Charm Communications Inc. Announces Unaudited First Quarter 2013 Results

   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

PR Newswire

BEIJING, May 21, 2013

BEIJING, May 21, 2013 /PRNewswire-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, 2013.

First Quarter 2013Highlights

  oTurnovergrew 10.7% year over year to $232.9 million in the first quarter
    of 2013
  oRevenuesgrew 13.6% yearover year to $38.1 million in the first quarter
    of 2013
  oRevenues for Charm's advertising agency businessdeclined 1.7% year over
    year to $10.1 million in the first quarter of 2013
  oRevenues for Charm's media investment management businessgrew 23.7% year
    over year to $27.5 million in the first quarter of 2013
  oGross profitdeclined 2.3% year over year to $9.6 million in the first
    quarter of 2013
  oNet income declined 277.9% year over year to a net loss of $1.5 million in
    the first quarter of 2013
  oNon-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 macroeconomic 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
Dang, 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 China."

"As we reposition our Shangxing Media brand from a media inventory seller to a
media service agency, we will carefully balance our 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 Chinese advertising market rebounds and develops,"
concluded Mr. Dang.

Mr. Wei Zhou, 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 2013Results

Turnover (non-GAAP)

US$ mm                         1Q13   1Q12   4Q12   Y-o-Y % Q-o-Q%
Total turnover (non-GAAP)      $233.0 $210.4 $201.6 10.7%   15.5%
Advertising agency             $205.5 $188.2 $169.6 9.2%    21.2%
Media investment management    $27.5  $22.2  $32.0  23.7%   -14.3%
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 10.7% year-over-year increase in total turnover was mainly due to the
increase in media investment business billings, 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 CCTV, 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 extraction 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 holiday period in particular.

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

Revenues

US$ mm                         1Q13  1Q12  4Q12  Y-o-Y % Q-o-Q%
Total revenues                 $38.1 $33.5 $47.1 13.6%   -19.1%
Advertising agency             $10.1 $10.3 $12.5 -1.7%   -19.2%
Media investment management    $27.5 $22.2 $32.0 23.7%   -14.3%
Branding and identity services $0.5  $1.1  $2.6  -49.1%  -79.0%

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

US$ mm           1Q13  1Q12  4Q12  Y-o-Y % Q-o-Q%
Cost of revenues $28.5 $23.7 $34.1 20.2%   -16.5%
Gross profit     $9.6  $9.8  $13.0 -2.3%   -26.1%
Gross margin     25.2% 29.3% 27.6%

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 (Loss)

US$ mm                     1Q13  1Q12 4Q12  Y-o-Y %  Q-o-Q%
Total operating expenses   $11.5 $9.5 $17.2 20.7%    -32.9%
Selling and marketing      $8.7  $7.4 $11.3 17.5%    -22.8%
General and administrative $2.8  $2.1 $5.9  31.8%    -52.4%
Operating profit (loss)    -$2.2 $0.2 -$3.5 -1032.1% -39.3%

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)

US$ mm                                  1Q13   1Q12  4Q12   Y-o-Y % Q-o-Q%
Non-GAAP net income (loss)*             -$0.8  $1.9  -$3.8  -142.0% -79.3%
Net income (loss)                       -$1.5  $0.8  $-4.2  -277.9% -65.1%
Basic net income (loss) per ADS (US$)   -$0.05 $0.01 -$0.13
Diluted net income (loss) per ADS (US$) -$0.05 $0.01 -$0.13

*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 depositary share ("ADS") represents two common shares. The
weighted average number of shares used to compute 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

Net 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 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 2012.

Customers

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.

Employee Headcount

As of March 31, 2013, the Company had 790 employees, compared to 813 employees
as of December 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 year:

  oCharm Advertising won the television business for Lafaso, a leading online
    cosmetics retailer, Ginsber Beer, INOFA, Yake Foods, Shuanglun, Yinlu,
    Roban, Johnson Fitness, Fengfan, Lefeng and Nanfang Black Sesame Group;
  oCharm Click won the search engine marketing businesses for Qunar, a
    leading travel vertical, Shandong Gold, Ask.com, Uni-President, Budweiser
    and Mengsi Mattress;
  oCharm Interactive won the digital marketing business for Haier Group and
    Shanxin Fenqiu Alcohol Group.

