Raymond Huang – Senior Director, IR Herman Man Guo – our Chairman and CEO Henry Ho – CFO

[Jiong] – Nomura Gillian Chung – Morgan Stanley

Ladies and gentlemen, thank you for standing by, and welcome to the AirMedia Fourth Quarter and Fiscal Year 2012 financial results earnings conference call. [Operator Instructions]. I must advise you that this conference is being recorded today, Friday, the 15th of March, 2013. I would now like to hand the conference over to your speaker today, Mr. Raymond Huang, Senior Director of Investor Relations. Thank you, sir. Please go ahead.

Hello, everyone. Thank you for joining AirMedia's fourth quarter and fiscal year 2012 earnings conference call. Today Herman Man Guo, our Chairman and CEO, will present highlights for the fourth quarter of 2012, and Henry Ho, our CFO, will provide details on our financial results. Following their prepared remarks, the management team will be available to take your questions. Before management presentation, please allow me to read you our Safe Harbor statement. During this conference call, representatives of the company will make certain forward-looking statements. These statements are based upon management's current views and expectations with respect to future events and are not a guarantee of future performance. Furthermore, these statements are, by their nature, subject to a number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements. AirMedia does not undertake any obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. Please refer to AirMedia's filings with the SEC including its Form 20-F for a discussion of important factors that could affect future results. A press release and this call includes discussion of unaudited GAAP financial information as well as some unaudited non-GAAP financial measures. A press release contains a reconciliation of unaudited non-GAAP measures to unaudited most directly comparable GAAP measures. The press release is available on the Investor Relations section of AirMedia's website at ir.airmedia.net.cn. I would now turn the call over to our Chairman and CEO, Herman Man Guo.

Thank you, Raymond. Good morning and good evening, everyone. Total revenues for the fourth quarter of 2012 reached US$84.2 million, representing a year-over-year decrease of 4.2% from US$87.8 million and quarter-over-quarter increase of 15.2% from US$73.1 million. The year-over-year decrease was primarily due to decreases in revenues from digital TV --

Ladies and gentlemen, your speaker has experienced some technical difficulties with their line. Please stand by while we address this situation. You'll be on a music hold until the conference resumes.

I would now like to hand the conference back to the speaker, Mr. Raymond Huang, Senior Director of Investor Relations. Please go ahead, sir.

Sorry, everyone, we got some technical problems just now, we got distracted. Now Herman will read his script from the beginning. Herman, you may begin.

