With operating expenses high after three acquisitions, Hurray Holding's (HRAY) unaudited financial results for the first quarter ended March 31, 2006 show the company's profit sank by more than 80%.
QD Wang, Chairman and CEO of Hurray said, "While we are satisfied with our revenue results which are within our previous estimate, we are disappointed with the weaker net income for the quarter due to continued weakness in our WAP business, slowdown in software business, and increased costs and operating expenses."
Net income was US$0.9 million for the first quarter of 2006, representing a decrease of 69.3% as compared to US$3.0 million for the previous quarter, and a decrease of 83.5% as compared to US$5.6 million for the first quarter of 2005. Net margin was 5.5% for the first quarter of 2006 as compared to 18.7% for the previous quarter and 37.4% for the first quarter of 2005.
Total gross profit was US$5.9 million for the first quarter of 2006, representing a decline of 11.0% as compared with US$6.6 million for the previous quarter and a decline of 30.7% as compared with US$8.5 million for the first quarter of 2005.
Total revenues for the first quarter ended March 31, 2006 were US$16.6 million, representing a 3.9% increase over US$16.0 million for the preceding quarter, and an 11.4% increase from US$14.9 million for the first quarter in 2005.
Total wireless value-added services revenues were US$14.5 million for the first quarter of 2006, a decline of 0.8% as compared with US$14.6 million in the previous quarter and growth of 11.8% as compared with US$12.9 million in the first quarter of 2005.
2.5G services revenues were US$7.9 million for the first quarter of 2006, representing a decrease of 6.7% as compared with US$8.5 million for the previous quarter and a decrease of 15.7% as compared with US$9.4 million for the first quarter of 2005.
Of 2.5G services revenues, WAP revenues were US$5.6 million, a decline of 23.7% as compared with US$7.3 million in the previous quarter and a decline of 40.3% as compared with US$9.4 million in the first quarter 2005.
The company says the decline of WAP revenues was caused by the continued weakness of China Unicom's WAP business, and the negative impact of the previously disclosed sanction imposed by China Mobile.
WAP revenues from China Unicom were US$3.5 million for the quarter, as compared to US$4.5 million in the previous quarter and US$7.1 million in the first quarter of 2005. WAP revenues from China Mobile were US$2.1 million for the quarter, as compared to US$2.9 million in the previous quarter and US$2.3 million in the first quarter of 2005.
MMS, which was fully commercially launched in the second quarter of 2005, recorded revenues of US$1.4 million for the first quarter 2006, an increase of 23.0% as compared with US$1.1 million in previous quarter.
RBT, which was launched at the end of first quarter 2005, recorded revenues of US$0.5 million for the first quarter 2006, representing a decline of 23.6% as compared with US$0.7 million in previous quarter.
In the first quarter of 2006, financial results also included for the first time revenues from recorded music, which represents the revenues of the company's controlled music companies into which it recently invested, Freeland Music and Huayi Brothers Music. In the first quarter, such revenues were US$1.5 million.
Total gross margin was 35.5% for the first quarter of 2006 as compared with 41.5% for the previous quarter and 57.1% for the first quarter of 2005.
Gross margin for wireless value-added services was 34.6% for the first quarter of 2006, as compared with 36.8% in the previous quarter and 55.1% for the first quarter of 2005.
Total operating expenses were US$5.3 million for the first quarter of 2006, representing an increase of 20.6% as compared to US$4.4 million for the previous quarter and an increase of 73.9% as compared to US$3.0 million for the first quarter of 2005.
As of March 31, 2006, the company had US$78.3 million in cash and cash equivalents.