BEIJING, May 25 /Xinhua-PRNewswire/ -- Hurray! Holding Co., Ltd.
(Nasdaq: HRAY), a leader in wireless music distribution and other wireless
value-added services, artist development and music production in China, today
announced its unaudited financial results for the first quarter ended March
31, 2007.
(Logo: http://www.prnasia.com/sa/200611091912.jpg )
FINANCIAL HIGHLIGHTS:
Highlights for First Quarter 2007
- Total revenues: $16.6 million, a decline of 2.2% quarter-over-quarter
and 0.9% year-over-year, exceeding previous guidance of $15.0-16.0
million
- Wireless value-added services revenues: $14.9 million, a decline of
1.1% quarter-over-quarter and growth of 3.3% year-over-year
- Recorded music revenues, which are from our record label businesses:
$1.5 million, a decline of 15.9% quarter-over-quarter and growth of
0.7% year-over-year
- Software and system integration services revenues: $0.2 million, growth
of 79.4% quarter-over-quarter and a decline of 78.2% year-over-year
- Net income: $1.0 million, a decline of 38.9% quarter-over-quarter and
growth of 3.8% year-over-year
- Adjusted EBITDA (a non-GAAP measure which is defined as earnings before
interest, tax, depreciation, amortization and stock-based
compensation): $1.63 million, growth of 13.1% quarter-over-quarter and
growth of 1.4% year-over-year
- Diluted earnings per ADS: $0.04
Commenting on the first quarter results, QD Wang, Chairman and CEO of
Hurray! stated: "We are pleased to report a solid quarter which exceeded our
previous estimate despite a challenging operating environment. Going forward,
we will further our strategy of developing proprietary contents and
diversifying distribution channels, while continuing our transformation into a
leading entertainment content production and distribution house in China."
BUSINESS RESULTS
Total revenues for the first quarter ended March 31, 2007 were $16.6
million, representing a 2.2% decrease from $17.0 million for the preceding
quarter, and a 0.9% decrease from $16.8 million for the first quarter in 2006.
Total wireless value-added services revenues were $14.9 million for the
first quarter of 2007, a decline of 1.1% as compared with $15.1 million in the
previous quarter and growth of 3.3% as compared with $14.5 million in the
first quarter of 2006.
Recorded music revenues, which represent revenues of our controlled music
companies Hurray! Freeland and Huayi Brothers Music, were $1.5 million, a
decline of 15.9% as compared with $1.8 million in the previous quarter and
growth of 0.7% as compared with $1.5 million in the first quarter of 2006.
Software and system integration services revenues were $0.2 million for
the first quarter of 2007, representing growth of 79.4% as compared with $0.1
million for the previous quarter and a decrease of 78.2% as compared with $0.8
million for the first quarter of 2006.
Total gross margin was 32.8% for the first quarter of 2007 as compared
with 31.2% for the previous quarter and 36.2% for the first quarter of 2006.
Gross margin for wireless value-added services was 30.8% for the first
quarter of 2007, as compared with 31.9% in the previous quarter and 34.6% for
the first quarter of 2006.
Recorded music gross margin was 51.0% for the first quarter of 2007 as
compared to 33.6% in the previous quarter and 48.6% for the first quarter of
2006.
Software and system integration services gross margin was 30.4% for the
first quarter of 2007, as compared to -109.9% for the previous quarter and
40.3% for the first quarter of 2006.
Total gross profit was $5.4 million for the first quarter of 2007,
representing growth of 2.6% as compared with $5.3 million for the previous
quarter and a decline of 10.2% as compared with $6.1 million for the first
quarter of 2006.
Total operating expenses were $4.7 million for the first quarter of 2007,
representing a decline of 0.8% as compared to $4.7 million for the previous
quarter and a decline of 10.7% as compared to $5.3 million for the first
quarter of 2006.
Interest income for the first quarter of 2007 was $0.6 million, the same
as the previous quarter. Income tax was $0.3 million in the first quarter
2007, the same as the first quarter of 2006, but an increase compared to a
credit of $0.6 million in the previous quarter.
Net income was $1.0 million for the first quarter of 2007, representing a
decrease of 38.9% as compared to $1.6 million for the previous quarter, and
growth of 3.8% as compared to $0.9 million for the first quarter of 2006. Net
margin was 5.8% for the first quarter of 2007 as compared to 9.2% for the
previous quarter and 5.5% for the first quarter of 2006.
Adjusted earnings before interest, tax, depreciation, amortization and
stock-based compensation (adjusted EBITDA), was $1.63 million for the quarter,
growth of 13.1% as compared with $1.4 million in the previous quarter and
growth of 1.4% as compared with $1.61 million in the first quarter of 2006.
Reconciliations of net income under U.S. generally accepted accounting
principles (GAAP) and adjusted EBITDA are included at the end of this release.
Fully diluted earnings per ADS were $0.04 based on a weighted average of
21.8 million diluted ADSs for the first quarter of 2007. This figure compares
to $0.07 based on a weighted average of 21.7 million diluted ADSs for the
previous quarter and $0.04 based on a weighted average of 22.5 million diluted
ADSs for the first quarter of 2006.
