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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good day, ladies and gentlemen, and welcome to the first-quarter 2008 Acorn International Incorporated earnings conference call. My name is Maikeda and I will be your coordinator for today. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Chen Fu, Director of Investor Relations of Acorn. Please proceed, ma'am.
CHEN FU, DIRECTOR OF IR, ACORN INTERNATIONAL INC.: Thanks. Hello, everyone. Thank you for joining us today for our first-quarter 2008 earnings conference call. With me today are Mr. James Hu, Chief Executive Officer and Mr. Gordon Wang, Chief Financial Officer.
After prepared remarks, we will open the line for questions. As a reminder, this conference call is being recorded. A live web-cast and replay of this conference call will be available via the Investor Relations section of our website at, www.ChinaDRTV.com.
Before we continue, I would like to remind you the discussion today will contain forward-looking statements. Forward-looking statements include, among other things, those regarding Acorn's anticipated future media purchases, revenue mix and operating results. Acorn's business involves a number of inherent risks and uncertainties. As such, actual results may be materially different from the views expressed or anticipated results described today. A number of potential risks and uncertainties are outlined in the Company's public filings with the U.S. Securities and Exchange Commission.
Acorn International does not undertake any obligation to update any forward-looking statements except as required by applicable law.
On the call today, we will also mention non-GAAP financial measures during the discussion of our performance. Reconciliations of those measures to comparable GAAP information can be found in the first-quarter 2008 earnings release that was distributed earlier. Now, allow me to turn over the call to our CEO, Mr. James Hu.
JAMES HU, CHAIRMAN AND CEO, ACORN INTERNATIONAL INC.: [spoken in Chinese].
CHEN FU: (interpreted). Hello, everyone. Thanks for joining us to review our first-quarter 2008 financial results. Today, I will briefly highlight some of our important business developments and updates on the overall industry landscape. Gordon will take you through the financial performance in detail.
CHEN FU: Thank you, everyone. In the interest of time, please allow me to comment on the Company's operations on behalf of our CEO, Mr. James Hu.
We continue to experience a residual sales decline from competition in our handsets and Ozing product lines. Combined with the snowstorm during this Chinese new year, the first quarter came in on the low end of our expectations. Despite a slowdown in our business, we have actually seen an increase in our total market shares in 2007 as we widen our gap from our nearest competitor, first in terms of total revenues generated and total air time spent. The success we have demonstrated in the mobile handset sector has further proven the power of our marketing and distribution capability and made us the undisputed partner of choice in a TV direct sales business.
Furthermore, we're happy to see the directional changes implemented in the fourth quarter of 2007 against those challenges in our handsets and Ozing business have all brought positive results. The strategic shift in product mix and change in Ozing's distributional discount have both resulted in an immediate improvement in the Company's gross margin for the first quarter of 2008. We believe that we have taken the right approach in dealing with the competition, and that more positive outcome will likely show in the coming months.
We continue to see a healthy development in our cosmetics business, which demonstrated another strong quarter-on-quarter growth. As part of our important initiative in 2008 to build a continuity business, we will continue to allocate time and resources to make further improvements in the cosmetic category, borrowing knowledge and expertise both regionally and abroad.
The first quarter also saw a strengthening in our GPS business due to an effective new marketing campaign. As Acorn was the pioneer in bringing GPS products to TV, we're confident that we will remain a sales leader in this category with an increasing consumer demand for GPS-related products in China.
Lastly, our CPS business further stood the test of time as it weathered another quarter of volatile domestic stock market by adding another 17,683 new subscribers in the first quarter. Despite a slowdown in our handsets and Ozing product categories, we are glad to see the continued growth in our other products segments.
On the platform side, we continue to make improvements in our eCommerce and third-party bank sales channels. We are in the process of relaunching our eCommerce website under a new domain name and are expanding its product portfolio to include a wider range of mid to high-end established brands beyond inventory available through our TV platform. And we have signed up four more banks since the last quarter on the credit card payment solutions. Both of these are ongoing efforts which will take time to generate scale and gain momentum. However, they represent our important strategic focuses as we seek synergies in these alternative sales channels for cross promotion and distribution.
Last, a few more remarks on the regulatory environment. We're glad to see that the government continues to strengthen its enforcement in the TV direct sales industry in China, as we saw a slew of crackdowns on tax evasion by TV direct sales companies, starting at the end of last year and continue on to the early part of this year. We believe the government's involvement benefits long-term players such as Acorn, as these enforcements weed out bad players and help to raise the reputation for the overall industry.
So on absolute financial terms, the first quarter still represented a declining period in our business. However, the trajectory of growth and continued progress in many parts of our business can hardly be dismissed, as they laid a foundation for our future growth potential.
As the TV...
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