Hurray! Holding Co. Ltd. Q1 2010 Earnings Call Transcript - TheStreet

Hurray! Holding Co. Ltd. Q1 2010 Earnings Call Transcript

Hurray! Holding Co. Ltd. Q1 2010 Earnings Call Transcript
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Hurray! Holding Co. Ltd. (HRAY)

Q1 2010 Earnings Call

June 2, 2010 12:00 a.m. ET

Executives

Matthew Zhao - IR Officer

Chen Yuan Yuan - IR, Christensen IR

Haibin Charles Qu - Acting CEO

Yao Johnson Li - Acting CFO

Analysts

Eddie Leung - Bank of America

Presentation

Operator

Good day, ladies and gentlemen, and welcome to your first quarter 2010 Hurray! Holding conference earnings call. (Operator Instructions)

And now, I'd like to hand the conference over to Matthew Zhao, Investor Relations Officer.

Matthew Zhao

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Hello from Hurray! to Beijing. Our team today includes Mr. Haibin Charles Qu, is our Acting CEO; and Mr. Yao Johnson Li is our Acting CFO. And I am currently in charge of Investor Relations at Hurray!

I remind you that our conference call may include forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act. Although we believe that the expectations reflected in our forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause actual results to differ dramatically from those projected. There can be no assurance that those expectations will prove to be correct.

Further information about these and other risks are included in our filings with the Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements as a result of new information, future events, changes in market conditions or otherwise except as required by law.

About 4:30 p.m. in New York on June 1, we issued our earnings release. So we assume you have taken a moment to look at it. First, it is Mr. Qu Haibin Charles, our Acting CEO.

Haibin

Charles

Qu

Thank you, Matthew. Hello, everyone, and thank you for joining our meeting today. Let's talk about the business.

The operating environment of WVAS industry remained tough in the first quarter, as a series of regulation which was enacted by the telecom companies in the fourth quarter 2009 essentially remain in case, so that will add up in the first quarter of this year.

I had mentioned in fourth quarter end of fiscal year 2009 earnings call. Same for first quarter after 2009, all the major telecom operators, including China Mobile, China Unicom, China Telecom, had refined their measures to further improving overall performance of billing quality and the custom discussion with WVAS service.

We understand that laws and regulations aimed at supporting the China government's efforts in claiming of the internet and various environments which could be beneficial for the healthy growth of the WVAS industry and market in future. But however, it may still adversely affect Hurray!'s WVAS performance in the short run.

Moving to our music business, we achieved over seven quarters increase in the gross profit from our recorded music business compared to last quarter of 2009, although the segment revenue remained stable, which could be attributed to the change of product mix and could also be a result of the continuous realignment of results among the business line we took on since middle 2009.

With the completion of the acquisition of Ku6 in late January, Hurray! had been committed in investing in online video portal operation for further transforming Ku6 to an influential internet video/audio media platform in China. In spite of the industry environment of Hurray!'s, with right business segments, it seems to be positive on long term prospects for the online audio-video business. Therefore, we will continue to invest and developing in this arena; however, we may encounter sizeable cash flows and pressure on operating results of Hurray's in the short run, as it showed in the operating results for first quarter 2010.

The sale of Huayi Brothers Music Corporation to Beijing Huayi Brother Media Corporation and the asset sale and purchase transaction with the Shanda Interactive Media which were announced on May 14 and June 1 respectively could be seen as part of Hurray's repositioning through (inaudible) or both.

We would like to share more details of the future through (inaudible) with you why it's become corporate.

So now, let's have our Acting CFO, Johnson Yao, who will briefly cover our first quarter financial results. Then we'll be going through your questions.

Yao Johnson Li

Thank you, Charles, and thank you all for joining our conference and earnings call today. In the first quarter of 2010, our total revenues decreased 42% from the first quarter last year, and an increased sequentially 10.6% from the fourth quarter. Revenue in the first quarter this year included $1.2 million as advertising revenues from Ku6. We began consolidating Hurray!'s financial results on February 1, 2010. So Ku6 is included only for the two months of February and March 2010.

Total wireless value added services revenues decreased 77.9% in the first quarter 2010 from the first quarter last year and decreased sequentially 24.4% from the first quarter. The decreases were mainly due to the tough short-term business environment in WVAS industries as mentioned by Charles.

Recorded music revenues in the first quarter remained stable with last year's first and fourth quarters. Gross profit for Hurray! was $3.2 for the first quarter 2010 compared with the a gross profit of $1.9 million in the first quarter 2009 and a gross profit of $1.2 million in the fourth quarter of 2009. The gross loss contributed by the recently acquired the Ku6 was $5 million in the first quarter this year.

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