Charm Communications Inc. (NASDAQ:CHRM)
Q4 2012 Results Earnings Call
March 19, 2013 8:00 AM ET
Nicholas Manganaro - Ogilvy Financial, IR
He Dang - Founder, Chairman and CEO
Wei Zhou - Chief Financial Officer
Eddie Leung - Merrill Lynch
Jake Lynch - Macquarie Securities
Hello. And thank you for standing by for Charm Communications Earnings Conference Call. At this time, all participants are in listen-only mode. After management’s prepared remarks there will be a question-and-answer session. Today’s conference is being recorded. If you have any objections you may disconnect at this time.
I would now like to turn the call over to your host for today’s conference, Mr. Nicholas Manganaro from Ogilvy Financial. Thank you. Please go ahead, sir.
Hello, everyone. And welcome to Charm Communications’ earnings conference call for the fourth quarter and full year ended December 31, 2012. The company’s earnings results were released yesterday and are available on the company’s IR website at ir.charmgroup.cn, as well as on newswire services.
Today, you will hear opening remarks from Charm’s Founder, Chairman and CEO, Mr. He Dang, followed by the company’s Chief Financial Officer, Mr. Wei Zhou, who will provide a financial overview and guidance for the first quarter of 2013. After their prepared remarks, they will be available to answer your questions.
Before we continue, please note that the discussion today will contain certain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from managements current expectations. Charm does not assume any obligation to update any forward-looking statements except as required under applicable law.
Also, please note that some of the information to be discussed includes non-GAAP financial measures as defined in Regulation G. The most directly comparable U.S. GAAP financial measures and information reconciling these non-GAAP financial measures to Charm’s financial results prepared in accordance with U.S. GAAP are included in Charm’s earnings release, which has been posted on the company’s IR website at ir.charmgroup.cn. Please note that this conference is being recorded. In addition, a webcast of this conference call will be available on Charm’s Investor Relations website.
I will now turn the call over to Charm Communications Founder, Chairman and CEO, Mr. Dang, for whom I will read a translation.
Hello, everyone. And welcome to our fourth quarter and full year 2012 earnings conference call. Our core advertising agency business powered by our leadership position we expect the China Central Television one of the fast growing digital business outperform the market last year, increasing approximately 12% in gross billings and 35% in revenues from 2012. Overall, however, we saw mixed results in 2012.
Our media business was significantly impacted by the regulatory changes that impacted China’s satellite television channels early in 2012, as well as by softer than expected advertising demand in the second half of the year.
Before discussing our business results in more detail, I would like to announce that our Board of Directors has approved the cash dividend of $0.50 per American depositary share. Despite the market turbulence of 2012, we remain committed to sharing our longer term success with our shareholders and we’ll evaluate the possibility of future dividends based on our capital requirements.
China’s microeconomics slowdown in 2012 had a substantial impact on the country’s advertising industry. According to CTR market research traditional media advertising increased just 4.5% in 2012 with 6.4% growth in TV ad spend, the lowest rate in the past five years.
Although, we anticipated and planned for challenging conditions last year, we fail to see the expected rebound in advertising demand at the end of 2012. As a result, our level of excess media inventory weighed on our margins.
For 2013, we expect the overall advertising market to grow 7% with mid single-digit growth in TV and 20% in digital. This underscores the importance of offering integrated digital solutions, which we expect to benefit from the leadership of our newest Vice President, Johnny Zhu.
With regard to our CCTV business, we continue to lead the market with our unrivaled expertise and total client ad spend. In November 2012 and for the 10th consecutive year, we secured the number one position in terms of successful bidding volume, positioning us well for the year ahead.
CCTV continues to be the dominant platform for nationwide advertising in China and we will continue to leverage our strength in CCTV media to grow our advertising business and support our integrated advertising platform.
Moving on now to our operating highlights for the fourth quarter and full year. As a result of our increased revenue extraction rate, our advertising agency revenues grew 6.5% year-over-year in the fourth quarter. Despite a decrease in agency billings after third quarter then it had been dominated by the Summer Olympics-related campaigns.
Our revenue extraction rate was 7.4% in the fourth quarter, compared to 6.2% in the fourth quarter of 2011. This significant improvement is mainly attributed to the diversification of ad spending beyond CCTV to internet and satellite platforms, which presents higher margins relative to those of CCTV.