The Company won awards for the following campaigns from 2012:

  oICBC 2012 Olympic "Becoming a Legend" campaign: China Advertising Forum's
    Most Influential Campaign for 2012, and Tiger Roar Outstanding Awards
    sponsored by Advertising Panorama Magazine;
  oMurray Goulburn Dairy's 2012 Interactive Australia Campaign: China
    Advertising Forum's Outstanding Case of 2012;
  oSunrain's CCTV supporting rural education public service campaign; Baihe's
    DM^2 Campaign; and Bosideng's Xuezhongfei Brand's Yiqishang campaign:
    Advertising Panorama Magazine's Tiger Roar Outstanding Cases of 2012.

Business Outlook

US$ mm               2Q13E
Non-GAAP net income* 3.5~4.0

*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 RMB6.20 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 condensed consolidated financial information
presented in accordance with Accounting Principles Generally Accepted in the
United States ("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 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:

  othese non-GAAP financial measures are limited in their usefulness and
    should be considered only as a supplement to the Company's GAAP financial
    measures;
  othese non-GAAP financial measures should not be considered in isolation
    from, or as a substitute for, the Company's GAAP financial measures;
  othese non-GAAP financial measures should not be considered to be superior
    to the Company's GAAP financial measures; and
  othese 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 Wednesday, May 22, 2013.

Dial-indetails for the conference call are as follows:

United States:      +1-718-354-1231
United Kingdom:     +44-20-3059-8139
Hong Kong:     +852-2475-0994
International: +65-6723-9381
Passcode:      69901541

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:

International: +61-2-8199-0299
Passcode:          69901541

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 tohttp://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:

Ms. Jenny Wang
IR Department
Charm Communications Inc.
Phone: +86-10-8556-2527
Email:ir@charmgroup.cn

In the United States:

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)
                                                                   March31 December31

                                                                   2013     2012
ASSETS
Current Assets
 Cash and cash equivalents                                         99,574   116,589
 Notes receivable                                                  12,276   6,993
 Prepaid expenses                                                  95,823   93,838
 Deposits                                                          24,790   24,723
 Accounts receivable                                               94,125   89,964
 Amount due from related parties                                   2,115    1,938
 Deferred tax assets                                               192      191
 Other current assets                                              4,442    4,021
Total current assets                                               333,337  338,257
 Fixed assets, net                                                 7,497    7,638
 Intangible assets, net                                            2,157    2,375
 Investments under equity method                                   1,895    2,133
 Goodwill                                                          4,393    4,379
 Cost method investments                                           805      803
 Other non-current assets                                          2,634    3,045
Total non-current assets                                           19,381   20,373
TOTAL ASSETS                                                       352,718  358,630
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
Current Liabilities
 Accounts payable (of which 53 and 53, as of March 31, 2013 and

 December 31,2012 of the consolidated VIE without recourse to the  33,753   38,855

 Company, respectively)
 Amounts due to related parties (of which 313 and 313 as of March
 31,
                                                                   10,808   13,310
 2013 and December 31,2012 of the consolidated VIE without

 recourse to the Company, respectively)
 Advancesfromcustomers(ofwhich1,390and1,408asofMarch31,

 2013 and December 31,2012 of the consolidated VIE without         59,914   56,343

 recourse to the Company, respectively)
 Accrued expenses and other current liabilities (of which 3,085
 and
                                                                   14,281   18,912
 3,246 as of March 31, 2013 and December 31, 2012 of the

 consolidated VIE without recourse to the Company, respectively)
 Consideration payable (of which nil as of March 31, 2013 and

 December 31, 2012 of the consolidated VIE without recourse to the 2,273    2,507

 Company, respectively)
 Dividend payable (of which nil as of March 31, 2013 and December

 31, 2012 of the consolidated VIE without recourse to the Company, 19,898   -

 respectively)
Total current liabilities                                          140,927  129,927
 Consideration payable (of which nil as of March 31, 2013 and

 December 31, 2012 of the consolidated VIE without recourse to the 1,332    1,327

 Company, respectively)
Total non-current liabilities                                      1,332    1,327
Total liabilities                                                  142,259  131,254
Redeemable noncontrolling interest                                 5,622    5,434
Equity:
Charm Communications Inc.'s equity
 Ordinary shares                                                   8        8
 Additional paid-in capital                                       84,726   100,850
 Retained earnings                                                 99,476   101,225
 Accumulated other comprehensive income                            16,318   15,652
Total Charm Communications Inc. shareholders' equity               200,528  217,735
Noncontrolling interest                                            4,309    4,207
Total equity                                                       204,837  221,942
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING
INTEREST AND EQUITY                                               352,718  358,630