Thank you, Raymond. Good morning and good evening, everyone. Total revenues for the fourth quarter of 2012 reached US$84.2 million, representing a year-over-year decrease of 4.2% from US$87.8 million and quarter-over-quarter increase of 15.2% from US$73.1 million. The year-over-year decrease was primarily due to decreases in revenues from digital TV screens in airports, traditional media in airports and gas station media network, as well as China’s replacement of regular business tax with the value-added tax in Beijing, one of AirMedia’s key regions of operations. In the fourth quarter of 2012 we saw more declines in advertising from Japanese brands, especially Japanese automobile manufacturers. But our diversified customer base enabled us to compensate for the adverse impacts from the anti-Japanese protests in China. The increase in advertising spending from other automobile brands and consumer growth from other advertising sectors more than offset the loss in Japanese brands. Automobile advertising, [our top one advertising industry], increased by 10% year over year and 21.6% quarter over quarter. Thanks to the strong growth in advertising from automobile manufacturers and sequential growth from most of our top ten advertising industries, we were able to raise our net revenue guidance of the fourth quarter of 2012 in January 2013 and meet our guidance at the high end. In the fourth quarter of 2012, we also achieved income from operations of US$6.5 million, a record-high quarterly number for us in the past four years. Our mega-size LED screens have become the biggest growth driver for our company in 2012, even though many of the mega-size LED screens currently in operation commenced operations in the second half of 2012. We currently operate mega-size LED screens in seven airports and are in the process of installing mega-size LED screens in another four airports. With the operations of our mega-size LED screens in more airports in 2013, we expect that revenues from this product line will continue to grow fast and that it will become an important product line for the company. Net loss attributable to AirMedia's shareholders for fiscal year 2012 was US$32.7 million, which include an impairment of goodwill and the impairment of intangible assets of a total US$30.2 million. Non-GAAP -- net income attributable to AirMedia's shareholders was [US$4.4] million. I'd like to point out that excluding the loss of our gas station media network, net income for our core business in air travel advertising was positive in fiscal year 2012. We have realized that the key to make our company profitable again is not only about the top line growth but also about how we can turn around our unprofitable product lines which will help us improve our margins. We have identified some possible solutions and directions for our loss-making product lines such as our gas station media network and are in the process of implementing such solution. As we have announced in November, some members of the management team of our subsidiary operating our gas station network invested [RMB50 million] personally and obtained 22% share of the subsidiary. We believe management's participation in share ownership at the subsidiary level will enhance [good governance]. After prudent analysis, we intend to change the media format of our gas station media network to LED screens. We believe LED screens will be a suitable media for gas stations because it offers the following advantages compared with our current [inaudbile] light boxes. Firstly, LED screens are larger and more eye-catching, so that they can draw more attention from audiences. Secondly, our regional [inaudbile] light boxes only have fixed capacities each, so although the utilization rates [inaudbile] light boxes across our gas station network [inaudbile] there are sufficient capacities in premier locations. LED screens will substantially increase the capacities our gas station media network. Last but not the least, LED screens will dramatically eliminate our operational costs. It has always been an issue for our gas station media network to efficiently change advertisements manually in all the cities because we don't have enough people on the ground in all the cities. With LED screens, we can control and change advertisement simultaneously from our headquarter in the future. Our feedback from advertisers on this new media format is very positive. While the management strongly believes that a format upgrade [inaudbile] upsell to the gas station business, on the risk consideration at the group level [inaudbile] to control the amount of capital we committed to this product. Therefore, we are launching [inaudbile] investors to fund the expansion and to show that our path of the financing of this new initiative [inaudbile]. We are willing to lower our shareholdings in our subsidiary that operates the gas station media network [inaudbile]. On the cost side, we also made efforts to control the increase in concession fees. Due to the disagreement over renewal fees, we decided not to renew our concession rights contract for the digital TV screens on Air China’s planes, and instead became a selling agent for Air China’s digital TV screens starting from January 1, 2013. We believe we have the capability to convince most of the original advertisers on Air China to reallocate their advertising budgets to our other product lines, especially our digital frames in airports. We expect that the loss in revenues due to the loss of our concession rights contract with Air China would be smaller than the concession fees we would need to pay to Air China under a renewed concession rights contract. We believe that choosing not to renew the Air China concession rights contract for the time being will be beneficial to the company in the long run as it shows our bargaining power and set an example to concession rights holders that the contract [inaudbile] brings benefits to both parties rather than to just one side. This will help us control increase of concession fees in the long term. Another example of our efforts to reduce concession fees and improve profitability is that we didn't renew our concession rights contract for traditional media in Shenzhen airport after the contract expiration on December 31, 2012, because traditional media in Shenzhen airport, it presented [inaudbile]. In the future we may continue to optimize our media platform by not renewing unprofitable or low-margin media. We may see decreases in our revenues with corresponding decrease in concession fees due to decisions to not renew certain concession rights contracts, which we expect will increase our profitability and margin [inaudbile]. With that, I'd like to pass the call to Henry Ho, our CFO, to give you our financial results in detail. Henry?

