Hurray! Q2 2006 Earnings Conference Call Transcript (HRAY)

Hurray! Holding Co., Ltd (HRAY)
Q2 2006 Earnings Conference Call
August 17, 2006 9:00 pm ET

Executives

QD Wang - Chairman and Chief Executive Officer
Jesse Liu - Chief Financial Officer
Shaojian Wang - President and Chief Operating Officer

Analysts

Michael Zhang – ThinkEquity
Catherine Young – Citigroup
Ming Zhao – Susquehanna
Eddie Liang – Deutsche Bank
William Bean - Deutsche Bank
Tian Hou – CE Unterberg

Presentation

Operator

Welcome to our Q2 2006 earnings conference call. During this call, QD Wang, our Chairman and Chief Executive Officer; and Jesse Liu, our Chief Financial Officer; and Shaojian Wang, our President and Chief Operating Officer will discuss Hurray’s financial results for the second quarter of 2006 and business operations. After their remarks we will open the call for your questions.

Before we begin, I would like to remind you that during the course of this call we will be making forward-looking statements which are subject to risks and uncertainties. You can also identify forward-looking statements by terminology such as: ‘will’, ‘expect’, ‘anticipate’, ‘future’, ‘intend’, ‘plan’, ‘believe’, ‘estimate’ and similar statements. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause our actual results to differ materially from those projected or anticipated.

Such risks and uncertainties include, but are not limited to, those outlined in our filings with the Securities and Exchange Commission, including our registration statement on form F1. We do not undertake any obligation to update this forward-looking information, except as required under applicable law.

Now I would like to invite QD Wang, our CEO, to address you.

QD Wang

Good evening and good morning to those from Asia. Thank you for joining us on Hurray! Second quarter 2006 earnings conference call. First of all, I would like to share with you Hurray! second quarter 2006 financial highlights. Second, Jesse Liu, our CFO, will give you the financial results for the quarter in more details. Third, I will review our business strategies and operations, followed by a Q&A session with Jesse Liu and Shaojian Wang.

Now let’s start from our Q2 2006 financial highlights. Total revenues was $18.3 million, up 10.2% quarter-over-quarter and 22.1% year-over-year exceeding previously reaffirmed guidance of $16.5 million to $17.5 million. Record wireless value-added services revenues was $16.6 million, growth of 14.5% quarter-over-quarter and growth of 23.7% year-over-year.

Software and system integration services revenues were $0.4 million, a decline of 43.0% quarter-over-quarter and 77.1% year-over-year. Recorded music revenues, which are from the Company's new music development, production and distribution business were $1.4 million.

Net income was $1.7 million, growth of 84.9% quarter-over-quarter and a decline of 66.0% year-over-year. Adjusted EBITDA of $2.2 million, growth of 39.5% quarter-over-quarter and a decline of 58.3% year-over-year. Diluted earnings per ADS were $0.08.

Here at Hurray! we are very pleased to report record revenues which exceed our previous estimate. