157      Other current liabilities                    65,140,537    44,473,366   Total current liabilities                      105,464,432    79,213,711   Deferred tax liabilities                        36,035,746    37,741,579   Long term payables, non-current portion         59,491,532    65,150,610   Total liabilities                              200,991,710   182,105,900   Minority Interests                               2,612,648     2,060,745    Mezzanine equity:   Series B convertible preferred shares (par    value $0.001; 300,000 shares authorized,    issued and outstanding as of June 30, 2008)    29,450,000            --   Shareholders' equity:   Class A common shares and nonvested shares    (par value $0.001; 143,822,874 as of     December 31, 2007 and June 30, 2008     shares authorized; 90,061,269 as of     December 31, 2007 and 93,942,703 as     of June 30, 2008 shares issued and     outstanding)                                      93,943        90,061   Class B common shares (par value $0.001;    50,054,619 as of December 31, 2007    and June 30, 2008 shares authorized;    50,054,618 as of December 31, 2007 and    as of June 30, 2008 shares issued and    outstanding)                                        7,442         7,442   Additional paid-in capital                     448,473,469   439,516,974   Retained earnings                               15,586,362    23,903,560   Accumulated other comprehensive income           7,200,330     3,117,531   Total shareholders' equity                     471,361,546   466,635,568   Total liabilities, mezzanine equity and    shareholders' equity                          704,415,904   650,802,213      Condensed Consolidated Statements of Operations                               3 months ended  3 months ended  3 months ended   (in U.S. Dollars)          Jun 30, 2008    Jun 30, 2007    Mar 31, 2008                                Unaudited       Unaudited       Unaudited   Net revenue:      Advertising services       26,852,171      19,165,786      21,176,603      Content production          2,888,164       3,050,899         573,453      Advertising sales          19,006,987       6,477,426      14,738,927      Publishing services           108,924         265,422         201,224   Total net revenue             48,856,246      28,959,533      36,690,207   Cost of revenue:      Advertising services       18,781,998      12,073,200      15,697,961      Content production          1,060,419       1,341,785         442,057      Advertising sales           7,644,880       3,613,015       7,152,328      Publishing services           254,844         180,902         294,292   Total cost of revenue         27,742,141      17,208,902      23,586,638   Operating expenses:      Selling and                 5,560,512       3,165,211       5,140,842       distribution      General and       administrative            11,301,796       5,828,831      14,137,279   Total operating expenses      16,862,308       8,994,042      19,278,121   Other operating income             7,220              --              --   Income (loss) from    operations                    4,259,017       2,756,589      (6,174,552)      Other income (expenses)       (Note 6)                  (1,136,041)        (70,368)       (810,563)   Income (loss) before    provision for income taxes    and minority interest         3,122,976       2,686,221      (6,985,115)   Provision for income taxes    (Note 7)                      1,989,097         202,457       1,339,884   Net income (loss) before    minority interest             1,133,879       2,483,764      (8,324,999)   Minority interest                370,913         229,355         (44,829)   Net income (loss)                762,966       2,254,409      (8,280,170)   Dividend on convertible    preferred shares                600,000              --         200,000   Net income (loss)    attributable to holders    of common shares                162,966       2,254,409      (8,480,170)   Net income (loss) per    share:   Basic - Common Shares                 --            0.02           (0.07)   Basic - American Depositary    Shares                               --            0.04           (0.13)   Diluted - Common Shares               --            0.02           (0.07)   Diluted - American Depositary    Shares                               --            0.03           (0.13)     Condensed Consolidated Statements of Cash Flows                                     3 months        3 months                                     ended         ended     3 months ended   (in U.S. Dollars)            Jun 30, 2008    Jun 30, 2007   Mar 31, 2008                                  Unaudited       Unaudited      Unaudited   Net cash provided by/(used    in) operating activities       7,603,264          41,081     (1,554,573)   Net cash used in investing    activities                   (19,234,247)    (97,768,365)    (1,908,350)   Net cash provided by/(used    in) financing activities      (1,506,267)      2,660,996     26,418,367   Effect of exchange rate    changes                          666,271         546,121      2,153,245   Net increase/(decrease) in    cash                         (12,470,979)    (94,520,167)    25,108,689   Cash, as at beginning of    the period                    69,544,776     175,931,874     44,436,087   Cash, as at end of the    period                        57,073,797      81,411,707     69,544,776      Notes to Financial Information   1) 2007 condensed consolidated balance sheets  

Information was extracted from the audited financial statements included in Form 20-F of the Company filed with the Securities and Exchange Commission on May 19, 2008.

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) Principal protected note Principal protected note of $25.0 million represents investment on 100% Principal Protection Barrier Notes due on January 30, 2009.

4) Accounts receivables and debtors turnover Debtors turnover for the first quarter of 2008 and second quarter of 2008 were 113 days and 90 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.

5) Intangible assets

Net book value for intangible assets as of June 30, 2008 was $225.0 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 a $95.8 million advertising license agreement for our TV business, a $71.1 million exclusive advertising agreement for our newspaper business, and $9.3 million of 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 2007 and hence the net book value for intangible assets is preliminary and subject to revision once we complete the valuation exercise.

6) Other income (expenses)

Other income (expenses) includes net interest income (expense) and net other income (expense).

7) Provision for income taxes

Provision for income taxes includes deferred tax credits of $0.8 million and $1.0 million in the first quarter of 2008 and second quarter of 2008, respectively.

   For more information, please contact:    Media Contact   Ms. Joy Tsang   Tel:   +86-21-6113-5999   Email: joy.tsang@xfmedia.cn    IR Contact   Mr. Edward Liu   Tel:   +86-21-6113-5978   Email: edward.liu@xfmedia.cn  

Source: Xinhua Finance Media Limited

CONTACT: Media Contact: Joy Tsang at +86-21-6113-5999 or
joy.tsang@xfmedia.cn; IR Contact: Edward Liu at +86-21-6113-5978 or
edward.liu@xfmedia.cn

Web site: http://www.xfmedia.cn/

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Profile: International Entertainment