Thank you, Herman, and thanks to everyone for joining our fourth quarter and 2012 financial reviews. Let me start with two highlights. First, on revenue. With advertisers' tightened advertising budgets in 2012, we were still able to deliver 15.2% quarter-over-quarter increase in total revenues in the fourth quarter. Total revenues for the fourth quarter of 2012 reached US$84.2 million, representing a year-over-year decrease of 4.2% from US$87.8 million in the same period one year ago and a quarter-over-quarter increase of 15.2% from US$73.1 million in the previous quarter. The year-over-year decrease was partially due to China's replacement of regular business with VAT in Beijing, one of AirMedia's key regions of operations. As Herman mentioned, prior to September 1, 2012, revenues were recorded gross of business tax. Subsequent to this change, revenues are recorded net of VAT as from September 2012 onwards. Now, revenues from most of the company's product lines now are booked in total revenues. Given -- [in the above] fourth quarter 2012 breakdown, these revenues were already net revenue after deducting VAT. I repeat, after deducting VAT. Revenues in the fourth quarter of 2011, for the previous year, and most revenues in third quarter of 2012, they're all booked before deducting business tax. I repeat, before deducting business tax. So this tax change was partially the reason for the year-over-year decrease in revenue, and partially offset the quarter-over-quarter increase in revenue. As such, year-over-year and quarter-over-quarter revenue comparisons cannot be made easily when revenues are not booked on the same basis. My second highlight is one key financial indicator. Net revenues of fiscal year 2012 grew by 6% year over year while cost of revenues only increased by 2.5% year over year. Non-GAAP adjusted net income for fiscal year 2012 increased by 669% year over year from US$468,000 to US$3.6 million. This increase reflects, amongst other things, various profitability improving measures which I will elaborate further, and also the operating leverage of our business. Now to follow on with the profitability improving measures, let me go through the key measures implemented going -- and also going forward. These measures include, number one, upgrades in existing product lines to support revenue increase, such as the mega-size LED screens as described by Herman. Number two, tight control over concession fee increases upon renewal negotiations. Examples are our decisions not to renew the concession rights contracts for digital TV screens on Air China's airplanes and not to renew traditional media in Shenzhen airport as described earlier. Number three, our incentives to turn around loss-making business lines. A very good example of turning around loss-making business lines is the purchase of shares by management team at our subsidiary that operates our gas station media network, and also the new media format upgrade proposal. As CFO of the group, I will provide some financial analysis as input for strategic decision-making and formulate prudent financial planning and control for the implementation of these measures. Now let me go through the details of our fourth quarter financial results with you. Let's start with revenue. Total revenues for the fourth quarter of 2012 reached US$84.2 million, representing a year-over-year decrease of 4.2% from US$87.8 million in the same period one year ago and a quarter-over-quarter increase of 15.2% from US$73.1 million in the previous quarter. The year-over-year decrease was primarily due to decreases in revenues from digital TV screens in airports, in traditional media in airports and in media at our gas station network, as well as the tax reform in China. The quarter-over-quarter increase in total revenues was primarily due to increases in revenues from most of our product lines. Next, let me go through each product line with you. Revenues from digital screens in airports for the fourth quarter of 2012 increased by 6.5% year over year and by 16.5% quarter over quarter to US$40.8 million. The year-over-year increase was due to additional revenues from the rapidly growing product line of mega-size LED screens, with operations in additional airports. The quarter-over-quarter increase was primarily due to advertisers’ yearend budget flush, additional revenues from the rapidly growing product line of mega-size LED screens and a seasonally strong quarter in the fourth quarter. Revenues from digital TV screens in airports for the fourth quarter of 2012 decreased by 42.3% year over year and increased by 97.4% quarter over quarter to US$5.4 million. The year-over-year decrease was primarily due to a drop in demand from advertisers as a result of competition from AirMedia’s other product lines and the fact that, with the rapid development of mobile internet, most people now pay attention to their cell phones instead of AirMedia’s digital TV screens. The quarter-over-quarter increase was primarily due to advertisers’ yearend budget flush and a seasonally strong quarter in the fourth quarter. Revenues from digital TV screens on airplanes, now for the fourth quarter of 2012, this increased by 4.5% year over year and by 19.7% quarter over quarter, I beg your pardon, quarter over quarter, to US$7.9 million. The year-over-year increase was primarily due to the company’s continued sales efforts. The quarter-over-quarter increase was primarily due to advertisers’ yearend budget flush and a seasonally strong time in the fourth quarter. Revenues from traditional media in airports, this line for the fourth quarter of 2012 decreased by 6.4% year over year and increased by 3.4% quarter over quarter to US$20.8 million. The year-over-year decrease was primarily due to a reduction in the number of locations for sale as a result of a delay in a scheduled media format upgrade. AirMedia was upgrading 18 light boxes at prime locations inside the Beijing Capital International Airport to a better advertising format, but the upgrade is behind schedule. The quarter-over-quarter increase was primarily due to a seasonally strong time in the fourth quarter. Revenues from the gas station media network, this product