China MediaExpress Holdings, Inc. Announces Third Quarter Financial Results

Third Quarter Revenue and Net Income Increased by 118% and 167%, Respectively

Increases 2010 Net Income Guidance to Between $100 Million and $104 Million

FUJIAN, China--(BUSINESS WIRE)--China MediaExpress Holdings, Inc. (NASDAQ GS: CCME) (“CME” or “Company”), China’s largest television advertising operator on inter-city and airport express buses, today announces financial results for the three and nine months ended September 30, 2010.

Third Quarter 2010 vs. Third Quarter 2009

• Revenue increased by 118% to $57.0 million as compared to $26.1 million;
• Gross margin was 76.8% as compared to 67.0%;
• Income from operations increased by 166% to $41.2 million as compared to $15.5 million; and,
• Net income increased by 167% to $31.1 million or $0.81 per diluted share as compared to $11.7 million or $0.56 per diluted share.

Nine Months 2010 vs. Nine Months 2009

• Revenue increased by 142% to $155.0 million as compared to $64.0 million;
• Gross margin was 72.6% as compared to 64.1%;
• Income from operations increased by 179% to $103.8 million as compared to $37.2 million;
• Net income increased by 184% to $77.8 million or $1.86 per diluted share as compared to $27.4 million or $1.31 per diluted share; and,
• As of September 30, 2010, the Company had approximately $170 million in cash.

Zheng Cheng, CME’s Founder and CEO, commented, “As expected, revenue and net income maintained very strong growth in the third quarter. The growth was primarily attributed to the power from our largest inter-city buses network in China where our advertising time sold, average advertising rates, number of our advertising customers, and a greater proportion of direct sales to agency sales increased substantially compared to last year.

“In addition, embedded advertising continued to generate a significant portion of our revenue as we have packaged and sold it separately to our clients since Q3 2009. The embedded advertising, which is displayed during the broadcasting of the content, has relatively low production cost, generates high margins and accounts for approximately 23% of our revenue for the nine months ended September 30, 2010.

“Furthermore, our year-to-date results reflect the success of our airport express bus business. Since the first launch of this new business line at the beginning of 2010, the advertising packages sold for airport express buses have been at premium prices, because of the demographics of airport express bus travelers, exclusivity for all the buses from the airports and the unique captive environment. As a result, the expansion of this business has generated significant revenue and has produced higher gross margins overall. For the nine months ended September 30, 2010, the revenue generated from airport express buses was approximately $35.1 million, of which approximately $15.0 million was generated in the third quarter. Our network today covers six large and important airports in China: Beijing, Fuzhou, Guangzhou, Qingdao, Changsha and Chongqing.”

Mr. Cheng continued, “We continue to grow our bus network through new contracts with bus operators in regions we already serve and by expanding into new regions in this highly fragmented niche market. Since the start of this year, we have grown our network by more than 4,000 express buses and have expanded into five new regions: Zhejiang, Hunan, Jianxi, Henan and Inner Mongolia. We have long-term contracts in place, ranging from three to eight years with 63 bus operators.”

Jacky Lam, CME’s Chief Financial Officer stated, “As of September 30, 2010, we had approximately $170 million in cash up from $139 million as of June 30, 2010. Cash generated from operating activities for the first nine months of 2010 was $69.0 million (of which $30.8 million was generated in the third quarter), compared to $29.9 million generated in the same period of 2009. Net cash used in investing activities during the current nine month period was $3.6 million. Our cash resources continue to be sufficient to meet both our short-term and long-term liquidity needs, capital expenditure requirements to achieve our expansion plans, including internal growth initiatives as well as potential acquisitions.”

Increase 2010 Net Income Guidance

Based on year-to-to-date results and expectations for the fourth quarter, the Company is increasing its 2010 net income guidance which is expected to be in the range of $100 million to $104 million compared to the previous net income guidance of $82 million to $85 million (on a non-GAAP basis, exclusive of non-cash charges for (i) share based compensation in connection with the granting of options under the Company’s share incentive plan expected to be adopted later in 2010 and (ii) deemed dividends on outstanding convertible preferred shares).