In the fourth quarter, Charm Advertising won the TV business for Brilliance Auto, a large-scale automotive manufacturer in China that works with top international car companies like BMW and Toyota. We also won new business from Jian Nan Chun, a leading maker of traditional Chinese wines.
For the full year 2012 we saw increase contributions from fast moving consumer goods and financial services. That growth was partially offset by softer advertising demand related to pharmaceuticals and home appliances.
We expanded our geographic reach in 2012 with a number of key wins in Shanghai and Eastern China under the leadership of our new Agency Head, Cathy Chen. We also consolidated our management teams in Southern China and expect to see additional client wins, particularly on midsized enterprises in both regions in a year ahead.
Our digital business continued to grow at a rapid pace, up 22.4% year-over-year in terms of turnover for the full year 2012. Charm Click is integrating well with rest of our digital business, thanks in large part to the leadership of Johnny Zhu. Throughout 2012, we added over 30 SEM customers with total search billings up over 80%, higher even than the growth rate of China’s leading search engine Baidu.
Our SEM agency business for Baidu Europe is also performing well. We now have 10 local partners in Europe and our presence there is helping us to expand among global advertisers.
We will continue to integrate our digital business investing strategically in staff for Charm Interactive and capitalizing on Charm Click’s strong industry position to enhance our digital services and offer seamlessly integrated solutions to our clients.
As noted in previous calls, 2012 was a challenging year for Shangxing Media. In additional to soft demand as a result of weak microeconomic conditions, satellite TV regulations that took effect at the beginning of 2012 made for an extremely difficult operating environment and forced us to rethink our media strategy. We have since modified our inventory mix, reducing our exposure to satellite channels and entering into non-exclusive agency models to help media owners sell their resources.
We use the sales based commission model that does not require us to carry inventory, thereby helping us to maintain healthy margins. At present, we hold inventories with respect to three CCTV-2 programs, BTV-Sports, Dongguan Satellite TV and portions of Tianjin Satellite Channels.
We also operator under Non-Exclusively Agency Agreements with Shanghai Dragon Satellite and Hubei Economic TV among others. We expect 2013 to be a transition year in which we expand beyond the role of media reseller to one of media service provider that carries less inventories and facility the sale of media.
Lastly, although we remain cautious about the 2013 advertising market, we are supremely confident in long-term growth of China’s advertising industry. We will continue to invest in our core agency business especially with respect to our digital business which we will work to further integrate with our traditionally strong TV business to offer clients a full suite of advertising solutions. At the same time, we will remain conservative with our media business and believe we have the right strategies to return to sustainable long-term growth.
I will now turn the call over to our CFO, Wei Zhou, who will discuss our financial results.
Thank you, Chairman Dang. Hello everyone on the call. Before I go to the financials, I’d like to take you through our three core business segments to give you some updates on our progress to date.
Please note in the first section, I’ll be referencing some of our fourth quarter and full year results using non-GAAP numbers in order to better convey our performance. We define our non-GAAP turnover as total customer advertising spending placed through or with Charm in order to reflect the scale of our business.
In the fourth quarter of 2012, turnover declined 20.9% year-over-year and decreased 6.9% quarter-over-quarter to approximately $201.6 million. The 20.9 % year-over-year decrease in turnover was mainly due to the decrease in the media investor business, which was a result of dropping of several media assets at the beginning of 2012 to modify our inventory mix and to reduce risk following in our regulatory changes in the satellite TV market. The 6.9% quarter-over-quarter decrease in turnover was largely attributed to seasonal factors.
For the full year 2012, turnover increased 5.8% to approximately $823.9 million. I will break turnover down by business. The non-GAAP turnover for the agency business declined 10.4% year-over-year and decreased 7.1% quarter-over-quarter to $169.6 million in the fourth quarter of 2012.
The 10.4% year-over-year and 7.1% quarter-over-quarter decrease in the advertising agency business turnover was mainly due to the decrease in advertising spending from existing agency clients, who allocated portion of the advertising budgets to the third quarter for this special -- for the Summer Olympics.
For full year 2012, the turnover for the advertising agency business grew 11.9% to approximately $711.1 million. In the fourth quarter, we provided advertising agency services to 174 advertising client accounts compared to 167 accounts in the third quarter of 2012 and 148 accounts for the fourth quarter of 2011. And those significant client wins in the fourth quarter included Brilliance Auto and Jian Nan Chun as Mr. Dang mentioned earlier.
