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Charm Communications Inc. Announces Unaudited First Quarter 2012 Results

BEIJING, May 16, 2012 /PRNewswire-Asia-FirstCall/ -- Charm Communications Inc. (NASDAQ: CHRM) ("Charm" or the "Company"), a leading advertising agency in China, today announced its unaudited financial results for the first quarter ended March 31, 2012.

First Quarter 2012 Highlights

    --  Turnover in the first quarter of 2012 grew 6.1% year over year to $210.4
        million
    --  Revenues for Charm's advertising agency business grew 44.6% year over
        year to $10.3 million in the first quarter of 2012
    --  Revenues for Charm's media investment management business declined 58.9%
        year over year to $22.2 million in the first quarter of 2012 mainly due
        to a change in the Company's media asset mixture to reduce exposure to
        regulatory risks
    --  Revenues in the first quarter of 2012, as a result of the above,
        declined 46.1% year over year to $33.5 million
    --  Gross profit for the first quarter of 2012 declined 33.7% year over year
        to $9.8 million due to lower contribution from the media investment
        management business
    --  Net income for the first quarter of 2012 declined 90.0% year over year
        to $0.8 million
    --  Non-GAAP net income, which excludes share-based compensation expenses,
        amortization of intangible assets and impairment on investments,
        declined 79.1% year over year to $1.9 million in the first quarter of
        2012
    --  Basic net income per American depositary share ("ADS") for the first
        quarter of 2012 was $0.01, compared to $0.20 for the first quarter of
        2011 and $0.38 for the fourth quarter of 2011

"We achieved robust growth in our core advertising agency business, despite the softer-than-usual advertising environment in the first quarter," said Mr. He Dang, Charm's founder, chairman and chief executive officer. "We will continue to enhance the services and capabilities of our agency services with investments in talent and infrastructure, especially in the faster-growing digital space."

"Although we reduced our exposure to satellite channels in our media business, the joint impact of macro uncertainties and regulatory changes was greater than anticipated and resulted in weaker sales. In this challenging macro environment, our goal is to minimize our short-term media inventory risk while looking opportunistically for long-term media partners, especially as media prices begin to rationalize," concluded Mr. Dang.

Mr. Wei Zhou, Charm's chief financial officer, added, "We saw solid turnover growth in our television and internet agency businesses as a result of strategic investments to enhance our services and capabilities. Looking ahead, 2012 will remain a key investment year for Charm, as talent and infrastructure remain the key building blocks to support our long-term growth."

First quarter 2012 Results

Turnover (non-GAAP)

    US$ mm                         1Q12   1Q11   4Q11     Y-o-Y % Q-o-Q%
    ------                         ----   ----   ----       ------  -----
    Total turnover (non-GAAP)           $210.4 $198.2 $254.8   6.1% -17.4%
    ------------------------            ------ ------ ------   ---  -----
    Advertising agency                  $188.2 $144.2 $189.2  30.5%  -0.5%
    ------------------                  ------ ------ ------  ----   ----
    Media investment management          $22.2  $54.0  $65.6 -58.9% -66.2%
    ---------------------------          -----  -----  ----- -----  -----
    Branding and identity services         N/A    N/A    N/A   N/A    N/A
    ------------------------------         ---    ---    ---   ---    ---

The Company uses turnover (non-GAAP), defined as total customer advertising spending placed through or with Charm, to reflect the scale of its business.

The 6.1% year-over-year increase in total turnover was mainly due to the increase in the number of advertising clients and the increase in advertising spending from existing clients. The 17.4% quarter-over-quarter decrease in turnover was largely attributed to the decline in the media investment business as well as seasonal factors.

The 30.5% year-over-year increase in the advertising agency business, or agency business, turnover was mainly due to the increase in the number of new agency clients and the increase in advertising spending from existing agency clients. The 0.5% quarter-over-quarter decline in turnover was mainly attributed to slightly weaker demand in the first quarter due to seasonal factors. In the first quarter of 2012, Charm's agency business had 160 advertisers, compared to 153 advertisers in the fourth quarter of 2011 and 140 advertisers in the first quarter of 2011.

