Chinese wireless value-added services firm Hurray (HRAY) has announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2006.

Total revenues for the fourth quarter ended December 31, 2006 were US$17.0 million, representing a 5.6% decrease from US$18.0 million for the preceding quarter, and a 6.3% increase from US$16.0 million for the fourth quarter in 2005. Total revenues for fiscal year 2006 were US$70.1 million, representing a 10.7% increase from US$63.4 million for fiscal year 2005.

QD Wang, chairman and CEO of Hurray said, "We are pleased to report a solid quarter which meets our previous estimate despite renewed deterioration in our operating environment during December. Going forward, we will continue our strategy of developing proprietary contents and diversifying distribution channels, while transforming ourselves into a leading entertainment content production and distribution house in China."

Total wireless value-added services revenues were US$15.1 million for the fourth quarter of 2006, a decline of 7.8% as compared with US$16.4 million in the previous quarter and growth of 3.7% as compared with US$14.6 million in the fourth quarter of 2005.

2.5G services revenues were US$6.5 million for the fourth quarter of 2006, representing a decline of 11.8% as compared with US$7.4 million for the previous quarter and a decline of 23.5% as compared with US$8.5 million for the fourth quarter of 2005. Of 2.5G services, WAP revenues were US$5.1 million, a decline of 2.0% as compared with US$5.2 million in the previous quarter and a decline of 31.1% as compared with US$7.4 million in the fourth quarter 2005. The decline of WAP revenues in the quarter was a result of new regulations implemented in the quarter mandating free trial periods and double reminders for subscription based services. MMS revenues were US$0.6 million, a decline of 24.0% as compared with US$0.8 million in previous quarter and 45.5% as compared with US$1.1 million in the fourth quarter of 2005. The decline of MMS revenues in the quarter was a result of the same regulations that impacted our WAP revenues.

Java revenues were US$0.7 million for the fourth quarter 2006, representing a decline of 51.0% as compared with US$1.4 million in the previous quarter. We acquired Shanghai Magma at the beginning of the year and have consolidated its operations since first quarter 2006. 2G services revenues were US$8.6 million for the fourth quarter of 2006, representing decline of 4.5% as compared to US$9.0 million for the previous quarter and a growth of 41.6% as compared to US$6.1 million for the fourth quarter of 2005. Of 2G services, SMS revenues were US$5.3 million for the fourth quarter of 2006, representing a decline of 2.7% as compared with US$5.5 million in the previous quarter and an increase of 89.3% as compared with US$2.8 million in the fourth quarter of 2005. The annual increase in SMS revenues was due to our increased direct media advertising efforts commenced earlier.

IVR revenues were US$2.3 million for the fourth quarter of 2006, a decline of 12.6% as compared with US$2.6 million for the previous quarter and a decline of 12.6% as compared with US$2.6 million for the fourth quarter of 2005. RBT revenues were US$1.0 million for the fourth quarter 2006, representing growth of 6.2% as compared with US$0.9 million in the previous quarter, and growth of 42.9% as compared with US$0.7 million for the fourth quarter of 2005. Total wireless value-added services revenues for fiscal year 2006 were US$62.5 million, an increase of 11.5% as compared with US$56.1 million in fiscal year 2005. 2.5G services revenues were US$29.9 million for fiscal year 2006, representing a decline of 16.7% as compared with US$35.9 million for fiscal year 2005.

Total gross margin was 31.2% for the fourth quarter of 2006 as compared with 37.6% for the previous quarter and 41.5% for the fourth quarter of 2005. For fiscal year 2006, total gross margin was 35.6% as compared with 52.7% for fiscal year 2005. Gross margin for wireless value-added services was 31.9% for the fourth quarter of 2006, as compared with 36.9% in the previous quarter and 36.8% for the fourth quarter of 2005. Gross margin for 2.5G services was 41.8% for the fourth quarter of 2006, as compared to 48.2% for the previous quarter and 56.3% for the fourth quarter of 2005. The decrease in 2.5G gross margin was due to an increase in content and promotion costs.

For fiscal year 2006, total gross profit was US$25.0 million, a decline of 25.3% as compared with US$33.4 million for fiscal 2005.

Total operating expenses were US$4.7 million for the fourth quarter of 2006, representing a decline of 14.8% as compared to US$5.6 million for the previous quarter and an increase of 8.5% as compared to US$4.4 million for the fourth quarter of 2005. The decrease in operating expenses quarter-to-quarter is mostly due to our cost optimization program implemented in the second and third quarters of 2006; the increase year over year is mainly due to the expenses of the newly acquired music companies.

For fiscal year 2006, total operating expenses were US$21.0 million, an increase of 32.8% as compared with US$15.8 million for the fiscal 2005.

Interest income for the fourth quarter of 2006 was US$0.6 million as compared to US$0.7 million in the previous quarter. Income tax was a credit of US$0.6 million in the fourth quarter 2006 compared to US$0.2 million in the fourth quarter of 2005 mainly as result of the reversal of previously accrued tax as one of our companies qualified for preferential tax rates.

For fiscal 2006, interest income was US$2.6 million as compared with US$1.4 million in 2005, principally resulting from higher interest rates, and income tax expense was US$0.1 million compared to US$0.4 million in 2005.

Net income was US$1.6 million for the fourth quarter of 2006, representing a decrease of 2.7% as compared to US$1.6 million for the previous quarter, and a decrease of 47.8% as compared to US$3.0 million for the fourth quarter of 2005. Net margin was 9.2% for the fourth quarter of 2006 as compared to 8.9% for the previous quarter and 18.7% for the fourth quarter of 2005.

For the fiscal 2006, net income was US$5.8 million, a decline of 68.8% as compared with US$18.6 million for the fiscal 2005. Net margin was 8.3% for the year, as compared with 29.4% for the fiscal 2005.

Adjusted earnings before interest, tax, depreciation, amortization and stock-based compensation (adjusted EBITDA), was US$1.4 million for the quarter, a decline of 32.1% as compared with US$2.1 million in the previous quarter and a decline of 48.1% as compared with US$2.8 million in the fourth quarter of 2005. Reconciliations of net income under U.S. generally accepted accounting principles (GAAP) and adjusted EBITDA are included at the end of this release.

Adjusted earnings before interest, tax, depreciation, amortization and stock-based compensation (adjusted EBITDA), was US$7.4 million for fiscal year 2006, a decline of 62.1% as compared with US$19.6 million in the previous year.

Fully diluted earnings per ADS were US$0.07 based on a weighted average of 21.7 million diluted ADSs for the fourth quarter of 2006. This figure compares to US$0.07 based on a weighted average of 21.7 million diluted ADSs for the previous quarter and US$0.13 based on a weighted average of 22.4 million diluted ADSs for the fourth quarter of 2005.

Fully diluted earnings per ADS were US$0.26 based on a weighted average of 22.1 million diluted ADSs for fiscal year 2006. This figure compares with US$0.87 based on a weighted average of 21.2 million diluted ADSs for fiscal 2005.

As of December 31, 2006, the company had outstanding 21.5 million basic ADSs and 21.7 million fully diluted ADSs, excluding share options granted above the average market value of Hurray stock for the quarter as their effect would have been anti-dilutive.

As of December 31, 2006, Hurray had US$74.6 million in cash and cash equivalents.

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