The revenue extraction rate for agency business which is defined as revenue divided by turnover was 7.4%, compared to 6.2% in the fourth quarter of 2011 and 7.5% in the third quarter of 2012. The year-over-year increase was mainly due to the increase in advertising spending on non-CCTV media platforms, features on the internet and other television channels, all of which have exhibited higher extraction rate relative to CCTV. The quarter-over-quarter decrease was due to Olympic-related spending in the third quarter.
We expect the revenue extraction rate to increase as we expand our full service offering across media platforms under Charm advertising and ramp-up digital offerings under Charm Interactive and Charm Click.
The turnover for principle media business or media investment management business which operates under the Shangxing Media brand declined 51.2% year-over-year and decreased 6% quarter-over-quarter to $32 million. The year-over-year decrease is mainly due to the slowdown in the boarder economic environment and the dropping of several media assets at the beginning of 2012 following satellite TV regulatory changes.
The 6% quarter-over-quarter decrease in turnover in principle media business were primarily because of weaker demand from advertisers in the fourth quarter. For the full year 2012, turnover for the principle media business decreased 52.8%, so approximately $112.8 million. In the fourth quarter of 2012, we have 203 advertisers for principal media business compared to 231 advertisers in the fourth quarter of 2011 and 297 advertisers in the third quarter of 2012.
Now, going back to GAAP figures. The total U.S. GAAP revenue was $47.1 million in the fourth quarter of 2012 in line with our guidance and representing a decrease of 41.3% compared to $80.3 million in the fourth quarter of 2011, and a decrease of 3.5% compared to $48.8 million in the third quarter of 2012. For the full year of 2012, GAAP revenues decreased 40.9% to approximately $165.5 million.
Revenues per advertising agency business were $12.5 million in the fourth quarter of 2012, an increase of 6.5% compared to $11.7 million in the fourth quarter of 2011, and a decrease of 8.3% compared to $13.6 million in the third quarter of 2012.
The changes in agency revenues are consistent with changes in turnover and revenue extraction rate. For full-year 2012, revenues for the advertising agency business grew 34.9% to approximately $46.2 million. Our principal media business revenues are equivalent to the turnover I mentioned earlier.
Branding and identity services revenues were $2.6 million in the fourth quarter of 2012, a decrease of 13.5% compared to $3 million dollars in the fourth quarter of 2011 and an increase of 129% compared to $1.1 million in the third quarter of 2012.
The quarter-over-quarter increase in branding and identity services were primarily due to the increased client demand for creative services in the fourth quarter, while the year-over-year decrease was due to overall decrease in client demand since the third quarter of 2011.
For the full-year 2012, revenues for branding and identify services increased 7.7% to $6.5 million. Cost of revenues in the fourth quarter of 2012 was $34.1 million, a decrease of 34.1%, compared to $51.8 million in the fourth quarter of 2011 and a decrease of 1% compared to $34.5 million in the third quarter of 2012. We mainly attribute the year-over-year decrease in cost of revenue to the dropping of several media assets.
For full-year 2012, cost of revenues decreased 40.1% from approximately $117.1 million. Gross profit in the fourth quarter of 2012 was $30 million, a decrease of 54.4% from $28.5 million in the fourth quarter of 2011 and a decrease of 9.5% from $14.4 million in the third quarter of 2012.
Gross margin in the fourth quarter of 2012 was 27.6%, compared to 35.5% in the fourth quarter of 2011 and 29.4% in the third quarter of 2012. The year-over-year decline in gross profit was due to lower contribution from the principal media business. The quarter-over-quarter decline in gross profit was a result of lower revenues from the agency and media business, combined with relatively flat quarter-over-quarter cost of revenues.
For full-year 2012, gross profit decreased 42.8% to $48.4 million. The full year gross profit margin was 29.2% compared to 30.2% for 2011. Selling and marketing expenses were $11.3 million for the fourth quarter 2012, an increase of 17% from $9.6 million in the fourth quarter of 2011 and an increase of 19.9% from $9.4 million in the third quarter of 2012. The year-over-year and quarter-over-quarter increase were primarily due to increased headcount, including executive hires within our agency business.