The revenue extraction rate, which is defined as revenue divided by turnover, was 5.5% for the agency business, compared to 4.9% for the first quarter of 2011 and 6.2% for the fourth quarter of 2011. The year-over-year increase in the revenue extraction rate was mainly due to the increased advertising spending on non-CCTV media platforms, internet and satellite channels, which have a higher extraction rate. The quarter-over-quarter decrease in the revenue extraction rate was mainly due to strong, seasonal-related placements in the first quarter on China Central Television ("CCTV"), which generally has slightly lower extraction rates compared to other media platforms. Charm expects the revenue extraction rate to increase as the Company expands its full-service offerings across all media platforms under Charm Advertising and ramps up digital media offerings under Charm Interactive and Charm Click.

The 58.9% year-over-year and 66.2% quarter-over-quarter turnover decrease (equivalent to GAAP revenue) in the media investment management business, or principal media business, which operates under the Shangxing Media brand, was mainly due to the dropping of several media assets in order to modify the Company's media inventory mix and reduce risks associated with uncertainties in the satellite market following recent regulatory changes. For the first quarter of 2012, Charm had 150 advertisers for its principal media business, compared with 325 advertisers for the first quarter of 2011. The decline in advertisers is mainly due to the dropping of Hubei Provincial Economic TV, which had a large number of small advertisers.

Revenues

    US$ mm                         1Q12  1Q11  4Q11    Y-o-Y % Q-o-Q%
    ------                         ----  ----  ----      ------  -----
    Total revenues                      $33.5 $62.3 $80.3 -46.1% -58.3%
    --------------                      ----- ----- ----- -----  -----
    Advertising agency                  $10.3  $7.1 $11.7  44.6% -12.4%
    ------------------                  -----  ---- -----  ----  -----
    Media investment management         $22.2 $54.0 $65.6 -58.9% -66.2%
    ---------------------------         ----- ----- ----- -----  -----
    Branding and identity services       $1.1  $1.1  $3.0  -4.7% -64.3%
    ------------------------------       ----  ----  ----  ----  -----

The increase in agency revenues is consistent with the changes in turnover. The decrease in principal media business revenues is consistent with the changes in turnover while the quarter-to-quarter decrease in branding and identity services is primarily due to decreased client demand for creative services due to seasonal factors in the first quarter of 2012.

Gross Profit

    US$ mm           1Q12        1Q11        4Q11        Y-o-Y %  Q-o-Q%
    ------           ----        ----        ----         ------    -----
    Cost of revenues      $23.7       $47.4       $51.8    -50.0%   -54.3%
    ----------------      -----       -----       -----    -----    -----
    Gross profit           $9.8       $14.8       $28.5    -33.7%   -65.5%
    ------------           ----       -----       -----    -----    -----
    Gross margin           29.3%       23.8%       35.5%
    ------------           ----        ----        ----

Charm mainly attributes the year-over-year decrease in cost of revenues to the dropping of several media assets in order to modify the Company's media inventory mix due to uncertainties in the satellite market following recent regulatory changes. The year-over-year decline in gross profit was due to a lower contribution from the media investment management business.

Operating Profit

    US$ mm                     1Q12 1Q11 4Q11    Y-o-Y % Q-o-Q%
    ------                     ---- ---- ----      ------  -----
    Total operating expenses        $9.5 $6.8 $13.0  40.8% -26.5%
    ------------------------        ---- ---- -----  ----  -----
    Selling and marketing           $7.4 $5.0  $9.6  48.2% -23.1%
    ---------------------           ---- ----  ----  ----  -----
    General and administrative      $2.1 $1.8  $3.4  20.0% -36.5%
    --------------------------      ---- ----  ----  ----  -----
    Operating profit                $0.2 $8.1 $15.5 -97.1% -98.5%
    ----------------                ---- ---- ----- -----  -----

The 48.2% year-over-year increase in selling and marketing expenses was primarily due to the continued investment in the Company's digital business, including increased headcount at Charm Interactive and Charm Click. The 23.1% quarter-over-quarter decrease in selling and marketing expenses was primarily due to seasonal factors as fewer marketing events were held in the first quarter of 2012.

General and administrative expenses in the first quarter of 2012 grew 20.0% year over year and decreased 36.5% quarter over quarter to $2.1 million. The year-over-year increase was mainly attributed to investment in infrastructure to support long-term growth, such as office expansion and information technology ("IT") systems.

