Hurray! News

Hurray! Reports First Quarter 2005 Unaudited Financial Results

BEIJING, May 19 /Xinhua-PRNewswire/ -- Hurray! Holding Co., Ltd. (Nasdaq: HRAY - News), a provider of advanced wireless value-added services in China, today announced its unaudited financial results for the first quarter ended March 31, 2005.

FINANCIAL HIGHLIGHTS:

 Total revenues $14.9 million, grew 6.2% quarter-over-quarter and unchanged year-over-year
 2.5G services revenues $9.4 million, grew 4.3% quarter-over-quarter and 140.3% year-over-year
 2G services revenues $3.5 million, unchanged quarter-over-quarter and declined 21.8% year-over-year
 Software and system integration services revenues $2.0 million, grew 32.1% quarter-over-quarter, declined 69.1% year-over-year.
 Net income $5.6 million, grew 6.1% quarter-over-quarter and 90.8% year-over-year.

“We are very pleased with our overall financial performance during the first quarter of 2005”, said QD Wang, Chairman and Chief Executive Officer of Hurray! Holdings, Inc. “We are particularly proud with the growth that we have enjoyed during a period of continued market change, regulatory uncertainty and sector development. We continue to lead in 2.5G WAP content and software business and have great confidence in the long term growth opportunities for 2.5G services. We believe we are well positioned for market leadership as wireless value added services continue to migrate to 3G platforms.”

BUSINESS RESULTS

Total revenues for the first quarter ended March 31, 2005 were $14.91 million, representing an increase of 6.2% compared to $14.04 million for the previous quarter and were largely unchanged from the total revenues of $14.82 million in the first quarter 2004.

2.5G services revenues were $9.41 million for the first quarter 2005, representing an increase of 4.3% as compared to $9.02 million for the previous quarter and 140.3% as compared to $3.92 million for the first quarter 2004. WAP services revenue growth was impacted by slower growth of the Unicom CDMA user base and intensified competition among China Mobile wireless value-added service providers. Almost all of our 2.5G service revenues were derived from WAP services with a relatively limited contribution from our existing Java services and MMS services which were first introduced during the first quarter 2005

2G services revenues were $3.52 million for the first quarter 2005, unchanged from the $3.53 million for the previous quarter and representing a decline of 21.8% as compared to $4.51 million for the first quarter 2004. SMS revenues were $2.28 million for the first quarter 2005, representing a decline of 21.6% as compared with $2.90 million in the previous quarter and a decline of 49.4% as compared with $4.51 million in the first quarter 2004. The decline in revenues from our SMS business was offset by strong growth in our IVR services. IVR revenues were $1.25 million for the first quarter 2005, representing an increase of 100.6% as compared with $0.62 million for the previous quarter.

Software and system integration services revenues were $1.98 million for the first quarter 2005, representing an increase of 32.1% as compared with $1.50 million for the previous quarter but a decline of 69.1% as compared with $6.40 million for the first quarter 2004. Software and system integration services revenues are impacted by the inclusion of revenue from third-party hardware sold on a no-margin, pass-through basis. Revenues in the first quarter 2005 and fourth quarter 2004 included only limited amounts of such hardware compared with the first quarter of 2004.

Gross margin was 57.3% for the first quarter 2005 as compared with 62.4% for the previous quarter and 36.9% for the first quarter 2004. Gross margin for 2G services was 51.4% for the first quarter 2005, as compared with 52.5% for the previous quarter and 58.4% for the first quarter 2004. Gross margin for 2.5G services was 56.7% for the first quarter 2005, as compared with 61.8% for the previous quarter and 56.5% for the first quarter 2004. Increased revenue sharing payments to third parties and promotion partners impacted the gross margin for 2.5G services in the first quarter 2005. Software and system integration services gross margin was 70.4% for the first quarter 2005, as compared with 89.7% for the previous quarter and 9.7% for first quarter 2004, reflecting the impact of the sale of no-margin third party hardware.

Gross profit was $8.54 million for the first quarter 2005, representing a decline of 2.6% as compared with $8.77 million for the previous quarter and an increase of 56.3% as compared with $5.46 million for the first quarter 2004.

Total operating expenses were $3.06 million for first quarter 2005, representing a decline of 11.3% as compared with $3.45 million for the previous quarter and an increase of 24.9% as compared with $2.45 million for the first quarter 2004.

For first quarter 2005, income tax was $0.56 million, which includes an amount of $0.19 million in non-recurring tax expenses.