Selling and marketing expenses represent 23.9% of our total revenues in the fourth quarter of 2012, compared to 12% in fourth quarter of 2011 and 19.7% in the third quarter of 2012. The year-over-year increase in selling and marketing expense as a percentage of total revenues was mainly due to the shift in business from our principal media business to our agency business, which tends to have higher selling and marketing expense as a percentage of revenues. For the full-year 2012, selling and marketing expense grew 32.8% to approximately $36 million.
General and administrative expenses in the fourth quarter of 2012 grew 75.9% year-over-year, an increase of 9.2% quarter-over-quarter to $5.9 million. The 75.9% year-over-year increase in G&A expenses was primarily attributed to a bad debt provision of $2.7 million in the fourth quarter for our client, which declared bankruptcy. We expect this to be an isolated event, but we will remain conservative going forward and have a better policy in place.
G&A expenses increased 12.5% of our total revenues for the fourth quarter of 2012, compared to 4.2% for the fourth quarter of 2011 and 11% in the third quarter of 2012. For full-year 2012, G&A expenses grew 67.3% to approximately $16.2 million.
Operating loss was $3.5 million for the fourth quarter of 2012, compared to an operating profit of $15.5 million in the fourth quarter of 2011, and an operating profit of $200,000 in the third quarter of 2012.
Operating profit decreased 106.8% to a loss of $3.2 million. GAAP net loss was $4.2 million in the fourth quarter of 2012, compared to a net income of $15.7 million in the fourth quarter of 2011 and $100,000 in the third quarter of 2012.
Fully diluted net loss per ADS in the fourth quarter of 2012 was $0.13, compared to a fully diluted net income per ADS of $0.36 in the fourth quarter of 2011 and a fully diluted net loss per ADS of $0.01 in the third quarter of 2012. Each, ADS represents two common shares.
Our fourth quarter non-GAAP net loss, which excludes share-based compensation expenses, amortization of intangible assets, and net change in fair value of consideration payable and call option was $3.8 million, compared to a net income of $17.1 million in the fourth quarter of 2011 and a net income of $800,000 in the third quarter of 2012.
For full-year 2012, GAAP net loss was US$2.5 million, compared to a net income of $48 million in 2011. Fully diluted net loss per ADS for full-year 2012 was $0.12, compared to a fully diluted net income per ADS of $1.12 in 2011. Our full year non-GAAP net income was $500,000, compared to $51.7 million in 2011.
Net cash flow from operations in the fourth quarter was negative $1.1 million. As of December 31, 2012, we had a cash and cash equivalent of $116.6 million compared to $117.9 million at the end of third quarter of 2012. We had 813 employees as of December 31, 2012, compared to 842 employees as of September 30, 2012.
Now turning to our business outlook, we estimate our first quarter 2013 non-GAAP net loss will be in the range of $1.25 million to $750,000. We based this estimates on a foreign exchange rate of RMB6.3 per U.S. dollar and it reflects our current and preliminary view, which is subject to change.
I will now hand the call over to the operator who will open the line for questions.
Thank you very much. (Operator Instructions) Your first question comes from the line of Eddie Leung from Merrill Lynch. Please ask the question.
Eddie Leung - Merrill Lynch
Good evening. Thank you for taking my questions. I have a couple of questions. The first one is regarding your first quarter guidance. Could you share more color with us, for example, what would be the revenue growth and the breakdown of different segments. And then secondly, also could you share more color with us on the bad debt charges in fourth quarter?
For example, are we seeing that related to a limited number of clients or in general just a large group of clients and then what should we think about the bad debt going into 2013? And then finally is a question about your media business. Given the current environment, did you push to any price increase for your media, TV business this year? Thank you.
Thanks, Eddie. I’ll answer the provision question first with bad debt provision. That was an isolated instance of single client that actually declared bankruptcy in the fourth quarter. And so in terms of the AR that we have, which is a one-time write-off. And I think as we discussed in the previous quarters is that, given the soft demand environment as well as the macro conditions, we basically have been strengthening our accounts receivable policies just in the middle of last year. In terms of providing credit, we need sort of the highest quality clients.
So we expect the situation to stabilize going forward. In terms of our guidance, I think we’ve only provided the net income, our non-GAAP net income guidance for the first quarter of the year. From a revenue perspective, I think for the full year, we expect for our core agency business, as we discussed earlier to continue to outgrow the market which we expect to grow in sort of the 7% overall. So we expect our turnover for the overall business to grow, especially for agency business to grow faster than that of market.