Net Income

    US$ mm                1Q12       1Q11       4Q11       Y-o-Y %  Q-o-Q%
    ------                ----       ----       ----        ------    -----
    Non-GAAP net income*        $1.9       $8.9      $17.1   -79.1%   -89.1%
    -------------------         ----       ----      -----   -----    -----
    Net income                  $0.8       $8.2      $15.7   -90.0%   -94.8%
    ----------                  ----       ----      -----   -----    -----
    Basic net income per
     ADS (US$)                 $0.01      $0.20      $0.38
    --------------------       -----      -----      -----
    Fully diluted net
     income per ADS (US$)      $0.01      $0.19      $0.36
    ---------------------      -----      -----      -----

*The Company's non-GAAP net income excludes share-based compensation expenses, amortization of intangible assets and impairments on investments.

Each ADS represents two common shares. The weighted average shares used to compute basic net income per ADS for the first quarter of 2012 is 39,068,333. As of March 31, 2012, 38,967,941 ADS were issued and outstanding.

Cash Flows and Cash Position

Net cash outflow from operations for the first quarter of 2012 was $4.7 million, which is mainly due to deposits made for new CCTV media inventory. As of March 31, 2012, the Company had cash and cash equivalents of $132.5 million, compared to $139.4 million at the end of the fourth quarter of 2011.

Customers

In the first quarter of 2012, Charm's agency business had 160 advertisers, compared to 153 advertisers in the fourth quarter of 2011 and 140 advertisers in the first quarter of 2011.

In the first quarter of 2012, Charm's principal media business had 150 advertisers, compared to 325 advertisers in the first quarter of 2011

Employee Headcount

As of March 31, 2012, the Company had 764 employees, compared to 691 employees as of December 31, 2011.

Recent Business Developments

In February 2012, Charm was named CCTV's "Top Advertising Agency" for the ninth consecutive year and tenth overall, extending its dominant run as the go-to agency for advertisers on China's largest television network.

In March 2012, Charm Click received the 2012 Discovery Award from Baidu, Inc. ("Baidu"), the leading Chinese-language internet search provider, as well as the 2011 Outstanding Partner Award from Taobao, China's largest e-commerce marketplace operator. The awards were based on the number of Charm Click clients, the volume of billings and the effectiveness of the SEM solutions delivered to both Baidu and Taobao in 2011.

In April 2012, Charm paid a cash dividend of US$0.16 per ordinary share, which is equivalent to US$0.32 per ADS. In the future, Charm's Board of Directors will evaluate the Company's dividend policy on an annual basis.

In April 2012, Charm established a three-year sponsorship and promotional agreement with various Chinese Winter Olympic sports associations, including China's ice hockey, curling, short-track speed skating, figure skating, and freestyle skiing teams. The cooperation initiatives will be managed by Charm's new sports marketing department, which is led by Mr. Lei Wu, a veteran of the sports marketing business and who joined Charm from the CCTV Sports and Entertainment Group.

In May 2012, Charm signed an exclusive advertising agency agreement with Beijing Television ("BTV") to operate on its sports channel ("BTV-Sports"), effective June 1, 2012 to December 31, 2014. BTV-Sports is a 24-hour sports channel broadcasting to the greater Beijing area with programming that includes live and recorded popular athletic events such as the English Premier League, UEFA Champions League, the Chinese Basketball Association and the (U.S.) National Basketball Association. Charm expects the initial payment and ramp-up period to impact the Company's second quarter results.

Charm won the following accounts in the first quarter of 2012:

    --  Charm Advertising won the overall television media business for TCL and
        Baihe.com
    --  Charm Interactive won the full digital campaign for AAE Travel, a joint
        venture between the world's leading online travel company, Expedia, and
        award-winning low-cost airline, AirAsia
    --  Charm Click won the search engine marketing businesses for Tommy
        Hilfiger and MG Cosmetics

Business Outlook

    US$ mm                             2Q12E
    ------                             -----
    Total revenues                   $36.0 to $37.5
    --------------                   --------------
    Non-GAAP net income*             $1.50 to $2.00
    -------------------              --------------

*The Company's non-GAAP net income excludes share-based compensation expenses, amortization of intangible assets and impairments on investments.

The Company bases these estimates on a foreign exchange rate of RMB6.30 to US$1.00. This forecast reflects the Company's current and preliminary view, which is subject to change.

