Tom Online Posts Good Q2 Results

Tom Online's (TOMO) total revenues for the second quarter of 2006 were US$50.10 million, an increase of 17.1% from the same period last year and up 3.1% from last quarter.

Wireless Internet revenues were US$45.71 million, representing a 12.4% increase over the same period last year and a 0.5% increase over the previous quarter. Wireless Internet revenues made up 91.2% of the company's total quarterly revenues.

Wang Lei Lei, Chief Executive Officer and an Executive Director of Tom Online, said: "Tom Online's Internet and WVAS businesses maintained their healthy growth in the reporting period. The performance of our portal and online advertising businesses in particular had improved markedly. Although industry policy changes and the government's efforts to better regulate the WVAS market had affected our business at the end of the second quarter and the measures are expected to continue to affect our business in the coming quarters, we believe China's Internet and WVAS markets are still full of business potentials. Tom Online will be able to seize those opportunities as it continues to work closely with partners."

Online advertising revenues were US$3.89 million, representing a 43.9% increase QoQ and an increase of 111.7% YoY, as the company's online advertising sales activities continued to show positive results and benefited from incremental advertiser interest in its World Cup and Wanleba Internet offerings.

Gross profit was US$19.05 million representing an increase of 7.1% over the same period last year but a 4.6% decline QoQ as gross margins declined in the second quarter to 38.0% from 41.1% in the first quarter of 2006 and 41.6% in the second quarter of 2005.

Total operating expenses were US$8.00 million in 2Q06, down 5.3% from the same period last year and down 14.1% from the previous quarter. Due to the expected slowdown in business over the remainder of the year from new mobile data service policies, the company has decided to suspend senior management bonuses which had been previously accrued in the first quarter of 2006 and hence were reversed in 2Q06.

Net Income was US$11.75mn, an increase of 14.7% YoY and down 3.2% from 1Q06. Excluding SBC expenses, Non-GAAP net income would have been US$12.52 million, or an increase of 22.2% YoY.

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