Net income was $5.58 million for first quarter 2005, representing an increase of 6.1% compared with $5.26 million for the previous quarter, and an increase of 90.6% compared with $2.93 million for first quarter 2004. Net margin was 37.4% for the first quarter 2005 compared to 37.4% for the previous quarter and 19.8% for first quarter 2004. Fully diluted earnings per ADS was $0.31 based on weighted average of 17.9 million diluted ADSs for first quarter 2005, taking into consideration our IPO closing on February 9, 2004, the resulting 30% dilution, and share options granted above our IPO price or already forfeited. This figure compares to $0.33 based on a weighted average of 15.9 million diluted ADSs for the previous quarter and $0.19 based on a weighted average of 15.5 million diluted ADSs for first quarter 2004.

As of March 31, 2005, the Company had outstanding 21.9 million basic ADSs and 22.3 million fully diluted ADSs, excluding share options granted above the IPO price or already forfeited.

BUSINESS HIGHLIGHTS

China’s wireless value services sector continues to struggle through major market changes and regulatory uncertainties in the near term. To further reduce our business risk and strengthen our market position going forward, the Company has been focusing on the following initiatives starting from 2005:

Strengthening existing marketing and distribution channels
 Became China Unicom’s Gold Strategic Partner for overall marketing and promotion support
 Became China Mobile’s Preferred Strategic Partner for music and video services
 Developed technology platform to support cross selling among all our 2G and 2.5G service platforms

Increasing service platforms and customer reach
 Acquired a MMS service provider and a IVR service provider for a total consideration of $0.66 million in cash, enabling the Company to quickly launch its existing MMS and IVR service portfolio over China Mobile platform;
 Launched Color Ring Back Tone (CRBT) services through both China Mobile and China Unicom platforms;
 Initiated IVR and CRBT services access over fixed wireless platform (Little Smart) of China Telecom and China Netcom;
 Continued 3G software platform trial initiatives with China Telecom in anticipation of China Telecom receiving 3G license some time this year.

Establishing alternative marketing, promotion, and distribution channels
 Initiated Internet marketing alliance
 Expanded alliance with major handset manufacturers, distributors, and retailers
 Increased marketing and promotion through print, radio, and TV media
 Pursued strategic alliance with various Internet based content providers

Accelerating new product rollout through in-house development and partnership
 Signed licensing agreements with three record companies: Warner Music, EMI and Ocean Butterflies Music
 Mobile Internet search
 Java casual game portal
 Video streaming

Wireless value added services market in China offers great long term growth potential compared to Japan and Korea market today. We believe these business initiatives will well position us for sustainable long term growth moving from 2.5G to 3G.

Note to the Financial Information
The financial information in this press release are extracted from financial statements prepared in accordance with generally accepted accounting principles in the United States

Conference Call
The company will host a conference call to discuss the first quarter result at

Time: 9:00 pm Eastern Standard Time on May 19, 2005
or 9:00 am Beijing/Hong Kong Time on May 20, 2005

The dial-in number: 800-299-0433 (US)
617-801-9712 (international)
Password: Hurray

A replay of the call will be available from May 19, 2005 until May 26, 2005 with following access:
888-286-8010 (US)
617-801-6888 (international)
PIN number: 83368015

Additionally, a live and archived web cast of this call will be available at:
http://www.videonewswire.com/event.asp?id=28590 or
http://www.hurray.com/english/home.htm

About Hurray! Holding Co., Ltd.
Hurray! provides wireless value-added services such as ringtones, picture downloads, community and entertainment services to mobile users in China. The company is one of the market leaders in providing these services using wireless application protocol, commonly referred to as WAP, in China. WAP services are offered through the advanced 2.5G mobile networks, the most advanced broadly available mobile networks deployed in China. Hurray! also offers these services through 2G mobile networks.

In addition, Hurray! designs, develops, sells and supports a service provisioning and management software that is used by China Unicom, one of the two principal mobile operators in China, to support its 2.5G services platform.

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: the risk that Hurray! may not be able to develop services incorporating the songs of its content partners which are timely and attractive to China's mobile phone users; uncertainty regarding the future level of consumer demand for wireless music services in China; the possibility that the songs in the "No. 89757" album and the other songs licensed from Hurray!'s content partners will not be as popular among China's mobile phone users as management expects; Hurray!'s ability to maintain its relationships with Ocean Butterflies Music and its other content partners; continued competitive pressures in China's wireless value-added services market; changes in technology and consumer demand in this market; the state of Hurray!'s relationships with China's mobile operators; 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.

Source: Hurray! Holding Co., Ltd.