Non-GAAP Financial Measures:

To supplement the unaudited condensed consolidated financial information presented in accordance with Accounting Principles Generally Accepted in the United States of America ("GAAP"), the Company also provides the following non-GAAP financial measures: "turnover," which is defined as total customer advertising spending placed through or with Charm, and "non-GAAP net income," which is defined as GAAP net income excluding stock-based compensation expenses, amortization of intangible assets and impairment on investments.

The non-GAAP financial measures are provided to enhance investors' overall understanding of the Company's current and past financial performance in ongoing core operations as well as prospects for the future. These measures should be considered in addition to results prepared and presented in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. Management uses both GAAP and non-GAAP information in evaluating and operating the Company's business internally and therefore deems it important to provide all of this information to investors.

Cautions on Use of Non-GAAP Measures

In addition to Charm's consolidated financial results prepared under US GAAP, the Company also provides non-GAAP financial measures, including "turnover" and "non-GAAP net income." The Company believes that the non-GAAP financial measures provide investors with another method for assessing its operating results in a manner that is focused on the performance of its ongoing operations.

Management believes investors will benefit from greater transparency in referring to these non-GAAP financial measures when assessing the Company's operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:

    --  these non-GAAP financial measures are limited in their usefulness and
        should be considered only as a supplement to the Company's GAAP
        financial measures;
    --  these non-GAAP financial measures should not be considered in isolation
        from, or as a substitute for, the Company's GAAP financial measures;
    --  these non-GAAP financial measures should not be considered to be
        superior to the Company's GAAP financial measures; and
    --  these non-GAAP financial measures were not prepared in accordance with
        GAAP and investors should not assume that the non-GAAP financial
        measures presented in this earnings release were prepared under a
        comprehensive set of rules or principles.

Further, these non-GAAP financial measures may be unique to the Company, as they may be different from non-GAAP financial measures used by other companies. As such, this presentation of non-GAAP financial measures may not enhance the comparability of the Company's results to the results of other companies. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies.

A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure or measures appears at the end of this press release.

Conference Call

Charm's management team will hold an earnings conference call at 8 a.m. U.S. Eastern Time (8 p.m. Beijing/Hong Kong Time) on Thursday, May 17, 2012.

Dial-in details for the conference call are as follows:

    U.S.:                             +1-718-354-1231
    International:                    +1-866-519-4004
    United Kingdom:                   +44-20-3059-8139
    Hong Kong:                        +852-2475-0994
    Passcode:                                           79400253

A replay of the call will be available from 1 a.m. May 18, 2012 until May 25, 2012 U.S. Eastern Time. Dial-in details for the replay are as follows:

    International:                    +61-2-8235-5000
    Passcode:                                           79400253

Additionally, an archived webcast of this call will be available on the Investor Relations section of the Charm web site at http:/ir.charmgroup.cn.

About Charm

Charm Communications Inc. (NASDAQ: CHRM) is a leading advertising agency group in China that offers integrated advertising services with particular focus on television and the internet. Charm's integrated advertising services include full media planning and buying, as well as creative and branding services. Charm has built a full service digital advertising platform, which offers digital campaign capabilities across all key digital media, including search engines, display portals, online video sites and social networking services. Charm also secures advertising inventory and other advertising rights, such as sponsorships and branded content, from premium media networks and resells to clients as part of its integrated media offerings. Charm's clients include China's top domestic brands, as well as some major international brands, across a wide range of industries. Since 2003 Charm has been the top agency every year for China's leading television network, China Central Television (CCTV). For more information, please go to http://ir.charmgroup.cn.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in 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. All statements other than statements of historical fact in this press release are forward-looking statements and involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These forward-looking statements are based on management's current expectations, assumptions, estimates and projections about the Company and the industry in which the Company operates, but involve a number of unknown risks and uncertainties. Further information regarding these and other risks is included in Charm's filings with the U.S. Securities and Exchange Commission, including its registration statement on Form F-1. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and actual results may differ materially from the anticipated results. You are urged to consider these factors carefully in evaluating the forward-looking statements contained herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements.

