WTHN Widerthan

Second Quarter Revenues Grow to $33.1 Million, an Increase of 49% Year-Over- Year; New Customer Win in Ringback Tone Service Announced SEOUL, South Korea, Aug. 9 /PRNewswire-FirstCall/ -- WiderThan Co., Ltd. (NASDAQ:WTHN), a leading global provider of integrated mobile entertainment solutions for wireless carriers, today reported financial results for the second quarter ended June 30, 2006 and issued financial guidance for the third quarter and fourth quarter of 2006. Second quarter 2006 revenues were $33.1 million, an increase of 49% over the $22.2 million in the second quarter of 2005. Net income, calculated in accordance with generally accepted accounting principles in the United States (US GAAP), for the second quarter of 2006 was $4.6 million, or $0.23 per diluted American Depositary Share (ADS), compared to $1.6 million or $0.08 per diluted ADS in the prior year period. Included in net income for the second quarter of 2006 was a non-cash, stock-based compensation charge of $0.7 million, compared to a charge of $0.6 million in the prior year period. Adjusted net income, which excludes non-cash stock compensation expense, was $5.2 million, or $0.26 per diluted ADS, in the second quarter of 2006, compared to an adjusted net income of $2.2 million, or $0.21 per diluted ADS, in the prior year period. Commenting on the results, Sang Jun Park, WiderThan's Chief Executive Officer, said, "WiderThan had a strong second quarter in 2006. I am also very pleased to announce that we have signed a new carrier customer for our Ringback Tone (RBT) Service. Service integration for this carrier is underway and we expect to launch service by the end of the third quarter of this year." F. Terry Kremian, WiderThan's Global President, said, "Ringback tone subscribers outside Korea grew 20% sequentially in the second quarter of 2006 from the first quarter of 2006. Overall, we added a total of 1.5 million new RBT users bringing our total active RBT subscribers to 16.9 million." Mr. Kremian added, "We continue to see solid consumer uptake for our carriers' services in both ringback tone penetration and music-on-demand services." Cash, cash equivalents and short-term financial instruments on June 30, 2006, totaled $93.1 million. During the second quarter of 2006, WiderThan generated approximately $3.0 million in cash from operations. Hoseok Kim, WiderThan's Chief Financial Officer, commented on the company's finances saying, "Positive cash flow in the second quarter further enhances our strong balance sheet. In addition, we continue to improve our internal processes related to financial reporting which enables us to report our results in a more timely manner." Third and Fourth Quarter 2006 Outlook WiderThan is issuing financial guidance for the third quarter and fourth quarter of 2006 based on information as of August 8, 2006. This guidance assumes that our major currency exchange rates remain constant. Third Quarter 2006 Fourth Quarter 2006 Net Revenues $31.0-$33.0 million $34.8-$37.3 million US GAAP Net Income $3.9-$4.3 million $5.0-$5.6 million Adjusted Net Income $4.5-$4.9 million $5.6-$6.2 million Presentation, Conference Call and Web Cast On Wednesday, August 9, 2006 at 4:15 p.m. Eastern Daylight Time, WiderThan will post to its web site at http://ir.widerthan.com/ a prerecorded presentation and transcript of the WiderThan management team's review of the company's second quarter financial performance. There will be a live question and answer (Q&A) conference call to allow analysts and investors to ask questions of the WiderThan management team at 5:00 p.m. Eastern Daylight Time that same day. A listen-only web cast of the Q&A session will be available at http://ir.widerthan.com/. Those wishing to participate in the live Q&A session should use the following numbers to dial into the session: Calling from the United States or Canada: 800-260-8140 Calling from other countries: 617-614-3672 Pass code: 11764871 An online replay of the presentation and Q&A web cast will be available at http://ir.widerthan.com/ following the completion of the live call and will remain