At the same time, we expect our extraction rates for agency business to continue to improve, as we diversify our agency turnover outside of CCTV. For the media investment management business, the inventory that we carry this year will be slightly less than last year but we -- sort of overall of that business, we expect our margins to improve through the later course of the year.
Of course the first quarter, given sort of the Chinese New Year break, typically is sort of the softer season for advertising, that’s why in terms of looking at the numbers we are projecting a net loss in the first quarter of the year. But that margin, especially for the media business, we expect to improve through the course of the year because I think, we sort of saw bottoming in the fourth quarter.
And then the third question in terms of media inflation that was seen in the marketplace. I think across the board, the high-level number that we saw out of the CCTV auction was around 10% year-over-year increase in terms of the total volume. But sort of the actual transaction price did not changed that much, so we're not seeing outside of state, some of the key primes sort of television advertising assets, we are not seeing a price increase. But we are not seeing media inflation, taking sort of -- we are not seeing sort of that drastic media inflation that we have seen in the past. So we are not seeing price coming out of television.
Eddie Leung - Merrill Lynch
Understood. Thank you very much, Wei. I will get back in the queue.
Thank you very much. Your next question comes from the line of Jake Lynch from Macquarie Securities. Please ask your question.
Jake Lynch - Macquarie Securities
Yeah. Thanks for taking my call. I wanted to come back to a statement earlier, Mr. Dang made upon, that 2013 would be a transition year and if I was hearing correctly, it sounded like acceleration of the transition away from the MIM business. I wanted to make sure I understand that correctly and the second and somewhat related question is if we come back to the guidance for the first quarter again for a loss. It sounds as if you’re saying that loss has a lot to do with weaker margins in the MIM in the first quarter. But my question would be, what’s different about this first quarter than say last year’s first quarter?
Thanks Dick. Yeah, I mean, I think what Mr. Dang has meant sort of, in terms of, the transition is more. If you look at some of the partners that we have worked with in the past like Shanghai Dragon Satellite Channel as well as Hubei Economic Channel, I think back in 2012 and then also in 2011, we had worked with these guys on a sort of exclusive basis, where we had paid for the media and then basically became a reseller.
But what we’re doing is that we’re actually continuing to work with these media owners and then also continuing to work with another former partner, which is -- another partner which is Tianjin Television Station in terms of selling their media but they’re not taking an inventory risk.
So that business is sort of, sits in between the traditional agency business and the pure sort of media investment management business. But in this case, the client is actually the television channel. We’re actually helping them to sell their media in this environment without taking on the inventory risk.
What that means is that the actual upside in margins will be lower than what we had seen historically. Historically, we expect the media business to run in sort of 20% to 25% gross margin rate. And then sort of you look at the agency extraction rate, sort of -- that's around 6% to 7% for satellite channels. So that business, sort of, sits somewhere in between.
From an accounting perspective, revenue contributions from these business segments -- from this business will actually flow into the advertising agency segment. But from a business operational perspective, these business units -- these businesses will actually operate under the same business unit as sort of the media resellers.
So from that transition perspective, it’s in terms of shifting the business model a little bit from a pure inventory model to sort of a mixed model. From an accounting perspective, we’re going to see that revenue contribution going to the agency line rather than into the media investment management line.
So I think that sort of the key this year. And we have several agreements in place to work on the television channel on sort of a non-exclusive basis. And then going back to guidance for the first quarter, I think the main reason for the losses we continue to see margin pressure for the media business.
And then compared to -- compared to last year, the difference being in that -- last year we added, I think one new channel in the first quarter and then we added BTV-Sports in the middle of the year. But due to sort of the software environment, the ramp-up of BTV-Sports has been a lot slower than expected.
That channel, which we had originally expected to operate at a gross positive after about two quarters, on that channel, we started working with in July last year. So after two quarters, I think that channel is still operating in a loss. So sort of -- so compared to say first quarter of last year, we had an asset. We did not have this asset in the first quarter of last year but we have this asset first quarter of this year and this asset is operating our loss.
And I think, for the BTV-Sports, we still see that as a unique asset in the market place here. And that is only one of the two sports channel on television for the Beijing region and the other one being CCTV-5. I think -- and in the contract we have run all the way until the end of 2014. So we believe that we still should be able to hit our sort of -- our return hurdle but it’s just that the ramp-up time is taking a lot longer than as expected.
