China MediaExpress Holdings Releases 1Q 2010 Financial Results

China MediaExpress Holdings, Inc., a television advertising operator on inter-city express buses in China, announced financial results for the first quarter ended March 31.

In a May 14 release, the company noted that financial highlights - first quarter 2010 vs. first quarter 2009 - include:

-Revenue increased by 137 percent to $44.5 million as compared to $18.8 million;

-Gross margin for first quarter was 60 percent;

-Income from operations increased by 130 percent to $24.2 million as compared to $10.5 million;

-Net income increased by 143 percent to $18.1 million as compared to $7.5 million; and,

-As of March 31, the Company had more than $114.4 million in cash.

Zheng Cheng, CME's Founder and CEO, said, "We started 2010 on a very strong note with record revenue and net income. Our revenue and net income for the quarter grew by 39 percent and 27 percent respectively when compared to the 2009 fourth quarter. Basic and diluted earnings per share in the first quarter of 2010 was $0.28 and $0.27, respectively (after a one-time charge of $9,242,000 related to a deemed dividend on the issuance of our convertible preferred stock in the first quarter); excluding this deemed dividend, the income attributable to holders of common shares (non-GAAP net income) would be $18,142,000 and the basic and diluted earnings per share would have been $0.58 and $0.54, respectively."

Cheng said, "Growth was attributable to several factors including: an increase in advertising time sold, higher average advertising rates, the expansion of our geographic coverage and client base, and a higher proportion of direct versus agency sales. In addition, since the third quarter of 2009, we started to generate revenue from embedded advertisements which are displayed during the broadcast of the entertainment content. More importantly, in the first quarter of 2010, we implemented premium advertising rates for airport express buses compared to inter-city bus advertising rates. The revenue generated from the airport express buses for the three months ended March 31, was approximately $7.0 million. At the end of the first quarter, our network of airport express buses covered Beijing, Fuzhou, Guangzhou and Qingdao."

Cheng said, "Our network continues to grow through new agreements with bus operators and currently includes 49 bus operator partners, up from 46 at the end of 2009. The number of buses equipped with our television systems is now over 21,500. The growing network has attracted more than 450 advertisers either through advertising agencies or directly from us. Our clientele includes Hitachi, China Telecom, Toyota, Siemens and China Pacific Life Insurance, which have purchased advertising time from CME for more than three years; and many other well-known international and national brands including Coca Cola, Pepsi, Wahaha, Siemens, Hitachi, China Telecom, China Mobile, China Post, Toyota, Bank of China and China Pacific Life Insurance."

Cheng said, "We continue to explore and implement opportunities to expand our business by providing clients with additional advertising channels and passengers with new services. Encouraged by the success of embedded and airport express bus advertising, we are working on several outdoor media opportunities such as the establishing of stationary advertising media at inter-city express bus terminals to complement our core business and are offering new services to advertisers and passengers. We continue to pursue more direct advertising clients and expect that by year-end 2010, 35 percent of our revenue mix will be generated by direct advertising clients."

Jacky Lam, CME's Chief Financial Officer, said, "As of March 31, we had more than $114 million in cash as compared to $57.2 million at the end of 2009. In the first quarter of 2010, CME generated approximately $12.9 million in cash from operating activities. In addition, during the first quarter we completed two important transactions which increase our cash position: a $30 million private investment from Starr International Company, Inc., and the exercise and redemption of our publicly traded warrants, where we received gross proceeds of approximately $47.6 million. We also paid out approximately $20.9 million for the warrants and settled $10 million in outstanding promissory notes to the original shareholders of Hong Kong Mandefu Holding Limited as a part of the original share exchange."

Lam said, "As a result, we have sufficient resources to fund our business expansion plans, including internal growth initiatives as well as potential acquisitions."

Reaffirms 2010 Net Income Guidance

Based on the current customer base, geographic coverage, network of express buses and existing revenue streams, CME's management reaffirms its 2010 net income guidance which is expected to be in the range of $71 million to $75 million (on a non-GAAP basis, exclusive of share based compensation in connection with the share incentive plan which is expected to be adopted and with options to be granted in the 2nd or 3rd quarter of 2010 or deemed dividend on issuance of convertible preferred shares). As previously announced, these projections exclude the impact of any possible acquisitions, additional of new buses and new investments in other media projects in 2010."

Cheng said, "Looking ahead, as advertisers are accelerating their efforts to grow their sales beyond the first- and second-tier cities into less developed markets, we believe that we have positioned our Company to benefit from the rapid growth of advertising spending in China. We are very proud of our success which is a result of the dedication and hard work of our management team and all of our employees, and we are confident that our Company has a bright future."

CME, through contractual arrangements with Fujian Fenzhong, a variable interest entity of the Company, operates a television advertising network on inter-city express buses in China.