SearchMedia Reports Unaudited Financial Results for the First Six Months of 2011
SHANGHAI, CHINA -- (Marketwire) -- 09/29/11 -- SearchMedia Holdings Limited ("SearchMedia" or the "Company") (NYSE Amex: IDI) (NYSE Amex: IDI.WS), one of China's leading nationwide multi-platform media companies, today reported unaudited financial results for the six months ended June 30, 2011.
Paul Conway, Chief Executive Officer of SearchMedia, remarked, "We are pleased to achieve year-over-year revenue growth of 36.7% to $28.3 million and net income of $0.7 million for the first half of 2011 driven by revenue growth across all business segments. This period's profitability and strong performance is an important milestone for SearchMedia. Operationally, we have installed a highly scalable business model with the infrastructure and network in place to support a larger revenue, client and concession base. As our business grows, we expect margins to strengthen through operational efficiencies. From a competitive standpoint, we are well-positioned to capture the compelling market opportunities within China's advertising market with an established nationwide media presence. We also recently hired Johnny Lo, an outdoor industry veteran, as our Chief Operating Officer to better manage our operations, concession and advertising pipeline. Overall, we are pleased to have built a solid foundation to grow from and look forward to delivering strong, sustainable growth to shareholders moving forward."
Johnny Lo, Chief Operating Officer of SearchMedia, added, "I am honored to join SearchMedia's management team. The Company is poised to enter an exciting period of integration and growth. I hope to apply my experience in servicing high-profile brands and managing complex advertising operations to maximize our sales and concession growth while increasing operational synergies across business segments to drive shareholder returns."
Financial Highlights for the Six Months ended June 30, 2011
- Revenue increased 36.7% to $28.3 million from $20.7 million in the prior year period.
- Operating income rose to $1.8 million from an operating loss of $1.0 million in the prior year period.
- Net income was $0.7 million compared to a net loss of $3.5 million in the prior year period.
Unaudited Financial Results for the Six Months ended June 30, 2011
Revenue increased 36.7% to $28.3 million in the first six months of 2011 from $20.7 million in the first six months of 2010 primarily due to the continued expansion of the Company's outdoor billboard, elevator and transit platform, an increase in the amount of contracts and the addition of the Company's acquired subsidiary, Zhejiang Continental.
Gross profit increased 21.9% to $8.1 million from $6.7 million in the prior year period as a result of an increase in revenue during the period. Gross margin decreased to 28.6% from 32.1% in the prior year period due to higher concession costs as well as higher network expansion costs and increased advertising agency business. As the Company grows its occupancy rates and average revenue per contract, gross margins are expected to trend higher.
Total operating expenses for the first six months of 2011 were $6.4 million compared to $7.6 million for the prior year period demonstrating management's continued efforts to control costs. Sales and marketing expenses increased 12.5% to $2.5 million from $2.2 million in the prior year period, reflecting a proportional increase in sales commissions as well as continued investment in marketing expenses to drive business expansion. General and administrative expenses decreased to $3.9 million from $5.4 million in the prior year period, reflecting a decrease in salary expense driven by greater efficiency in the Company's elevator business, lower share-based compensation expense and lower professional fees and other expenses compared to the prior year period.
Operating income was $1.8 million compared to an operating loss of $1.0 million in the prior year period.
Net income for the first six months of 2011 was $0.7 million compared to a net loss of $3.5 million in the prior year period due to strong revenue growth complemented by operational cost-savings driven by economies of scale as well as improved performance from the elevator business.
Adjusted net income, excluding non-cash items such as approximately $0.4 million of share-based compensation, $0.8 million of amortization on intangible assets and $0.1 million of reversal of bad debt provision was $1.7 million compared to $0.9 million in the prior year period. Please refer to the non-GAAP reconciliation table provided at the end of the release for a period-over-period comparison of non-cash adjustments.
As of June 30, 2011, cash and cash equivalents totaled approximately $8.4 million. For the six months ended June 30, 2011, the Company had a weighted average number of basic and diluted shares outstanding of 20.9 million shares.
Wilfred Chow, Chief Financial Officer of SearchMedia, commented, "Our strong revenue growth and profitability in the first half of 2011 demonstrate the success of our diligent efforts to build a solid foundation of productive assets. Moving forward, we expect to build upon this strong performance through continued organic growth and our M&A pipeline. Furthermore, as revenue and utilization of network assets increases, we expect to realize further operational efficiencies to deliver greater profitability."
Outlook
Paul Conway, Chief Executive Officer of SearchMedia, noted, "We are pleased with the strong financial performance of the first half of 2011 and expect greater profitability in the second half of 2011. Due to our unique nationwide presence, we have received heightened interest for large, multi-city concessions. In addition, our M&A pipeline for billboards, transit and elevator advertising continues to grow, driven by our market presence, effective sales platform and positioning as a U.S.-listed company. These are exciting operational opportunities, which we believe will drive our long-term growth momentum."
"Furthermore, we expect to issue approximately 1.3 million common shares in the fourth quarter to satisfy certain earnout obligations. This will reduce our acquisition payable liability by approximately $9.6 million and better tie incentives of subsidiary's management teams with SearchMedia's performance," Paul Conway added.