Mr. Cheng concluded, “As we have mentioned in the past, we are working on several additional opportunities to increase our market share and reinforce our position as one of the leading players in the out-of-home advertising space. Furthermore, mergers and acquisition remain a corporate priority. We are very proud of our achievements and look forward to continued growth during the years ahead.”

Conference Call

CME’s Founder & CEO, Zheng Cheng and CFO, Jacky Lam will host a conference call today at 9:00 AM ET to discuss the results as well as recent corporate developments.

The dial-in numbers are:

[phone] (US & Canada)

[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 webcast, please go to www.ccme.tv or http://www.investorcalendar.com/IC/CEPage.asp?ID=162179. 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 Internet Explorer as their web browser.

CME, through contractual arrangements with Fujian Fenzhong, an entity majority owned by CME’s former majority shareholder, operates the largest television advertising network on inter-city and airport express buses in China. While CME has no direct equity ownership in Fujian Fenzhong, through the contractual agreements CME 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 24,400 express buses originating in eighteen of China’s most prosperous regions, including the four municipalities of Beijing, Shanghai, Tianjin and Chongqing and fourteen economically prosperous regions, namely Guangdong, Jiangsu, Jiangxi, Fujian, Sichuan, Hebei, Anhui, Hubei, Shandong, Shanxi, Inner Mongolia, Zhejiang, Hunan and Henan.

CME is included in the Russell Global Index. For more information visit: www.ccme.tv.

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:

	Three months ended September 30,				Nine months ended September 30,
		2010		2009		2010		2009
GAAP Income attributable to holders of common shares	$	31,131	$	11,664	$	68,535	$	27,400
Reconciling items:
Deemed dividend on convertible preferred shares		-		-		9,242		-
Non-GAAP Income attributable to holders of common shares		31,131		11,664		77,777		27,400
Weighted average number of shares:
Basic		33,823,161		20,915,000		32,805,597		20,915,000
Diluted		38,430,241		20,915,000		36,929,398		20,915,000
Non-GAAP Earnings per share:
Basic	$	0.92	$	0.56	$	2.37	$	1.31
Diluted	$	0.81	$	0.56	$	2.11	$	1.31

CHINA MEDIAEXPRESS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands of United States (“US”) dollars (“$‘000”), except number of shares and per share amounts) (Unaudited)
	Three months ended September 30,						Nine months ended September 30,
		2010			2009			2010			2009
Revenue, net	$	56,956		$	26,122		$	154,992		$	63,983
Cost of revenue		(13,198	)		(8,630	)		(42,527	)		(22,992	)
Gross profit		43,758			17,492			112,465			40,991
Selling expenses		(2,281	)		(1,371	)		(6,171	)		(1,897	)
Administrative expenses		(228	)		(588	)		(2,506	)		(1,941	)
Total operating expenses		(2,509	)		(1,959	)		(8,677	)		(3,838	)
Income from operations		41,249			15,533			103,788			37,153
Interest income		106			27			251			70
Income before income tax expense		41,355			15,560			104,039			37,223
Income tax expense		(10,224	)		(3,896	)		(26,262	)		(9,823	)
Net income	$	31,131		$	11,664		$	77,777		$	27,400
Deemed dividend on convertible preferred shares		-			-			(9,242	)		-
Income attributable to holders of common shares	$	31,131		$	11,664		$	68,535		$	27,400
Earnings per share:
Basic	$	0.92		$	0.56		$	2.09		$	1.31
Diluted	$	0.81		$	0.56		$	1.86		$	1.31
Weighted average number of shares used in calculating:
Basic		33,823,161			20,915,000			32,805,597			20,915,000
Diluted		38,430,241			20,915,000			36,929,398			20,915,000

