BEIJING, Dec. 15 /PRNewswire-Asia/ -- Hurray! Holding Co., Ltd.
(NASDAQ:HRAY), a leading company 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 third quarter ended September 30, 2009.
(Logo: http://www.newscom.com/cgi-bin/prnh/20050314/CNM005LOGO )
Financial Highlights Highlights for the Third Quarter of 2009: --
Total revenues: $6.9 million, representing a decrease of 2.9
million quarter-over-quarter and a decrease of 6.6 million
year-over-year. -- Wireless value-added services ("WVAS") revenues:
$4.5 million, representing a decrease of 1.0 million
quarter-over-quarter and a decrease of 6.5 million year-over-year.
-- Recorded music revenues, which are from our record label
businesses: $2.4 million, representing a decrease of 1.9 million
quarter-over-quarter and a decrease of 0.1 million year-over-year.
-- Net loss attributable to Hurray! Holding: $5.1 million --
EBITDA(1): a net loss of $4.0 million -- Diluted loss per ADS:
$0.23 Commenting on the third quarter results, Mr. Haibin Qu,
Acting CEO of Hurray! stated: "This quarter was challenging for
Hurray!. However, we view this quarter as a turning point for a new
Hurray! and going forward, we will remain focused on developing
ways to better enrich our contents and enhance our distribution
channels, as well as to integrate these business initiatives with
our existing business lines. We believe these efforts are essential
for the restoration of our growth and to further development of
Hurray! into an integrated digital media distribution platform."
(1) A non-GAAP measure, which is defined as net loss attributable
to Hurray! Holding company except for income (loss) before
interest, income tax, depreciation and amortization. Business
Results Total revenues for the third quarter ended September 30,
2009 were $6.9 million, decreased from $9.8 million for the
preceding quarter and $13.5 million for the same quarter last year.
Total wireless value-added services revenues were $4.5 million for
the third quarter of 2009, decreased from $5.5 million in the
previous quarter and $11.0 million in the same quarter of 2008 as a
result of business restructuring in Q2 and early Q3 that focused on
trimming off non-profitable WVAS business lines and resources
realignment amongst WVAS business and music content business.
Recorded music revenues, which represent revenues of our controlled
music companies Freeland Music, Huayi Brothers Music, Hurray!
Secular Bird and Seed Music, which was acquired on January 1, 2009,
were $2.4 million, decreased from $4.3 million in the previous
quarter and $2.5 million in the same period of 2008, mainly
reflects a seasonal fluctuation of the music market. Total gross
margin was 20.7% for the third quarter of 2009 as compared to 21.3%
for the previous quarter and 30.9% for the same period of 2008.
Gross margin for wireless value-added services was 27.3% for the
third quarter of 2009, as compared to 26.7% in the previous
quarter, and 26.4% for the same period of 2008. Recorded music
gross margin was 8.6% for the third quarter of 2009 as compared to
14.4% in the previous quarter and 51.2% for the same period of
2008. The decrease in margin was mainly due to increment of
marketing programs to promote new artist releases by Hurray!
affiliated music companies, Seed Music, which may benefit and
strengthen the market presence in music content industry. Total
gross profit was $1.4 million for the third quarter of 2009, as
compared to $2.1 million for the previous quarter, and $4.2 million
for the same period of 2008. Total operating expenses were $6.5
million for the third quarter of 2009. This represents a decrease
of 57.9% as compared to the total operating expenses of $15.5
million for the previous quarter, which included provisions for
accounts receivable and other current assets of $3.3 million,
transaction expenses of $1.3 million in connection with the equity
tender offer by Shanda, an impairment for goodwill of $3.0 million
and a write-down for intangible assets of $3.5 million for music
business, and severance costs of $0.4 million in previous quarter,
and a decrease of 25.0% as compared to the total operating expenses
of $8.7 million for the same period of 2008, which included
impairment charges of $4.2 million in respect of our music
business. The income tax expense for the third quarter of 2009 was
$0.7 million, as compared to an income tax benefit of $0.4 million
in the previous quarter and the same period of 2008. Net loss
attributable to Hurray! Holding was $5.1 million for the third
quarter of 2009. EBITDA was negative $4.0 million for the quarter
ended September 30, 2009, as compared with an EBITDA of negative
$10.7 million in the previous quarter. A reconciliation of net loss
attributable to Hurray! Holding Company under U.S. generally
accepted accounting principles (GAAP) and adjusted EBITDA is