line for the fourth quarter of 2012 decreased by 20% year over year and increased by 22.4% quarter over quarter to US$4.8 million. The year-over-year decrease was primarily due to an exceptionally strong quarter in the fourth quarter of 2011. Advertisers cut spending on non-core advertising media such as gas station advertising in the first half of 2012 due to limited advertising budgets as a result of advertisers’ concern regarding the state of China’s economy. Revenues from the company’s gas station media network began to rebound in the third quarter and fourth quarter of 2012 but were not yet back to the level they were in the fourth quarter of 2011. The quarter-over-quarter increase was primarily due to the advertisers’ yearend budget flush and a seasonally strong quarter in the fourth quarter. Now let's move on to other lines in the income statement. So that's after the revenue, we go to the next section. Cost of revenues, costs for the fourth quarter of 2012 was US$65.4 million, representing a year-over-year decrease of 0.6% from US$65.8 million in the same period one year ago and a quarter-over-quarter increase of 4.5% from US$62.6 million in the previous quarter. The year-over-year decrease was primarily due to lower agency fees for third-party advertising agencies, which were partially offset by a non-cash loss on the disposal of certain fixed assets of US$0.8 million and higher concession fees. The year-over-year decrease in agency fees was primarily due to a lower revenue base and a partial reversal of certain previous year accrued agency fees that were waived by the related agents. The quarter-over-quarter increase in cost of revenues was primarily due to higher agency fees for third-party advertising agencies, the disposal of fixed assets and higher concession fees. Next is concession fees, fees for the fourth quarter of 2012 increased by 9.2% year over year and by 1.4% quarter over quarter to US$45.1 million. The year-over-year and quarter-over-quarter increases were primarily due to newly signed or renewed concession rights contracts during the period. Concession fees as a percentage of net revenues in the fourth quarter of 2012 was 54.6%, increasing from 48.6% in the same period one year ago and decreasing from 62.4% in the previous quarter. Next line is total operating expenses. Operating expenses for the fourth quarter of 2012 were US$10.7 million, representing a year over year decrease of 19% from US$13.2 million in the same period one year ago and a quarter-over-quarter decrease of 73.1% from US$39.9 million in the previous quarter. The year-over-year decrease was primarily due to fewer amortization of acquired intangible assets and the fact that there was an impairment of goodwill of ten -- sorry, of US$1 million in the same period one year ago. The quarter-over-quarter decrease was primarily due to the fact that there were an [improvement] of goodwill of US$20.6 million and impairment of intangible assets of US$9.6 million in the previous quarter. The bottom line, net income attributable to AirMedia’s shareholders for the fourth quarter of 2012 was US$3.4 million, compared to net income attributable to AirMedia’s shareholders of US$4.6 million in the same period one year ago and net loss attributable to AirMedia’s shareholders of US$27.3 million in the previous quarter. On the non-GAAP measures, let me go through some of them now. These non-GAAP financial measures are calculated by excluding share-based compensation expenses, amortization of acquired intangible assets, impairment of goodwill and impairment of intangible assets from the corresponding GAAP measures. Non-GAAP adjusted operating expenses for the fourth quarter of 2012 were US$9.7 million for the fourth quarter of 2012, representing a year-over-year decrease of 9.1% from US$10.7 million in the same period one year ago and a quarter-over-quarter increase of 17.7% from US$8.3 million in the previous quarter. Non-GAAP adjusted operating expenses as a percentage of net revenues was 11.8% in the fourth quarter of 2012, compared to 12.6% in the same period one year ago and 11.6% in the previous quarter. Non-GAAP adjusted income from operations for the fourth quarter of 2012 was US$7.5 million, for the fourth quarter of 2012, compared to adjusted income from operations of US$8.5 million in the same period one year ago and adjusted income from operations of US$557,000 in the previous quarter. Adjusted operating margin was 9.1% for the fourth quarter of 2012, compared to 10% in the same period one year ago and 0.8% in the previous quarter. Non-GAAP adjusted net income attributable to AirMedia’s shareholders for the fourth quarter of 2012 was US$4.4 million, compared to adjusted net income attributable to AirMedia’s shareholders of US$7.2 million in the same period one year ago and adjusted net income attributable to AirMedia’s shareholders of US$4.3 million in the previous quarter. Next, let's go through our balance sheet. Cash, restricted cash and short-term investments totaled US$126.3 million as of December 31, 2012, compared to US$119.1 million as of December 31, 2011. The increase in cash, restricted cash and short-term investments from December 31, 2011 was primarily due to positive cash flow from operations. The capital expenditure for the fourth quarter of 2012 was US$2 million. AirMedia currently expects its net revenue, this is the guidance for the first quarter of 2013, the current quarter, to range from US$61 million to US$63.0 million. I repeat, the guidance is for the quarter of 2013, between US$61 million to US$63 million, representing a year-over-year decrease of 7.8% to 4.8% from the same period in 2012 and a quarter-over-quarter decrease of 26.2% to 23.8% from the previous quarter. AirMedia currently expects its concession fees to be approximately US$46.1 million, I repeat, US$46.1 million, in the first quarter of 2013. The quarter-over-quarter increase from the third quarter of 2012 will be primarily due to the concession fee commitments under concession rights contracts that were newly signed or renewed or are expected to be signed or renewed. I'll stop here, and moderator, would you please open the call for questions?