As of March 31, 2007, the company had outstanding 21.7 million basic ADSs
and 21.8 million fully diluted ADSs, excluding share options granted above the
average market value of Hurray! stock for the quarter as their effect would
have been anti-dilutive.
As of March 31, 2007, the company had $70.6 million in cash and cash
equivalents.
BUSINESS HIGHLIGHTS
Hurray! continued to successfully execute its strategy of developing
proprietary content and diversifying distribution channels, with the following
highlights:
- Hurray! released a series of new songs and 14 new game titles on China
Mobile's music and game portals.
- Hurray! launched successful marketing programs to promote the new
releases simultaneously over Internet and wireless platforms.
Consequently, "Autumn Never Comes Back" and "Hard to Be Friends" became
popular hits in the first quarter and ranked in the top 10 for several
consecutive weeks in the second quarter on both China Mobile's music
portal and Baidu's music search platform.
- Music and game related revenues, representing revenues from our
recorded music and our wireless value-added services with music and
game content, were about 36.0% or $6.0 million of total revenues for
the quarter.
- Wireless value-added services revenues generated from operator-
independent marketing, promotion and distribution such as direct media
advertising, interactive media programs, Internet marketing alliances,
and handset vendor partnerships reached approximately 40%, or $6
million, of total wireless value-added services revenues. This compares
to 29.0% or $4.2 million in the year ago quarter.
"Despite the challenging wireless services operating environment, we are
committed to our transformation strategies and confident about our long term
prospects," commented Mr. Wang.
Business Outlook
For second quarter 2007, Hurray! expects its total consolidated revenues
to be between $15.0 and $16.0 million, reflecting the continued impact of
tightened enforcement of policy and regulation changes previously announced by
MII and mobile operators.
Fin 48 Compliance
In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement No. 109, which clarifies
the accounting for uncertainty in income taxes recognized in an enterprise's
financial statements in accordance with FASB Statement No. 109, Accounting for
Income Taxes. The interpretation prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. FIN No. 48
requires recognition of tax benefits that satisfy a greater than 50%
probability threshold. FIN No. 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN No. 48 is effective for the Company beginning
January 1, 2007. There was no cumulative adjustment on the adoption of FIN 48.
Note to the Financial Information
The financial information in this press release has been extracted from
the financial information prepared using the recognition and the measurement
basis of accounting principles generally accepted in the United States of
America.
Conference Call
The company will host a conference call to discuss the third quarter
results at
Time: 9:30 pm Eastern Standard Time on May 24, 2007
or 9:30 am Beijing/Hong Kong Time on May 25, 2007
The dial-in number: +1-866-272-9941 (US)
+1-617-213-8895 (international)
Password: 19600241
A replay of the call will be available from May 24, 2007 until May 31,
2007 as follows:
+1-888-286-8010 (US)
+1-617-801-6888 (international)
PIN number: 37323648
Additionally, a live and archived web cast of this call will be available
at: http://phx.corporate-ir.net/playerlink.zhtml?c=187793&s=wm&e=1544711
or http://www.hurray.com/english/home.htm
About Hurray! Holding Co., Ltd.
Hurray! is a leading provider of music and music-related products such as
ringtones, ringbacktones, and truetones to mobile users in China through SMS,
IVR, RBT, WAP, MMS and Java wireless value-added services platforms over
mobile networks and through the Internet. The company also provides a wide
range of other wireless value-added services to mobile users in China,
including games, pictures and animation, community, and other media and
entertainment services.
In addition, Hurray! is a leader in artist development, music production
and offline and online distribution in China through its majority-controlled
record labels Huayi Brothers Music and Hurray! Freeland.
Hurray! also designs, develops, sells and supports a service provisioning
and management software for mobile operators in China to manage wireless
value-added services.
Forward-looking Statements
This press release contains statements of a forward-looking nature. These
statements are made under the "safe harbor" provisions of the U.S. Private
Securities Litigation Reform Act of 1995. You can identify these forward-
looking statements by terminology such as "will," "expects," "believes" and
similar statements. The accuracy of these statements may be impacted by a
number of business risks and uncertainties that could cause actual results to
differ materially from those projected or anticipated, including risks related
to: continued competitive pressures in China's wireless value-added services
market; changes in technology and consumer demand in this market; the risk
that Hurray! may not be able to control its expenses in future periods;
Hurray!'s ability to succeed in the music development, production and
distribution business, with which it has only limited experience; changes in
the policies of the mobile operators in China or the laws governing wireless
value-added services; the state of Hurray!'s relationships with China's mobile
operators and the risk that Hurray! may be subject to further sanctions and
penalties from them in future periods; and other risks outlined in Hurray!'s
filings with the Securities and Exchange Commission, including its
registration statement on Form F-1, as amended. Hurray! does not undertake any
obligation to update this forward-looking information, except as required
under applicable law.
