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Charm Communications Inc. Announces Unaudited First Quarter 2013 Results.

First Quarter 2013 turnover up 10.7% year over year

First Quarter 2013 revenues up 13.6% year over year

  or  , city (1994 est. urban pop. 6,093,300; 1994 est. total pop. 7,240,700), capital of the People’s Republic of China. It is in central Hebei prov.
, May 21, 2013 /PRNewswire-FirstCall/ —
 magical formula or incantation, spoken or sung, for the purpose of securing blessing, good fortune, or immunity from evil. It presupposes a belief in demons or malignant spirits.
Inc. (

)(“Charm” or the “Company”), a
leading advertising agency in China, today announced its unaudited
financial results for the first quarter ended March 31, 2013.

First Quarter 2013 Highlights

* Turnover grew 10.7% year over year to $232.9 million in the first
quarter of 2013

* Revenues grew 13.6% yearover year to $38.1 million in the first
quarter of 2013

* Revenues for Charm’s advertising agency business declined
1.7% year over year to $10.1 million in the first quarter of 2013

* Revenues for Charm’s media investment management business
grew 23.7% year over year to $27.5 million in the first quarter of

* Gross profit declined 2.3% year over year to $9.6 million in the
first quarter of 2013

* Net income declined 277.9% year over year to a net loss of $1.5
million in the first quarter of 2013

* Non-GAAP net income , which excludes share-based compensation
expenses, amortization of intangible assets and net change in fair value
of consideration payable and call option, declined 142.0% year over year
to a net loss of $0.8 million in the first quarter of 2013

“Despite continued softness in China’s
n. (used with a sing. verb)
The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors.
 environment and limited visibility in the overall advertising market,
our total business volume continued to grow in the first quarter, driven
in particular by better-than-market growth from our Charm Click business
unit,” said Mr. He
Used to express dissatisfaction or annoyance.

adv. & adj.

tr.v. danged, dang·ing, dangs
To damn.

, Charm’s founder, chairman and chief
executive officer. “Moreover, our core agency business continued to
strengthen its service capabilities with fully-integrated regional
service centers now in place in northern, eastern, and southern

“As we reposition our Shangxing Media brand from a media
inventory seller to a media service agency, we will carefully balance
risk-adjusted return

 when adding inventory. At the same time, we
have complementary business models available to ensure that we capture
long-term growth opportunities with our media partners as the
 subfamily of the Sino-Tibetan family of languages (see Sino-Tibetan languages), which is also sometimes grouped with the Tai, or Thai, languages in a Sinitic subfamily of the Sino-Tibetan language stock.
 advertising market rebounds and develops,” concluded Mr. Dang.

 , river, c.450 mi (720 km) long, rising in SE Gansu prov. and flowing E through Gansu and Shaanxi provs. to the Huang He.
 or Chou or Chow  

A Chinese dynasty (traditionally dated 1122-221 ) characterized by great intellectual achievements, including the rise of Confucianism and Taoism and the writing of the
, Charm’s chief financial officer, added, “Our
first quarter results came in at the high end of our guidance as our
media business improved, with the channels we added in 2012 ramping up
in sales. To adjust for the soft environment, we will focus on making
productivity gains by streamlining and consolidating our cost base, but
at the same time we will continue to invest in our digital business and
other fast-growing areas.”

First Quarter 2013 Results

Turnover (non-GAAP)

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 10.7% year-over-year increase in total turnover was mainly due
to the increase in media investment business
 city (1990 pop. 81,151), seat of Yellowstone co., S Mont., on the Yellowstone River, in a valley surrounded by seven mountain ranges; inc. as a city 1885.
, which was
primarily the result of the addition of BTV-Sports in the middle of
2012. The 15.5% quarter-over-quarter increase in turnover was largely
attributed to the increased advertising agency spending, mainly on

closed-circuit television

 closed-circuit television
in the first quarter of 2013.

The 9.2% year-over-year and 21.2% quarter-over-quarter increase in
the advertising agency business (“agency business”) turnover
was mainly due to the increase in advertising spending from existing
agency clients and new clients.

The revenue
 /ex·trac·tion/ ()
1. the process or act of pulling or drawing out.

2. the preparation of an extract.
 rate, which is defined as revenue divided by
turnover, was 4.9% for the agency business, compared to 5.5% for the
first quarter of 2012 and 7.4% for the fourth quarter of 2012. The
year-over-year and quarter-over-quarter decreases were mainly due to
increased advertising spending on CCTV media platforms, which typically
exhibit lower extraction rates relative to those associated with
non-CCTV platforms, such as satellite TV channels and the internet,
during the first quarter of 2013 and during the
Chinese New Year
; Traditional Chinese: ; Pinyin: ), or Spring Festival
period in particular.

The 23.7% year-over-year increase in turnover (equivalent to

See generally accepted accounting principles (GAAP).
 revenue) for the media investment management business (“principal
media business”), which operates under the Shangxing Media brand,
was mainly due to the addition of BTV-Sports in the middle of 2012. The
14.3% quarter-over-quarter decrease in turnover in the principal media
business was mainly due to seasonal factors.


The changes in principal media business revenues are consistent with
the changes in turnover, while the decreases in agency revenues are
consistent with the decreases in the revenue extraction rate. The
decreases in branding and identity services were primarily due to an
overall decrease in client demand for
creative services


Gross Profit

Charm mainly attributes the year-over-year increase in cost of
revenues to the addition of BTV-Sports in the middle of 2012. The
declines in gross profit were due to a lower contribution from the
principal media business.

Operating Profit

See operating income.

The 17.5% year-over-year increase in selling and marketing expenses
was primarily due to executive hires within the Company’s agency
business. The 22.8% quarter-over-quarter decrease in selling and
marketing expenses was primarily due to the Company streamlining and
consolidating its cost base to improve productivity within its
traditional agency business.