Certainly. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. Your first question comes from the line of Jin Yoon of Nomura. Please go ahead. [Jiong] – Nomura: Hi. [Jiong] calling for Jin Yoon. Thank you for taking my questions. First of call, can you share with us the top five sectors in the quarter in terms of the revenue contribution? And also, given the strong performance of the auto sector in the fourth quarter, can we also get some more color on the outlook for the auto sector into 2013? Thanks.

Okay. Okay, let me answer the first question. In the fourth quarter, the top five categories are, the first one, auto, which accounted for 35%; and the second one is finance, accounting for 13.5%; and the third one, consumer electronics, accounted for 9.7%; the fourth, high-end food and beverage, accounted for 8.2%; the five is apparels, which accounts for 4.4%. And Herman will answer the second question about the 2013 auto outlook.

Okay. [Chinese language spoken]

We expect in 2013 the auto will continue to have increase in 2013. The Japanese brands, they were impacted due to the [inaudbile] Japan [first half] in 2012, so we expect in 2013 they will increase their advertising budgets. And for other auto brands, we expect some of them will be stable, some of them, after we have the discussion with them, we expect they will have certain increase. So overall, the advertising AirMedia we expect auto will -- to have certain increase in 2013, and continue to be over 30% of our total revenues. Does that answer your question? Thank you. [Jiong] – Nomura: Yes. Thanks very much.

Your next question comes from the line of Gillian Chung of Morgan Stanley. Please go ahead. Gillian Chung – Morgan Stanley: Hi. Thank you for taking my question. First of all, I would like to know about how many numbers of advertisers do you have for this quarter? And then, can you just add just some color about your pricing trends? For example, did you raise the price? And also, what percentage of your full-year sales has been secured by presales? I have another question, thank you.

Okay, let me answer the first question. In the fourth quarter we have accumulated 1,798 customers. We added 82 new customers. And I will give the question -- the second and third questions to Herman.

Okay. [Chinese language spoken]

As you know, we're installing and expanding our mega-size LED network, so in 2013 for those mega-size LED, we actually have certain price increase. And for the 108-inch standalone digital frame [inaudbile] areas in Beijing Capital International Airport, we also expect to increase the price. And overall for standalone digital frames and digital TV attached digital frames will maintain the same price as 2012. And for digital TV in airport, we expect to have certain promotion. We'll give certain discounts to advertisers. And Henry will answer the third question about the sales ratio.

And Gillian, as you know, most advertiser starts to look at their full-year budget in the first quarter of the year. And so far, very similar to last year, we look at their booking, presale, and that's around 30% of what we think the full year will come in. And if you look at the first quarter, based on our guidance, actually is based on what we have -- at least 90% of that is already based on what we've seen coming in. But we expect that all this forward one year booking presale will come in as we go on over the next one or two months. Thanks. Gillian Chung – Morgan Stanley: And I have another question on traditional media. In the press release, the upgrade is behind schedule. So when do we expect the upgrade will complete? And what would be the financial impact? Thank you.

[Chinese language spoken] Okay.

There were some sectors impacted we're upgrading. Herman mentioned that the Spring Festival period we could not upgrade the media format, so that impacted our progress. And after the Spring Festival, then there was the opening of the National People's Congress and Chinese People's Political Consultative Congress. So during that period we could also not upgrade some media formats. So the TV upgrading was also harder than our -- originally expected. So, Herman expected that the impact will be finished by the end of first quarter, we expect there will be minimum impact in the second quarter.

Let's -- it's Henry, and let me look at the financial impact. This actually is a new format, so we are just making some estimates on what it will [tax] for us, when it's implemented. So in the second quarter, we expect that our capacity for sales would be back to what we were targeting. The second thing is that we, roughly, we expect that our capacity, that utilization should go up because we think that this is a better format, and it could affect our quarterly income. Our rough estimate is a few million dollars. That's at the current estimate, and we'll find out more in the second quarter. Gillian Chung – Morgan Stanley: That's helpful. Thank you.

Thank you.

[Operator Instructions]. There appears to be no further questions at this time. I'd like to hand the conference back to today's presenters. Please continue.

Thank you for joining our call. Look forward to speaking with you next time. Bye.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.