Hurray! Holding Co., Ltd.
Unaudited Condensed Consolidated Balance Sheets
As of As of
March 31, December 31,
2007 2006(1)
(Unaudited)
(in thousands of U.S. dollars)
Assets
Current assets:
Cash and cash equivalents $70,580 $74,597
Accounts receivable 15,828 13,178
Note receivable - 272
Prepaid expenses and other current assets 3,331 2,701
Amount due from related parties 315 167
Current deferred tax assets 142 82
Inventories 198 178
Total current assets 90,394 91,175
Deposits and other non-current assets 649 632
Prepaid acquisition cost 4,631 -
Property and equipment, net 1,955 1,954
Acquired intangible assets, net 5,769 6,023
Goodwill 39,932 39,622
Non-current deferred tax assets 309 371
Total assets $143,639 $139,777
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $5,280 $3,681
Acquisition payable 5,877 5,832
Accrued expenses and other current liabilities 2,579 2,613
Amount due to a related party 65 -
Income tax payable 462 489
Current deferred tax liabilities 413 132
Total current liabilities 14,676 12,747
Non-current deferred tax liabilities 826 851
Total liabilities 15,502 13,598
Minority interests 3,474 3,359
Shareholders' equity:
Ordinary shares 109 108
Additional paid-in capital 73,789 73,608
Retained earnings 46,661 45,705
Accumulated other comprehensive income 4,104 3,399
Total shareholders' equity 124,663 122,820
Total liabilities and shareholders' equity $143,639 $139,777
(1)December 31, 2006 balances were extracted from audited financial
statements.
Hurray! Holding Co., Ltd.
Unaudited Condensed Consolidated Statements of Operations
For the three months ended
March 31, December 31, March 31,
2007 2006 2006
(in thousands of U.S. dollars, except share and per share data)
Revenues:
Wireless value-added services $14,935 $15,106 $14,461
Recorded music 1,518 1,805 1,507
Software and system integration
services 177 98 810
Total revenues 16,630 17,009 16,778
Cost of revenues:
Wireless value-added services 10,313 10,292 9,451
Recorded music 744 1,199 775
Software and system integration
services 123 206 484
Total cost of revenues 11,180 11,697 10,710
Gross profit 5,450 5,312 6,068
Operating expenses:
Product development 653 698 739
Selling and marketing 2,657 2,751 2,832
General and administrative 1,389 1,286 1,689
Total operating expenses 4,699 4,735 5,260
Income from operations 751 577 808
Interest expense (45) (45) -
Interest income 628 587 619
Income tax expense (263) 564 (323)
Minority interests (115) (117) (182)
Net income $956 $1,566 $922
Earnings per share, basic $0.0004 $0.0007 $0.0004
Earnings per ADS, basic $0.04 $0.07 $0.04
Earnings per share, diluted $0.0004 $0.0007 $0.0004
Earnings per ADS, diluted $0.04 $0.07 $0.04
Shares used in calculating
basic earnings per share 2,167,890,217 2,152,282,170 2,229,854,010
ADSs used in calculating basic
earnings per ADS 21,678,902 21,522,822 22,298,540
Shares used in calculating diluted
earnings per share 2,177,185,265 2,171,571,924 2,245,876,853
ADSs used in calculating
diluted earnings per ADS 21,771,853 21,715,719 22,458,769
The use of non-GAAP financial measures:
To supplement its consolidated financial statements presented in
accordance with generally accepted accounting principles ("GAAP") in the
United States, Hurray! uses non-GAAP measures of operating results and net
income, including in this press release earnings before interest, taxes,
depreciation and amortization, and before stock-based compensation expense
("adjusted EBITDA"), which are adjusted from results based on GAAP to exclude
certain expenses. Hurray!'s management believes the use of these non-GAAP
financial measures provide useful information to both management and investors
by excluding certain expenses that are not related to the Company's
operations. These non-GAAP financial measures also facilitate management's
internal comparisons to Hurray!'s historical performance and our competitors'
operating results. Hurray! believes these non-GAAP financial measures are
useful to investors in allowing for greater transparency with respect to
supplemental information used by management in its financial and operational
decision making. The presentation of this additional financial information is
not intended to be considered in isolation or as a substitute for the
financial information prepared and presented in accordance with GAAP. Please
see below financial table for a reconciliation of adjusted EBITDA.
Reconciliation of net income under GAAP to adjusted EBITDA for the following
periods:
For the three months ended
March 31, December 31, March 31,
2007 2006 2006
(in thousands of U.S. dollars, except share and per
share data)
Net income $956 $1,566 $ 922
Add:
Interest expense 45 45 -
Income tax expense 263 (564) 323
Depreciation and amortization 829 825 892
Non-cash stock compensation
expense 167 158 91
Less:
Interest income 628 587 619
Adjusted EBITDA $1,632 $1,443 $1,609
For more information, please contact:
Phoebe Meng
Investor Relations Manager
Tel: 8610-84555566 x5532
yfmeng@hurray.com.cn