BEIJING, Aug. 22 /Xinhua-PRNewswire/ -- Hurray! Holding Co., Ltd.
(Nasdaq: HRAY), a leader in artist development, music production and wireless music distribution and other wireless value-added services in China, today announced its unaudited financial results for the second quarter ended June 30, 2008.
(Logo: http://www.prnasia.com/sa/200611091912.jpg )
FINANCIAL HIGHLIGHTS:
Highlights for Second Quarter 2008
-- Total revenues: $12.8 million, representing a decline of 3.7%
quarter-over-quarter and 12.4% year-over-year; below our previous
guidance of $13-14 million.
-- Wireless value-added services (“WVAS”) revenues: $9.2 million,
representing a decline of 16.5% quarter-over-quarter and 27.9%
year-over-year.
-- Recorded music revenues, which are from our record label businesses:
$3.6 million, representing a growth of 59.3% quarter-over-quarter and
95.4% year-over-year.
-- Net income: $1.6 million
-- Adjusted EBITDA (a non-GAAP measure which is defined as income from
continuing operations before interest, tax, depreciation, amortization,
stock-based compensation, gains on reduction of acquisition payable and
reversal of Unicom liability): $0.8 million
-- Diluted earnings per ADS: $0.07
Commenting on the second quarter results, QD Wang, Chairman and CEO of Hurray! stated: “We narrowly missed our guidance primarily due to the performance of our WVAS business which was impacted by temporary suspensions of certain WVAS marketing campaigns since May due to the Sichuan earthquake. Our music business has also been impacted in Q2 as many charity activities and donations to the relief efforts were organized. Overall, we have further stabilized our WVAS business and continue to generate positive operating cash flow. Going forward, we will continue to further develop and promote our music and entertainment business in China. With our strong cash position, we are confident to further execute our strategy to become a leading entertainment content production and distribution house in China.”
BUSINESS RESULTS
Total revenues for the second quarter ended June 30, 2008 were $12.8 million, representing declines of 3.7% from $13.2 million for the preceding quarter, and 12.4% from $14.6 million for the second quarter in 2007.
Total wireless value-added services revenues were $9.2 million for the second quarter of 2008, representing declines of 16.5% from $11.0 million in the previous quarter and 27.9% as compared to $12.7 million in the second quarter of 2007.
Recorded music revenues, which represent revenues of our controlled music companies Freeland Music, Huayi Brothers Music and Hurray! Secular Bird, were $3.6 million, representing an increase of 59.3% as compared to $2.2 million in the previous quarter and significant growth of 95.4% as compared to $1.8 million in the second quarter of 2007.
Total gross margin was 36.4% for the second quarter of 2008 as compared to 36.5% for the previous quarter and 32.8% for the second quarter of 2007.
Gross margin for wireless value-added services was 29.8% for the second quarter of 2008, as compared to 35.0% in the previous quarter and 30.1% for the second quarter of 2007.
Recorded music gross margin was 53.4% for the second quarter of 2008 as compared to 43.8% in the previous quarter and 51.7% for the second quarter of 2007.
Total gross profit was $4.6 million for the second quarter of 2008, representing declines of 4.0% as compared to $4.8 million for the previous quarter and 3.0% as compared to $4.8 million for the second quarter of 2007.
Total operating expenses were $3.3 million for the second quarter of 2008, net of reversal of Unicom liability amount to $1.56 million, representing a decline of 30.2% as compared to $4.7 million for the previous quarter and 30.5% as compared to $4.7 million for the second quarter of 2007. In the second quarter of 2008, we benefited from a waiver of $1.56 million in alliance membership fees we had accrued under a 2005 agreement with China Unicom in respect of promotional and marketing activities, which China Unicom has terminated. All waived fees have been reported as other operating income.
Income tax expense was $0.3 million in the second quarter 2008, as compared to $0.7 million in the previous quarter and $38,000 in the second quarter of 2007.
Net income was $1.6 million for the second quarter of 2008.
Adjusted income before interest, tax, depreciation, amortization and stock-based compensation, gains on reduction of acquisition payable and reversal of Unicom liability (adjusted EBITDA), was $0.8 million for the quarter, a decline of 34.4% as compared with $1.3 million in the previous quarter and a decline of 27.7% as compared with $1.1 million in the second quarter of 2007. 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 was $0.07 based on a weighted average of 21.9 million diluted ADSs for the second quarter of 2008. This figure compares to $0.22 based on a weighted average of 21.9 million diluted ADSs for the previous quarter and earnings per ADS of $0.01 based on a weighted average of 21.8 million diluted ADSs for the second quarter of 2007.
As of June 30, 2008, the Company had $72.9 million in cash and cash equivalents.