available for at least 90 days. Non-GAAP Measures To supplement WiderThan's consolidated financial statements presented in accordance with US GAAP, WiderThan uses non-US GAAP measures of certain components of financial performance, including adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and adjusted net income, which are adjusted from our US GAAP results. These non-GAAP results provide useful information to both management and investors by excluding expenses which we believe may not be indicative of the Company's core operating results. These measures should be considered in addition to results prepared in accordance with US GAAP, but should not be considered a substitute for, or superior to, US GAAP results. The non-GAAP measures included in this press release have been reconciled to the nearest US GAAP measure. Adjusted EBITDA excludes non-cash stock-based compensation expense, depreciation and amortization expense from the Company's statement of operations. Adjusted net income excludes non-cash based stock compensation expense from the Company's statement of operations. About WiderThan WiderThan is a leading provider of integrated mobile entertainment solutions for wireless carriers. Our applications, content and services enable wireless carriers to provide a broad range of mobile entertainment, such as ringback tones, music-on-demand, mobile games, ringtones, messaging and information services, to their subscribers. WiderThan currently provides mobile entertainment solutions to more than 50 wireless carriers in over 25 countries, including SK Telecom in Korea, Cingular Wireless, Sprint Nextel, T- Mobile USA and Verizon Wireless in the United States, Bharti Airtel in India and Globe Telecom in the Philippines. Forward-Looking and Cautionary Statements Any statements in this announcement about the future expectations, plans or prospects of WiderThan, including statements containing the words "believe," "plan," "anticipate," "expect," "estimate," "will" and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including factors described in WiderThan's annual report on Form 20-F for the year ended December 31, 2005. These factors include the fluctuations of revenues and earnings, our reliance on SK Telecom to generate a majority of revenues and as a partner to develop and test services, the fact that the markets in which we operate are highly competitive, the challenges of global expansion, the lack of any contractual obligation for our carrier customers to use our services, the fact that a substantial portion of our revenues are subject to pricing decisions of carrier customers, the consolidation among our potential customer base, the dynamics of the wireless carrier markets in which our largest potential customers compete with one another, the fact that our carrier customers could begin developing and/or providing some or all of our carrier application services on their own, our dependence on ringback tone service for a significant portion of our revenue, potential increases in royalty rates payable to music label companies, currency exchange rate fluctuations, maintaining an effective system of internal controls and complying with regulations required by the telecom industry and in Korea. The forward- looking statements included in this announcement represent WiderThan's view as of the date of this release. WiderThan anticipates that subsequent events and developments may cause WiderThan's views to change. However, WiderThan disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this document. These forward-looking statements should not be relied upon as representing WiderThan's views as of any date subsequent to the date of this announcement. WiderThan Co., Ltd. Condensed Consolidated Statements of Operations (Unaudited) (In thousands of US dollars, except share and per share information) Three Months Ended Six Months Ended June 30, June 30, 2005 2006 2005 2006 Revenues Service revenues Carrier application services $13,860 $22,878 $26,004 $43,485 Content services 3,979 3,576 9,727 7,044 Professional and other services 2,082 3,081 4,263 5,466 Total