Beats by Dre Q1 2009 Earnings Call Transcript 24smRQF

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Beats by Dre Q1 2009 Earnings Call Transcript 24smRQF

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Q1 2009 Earnings Call Transcript Good evening, and thank you for standing by for VisionChina Media's First Quarter 2009 Earnings Conference Call. At this time, all participants are in listenonly mode. After management's prepared remarks, there will be a questionandanswer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Ms. Helen Plummer, Investor Relations Officer for VisionChina Media. Please proceed ma'am. Ms. Plummer, you may proceed.Hello, everyone, and welcome to VisionChina Media's first quarter 2009 earnings conference call.Today, you will hear from our Chairman and Chief Executive Officer, Mr. Limin Li, who will talk about our industry, our company's strategy and business operations. Mr. Alfred Tong, will discuss sales and marketing, and Mr. Christopher Patrick Holbert, will discuss financial results and give second quarter and annual guidance. After their prepared remarks, they will be joined for the questionandanswer portion of the call by Ms. Dina Liu, our former CFO, who is here with us today in her current capacity as an external advisor supporting the company's first quarter earnings release.Please note that today's discussion will contain certain forwardlooking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forwardlooking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today.Further information regarding these and other risks and uncertainties is included in our registration statement on Form F1 and annual report on Form 20F and other documents filed with the US Securities and Exchange Commission. VisionChina does not assume any obligation to update any forwardlooking statements except as required under applicable law. As a reminder, this conference is being recorded.I will now turn the call over to VisionChina Media's Chairman and CEO, Mr. Li.(Interpreted) Thank you all for joining us today. The first quarter of 2009 further demonstrated our strategy for growth continued to gain traction. We have seen evidence of economic rebound in the advertising industry starting in March and we expect that we will see an even stronger recovery in the second half of 2009. The recent economic environment while challenging has presented opportunities as advertisers have been forced to deploy their advertising budgets more carefully and at times reallocate budgets to different media forms in the search for more costeffective ways to spend.As advertising budgets return to more normalized levels, we expect to retain our customers and see a sustainable increase in their spending. We're confident in our guidance for 2009. The first quarter was challenging with seasonality compounded by a weak microenvironment and other industry challenges including pricing pressure in the cities in which we compete with other operators of mobile digital television advertising network. Despite these challenges, we were able to recognize impressive year over year growth with total revenues increasing 100% to 27.3 million.During 2008, we took advantage of our strong balance sheet to selectively acquire six advertising agencies. Even before the acquisition, VisionChina had strong relationships with these agencies as they were our distributors, which gave us solid working knowledge of their talented workforce and excellent customer relationships. Immediately after acquisition of these agencies, I became personally involved in the management of the sales force that came to us through the acquisition, and I have been very pleased with their results.Adding these companies to our corporation will have focused our efforts in ensuring that the acquired businesses are highly integrated with all aspects of our operations. I will manage the entire team in the same way we manage our other sales team. Contracts, human resources, corporate culture, training, pricing, income control, commission and financial control policy are all set by our headquarters, and revenues at both headquarters by our experienced corporate finance team. Additionally, Alfred and I are in constant contact with the management team of friends introduced to us by the acquired team. We are introducing CRM software to manage these customers and maintain proprietary customer information.We believe that over time whether introduced through the acquired team or own sales team, quickly come to appreciate the effectiveness of our platform and consider themselves to be direct clients of VisionChina. The acquisition has already made substantial contribution to our success. And the rest of VisionChina's operations have as a result been positively impacted. We're confident that the synergies remain very nice in connection with these acquisition will provide longterm benefit to the company and our shareholders.During the first quarter, we expanded into two new cities, Hangzhou and Tianjin, and added three additional lines to our Beijing subway presence, expanding our coverage to five of Beijing eight subway lines, with live cast and advertising capability. On January 1, 2009, we gained the rights to advertise on a second mobile television channel in Beijing subway that increases our network capacity in the capital city.Our network covers 18 of China's most prosperous cities, carrying a total of 95 million viewers experience per day. Looking ahead to the second quarter and the rest of the year, we will continue to expand our current network and also selectively enter new markets within the public transportation space. We have identified 30 cities that meets very specific criteria for entry, and we will continue to execute through our partners and contracts.The Chinese government stimulus plan which is largely focused on infrastructure development will likely benefit our company as well and are planning to expand as the transportation systems of our key cities continues to grow. Meanwhile we're also researching other delivery platforms that we might feel allow us to further grow operations in the future.Our longterm goal is to increase our market share going forward. One of the ways to achieve this goal is through mergers and acquisition deals at the right valuation that will create value for