China MediaExpress Holdings, Inc. Announces Strong First Quarter Financial Results

First Quarter Revenue and Net Income Increased by 137% and 143%, Respectively

Reaffirms 2010 Net Income Guidance

FUJIAN, China--(BUSINESS WIRE)--China MediaExpress Holdings, Inc. (NYSE Amex: CCME) (“CME” or “Company”), China’s largest television advertising operator on inter-city express buses, today announced financial results for the first quarter ended March 31, 2010.

“As a result, we have sufficient resources to fund our business expansion plans, including internal growth initiatives as well as potential acquisitions.”

Financial Highlights – First Quarter 2010 vs. First Quarter 2009

• Revenue increased by 137% to $44.5 million as compared to $18.8 million;
• Gross margin for first quarter was 60%;
• Income from operations increased by 130% to $24.2 million as compared to $10.5 million;
• Net income increased by 143% to $18.1 million as compared to $7.5 million; and,
• As of March 31, 2010, the Company had more than $114.4 million in cash.

Zheng Cheng, CME’s Founder and CEO, commented, “We started 2010 on a very strong note with record revenue and net income. Our revenue and net income for the quarter grew by 39% and 27% respectively when compared to the 2009 fourth quarter. Basic and diluted earnings per share in the first quarter of 2010 was $0.28 and $0.27, respectively (after a one-time charge of $9,242,000 related to a deemed dividend on the issuance of our convertible preferred stock in the first quarter); excluding this deemed dividend, the income attributable to holders of common shares (non-GAAP net income) would be $18,142,000 and the basic and diluted earnings per share would have been $0.58 and $0.54, respectively.”

Mr. Cheng added, “Growth was attributable to several factors including: an increase in advertising time sold, higher average advertising rates, the expansion of our geographic coverage and client base, and a higher proportion of direct versus agency sales. In addition, since the third quarter of 2009, we started to generate revenue from embedded advertisements which are displayed during the broadcast of the entertainment content. More importantly, in the first quarter of 2010, we implemented premium advertising rates for airport express buses compared to inter-city bus advertising rates. The revenue generated from the airport express buses for the three months ended March 31, 2010 was approximately $7.0 million. At the end of the first quarter, our network of airport express buses covered Beijing, Fuzhou, Guangzhou and Qingdao.”

Mr. Cheng continued, “Our network continues to grow through new agreements with bus operators and currently includes 49 bus operator partners, up from 46 at the end of 2009. The number of buses equipped with our television systems is now over 21,500. The growing network has attracted more than 450 advertisers either through advertising agencies or directly from us. Our clientele includes Hitachi, China Telecom, Toyota, Siemens and China Pacific Life Insurance, which have purchased advertising time from CME for more than three years; and many other well-known international and national brands including Coca Cola, Pepsi, Wahaha, Siemens, Hitachi, China Telecom, China Mobile, China Post, Toyota, Bank of China and China Pacific Life Insurance.”

Mr. Cheng added, “We continue to explore and implement opportunities to expand our business by providing clients with additional advertising channels and passengers with new services. Encouraged by the success of embedded and airport express bus advertising, we are working on several outdoor media opportunities such as the establishing of stationary advertising media at inter-city express bus terminals to complement our core business and are offering new services to advertisers and passengers. We continue to pursue more direct advertising clients and expect that by year-end 2010, 35% of our revenue mix will be generated by direct advertising clients.”

Jacky Lam, CME’s Chief Financial Officer stated, “As of March 31, 2010, we had more than $114 million in cash as compared to $57.2 million at the end of 2009. In the first quarter of 2010, CME generated approximately $12.9 million in cash from operating activities. In addition, during the first quarter we completed two important transactions which increase our cash position: a $30 million private investment from Starr International Company, Inc., and the exercise and redemption of our publicly traded warrants, where we received gross proceeds of approximately $47.6 million. We also paid out approximately $20.9 million for the warrants and settled $10 million in outstanding promissory notes to the original shareholders of Hong Kong Mandefu Holding Limited as a part of the original share exchange.”

Mr. Lam added, “As a result, we have sufficient resources to fund our business expansion plans, including internal growth initiatives as well as potential acquisitions.”