service revenues 19,921 29,535 39,994 55,995 System sales 2,283 3,531 4,479 5,874 Total revenues 22,204 33,066 44,473 61,869 Costs and expenses (Note A) Cost of service revenues (exclusive of depreciation and amortization, as shown below) 7,342 10,909 14,566 20,683 Cost of system sales (exclusive of depreciation and amortization, as shown below) 1,573 1,370 2,621 2,766 Depreciation and amortization 1,051 1,369 2,031 2,640 Selling and marketing 1,324 1,273 2,283 1,949 General and administrative 5,722 9,747 11,784 18,837 Research and development 3,179 2,120 5,794 5,138 Total costs and expenses 20,191 26,788 39,079 52,013 Operating income 2,013 6,278 5,394 9,856 Other income Interest income 121 935 249 1,768 Foreign exchange gain (loss), net 39 (92) 92 (367) Total other income 160 843 341 1,401 Income before taxes, minority interest and earnings from equity method investment 2,173 7,121 5,735 11,257 Income taxes 643 2,659 1,555 4,221 Income before minority interest and earnings from equity method investment 1,530 4,462 4,180 7,036 Minority Interest - - - - Gain (loss) from equity method investment 57 91 (60) 168 Income before cumulative effect of a change in accounting principle 1,587 4,553 4,120 7,204 Cumulative effect on prior years of retroactive application of FAS123(R) - - - 152 Net Income $1,587 $4,553 $4,120 $7,356 Accretion of preferred shares (297) - (626) - Amounts allocated to participating preferred shareholders (586) - (1,061) - Net income attributable to common shares $704 $4,553 $2,433 $7,356 Earning per share - basic $0.08 $0.23 $0.23 $0.37 Earning per share - diluted $0.08 $0.23 $0.23 $0.36 Weighted average number of shares - basic 10,500,000 19,807,216 10,500,000 19,807,216 Weighted average number of shares - diluted 10,510,517 20,220,824 10,510,517 20,258,320 Note A: The following stock compensation expenses resulting from our stock options, employee stock ownership association (ESOA) and virtual stock options (VSOs) are included in the following expense categories: Three Months Ended Six Months Ended June 30, June 30, 2005 2006 2005 2006 Cost of service revenues $57 $130 $111 $222 Cost of system sales 7 10 10 16 General and administrative 434 454 820 1,005 Research and development 138 57 250 116 Total $636 $651 $1,191 $1,359 WiderThan Co., Ltd. Condensed Consolidated Balance Sheet (In thousands of US dollars) December 31, June 30, 2005 2006 Assets (Audited) (Unaudited) Current assets Cash and cash equivalents $71,171 $50,931 Short-term financial instruments 14,851 42,172 Accounts receivable, net 34,924 32,972 Deferred costs 5,589 6,998 Other current assets 2,745 3,629 Total current assets 129,280 136,702 Property, plant and equipment, net 10,346 11,870 Goodwill 18,673 19,883 Other non-current assets 10,034 11,359 Total assets $168,333 $179,814 Liabilities and Stockholders' Equity Current liabilities Accounts payable 22,636 22,537 Current portion of deferred income 6,614 2,931 Accrued expenses 6,099 5,488 Taxes payable 2,620 3,284 Other current liabilities 3,753 3,937 Cash Appreciation Right liability 1,210 - Total current liabilities 42,932 38,177 Non-current liabilities Long-term deferred income, net of current portion 3,158 2,056 Other non-current liabilities 1,247 2,343 Total liabilities 47,337 42,576 Commitments and contingencies Minority interest (133) - Stockholders' equity Common stock: Won 500 par value; authorized 30 million shares, issued and outstanding 10.5 million, and 19.8 million shares in 2005 and 2006, respectively 8,871 8,871 Additional paid-in capital 87,540 89,080 Retained earnings 17,805 24,828 Accumulated other comprehensive income 6,913 14,459 Total stockholders' equity 121,129 137,238 Total liabilities and stockholders' equity $168,333 $179,814 WiderThan Co., Ltd. Condensed Consolidated Statement of Cash Flows (Unaudited) (In thousands of US dollars) Three Months Six Months Ended Ended June 30, 2006 June 30, 2006 Cash flows from operating activities: Net income $4,553 $7,356 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,369 2,640 Stock compensation expenses 651 1,359 Cumulative effect on prior years of retroactive