CHINA MEDIAEXPRESS HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands of US dollars except number of shares) (Unaudited)
	September 30, 2010		December 31, 2009
ASSETS
Current assets:
Cash	$	169,947	$	57,151
Accounts receivable		20,337		12,569
Prepaid expenses and other current assets		3,766		251
Total current assets	$	194,050	$	69,971
Non-current assets:
Property and equipment, net	$	11,734	$	11,065
Long term prepayment		12,060		-
Deferred tax assets		3,083		1,943
Total non-current assets	$	26,877		13,008
TOTAL ASSETS	$	220,927	$	82,979
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable (including accounts payable of the consolidated variable interest entities ("VIEs") without recourse to China MediaExpress Holdings, Inc. (the "Company") of $2,904 and $2,179 as of September 30, 2010, and December 31, 2009, respectively)	$	2,904	$	2,179
Amounts due to related parties		3,498		13,315
Payables for acquisitions of equipment (including amounts due to payables for acquisition of equipment of the consolidated VIEs without recourse to the Company of $1,676 and $2,071 as of September 30, 2010, and December 31, 2009, respectively)		1,676		2,071
Income tax payable		10,529		5,765
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIEs without recourse to the Company of $3,615 and $2,374 as of September 30, 2010, and December 31, 2009, respectively)		6,671		4,144
Accrued concession fees – current (including current portion of accrued concession fees of the consolidated VIEs without recourse to the Company of $3,047 and $1,134 as of September 30, 2010, and December 31, 2009, respectively)		3,047		1,134
Total current liabilities	$	28,325	$	28,608
Non-current liability:
Accrued concession fees – non-current (including non-current portion of accrued concession fees of the consolidated VIEs without recourse to the Company of $9,286 and $6,639 as of September 30, 2010, and December 31, 2009, respectively)		9,286		6,639
Total non-current liability	$	9,286	$	6,639
Total liabilities	$	37,611	$	35,247
Commitment
Shareholders’ equity
Common shares ($0.001 par value: 40,000,000 shares
authorized; 34,290,552 and 24,859,368 shares issued and outstanding as of September 30, 2010 and December 31, 2009 , respectively)	$	34	$	24
Preferred Shares ($0.001 par value: 1,000,000 shares authorized; 1,000,000 and Nil issued and outstanding as of September 30, 2010 and December 31, 2009, respectively; liquidation value: $30,000 as of September 30, 2010)		22,095		-
Additional paid-in capital		73,640		1,960
Subscription receivable from shareholders		-		(3,350	)
Accumulated other comprehensive income		3,010		1,346
Statutory reserve		8,834		8,834
Retained earnings		75,703		38,918
Total shareholders’ equity	$	183,316	$	47,732
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	220,927	$	82,979

CHINA MEDIAEXPRESS HOLDING INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands of US dollars)
	Nine months ended September 30,
Cash flows from operating activities:		2010			2009
Net income	$	77,777		$	27,400
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment		2,942			2,351
Amortization of long term prepayment		1,575			-
Deferred tax		(1,085	)		(332	)
Changes in operating assets and liabilities:
Accounts receivable		(8,005	)		(5,228	)
Prepaid expenses and other current assets		(17,399	)		33
Accounts payable		859			465
Amounts due to related parties		-			710
Income tax payable		4,587			1,495
Accrued expenses and other current liabilities		2,953			1,744
Accrued concession fees		4,759			1,140
Accrued severance payment		-			86
Net cash from operating activities	$	68,963		$	29,864
Cash flows used in investing activities:
Acquisitions of property and equipment, net of related payables	$	(3,610	)	$	(1,415	)
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	$	1,300		$	(36	)
Net increase in cash	$	112,796		$	10,858
Cash at the beginning of the period		57,151			29,997
Cash at the end of the period	$	169,947		$	40,855