our shareholders. We believe our industry is poised for consolidation and expect to play an active role in this trend. Just one of the many benefits of industry consolidation will be that operating in a less fragmented industry will alleviate some of the pricing pressure already having a negative impact on our operating results.Recently we told you about the departure of our CFO, Dina Liu, who after two years at the company made the difficult decision to step down to spend more time with her family. We were all sad to see her go, but appreciate her years of financial oversight and contribution to the company's assets. Our Search Committee has initiated the hunt for here replacement and is working to ensure that the right, highly qualified person takes the job.VisionChina's management works as a team. We continue to have a strong management team in place. The financial department for example remain well stocked. Chris Holbert, our VP of Finance since last year is a New York licensed CPA with experience in US listed companies, a Big Four background, and expertise in financial management and Sarbanes Oxley compliance. Several other financial directors are also from the Big Four accounting firms and bring strong oversight to the company.In the first quarter, we also added Helen Plummer to our team at the Investor Relations offices. Helen has led our company's Investor Relations effort as an external consultant for the last two years, and her addition to the team helps us to maintain our proactive approach to Investor Relations and ongoing transparency for the benefit of all shareholders.I would like to conclude by saying that long term growth prospect for our business in the digital mobile TV industry as a whole in China remains very strong, and we are optimistic of our strong fundamentals, leading market position and the exciting future of the digital mobile television industry.I will now turn the call over to Alfred Tong, our Chief Marketing Officer, who will discuss our marketing and sales efforts in the field.Thank you, Mr. Li. Hello, everyone.I would first like to go over some key operating metrics. In the first quarter of the year 2009, network capacity, which is measured by total broadcasting hours, was 33,747 hours, up from 31,Beats by Dre,834 hours in the fourth quarter of 2008, and 25,980 hours in the first quarter of 2008. This increase was due to the addition of Hangzhou and Tianjin as well as the addition of three new lines of Beijing subway to our network, plus the launch of advertising operations on a second television channel in Beijing that is broadcast to subway and separately broadcast to bus.Our ASP as measured by average advertising service revenue was $792 per broadcasting hour in the first quarter of 2009, down from $1,023 in the fourth quarter of 2008, and up from $493 in the first quarter of 2008. Our ASP were down due to seasonality and overall economic environment combined with the pricing pressure from competitors. Given the rate increase in January 2009 in five key markets, this gives us approximately 15% of that of traditional TV, according to the research by CPR [ph],Cheap Beats By Dre, give us plenty of room to increase rate cut and grow revenues in the region.In terms of our relationships with customers, we're seeing that companies that once go to VisionChina platform as a new or experimental advertising avenue now consider us to be a fixed part of their advertising spend. On that space, we sold 5.62 advertising minutes per broadcasting hour in the first quarter of 2009 compared to 6.24 minutes in the first quarter of 2008, because of the increase in network capacity. In the first quarter of 2009, the company sold a total of 184,045 advertising minutes in is network compared to 162,183 minutes in the first quarter of 2008, and 281,059 minutes in the fourth quarter of 2008.Over the quarter, our customer make up (inaudible) of about two part domestic and one part international brands, a quite healthy mix of advertiser across a variety of industries. Our retention and renewable rate remain very strong as well. And the amount of new clients that has once tested on our network, nearly all of them have continued to purchase advertising time on our network. We ended the first quarter with 806 advertising c customers, up from 705 at the end of the fourth quarter of 2008, and 381 customers just one year ago. In the first quarter, 257 customers placed advertisement on our network.In terms of sales personnel customers, we have 320 salespeople as of March 31, 2008, as compared to 300 at the end of December last year and 208 as of March 31, 2008. It is our goal to extend our sales force to approximately 400 people by the end of 2009. We expanded the contractors with several key customers and added many new customers to our strong client base during the first quarter, including Unilever, Philips, Toyota and (inaudible) which is a well known domestic fashion brand.Our concentration on clients among FMCG companies continue to provide deterrence from overall economic downturn at FMCG companies. These make up two third of our customer base, rely on ongoing advertising and promotions to quickly move good off store shelves. We're finding them more and more open turn up within portion of their available marketing budget,Cheap Beats by dre, which used to be used for promotion and event introduction in China as we provide a more cost effective and well targeted use of advertising dollars.Finally, before turning the call over to Chris, I want to mention that completion of the third phase of CTR Market Research Study (inaudible) of China digital mobile television industry. These findings has provided longterm measurable feedback regarding commuter demographic allowing us and our advertisers to better tailor programming and advertisement to meet the needs of commuters. This statistics continue to demonstrate that VisionChina digital mobile television platform has nation wide audience and generate high retention rate at a fraction of the cost of traditional television, finally (inaudible) the effectiveness of mobile television advertising and to (inaudible) in the past now have a much better understanding of how our media platform can complement the overall advertising strategy.

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