BUSINESS HIGHLIGHTS
Despite the previously mentioned impacts on our music business throughout Q2, we have consistently focused on developing our existing and new artists, as well as expanding our marketing and promotion channels. As part of our strategy to improve our music business through strategic initiatives and promotional activities, our affiliated music companies, Huayi Brothers Music, Freeland Music, New Run, and Secular Bird accomplished the following successes in the second quarter:
-- Huayi Brothers Music took part in many charity events and donations to
the relief efforts for the earthquake in Sichuan province, and produced
an earthquake relief song named ‘We Have Love’. Meanwhile, Jane Zhang,
was named the ‘Most Media Coverage Female Artist’ on Forbes ‘Top 25
Influential Star from China’ list. Concerts were also successfully held
in Beijing for artists, including Yang Kun and Li Huizhen.
-- Freeland Music signed up a number of popular leading artists, including
Ruby Lin Xinru, a Taiwanese actress and pop singer, who had her
breakout role as a leading actress in the very popular television
series Princess Pearl and its sequel, Princess Pearl II, and also Ni
Hongjie, Chen Derong, and Meng Xi. The company also released a series
of new songs, including 1 EP, and 2 albums, and launched successful
marketing programs to promote the new releases simultaneously over
Internet and wireless platforms. Subsequently, “Bond Lady” (“Bang
Nu Lang”) by Ni Hongjie and “Song of Eternal Sorrow” (“Chang Hen
Ge”) by Zhang Zhenyu became popular hits in the second quarter.
-- Freeland Music entered into a contract with Shanghai Dongfang Yanyi Co.,
Ltd. to organize the ‘2009 Andy Lau World Tour Concert’ next year and
Freeland’s affiliate, Fly Songs, successfully organized the ‘China Gold
Record Award’ concert in Beijing.
-- New Run, has also achieved successes in promoting the company’s artists
and brand name. New Run’s artists, including Shi Mei, Chen Rui, and Nan
He Wen Dou performed in Hengyang, Hunan Province, and they were
involved in a charity to raise Rmb 250, 000 for children living in
extreme poverty. The company also established an in-house ‘CRBT team’,
which effectively brought up our WVAS business, especially CRBT-related
products, throughout Q2.
-- Secular Bird artists received 11 major awards at the ‘First Annual
Guangdong Province Xinghai Music - Pop Music Award Ceremony’, a
remarkable improvement in building up the company’s brand name.
We also launched 5 new titles on China Mobile’s game portal, including “Legend of The Night Assassin”, “My 72 Transformations”, and “Heavy Metal World 2”. In Q3, we plan to launch 8 new titles.
Business Outlook
For the third quarter of 2008, Hurray! expects its total consolidated revenues to be between $12 and $13 million.
Conference Call
The Company will host a conference call to discuss the first quarter results at
Time: 9: 00 pm Eastern Daylight Time on August 21, 2008
or 9:00 am Beijing/Hong Kong Time on August 22, 2008
The dial-in number: +1-800-901-5217 (US)
+1-617-786-2964 (International)
Password: 95540380
A replay of the call will be available from August 21, 2008 until August 28, 2008 as follows:
+1-888-286-8010 (US)
+1-617-801-6888 (International)
PIN number: 91670606
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=1906375 or http://www.hurray.com.cn/english/home.htm .
About Hurray! Holding Co., Ltd.
Hurray! is a leader in artist development, music production and offline distribution in China through its record labels Huayi Brothers Music, Freeland Music, New Run Entertainment, and Secular Bird. The Company, through Fly Songs, also organizes concerts and other music events in China.
Hurray! is also a leading online distributor of music and music-related products such as ringtones, ringbacktones, and truetones to mobile users in China through the full range of 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.
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 June As of December
30, 2008 31, 2007(1)
(in thousands of U.S. dollars)
Assets
Current assets:
Cash and cash equivalents $ 72,887 $ 65,979
Accounts receivable 13,450 14,691
Prepaid expenses and other current
assets 3,936 3,120
Amount due from related parties 283 464
Current deferred tax assets 523 748
Inventories 282 293
Receivable on disposal of subsidiary 129 4,151
Total current assets 91,490 89,446
Deposits and other non-current assets 790 849
Property and equipment, net 1,309 1,636
Acquired intangible assets, net 5,057 4,971
Investment in equity affiliate 2,451 2,421
Goodwill 5,659 5,621
Non-current deferred tax assets 510 650
Total assets $ 107,266 $ 105,594
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable $ 2,521 $ 3,575
Acquisitions payable 28 7,102
Accrued expenses and other current
liabilities 2,917 2,906
Amount due to related parties 212 256
Income tax payable 178 211
Current deferred tax liabilities 963 417
Total current liabilities 6,819 14,467
Long term payable 27 32
Non-current deferred tax liabilities 562 845
Total liabilities 7,408 15,344
Minority interests 5,158 4,667
Shareholders’ equity:
Ordinary shares 109 109
Additional paid-in capital 74,449 74,067
Statutory reserve 6,503 6,503
Retained earnings (accumulated
deficit) 3,718 (2,751)
Accumulated other comprehensive
income 9,921 7,655
Total shareholders’ equity 94,700 85,583
Total liabilities and shareholders’
equity $ 107,266 $ 105,594
(1) December 31, 2007 balances were extracted from audited financial
statements.
Hurray! Holding Co., Ltd.