For investor and media inquiries, please contact:

In China:

Mr. Kevin Sun
IR Department
Charm Communications Inc.
Phone: +86-10-8556-2527
Email: ir@charmgroup.cn

In the U.S.:

Ms. Jessica Barist Cohen
Ogilvy Financial, New York
Phone: +1-646-460-9989
Email: chrm@ogilvy.com

                         Charm Communications Inc.
              Unaudited Condensed Consolidated Balance Sheets
                  (Amounts in thousands of U.S. dollars)

                                                       March 31, 2012 December 31, 2011
    ASSETS
    Current Assets
            Cash and cash equivalents                         132,480           139,406
            Notes receivable                                   14,798            28,880
            Prepaid expenses                                   92,529           106,393
            Deposits                                           26,787            25,730
            Accounts receivable                               101,141           103,920
            Amount due from related parties                     1,715             3,494
            Deferred tax assets                                   125               125
            Other current assets                                3,635             2,139
    Total current assets                                      373,210           410,087
                                                              -------           -------

            Fixed assets, net                                   5,770             4,344
            Intangible assets, net                              3,134             3,397
            Investments under equity method                     1,382             1,445
            Goodwill                                            4,332             4,335
            Other non-current assets                            1,009             1,009

    Total non-current assets                                   15,627            14,530
                                                               ------            ------

    TOTAL ASSETS                                              388,837           424,617
                                                              =======           =======

    LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
    Current Liabilities
             Accounts payable (of which 757 and 687,
             as of March 31, 2012 and December
             31,2011 of the consolidated VIE
             without recourse to the Company,
             respectively)                                     50,923            63,141
             Amounts due to related parties (of
             which 310 and nil as of March 31, 2012
             and December 31,2011  of the
             consolidated VIE without recourse to
             the Company, respectively)                         7,119             4,460
             Advances from customers (of which 1,559
             and 12,028 as of March 31, 2012 and
             December 31,2011  of the consolidated
             VIE without recourse to the Company,
             respectively)                                     64,479            85,720
             Accrued expenses and other current
             liabilities (of which 3,850 and 4,411
             as of March 31, 2012 and December
             31,2011 of the consolidated VIE
             without recourse to the Company,
             respectively)                                     16,951            22,876
             Dividends payable (of which nil as of
             March 31, 2012 and December 31,2011
             of the consolidated VIE without
             recourse to the Company, respectively)            12,556                 -
             Consideration payable (of which nil as
             of March 31, 2012 and December 31,2011
              of the consolidated VIE without
              recourse to the Company, respectively)            2,812             2,813
    Total current liabilities                                 154,840           179,010
                                                              -------           -------

             Consideration payable (of which nil as
             of December 31, 2011, September 30,
             2011  and December 31, 2010 of the
             consolidated VIE without recourse to
             the Company, respectively)                         2,474             2,476
    Total non-current liabilities                               2,474             2,476
                                                                -----             -----

    Total liabilities                                         157,314           181,486
                                                              -------           -------

    Redeemable noncontrolling
     interest                                                   4,744             4,723

    Equity:
    Charm Communications Inc.'s equity
            Ordinary shares                                         8                 8
            Additional paid-in capital                        104,335           116,637
            Retained earnings                                 106,482           105,930
            Accumulated other comprehensive income             13,258            13,384
    Total Charm Communications Inc.
     shareholders' equity                                     224,083           235,959
                                                              -------           -------
    Noncontrolling interest                                     2,696             2,449
    Total equity                                              226,779           238,408

    TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING
    INTEREST AND EQUITY                                       388,837           424,617
                                                              =======           =======

                                                         Charm Communications Inc.
                                              Condensed Consolidated Statements of Operations
                          (Amounts in thousands of U.S. dollars, except for number of shares and per share data)

                                                                                                                 For the three months ended,
                                                                                                                 ---------------------------
                                                                                        March 31, 2012  March 31, 2011  December 31, 2011
                                                                                          (Unaudited)    (Unaudited)       (Unaudited)

    Revenues:
                                                    Media investment management                                 22,194             54,046         65,618
                                                    Advertising agency                                          10,283              7,113         11,745
                                                    Branding and identity services                               1,064              1,116          2,979
                                                                                                                                    -----          -----
    Total revenues                                                                                              33,541             62,275         80,342
                                                                                                                ------             ------         ------

    Cost of revenues:
                                                    Media investment management                                 22,081             46,007         48,861
                                                    Advertising agency                                             982                816          1,207
                                                    Branding and identity services                                 638                611          1,739
                                                                                                                                      ---            ---
    Total cost of revenues:                                                                                     23,701             47,434         51,807
                                                                                                                ------             ------         ------
    Gross profit                                                                                                 9,840             14,841         28,535
                                                                                                                 -----             ------         ------