included at the end of this release. Fully diluted loss per ADS was
$0.23 based on a weighted average of 22.0 million diluted ADSs for
the third quarter of 2009, as compared to the diluted loss per ADSs
of $0.50 based on a weighted average of 22.0 million diluted ADSs
for the previous quarter, and a fully diluted loss per ADS of $0.42
based on a weighted average of 21.9 million diluted ADSs for the
third quarter of 2008. As of September 30, 2009, the Company had
$47.9 million in cash and cash equivalents, and short term time
deposit of $10.0 million. Business Highlights Hurray! continued
executing its strategy of developing proprietary content and
diversifying distribution channels, with the following highlights:
-- In August, Hurray! officially became China Unicom's GJAVA
partners, one of the first batch in mainland China since the
service was introduced by China Unicom. In addition, Hurray! was
also chosen to be one of the first batch of developers to work with
China Mobile's Mobile Market. In the fourth quarter of 2009, we are
launching another 2 new mobile games. -- Hurray! affiliated music
companies, including Huayi Brothers Music, Freeland Music, New Run
Entertainment, Secular Bird and Seed Music, released a series of
new songs, including 6 albums and 1 EP, and launched successful
marketing programs to promote the new releases simultaneously over
Internet and wireless platforms. Subsequently, "Very Yu Quan" ("Hen
Yu Quan") by Yu Quan, "Love Embrace" ("Ai De Bao Bao") by Shuyao
Kuo and the self-titled album "Zhou Hui") released by Zhou Hui,
became popular hits in the third quarter. -- Hurray! artists,
including Kenji Wu, Shuyao Kuo, Wen Lan and others, have signed up
various commercial endorsement deals, including Mengniu ice cream,
online game "Metal Knight Zero", Orangina soft drink, etc., in
mainland China and in Taiwan, respectively. Business Outlook
Release of New Chinese Telecommunication Operators' Measures As of
November 30, 2009, the three principal telecom operators in China,
including China Mobile Communications Corporation, or China Mobile,
China United Telecommunications Corporation, or China Unicom, and
China Telecommunications Corporation, or China Telecom has
announced that it suspended all of its WAP service partners'
ability to charge for services. This applies to all of its WAP
wireless value-added service partners in China, regardless of a
partner's propensity to disseminate pornography. The telecom
operators will now implement an overall examination, with the aim
of eradicating pornographic websites from its network. Prior to
this announcement, China's Ministry of Industry and Information
Technology has launched five measures to fight pornographic content
on the mobile Internet. At the moment, all three telecom operators
have suspended charges from all service and content providers that
signed WAP service fee collection agreements with the operators and
the operators will immediately implement an overall examination in
various areas, including service names, service contents, and
promotion channels. It will prevent errant WVAS providers from
conducting service promotions through third parties and will
require them to make an information security responsibility
commitment and promise there are no possible profit relations with
pornographic websites. We believe that services offered by the
Company do not contain any content targeted by these measures and
we believe these measures would benefit the WVAS industry in the
long run. However, the tentative suspension by the major telecom
operators of billing content suppliers for all WAP services
includes those services that do not contain offensive or
unauthorized content, on behalf of third party service providers of
services. Currently, the three principal telecommunication
operators have not yet indicated how long its new measures would
last or whether it will expand its current measures. This may bring
pressures on the WVAS market in China and add to uncertainty of
Hurray!'s WVAS operation in the following quarters. Announcement of
merger with Ku6 On November 27, 2009, the Company and the
shareholders of Ku6 Holding Limited ("Ku6"), a leading online video
portal in China agreed to the sale of Ku6 to Hurray!, in an all
stock transaction under which all of the outstanding capital shares
of Ku6 will be sold to Hurray!, and all of the outstanding employee
stock options of Ku6 will be cancelled, in exchange for an
aggregate of 723,684,204 Hurray! ordinary shares, of which
44,438,100 will be represented by American Depositary Shares of
Hurray!, each representing 100 ordinary shares of Hurray!.
Completion of the share purchase will be subject to the condition
that the shareholders of Hurray! approve the issuance of ordinary
shares of Hurray! to the shareholders and option holders of Ku6 at
a special shareholders meeting to be convened in the near future.