Reaffirms 2010 Net Income Guidance

Based on the current customer base, geographic coverage, network of express buses and existing revenue streams, CME’s management reaffirms its 2010 net income guidance which is expected to be in the range of $71 million to $75 million (on a non-GAAP basis, exclusive of share based compensation in connection with the share incentive plan which is expected to be adopted and with options to be granted in the 2^nd or 3^rd quarter of 2010 or deemed dividend on issuance of convertible preferred shares). As previously announced, these projections exclude the impact of any possible acquisitions, additional of new buses and new investments in other media projects in 2010.”

Mr. Cheng concluded, “Looking ahead, as advertisers are accelerating their efforts to grow their sales beyond the first- and second-tier cities into less developed markets, we believe that we have positioned our Company to benefit from the rapid growth of advertising spending in China. We are very proud of our success which is a result of the dedication and hard work of our management team and all of our employees, and we are confident that our Company has a bright future.”

Conference Call

CME’s Founder & CEO, Zheng Cheng and CFO, Jacky Lam will host a conference call for investors today, May 14, 2010, at 10:00 am EDT. Interested parties may participate in the call by dialing [phone] (US & Canada) and [phone] (International); please call in 10 minutes before the conference call is scheduled to begin and ask for the China MediaExpress conference call. After opening remarks, there will be a question and answer period.

The conference call will also be broadcast live over the Internet. To listen to the live call, please go to www.ccme.tv or http://investor.shareholder.com/media/eventdetail.cfm?eventid=80732&CompanyID=ABEA-3WTP6Z&e=1&mediaKey=761A92FA0816E8EB83B4B0EA40CA8AAC. Please go to the website at least 15 minutes early to register, and download and install any necessary audio software. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days at CME’s website. We suggest listeners use Microsoft Explorer as their browser.

About CME

CME, through contractual arrangements with Fujian Fenzhong, a variable interest entity of the Company, operates the largest television advertising network on inter-city express buses in China. While CME has no direct equity ownership in Fujian Fenzhong, through the contractual agreements CME indirectly control the operation of Fujian Fenzhong and receives the economic benefits of Fujian Fenzhong’s operations. Fujian Fenzhong generates revenue by selling advertisements on its network of television displays installed on over 21,500 express buses originating in fourteen of China’s most prosperous regions, including the five municipalities of Beijing, Shanghai, Guangzhou, Tianjin and Chongqing and nine economically prosperous provinces, namely Guangdong, Jiangsu, Fujian, Sichuan, Hebei, Anhui, Hubei, Shandong and Shanxi which generate more than half of China’s GDP.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”), as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about:

• The Company’s goals and strategies;
• The Company’s future prospects and market acceptance of its advertising network;
• The Company’s future business development, financial condition and results of operations;
• Projected changes in revenue, costs, expense items, profits, earnings, and other estimated financial information;
• The Company’s ability to manage the growth of its existing advertising network on inter-city express buses and expansion to prospective advertising network on high speed railways;
• Trends and competition in the out-of-home advertising media market in China;
• Changes in general economic and business conditions in China; and
• Chinese laws, regulation and policies, including those applicable to the advertising industry.

Use of Non-GAAP Financial Measures

In addition to CME's consolidated financial results under GAAP, the Company also provides non-GAAP financial measures, including non-GAAP net income and earnings per share, excluding non-cash deemed dividend on convertible preferred shares. The Company believes that the non-GAAP financial measures provide investors with another method of assessing CME's operating results in a manner that is focused on the performance of its ongoing operations. 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. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of CME's liquidity and when planning and forecasting future periods.