Jake Lynch - Macquarie Securities
Thanks. If I could just follow up with one follow-up question just on that. So you’re talking about your new business model that is somewhere between the previous MIM at the ad agency. If we look at 2013, how would that transition be happening? I mean -- if we were to take, what used to be 100% MIM, would in 2013, that now be sort of 50 new business model. 50 prior MIM or just give me a basic sense of kind of, how that proportion might be?
I think it’s actually from a sort of -- if you look at it -- if you look at it from the inventory carrying perspective, we’re actually carrying pretty similar amount of inventory this year as compared to last year. If you look at assets we’re operating this year, sort of, same as what we had operated at the end of third quarter and fourth quarter last year.
It’s actually more than addition. So we’re basically what that means is that the same team will actually start to work with more channel. But when they sign up new channels, they won’t be carrying inventory risk. They will actually be facilitating these channels to help them to sell and then for whatever they sell, we’ll basically collect a commission. And they will actually commit to a certain volume of sales for these new media partners. But then these commitments are not -- won't be booked as cost of expense.
Jake Lynch - Macquarie Securities
Okay. Thank you very much.
Thank you very much. (Operator Instructions) Your next question comes from the line of Eddie Leung from Merrill Lynch. Please ask your question.
Eddie Leung - Merrill Lynch
Hey, thanks. Just a follow-up question after listening to your previous answer about the media business. I’m just curious on your media business. I understand, I mean, the digital agency business has been in general performing better than the industry. I’m just curious on the media business. Are we seeing any structural change that may get a bit difficult event after a full year of transition last year because we remember that last year a lot of people would have low expectations because of the regulation changes.
But then given the low base, we would expect this year, we should see some rebound uptick in that, kind of, like your satellite TV business in general. So I suppose in terms of execution, you guys have been known among pretty good between your peers. So I’m just curious is there any special reason that it seem that the satellite TV in China is not doing that well even after the year after the regulation. And then would that affect your long-term plan in this media business?
Thanks for the question, Eddie. I think this sort of -- this is sort of a reason why we’re actually are transitioning a little bit in terms of how we work with media owners. I think historically, if you look at, sort of, from 2008 to around even last year, we basically carried inventory outright on our own books. And then finally, either on a sort of three-year contract level or one-year contract level.
And then with the hope that we will be able to up market, how we sort of look at this is that, I mean, after about Chinese New Year or after about a quarter and half, it should have been around 50% to 60% of these inventories sold. And with basically in a rising market, we’ll be able to basically make our margins, when we get our utilization rate up to around 70% to 80% mark.
But I think right now, a lot of this still has to do with sort of lack of demand in the market place. Therefore our utilization rates are actually staying in this sort of 50%, 60% level. And I think that’s true for our business but I think it’s true for -- most of it is true to satellite TV business as well.
I think from a larger structural change perspective, I think we can’t comment how the television industry will continue to be regulated or how sort of the viewership and cost will continue to change. But we were seeing a new business opportunity that on these television media owners will continue to meet agencies to help them to sell their advertising.
But what we’re seeing right now is that the risk of actually buying outright and then hoping to make that 20%, 30% margin to justify our risk is sort of not so, it’s kind of -- there is a higher risk to that business model nowadays compared to say two or three years ago. Unless the market changes drastically, we have distinct clients that we work with, we’re committed into these contracts.
But what we’re seeing is that there are additional TV channel that made these kind of services. So this is where we’re actually evolving that business model a little bit and they’re more continuing to helping to sell. But we’re not going to take any of that inventory risk.
So I think this business, how is that going to split in terms of what percentage of media that we work with are basically Charm’s inventory media, what percentage of media that we’re selling are basically non-Charm’s inventory media. I think that’s something that we’re kind of see that last year and we basically will start to implementing this year.
So I think this is what Mr. Dang mentioned sort of a transition business. In the meantime, I think the two new assets we added last year being Nanfang Satellite and BTV-Sports, they’re both new assets. So I think it’s just that we need some little bit longer ramp-up time to sort of to get them up to speed. So I think that sort of explains the numbers we saw in the first quarter.
Eddie Leung - Merrill Lynch
Thank you, Wei. Very helpful.
Thank you very much. (Operator Instructions) There is no more questions at this time. Ladies and gentlemen, thank you very much. This concludes today’s conference call. You may now disconnect.
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