The Board of Directors of Hurray! has unanimously recommended this
transaction. The transaction is expected to close in the first
quarter of 2010. Note to the Financial Information The unaudited
financial information disclosed above is preliminary. The results
for the nine months ended September 30, 2009 are not necessarily
indicative of the results expected for the full fiscal year or for
any future period. Adjustments to the financial statements may be
identified when audit work is completed, which could result in
significant differences from the audited financial statements to
this preliminary unaudited financial information. Conference Call
The Company will host a conference call to discuss the third
quarter 2009 results at Time: 9: 00 pm Eastern Time on December 15,
2009 or 10:00 am Beijing/Hong Kong Time on December 16, 2009 The
dial-in number: +1-800-901-5213 (US) +1-617-786-2962
(International) Password: 49890189 A replay of the call will be
available from December 16, 2009 until December 23, 2009 as
follows: +1-888-286-8010 (US) +1-617-801-6888 (International)
Password: 11825002 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=2561576
or http://www.hurray.com.cn/english/home.htm . About Hurray!
Holding Co., Ltd. Hurray! is a leading company 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's latest
acquisition, Seed Music, expands the Company's music services into
Taiwan as well growing our business in China. 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 the Company's annual report on Form
20-F. 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 September 30, December 31, 2009(1) 2008
(As Adjusted)(1) (in thousands of U.S. dollars) Assets Current
assets: Cash and cash equivalents $47,949 $59,473 Short-term
investment 10,000 -- Accounts receivable, net 5,219 12,658 Prepaid
expenses and other current assets 2,446 4,170 Amount due from
related parties 190 745 Current deferred tax assets -- 363
Inventories, net 184 255 Receivable on disposal of subsidiary -- 47
Total current assets 65,988 77,711 Deposits and other non-current
assets 1,306 720 Prepaid acquisition cost -- 2,507 Property and
equipment, net 718 980 Acquired intangible assets, net 1,113 1,945
Investment in equity affiliate 377 825 Goodwill 1,858 3,157
Non-current deferred tax assets -- 479 Total assets $71,360 $88,324
Liabilities and shareholders' equity Current liabilities: Accounts
payable $3,664 $2,454 Accrued expenses and other current
liabilities 4,362 3,033 Amount due to related parties 485 208
Income tax payable 681 124 Current deferred tax liabilities 12 497
Total current liabilities 9,204 6,316 Long term payable 19 24
Non-current deferred tax liabilities 276 292 Total liabilities
9,499 6,632 Redeemable non-controlling interest 620 --
Shareholders' equity: Ordinary shares 110 110 Additional paid-in
capital 75,155 75,013 Accumulated deficit (26,273) (8,201)
Accumulated other comprehensive income 9,959 9,987 Total Hurray!
Holding shareholders' equity 58,951 76,909 Non-controlling
interest(2) 2,290 4,783 Total shareholders' equity 61,241 81,692
Total liabilities and shareholders' equity $71,360 $88,324 Hurray!
Holding Co., Ltd. Unaudited Condensed Consolidated Statements of
Operations For the three For the nine months ended months ended
September September September September 30, 2009 30, 2008 30, 2009
30, 2008 (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 4,442 11,032
17,869 31,217 Recorded music 2,426 2,494 10,603 8,315 Total
revenues 6,868 13,526 28,472 39,532 Cost of revenues: Wireless
value-added services 3,231 8,124 13,795 21,723 Recorded music 2,216
1,217 9,232 4,143 Total cost of revenues 5,447 9,341 23,027 25,866
Gross profit 1,421 4,185 5,445 13,666 Operating expenses: Product
development 151 242 379 838 Selling and marketing 1,298 2,129 5,213
6,762 General and administrative 5,085 4,635 18,476 8,908
Impairment of goodwill -- 1,710 3,009 1,710 Gain on reduction of
Unicom liability -- -- -- (1,557) Total operating expenses 6,534
8,716 27,077 16,661 (Loss) income from operations (5,113) (4,531)
(21,632) (2,995) Interest income 97 579 372 1,398 Other income 42
107 304 242 Interest expense (3) -- (9) -- Foreign exchange loss --
(4,472) -- (4,472) Gain on reduction of acquisition payable -- --