The 31.8% year-over-year increase in general and administrative
expenses was mainly attributed to the increased office expenses. The
52.4% quarter-over-quarter decrease in general and administrative
expenses was mainly due to less bad debt provision expense incurred as a
result of the Company increasing its credit control and collection
efforts in the first quarter of 2013.

Net Income (Loss)

*The Company’s non-GAAP net income (loss) excludes share-based
compensation expenses, amortization of intangible assets and net changes
in fair value of consideration payable and call option.

Each American

 share (“ADS”) represents two
common shares. The weighted average number of shares used to

 basic net loss per ADS for the first quarter of 2013 was 38,479,967. As
of March 31, 2013, 40,032,131 ADSs were issued and outstanding.

Cash Flows and Cash Position

cash flow from operations

 for the first quarter of 2013 was
negative $20.0 million, which was mainly due to the significant cash
used in the settlement of accounts payable to media owners and an
increase in
accounts receivable
 n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business’ problems in paying
 in connection with several new key
accounts, for which the Company offered extended payment terms. As of
March 31, 2013, the Company had cash and cash equivalents of $99.6
million, compared to $116.6 million at the end of the fourth quarter of


In the first quarter of 2013, Charm’s agency business had 186
advertisers, compared to 174 advertisers in the fourth quarter of 2012
and 160 advertisers in the first quarter of 2012.

In the first quarter of 2013, Charm’s principal media business
had 196 advertisers, compared to 203 advertisers in the fourth quarter
of 2012 and 150 advertisers in the first quarter of 2012.

 or head·count
1. The act of counting people in a particular group.

2. The number of people counted in this way.

Noun 1.

As of March 31, 2013, the Company had 790 employees, compared to 813
employees as of
 see month.
 31, 2012.

Recent Business Developments

The Company won the following accounts in the first quarter of 2013,
the campaigns of which will take place through the course of this

* Charm Advertising won the television business for Lafaso, a
leading online
 preparations externally applied to change or enhance the beauty of skin, hair, nails, lips, and eyes. The use of body paint for ornamental and religious purposes has been common among primitive peoples from prehistoric times (see body-marking).
 retailer, Ginsber Beer, INOFA, Yake Foods,
Shuanglun, Yinlu, Roban, Johnson Fitness, Fengfan, Lefeng and Nanfang
Black Sesame Group;

* Charm Click won the search engine marketing businesses for Qunar,
a leading travel vertical,
 or   [east of the (Taishan) mountains], province (1994 est. pop. 86,520,000), c.59,000 sq mi (152,850 sq km), NE China.
 Gold,, Uni-President,
Budweiser and Mengsi Mattress;

* Charm Interactive won the digital marketing business for
; Pinyin: ) is a producer of household appliances (“white goods”), including air conditioners, laptops, refrigerators, etc.
 Group and Shanxin Fenqiu Alcohol Group.

The Company won awards for the following campaigns from 2012:


ICBC Interagency Committee on Back Contamination
Of or relating to the Olympic Games.


of the Olympic Games

Adj. 1. Olympic – of or relating to the Olympic Games; “Olympic winners”
 “Becoming a

” campaign: China
Advertising Forum’s Most Influential Campaign for 2012, and Tiger
Roar Outstanding Awards sponsored by Advertising Panorama Magazine;

 principal river of Australia, 1,609 mi (2,589 km) long, rising in the Australian Alps, SE New South Wales, and flowing westward to form the New South Wales–Victoria boundary.
 Goulburn Dairy’s 2012 Interactive
 , smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop.
China Advertising Forum’s Outstanding Case of 2012;

* Sunrain’s CCTV supporting rural education public service
campaign; Baihe’s DM[sup.2 ]Campaign; and Bosideng’s
Xuezhongfei Brand’s Yiqishang campaign: Advertising Panorama
Magazine’s Tiger Roar Outstanding Cases of 2012.

Business Outlook

*The Company’s non-GAAP net income (loss) excludes share-based
compensation expenses, amortization of intangible assets and net change
in fair value of consideration payable and call option.

The Company bases these estimates on a foreign exchange rate of


RMB Rolf Maier Bode
RMB Ren Min Bi  
6.20 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
v. con·densed, con·dens·ing, con·dens·es
1. To reduce the volume or compass of.

2. To make more concise; abridge or shorten.

3. Physics
v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates
1. To unite into one system or whole; combine:
information presented in

 with Accounting Principles Generally
Accepted in the
United States
 officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world’s third largest country in population and the fourth largest country in area.
 (“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
(loss),” which is defined as GAAP net income (loss) excluding
stock-based compensation expenses, amortization of intangible assets and
net changes in fair value of consideration payable and call option.

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 U.S. GAAP, the Company also provides non-GAAP financial measures,
including “turnover” and “non-GAAP net income
(loss).” 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

Management believes investors will benefit from greater

 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

 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

 Time) on

 see week.
, May 22, 2013.

Dial-indetails for the conference call are as follows:

A replay of the call will be available from 11 a.m. May 22, 2013
until May 29, 2013 U.S. Eastern Time. Dial-in details for the replay are
as follows:

Additionally, an archived webcast of this call will be available on
Investor Relations

 section of the Charm web site at

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

Safe Harbor


This press release contains “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as

v. a·mend·ed, a·mend·ing, a·mends
1. To change for the better; improve:

, and Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S.
Private Securities Litigation Reform

 of 1995. These forward-looking statements can be identified by


 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

, 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:

 see ass.

 IR Department Charm Communications Inc. Phone:
+86-10-8556-2527 Email:

In the United States:




New York
 Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
+1-646-460-9989 Email:

SOURCE Charm Communications Inc.