Unaudited Condensed Consolidated Statements of Operations
For the three months ended For the six months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
(in thousands of U.S. (in thousands of U.S.
dollars, except share dollars, except share
and per share data) and per share data)
Revenues:
Wireless value-added
services $ 9,185 $ 12,737 $ 20,185 $ 27,672
Recorded music 3,576 1,830 5,821 3,348
Total revenues 12,761 14,567 26,006 31,020
Cost of revenues:
Wireless value-added
services 6,451 8,898 13,599 19,211
Recorded music 1,666 883 2,927 1,627
Total cost of
revenues 8,117 9,781 16,526 20,838
Gross profit 4, 644 4,786 9,480 10,182
Operating expenses:
Product development 206 518 596 1,066
Selling and
marketing 2,232 2,485 4,633 4,921
General and
administrative 2,386 1,698 4,273 3,075
Reversal of
Unicom liability (1,557) -- (1,557) --
Total operating
expenses 3,267 4,701 7,945 9,062
Income from
operations 1,377 85 1,535 1,120
Other income
(expenses) 62 (36) 135 (36)
Interest expense -- (45) -- (90)
Interest income 465 571 819 1,183
Gain on reduction of
acquisition payable -- -- 5,000 --
Income before provision
For income taxes, loss
from equity investment
and minority
interests 1,904 575 7,489 2,177
Income tax expense 282 38 991 299
Net income before
earnings from equity
investment and
minority interests 1,622 537 6,498 1,878
Equity in earnings of
affiliate, net of tax 8 2 34 2
Minority interests,
net of tax (192) (118) (192) (233)
Income from
continuing operations 1,438 421 6,340 1,647
Discontinued
operations:
Loss from discontinued
operations, net of tax -- (228) -- (498)
Gain on sale of
subsidiary, net
of tax 129 -- 129 --
Income (loss) from
discontinued
operations 129 (228) 129 (498)
Net income $ 1,567 $ 193 $ 6,469 $ 1,149
Net income (loss) per
share-basic
Income from
continuing
operations $ 0.00 $ 0.00 $ 0.00 $ 0.00
Gain (loss) from
discontinued
operations $ 0.00 $ (0.00) $ 0.00 $ (0.00)
Net income $ 0.00 $ 0.00 $ 0.00 $ 0.00
Net income
(loss) per
ADS-basic
Income from
continuing
operations $ 0.07 $ 0.02 $ 0.29 $ 0.07
Gain (loss) from
discontinued
operations $ 0.01 $ (0.01) $ 0.01 $ (0.02)
Net income $ 0.07 $ 0.01 $ 0.30 $ 0.05
Net income
(loss) per
share-diluted
Income (loss)
from continuing
operations $ 0.00 $ 0.00 $ 0.00 $ 0.00
Gain (loss)
from discontinued
operations $ 0.00 $ (0.00) $ 0.00 $ (0.00)
Net income (loss) $ 0.00 $ 0.00 $ 0.00 $ 0.00
Net income (loss)
per ADS-diluted
Income from
continuing
operations $ 0.07 $ 0.02 $ 0.29 $ 0.07
Gain (loss)
from discontinued
operations $ 0.01 $ (0.01) $ 0.01 $ (0.02)
Net income $ 0.07 $ 0.01 $ 0.30 $ 0.05
Weighted average
shares used in
calculating
basic
Earnings
(loss) per
share 2,184,751,686 2,173,318,732 2,181,449,475 2,170,619,470
Weighted average
ADSs used in
Calculating
basic
Earnings (loss)
per ADS 21,847,517 21,733,187 21,814,495 21,706,195
Weighted average
shares used in
calculating
diluted
Earnings
(loss) per
share 2,186,254,898 2,182,733,566 2,187,269,646 2,179,974,411
Weighted average
ADSs used in
calculating
diluted
Earnings
(loss) per
ADS 21,862,549 21,827,336 21,872,696 21,799,744
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 including provisions for impairment, and before stock-based compensation expense, gains on reduction of acquisition payable and reversal of Unicom liability ("adjusted EBITDA"), which are adjusted from results based on GAAP to exclude certain expenses and non-recurring events. Hurray!’s management believes the use of these non-GAAP financial measures provides 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 from continuing operations under GAAP to adjusted EBITDA for the following periods:
For the three months For the six months
ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
(in thousands of (in thousands of
U.S. dollars) U.S. dollars)
Income from continuing operations $ 1,438 $ 421 $ 6,340 $ 1,647
Add (deduct):
Interest expense -- 45 -- 90
Income tax expense 282 38 991 299
Depreciation and amortization 934 994 1,741 1,798
Non-cash stock compensation expense 191 212 382 379
Gain on reduction of acquisition
payable -- -- (5,000) --
Reversal of Unicom liability (1,557) -- (1,557) --
Interest income (465) (571) (819) (1,183)
Adjusted EBITDA $ 823 $ 1,139 $ 2,078 $ 3,030
For more information, please contact:
Christina Low F.S.
Investor Relations Officer
Tel: +86-10-8455-5566 x5532
Email: IR@hurray.com.cn