-- 5,000 Loss before provision for income taxes, equity in earnings
(loss) of affiliate (4,977) (8,317) (20,965) (827) Income tax
(benefit) expense 686 (412) 227 579 Loss before equity in earnings
(loss) of affiliate (5,663) (7,905) (21,192) (1,406) Equity in
(loss) earnings of affiliate, net of tax (28) 1 (327) 34 Impairment
of the investment in music equity affiliate -- (1,871) (210)
(1,871) Loss from continuing operations (5,691) (9,775) (21,729)
(3,243) Discontinued operations: Gain on sale of subsidiary, net of
tax -- 237 222 366 Net loss (5,691) (9,538) (21,507) (2,877) Less:
Net loss attributable to the non-controlling interest(2) 616 294
3,435 102 Net loss attributable to Hurray! Holding Company (5,075)
(9,244) (18,072) (2,775) Net loss per share-basic Loss from
continuing operations ($0.00) ($0.00) ($0.01) ($0.00) Gain from
discontinued operations $0.00 $0.00 $0.00 $0.00 Net loss ($0.00)
($0.00) ($0.01) ($0.00) Net loss per ADS-basic Loss from continuing
operations ($0.23) ($0.43) ($0.83) ($0.15) Gain from discontinued
operations $0.00 $0.01 $0.01 $0.02 Net loss ($0.23) ($0.42) ($0.82)
($0.13) Net loss per share-diluted Loss from continuing operations
($0.00) ($0.00) ($0.01) ($0.00) Gain from discontinued operations
$0.00 $0.00 $0.00 $0.00 Net loss ($0.00) ($0.00) ($0.01) ($0.00)
Net loss per ADS-diluted Loss from continuing operations ($0.23)
($0.43) ($0.83) ($0.15) Gain from discontinued operations $0.00
$0.01 $0.01 $0.02 Net loss ($0.23) ($0.42) ($0.82) ($0.13) Weighted
average shares used in calculating basic loss per share
2,196,177,940 2,187,509,840 2,195,793,818 2,184,148,576 Weighted
average ADSs used in calculating basic loss per ADS 21,961,779
21,875,098 21,957,938 21,841,486 Weighted average shares used in
calculating diluted loss per share 2,196,177,940 2,187,509,840
2,195,793,818 2,184,148,576 Weighted average ADSs used in
calculating diluted loss per ADS 21,961,779 21,875,098 21,957,938
21,841,486 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 a non-GAAP measure of EBITDA, which is
adjusted from results based on GAAP to exclude certain expenses.
Hurray!'s management believes the use of this non-GAAP financial
measure provides useful information to both management and
investors by excluding certain expenses that are not related to the
company's operations. This non-GAAP financial measure also
facilitates management's internal comparisons to Hurray!'s
historical performance and our competitors' operating results.
Hurray! believes this non-GAAP financial measure is 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 EBITDA. Reconciliation of Net loss
attributable to Hurray! Holding Company under GAAP to EBITDA for
the following periods: For the three For the nine months ended
months ended September September September September 30, 2009 30,
2008 30, 2009 30, 2008 (in thousands of (in thousands of U.S.
dollars, U.S. dollars, except share and except share and per share
data) per share data) Net loss attributable to Hurray! Holding
Company ($5,075) ($9,244) ($18,072) ($2,775) Add (deduct): Interest
expense 3 -- 9 -- Income tax expense (benefit) 686 (412) 227 579
Depreciation and amortization 526 887 2,060 2,628 Interest income
(97) (579) (372) (1,398) EBITDA ($3,957) ($9,348) ($16,148) ($966)
(1) Effective January 1, 2009, the Company adopted SFAS 160. SFAS
160, which was retrospectively applied, requires non-controlling
interests to be separately presented as a component of
stockholders' equity on the unaudited condensed consolidated
financial statements. (2) June 30, 2008 and December 31, 2008
balances were extracted from the form 6-K for the quarters ended
June 30, 2008 and December 31, 2008 respectively, as adjusted
resulting from the adoption of Statement of Financial Accounting
Standards No. 160. For more information, please contact: Christina
Low Investor Relations Officer Tel: +86-10-8869-5237 Email:
http://www.newscom.com/cgi-bin/prnh/20050314/CNM005LOGO DATASOURCE:
Hurray! Holding Co., Ltd. CONTACT: Christina Low, Investor
Relations Officer, +86-10-8869-5237, or Web site:
http://www.hurray.com.cn/english/home.htm
http://phx.corporate-ir.net/playerlink.zhtml?c=187793&s=wm&e=2561576
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