    Operating expenses:
                                                    Selling and marketing expenses                               7,420              5,007          9,643
                                                     General and administrative
                                                     expenses                                                    2,127              1,773          3,350
    Total operating expenses                                                                                     9,547              6,780         12,993
                                                                                                                 -----              -----         ------
                                                     Gain(Loss) from equity method
                                                     investees                                                     -62                                -5

    Operating profit                                                                                               231              8,061         15,537
                                                                                                                   ---              -----         ------

                                                    Interest income                                                645                553            663
                                                    Other expense                                                   13

    Income before income tax expense                                                                               863              8,614         16,200
                                                    Income tax expense                                              43                431            465
                                                                                                                                      ---            ---
    Net income                                                                                                     820              8,183         15,735
                                                                                                                   ---              -----         ------
    Net income attributable to noncontrolling
     interest                                                                                                      268                309            944
    Net income attributable to Charm
     Communications Inc.                                                                                           552              7,874         14,791
                                                                                                                   ---              -----         ------

    Net income(loss) attributable to Charm
     Communications Inc. shareholders per ADS:
    Basic                                                                                                         0.01               0.20           0.38
    Diluted                                                                                                       0.01               0.19           0.36
    Shares used in computation of net income(loss)
      per ADS:
    Basic                                                                                                   39,068,333         39,135,833     39,075,906
    Diluted                                                                                                 40,900,414         40,911,713     40,976,069

    Notes:
    (1) Share-based compensation expenses during
     the period included in:
    Cost of revenues                                                                                                 1                  1              1
    Selling and marketing expenses                                                                                 535                422            571
    General and administrative expenses                                                                            238                250            303
    Total                                                                                                          774                673            875
                                                                                                                   ---                ---            ---


                                                                                                                  For the three months ended,
                                                                                                                  ---------------------------
                                                                                        March 31, 2012  March 31, 2011  December 31, 2011
                                                                                          (Unaudited)    (Unaudited)       (Unaudited)

    Net income                                                                                                     820              8,183         15,735
    Other comprehensive income:
    Change in cumulative foreign exchange
     translation adjustment                                                                                       (126)             1,293          2,938
    Comprehensive income                                                                                           694              9,476         18,673
                                                                                                                   ---              -----         ------

    Less: Comprehensive income attributable to
     non-controlling interest                                                                                     (247)              (309)          (755)
    Less: Comprehensive income attributable to
     redeemable non-controlling interest                                                                           (21)                 -           (189)

    Comprehensive income attributable to Charm
     Communications Inc.                                                                                           426              9,167         17,729
                                                                                                                   ---              -----         ------

                            Reconciliation from Net income to Non-GAAP net income:
                                    (Amounts in thousands of U.S. dollars)

                                     For the three months ended,
                                     ---------------------------
                                            March 31, 2012           March 31, 2011    December 31, 2011

     Net income                                              820                 8,183                  15,735

      Add back share-
      based compensation
      expenses
      during the related periods                             774                   673                     875

      Add back amortization on
      intangible assets                                      261                     -                     443

     Non-GAAP net income                                   1,855                 8,856                  17,053
                                                           -----                 -----                  ------

                               Reconciliation from Turnover (non-GAAP) to USGAAP Revenues:
                                          (Amounts in thousands of U.S. dollars)

                                        For the three months ended,
                                        ---------------------------
                                              March 31, 2012               March 31, 2011        December 31, 2011
     Turnover (non-GAAP):
     Media investment management                             22,194                      54,046                   65,618
     Advertising agency                                     188,162                     144,159                  189,178
     Branding and identity services                             N/A                         N/A                      N/A
     Total turnover                                         210,356                     198,205                  254,796
                                                            -------                     -------                  -------

     Extracted rate:
     Media investment management                              100.0%                      100.0%                   100.0%
     Advertising agency                                         5.5%                        4.9%                     6.2%
     Branding and identity services                             N/A                         N/A                      N/A

     USGAAP Revenue:
     Media investment management                             22,194                      54,046                   65,618
     Advertising agency                                      10,283                       7,113                   11,745
     Branding and identity services                           1,064                       1,116                    2,979
     Total revenue                                           33,541                      62,275                   80,342
                                                             ------                      ------                   ------

SOURCE Charm Communications Inc.

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