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,
                                           March31    March31    December31

                                           2013        2012        2012
                                           (Unaudited) (Unaudited) (Unaudited)
Revenues:
     Media investment management           27,456      22,194      32,042
     Advertising agency                    10,113      10,283      12,512
     Branding and identity services        542         1,064       2,578
Total revenues                             38,111      33,541      47,132
Cost of revenues:
     Media investment management           27,121      22,081      31,159
     Advertising agency                    1,005       982         1,337
     Branding and identity services        373         638         1,624
Total cost of revenues:                    28,499      23,701      34,120
Gross profit                               9,612       9,840       13,012
Operating expenses:
     Selling and marketing expenses        8,716       7,420       11,286
     General and administrative expenses   2,804       2,127       5,891
Total operating expenses                   11,520      9,547       17,177
     Gain (Loss) from equity method        (245)       (62)        307
     investees
     Net changes in fair value of
     consideration payable and             -           -           309

     call option
Operating profit (loss)                    (2,153)     231         (3,549)
     Interest income                       436         645         568
     Other expense                         -           13          -
Income before income tax expense           (1,717)     863         (2,981)
     Income tax expense                    (258)       43          1,195
Net income (loss)                          (1,459)     820         (4,176)
Net income attributable to noncontrolling  290         268         884
interest
Net income (loss) attributable to Charm    (1,749)     552         (5,060)
Communications Inc.
Net income(loss) attributable to Charm
Communications Inc.

shareholders per ADS:
Basic                                      (0.05)      0.01        (0.13)
Diluted                                    (0.05)      0.01        (0.13)
Shares used in computation of net
income(loss) per ADS:
Basic                                      38,479,967  39,068,333  38,269,369
Diluted                                    38,479,967  40,900,414  38,269,369
Notes:
Share-based compensation expenses during
the period

included in:
Cost of revenues                           -           1           -
Selling and marketing expenses             325         535         318
General and administrative expenses        130         238         150
Total                                      455         774         468
Charm Communications Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Amounts in thousands of U.S. dollars, except for number of shares and per
share data)
                                           For the three months ended,
                                           March31    March31   December31

                                           2013        2012        2012
                                           (Unaudited) (Unaudited) (Unaudited)
Net income (loss)                          (1,459)     820         (4,176)
Other comprehensive income (loss) net of
tax:
Changes in cumulative foreign exchange     666         (126)       1,957
translation adjustment
Comprehensive income (loss)                (793)       694         (2,219)
Less: Comprehensive income attributable to
                                           (102)       (247)       (590)
non-controlling interest
Less: Comprehensive income attributable to
                                           (188)       (21)        (297)
redeemable non-controlling interest
Comprehensive income (loss) attributable
to Charm                                   (1,083)     426         (3,106)

Communications Inc.



Reconciliation from Net Income (Loss) to Non-GAAP Net Income (Loss):
(Amounts in thousands of U.S. dollars)
                                           For the three months ended,
                                           March 31    March 31    December 31

                                           2013        2012        2012
                                           (Unaudited) (Unaudited) (Unaudited)
 Net income (loss)                         (1,459)     820         (4,176)
 Add back share-based compensation
 expenses                                  455         774         468

 during the related periods
 Add back amortization on intangible       225         261         261
 assets
 Deduct net changes in fair value of
 consideration payable                     -           -           (309)

 and call option
 Non-GAAP net income (loss)                (779)       1,855       (3,756)



Reconciliation from Turnover (non-GAAP) to USGAAP Revenues:
(Amounts in thousands of U.S. dollars)
                                For the three months ended,
                                March31    March31    December31

                                2013        2012        2012
                                (Unaudited) (Unaudited) (Unaudited)
 Turnover (non-GAAP):
 Media investment management    27,456      22,194      32,042
 Advertising agency             205,469     188,162     169,570
 Branding and identity services N/A        N/A        N/A
 Total turnover                 232,925     210,356     201,612
 Extracted rate:
 Media investment management    100.0%      100.0%      100.0%
 Advertising agency             4.9%        5.5%        7.4%
 Branding and identity services N/A       N/A       N/A
 USGAAP Revenue:
 Media investment management    27,456      22,194      32,042
 Advertising agency             10,113      10,283      12,512
 Branding and identity services 542         1,064       2,578
 Total revenue                  38,111      33,541      47,132





SOURCE Charm Communications Inc.

Website: http://ir.charmgroup.cn