application of FAS123R - (152) Foreign exchange translation loss, net 92 367 Equity in gain of related equity investment (91) (168) Provision for severance benefits 323 634 Change in operating assets and liabilities: Decrease (increase) in accounts receivable (2,684) 3,790 Increase in deferred costs (696) (1,032) Increase in other assets (1,592) (1,383) Increase (decrease) in trade accounts payable 1,528 (1,545) Decrease in deferred income (2,450) (4,054) Increase (decrease) in accrued expenses 900 (992) Increase in taxes payable 1,012 487 Increase (decrease) in long-term deferred income 362 (1,289) Payment of severance benefits (42) (50) Payment of cash appreciation right liability (1,210) (1,210) Increase in other liabilities 1,021 358 Net cash provided by operating activities 3,046 5,116 Cash flows from investing activities: (Decrease) increase in short-term financial instruments, net - (25,985) Purchase of property, plant and equipment (2,365) (3,290) Net cash used in investing activities (2,365) (29,275) Cash flows from financing activities: Decrease in minority interest 149 133 Net cash provided by financing activities 149 133 Effect of exchange rate changes on cash and cash equivalents 953 3,786 Net decrease (increase) in cash and cash equivalents 1,783 (20,240) Cash and cash equivalents: Beginning of year 49,148 71,171 End of period $50,931 $50,931 WiderThan Co., Ltd. Reconciliation of Non GAAP Measures to GAAP (Unaudited) (In thousands of US dollars, except share and per share information) Three Months Ended Six Months Ended June 30, June 30, 2005 2006 2005 2006 Reconciliation to adjusted EBITDA: Net income $1,587 $4,553 $4,120 $7,356 Cumulative effect on prior years of retroactive application of FAS123(R) - - - 152 (Gain) loss from equity method investment (57) (91) 60 (168) Minority interest - - - - Income taxes 643 2,659 1,555 4,221 Total other income (160) (843) (341) (1,401) Depreciation and amortization 1,051 1,369 2,031 2,640 Stock compensation expenses 636 651 1,191 1,359 Adjusted EBITDA $3,700 $8,298 $8,616 $14,159 Three Months Ended Six Months Ended June 30, June 30, 2005 2006 2005 2006 Reconciliation to adjusted net income: Income before cumulative effect of a change in accounting principle $1,587 $4,553 $4,120 $7,356 Stock compensation expenses 636 651 1,191 1,359 Adjusted net income $2,223 $5,204 $5,311 $8,715 Adjusted net income per share - diluted $0.21 $0.26 $0.51 $0.43 Weighted average number of shares - diluted 10,510,517 20,220,824 10,510,517 20,258,320 WiderThan Co., Ltd. Selected Operational Data for Carrier Application Services For the Three Months Ended June 30, 2005 2006 Ringback tones: Number of carriers (1) 6 7 Number of accessible subscribers (2) (in millions) 116.5 148.0 Number of ringback tone subscribers (3) (in millions) 11.9 16.9 Inter-carrier messaging: Number of carriers (1) 26 37 Number of messages delivered (4) (in billions) 4.0 9.2 Music-on-demand: Number of carriers (1) 1 2 Number of accessible subscribers (2) (in millions) 19.2 74.8 Notes: (1) Represents the aggregate number of carriers for which the relevant service was in operation during the relevant period. (2) Represents the approximate aggregate number of our carriers customers' wireless subscribers at the end of the relevant period as reported publicly by our carrier customers. (3) Represents the aggregate number of subscribers to the ringback tone service provided by our carrier customers during the relevant period. (4) Represents the aggregate number of messages delivered by means of our inter-carrier messaging service on behalf of our carrier customers during the relevant period. WiderThan Co., Ltd. Geographic Revenue Distribution For the Three Months Ended June 30, 2005 2006 Korea 69% 62% America 24% 31% Asia (ex-Korea) 5% 6% EMEA 2% 1% For the Six Months Ended June 30, 2005 2006 Korea 68% 62% America 24% 31% Asia (ex-Korea) 7% 6% EMEA 2% 1% DATASOURCE: WiderThan Co., Ltd. CONTACT: Investors: Tania Almond of WiderThan, +1-571-521-1080, Web site: http://www.widerthan.com/ http://ir.widerthan.com/

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