VISN

VisionChina Media, Inc. (VISN)

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VisionChina Media Inc. (VISN)

Q2 2010 Earnings Call

July 28, 2010 8:00 pm ET

Executives

Helen Plummer - IR Officer

Limin Li - Chairman and CEO

Scott Chen - CFO

Analysts

Philip Wan - Morgan Stanley

Dick Wei - JPMorgan

James Lee - CLSA

James Marsh - Piper Jaffray

Chenyi Lu - Cowen and Company

Paul Keung - Oppenheimer

Warren Wang - Hamon

Nan Li - SIG

Presentation

Operator

Good evening and thank you for standing by for VisionChina Media's second quarter 2010 earnings conference call. (Operator Instructions)

I will now turn the call over to your host for today's conference, Mrs. Helen Plummer, Investor Relations Officer for VisionChina Media.

Helen Plummer

Hello, everyone, and welcome to VisionChina Media's second quarter 2010 earnings conference call. The company's second quarter earnings results were released earlier today and are available on the company's IR website at www.visionchina.cn as well as on newswire services.

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; and Mr. Scott Chen, our Chief Financial Officer, who will take you through our financials and key operating metrics. After their prepared remarks, Mr. Li and Ms. Chen will be available for your questions.

Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking 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 Annual Report on Form 20-F and in other documents filed with the U.S. Securities and Exchange Commission. VisionChina Media does not assume any obligation to update any forward-looking statements except as required under applicable law.

As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on VisionChina Media's Investor Relations website at www.visionchina.cn.

I will now turn the call over to our CEO, Mr. Li.

Limin Li

Hello, everyone, and thank you for joining us today. We are very happy to see that by the end of the second quarter of 2010, VisionChina Media had taken great strides to overcome some of the short-term difficulties seen in the last quarter.

In the second quarter, we achieved total revenue of $31.8 million, surpassing our expectations with a quarter-over-quarter increase of 36% and year-over-year increase of 3.3%. Moreover, we returned to positive gross profit in the second quarter, giving us even greater confidence in our future.

Several positive factors are providing further evidence that the negative environment of the first quarter was temporary and that VisionChina Media has entered new phase of sustainable growth. We are seeing gradual recovery in the outdoor advertising market, strong progress in our integration with DMG following the acquisition as well as rapid growth of our in-house sales team.

Since the opening of the World Expo in Shanghai, our 13-line Shanghai subway network has been transporting hundreds of thousands of international and domestic expo visitors each day. A variety of programs and real-time information about expo are being broadcasted on network, capturing our target audiences' attention and making VisionChina Media one of the most effective outdoor ad, mobile, television advertising platforms for advertisers in that city.

Price and utilization in our subway network have both increased significantly. And during the second quarter, the utilization rate during primetime hours on Shanghai subway reached 90% and average utilization in our Shanghai subway network was 59% as opposed to 36% in the first quarter of this year.

Just three days ago, Sinomonitor, one of China's leading marketing research agencies, announced that 90.3% of Shanghai residents received Expo related information through subway, mobile television and also noted that Shanghai residents are now more accustomed to obtaining relevant information from subway mobile televisions.

In addition to receiving information via our subway television network, the same group also received Expo related information from other media sources. 86.7% received Expo related information on traditional television, 55.9% through the Internet, 43.7% on bus mobile television, and 27.6% from other outdoor advertising.

Subway mobile television has become highly effective, delivering mass media to audiences that appreciate.

In the next decade, China is going to construct more than 158 new tracks nationwide, with most of them including digital broadcasting capabilities. As the leader in digital out-of-home broadcasting for subways and buses, we expect subway to be a strong growth point for our company going forward.

In terms of media resource expansion, in July, we successfully renewed our exclusive contract with Beijing Subway System for the next five years. This was a critical next step for VisionChina Media as the renewal further solidified the company's market leadership position allowing us to approach 100% of the subway mobile television market share in China.

The acquisition of the six advertising agencies we made in 2008 was a strategic decision during a period of rapid growth for the company. Over the past two years, these six advertising agencies have supplied a large number of quality clients and a significant part of company's advertising income and have been invaluable in training and upgrading our in-house sales teams.

However, after reviewing projected revenue contribution from the acquired agencies, we believe it is prudent to take an impairment charge at this time on three out of the six advertising agencies we acquired in 2008 to better reflect our current business.

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