The reconciliation from GAAP income attributable to holders of common shares to non-GAAP income attributable to holders of common shares is as follows:

	For the period ended
	March, 31	March, 31
	2010	2009
GAAP Income attributable to
holders of common shares	$8,900	$7,455
Reconciling items:
Deemed dividend on convertible
preferred shares	9,242	-
Non GAAP Income attributable to
holders of common shares	18,142	7,455
Weighted average number of
shares:
Basic	31,275,245	20,915,000
Diluted	33,499,826	20,915,000
Non GAAP Earnings per share:
Basic	$0.58	$0.36
Diluted	$0.54	$0.36

CHINA MEDIAEXPRESS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of US dollars, except for number of shares and per share data)
(Unaudited)
	For the three months ended March 31,
	2010			2009
Revenue, net	$	44,525		$	18,769
Cost of revenue		(17,931	)		(7,133	)
Gross profit		26,594			11,636
Selling expenses		(1,756	)		(265	)
Administrative expenses		(597	)		(836	)
Total operating expenses		(2,353	)		(1,101	)
Income from operations		24,241			10,535
Interest income		61			22
Income before income tax expense		24,302			10,557
Income tax expense		(6,160	)		(3,102	)
Net income	$	18,142		$	7,455
Deemed dividend on convertible preferred
shares	$	(9,242	)		-
Income attributable to holders of common
shares	$	8,900		$	7,455
Earnings per share:
Basic	$	0.28		$	0.36
Diluted	$	0.27		$	0.36
Weighted average number of shares used in
calculating:
Basic		31,275,245			20,915,000
Diluted		33,499,826			20,915,000

CHINA MEDIAEXPRESS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of US dollars except number of shares)
(Unaudited)
	March 31, 2010		December 31, 2009
ASSETS
Current assets:
Cash	$	114,396	$	57,151
Accounts receivable		18,805		12,569
Prepaid expenses and other current assets		1,929		251
Total current assets	$	135,130	$	69,971
Non-current assets:
Property and equipment, net	$	11,525	$	11,065
Long term prepayment		7,051		-
Deferred tax assets		3,605		1,943
Total non-current assets	$	22,181		13,008
TOTAL ASSETS	$	157,311	$	82,979
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,571	$	2,179
Amounts due to related parties		3,364		13,315
Payables for acquisitions of equipment		1,579		2,071
Income tax payable		8,333		5,765
Accrued expenses and other current liabilities		4,992		4,144
Accrued concession fees - current		1,809		1,134
Total current liabilities	$	22,648	$	28,608
Non-current liabilities:
Accrued concession fees – non-current		12,610		6,639
Total non-current liabilities	$	12,610	$	6,639
Total liabilities	$	35,258	$	35,247
Commitment
Shareholders’ equity
Common shares (0.001 par value: 40,000,000 shares
authorized; 24,859,368 and 33,275,517 shares issued and
outstanding as of December 31, 2009 and March 31, 2010,
respectively)	$	33	$	24
Preferred Shares ($0.001 par value: 1,000,000 shares
authorized; 0 and 1,000,000 shares issued and outstanding as
of December 31, 2009 and March 31, 2010, respectively)		22,095		-
Additional paid-in capital		62,781		1,960
Subscription receivable from shareholders		-		(3,350	)
Accumulated other comprehensive income		1,382		1,346
Statutory reserve		8,834		8,834
Retained earnings		26,928		38,918
Total shareholders’ equity	$	122,053	$	47,732
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	157,311	$	82,979

CHINA MEDIAEXPRESS HOLDING INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of US dollars)
	For the period ended
	March 31, 2010			March 31, 2009
	(Unaudited)			(Unaudited)
Net cash provided by operating activities	$	12,946		$	8,495
Cash flows used in investing activities:
Acquisitions of property and equipment, net of related
payables	$	(1,875	)	$	(456	)
Cash flows from/(used in) financing activities:
Dividend paid to shareholders	$	-		$	(17,555	)
Exercise of warrants		47,616			-
Issuance of preferred shares and warrants		30,000			-
Payment of additional consideration in relation to the Share
Exchange		(20,890	)		-
Repayment of promissory note in connection with Share
Exchange		(10,000	)		-
Transaction cost paid for issuance of preferred shares and
warrants		(583	)		-
Net cash from/(used in) financing activities	$	46,143		$	(17,555	)
Effect of foreign currency translation adjustments on
cash	$	31		$	(65	)
Net increase (decrease) in cash	$	57,245		$	(9,581	)
Cash at the beginning of the period	$	57,151			29,997
Cash at the end of the period	$	114,396		$	20,416