About SearchMedia
SearchMedia is a leading nationwide multi-platform media company and one of the largest operators of integrated outdoor billboard and in-elevator advertising networks in China. SearchMedia operates a network of high-impact billboards and one of China's largest networks of in-elevator advertisement panels in 50 cities throughout China. SearchMedia's core outdoor billboard and in-elevator platforms are complemented by its transit advertising platform, which together enable it to provide multi-platform, "one-stop shop" services for its local, national and international advertising clients.
Forward-Looking Statements
Any statements contained in this press release that do not describe historical facts, including statements about SearchMedia's beliefs and expectations, may constitute forward-looking statements as that term is defined by the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expect," "anticipate," "future," "intend," "plan," "believe," "estimate," "confident" and similar statements. Any forward-looking statements contained herein are based on current expectations, but are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, whether the Company's scalable business model will support a larger revenue, client and concession base; whether margins will strengthen through operational efficiencies; whether the Company will capture market opportunities within China's advertising market because of its established nationwide presence; whether the Company can grow and can deliver strong, sustainable growth to shareholders; whether Mr. Lo's experience will enable him to maximize the Company's sales and concession growth while increasing operational synergies across business segments; whether growth in occupancy rates and average revenue per contract will increase gross margins; whether the Company can continue to control costs; whether the Company's subsidiaries and its headquarters operations will be profitable in the second half of 2011; whether the Company's operational opportunities will drive the Company's long-term growth momentum whether acquisitions previously under discussion or negotiation will be completed in a timely matter or at all and whether such acquisition will be successful; the uncertainties associated with the timing and outcome of legal proceedings; whether the Company's management structure will result in the benefits, integration and growth anticipated, including accelerated growth for 2011 or beyond; and the risks that there are uncertainties and matters beyond the control of management, and other risks outlined in the Company's filings with the U.S. Securities and Exchange Commission. SearchMedia cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. SearchMedia does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which any such statement is based.
SearchMedia Holdings Limited
Condensed Balance Sheets
In USD'000 June 30, December 31,
2011 2010
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Unaudited Audited
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,370 $ 7,554
Restricted cash 11 11
Accounts receivable, net 20,035 18,065
Other current assets 15,745 10,197
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Total current assets 44,161 35,827
NON-CURRENT ASSETS
Property and equipment, net 966 1,133
Deposits for property and equipment 40 2
Intangible assets, net 3,286 3,954
Goodwill 47,013 45,955
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Total assets $ 95,466 $ 86,871
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LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 14,455 $ 13,894
Acquisition consideration payable 29,381 29,033
Income taxes payable 11,024 9,228
Other current liabilities 27,846 23,099
------------- -------------
Total current liabilities 82,706 75,254
NON-CURRENT LIABILITIES
Deferred tax liabilities 822 989
Long-term acquisition consideration payable 10,399 10,162
Long-term payables 2 3
------------- -------------
Total liabilities $ 93,929 $ 86,408
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SHAREHOLDERS' EQUITY
Common Shares - $0.0001 par value,
1,000,000,000 shares authorized, 20,858,661
shares issued and outstanding on June 30,
2011 and December 31, 2010 $ 2 $ 2
Additional paid-in capital 121,908 121,521
Accumulated other comprehensive income 1,156 1,153
Accumulated deficit -121,529 -122,213
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Total shareholders' equity 1,537 463
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Total liabilities and shareholders' equity $ 95,466 $ 86,871
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SearchMedia Holdings Limited
Condensed Statements of Operations
In USD'000
For Six Months Ended June 30
----------------------------
2011 2010
------------- -------------
Unaudited Unaudited
Advertising service revenues $ 28,309 $ 20,703
Cost of revenues -20,200 -14,051
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Gross profit 8,109 6,652
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Operating expenses
Sales and marketing expenses -2,494 -2,216
General and administrative expenses -3,858 -5,409
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Income/(loss) from operations 1,757 -973
Other income/(expense)
Interest income/(expenses) 8 -7
Loss on impairment of goodwill and intangible
assets - -1,676
Other net income/(expense), net 22 719
------------- -------------
Income/(loss) before income taxes 1,787 -1,937
Provision for income taxes -1,103 -1,524
------------- -------------
Net income/(loss) $ 684 -$3,461
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SearchMedia Holdings Limited
Condensed Statements of Cash Flows
In USD'000
For Six Months Ended June 30
----------------------------
2011 2010
------------- -------------
Unaudited Unaudited
Net cash provided by/(used in) operating
activities $ 1,417 -$4,732
Net cash used in investing activities -374 -8,880
Net cash provided by/(used in) financing
activities - -3,604
Foreign currency translation adjustment -227 91
------------- -------------
Net increase/(decrease) in cash and cash
equivalents 816 -17,125
Cash and cash equivalents at beginning of period 7,554 29,398
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Cash and cash equivalents at end of period $ 8,370 $ 12,273
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SearchMedia Holdings Limited
Reconciliation of net income to non-GAAP
adjusted net income
In USD'000
For Six Months Ended June 30
----------------------------
2011 2010
------------- -------------
Unaudited Unaudited
Net income/(loss) $ 684 -$3,461
Add back non-cash items:
Loss on impairment of goodwill and intangible
assets - 1,676
Share-based compensation 386 1,514
Amortization on intangible assets 752 738
Bad debt provisions -89 474
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Adjusted net income (non-GAAP) $ 1,733 $ 941
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For more information, please contact:
ICR, Inc.
In New York:
Ashley De Simone
(646) 277-1227
In Beijing:
Wen Lei Zheng
86 10 6583-7510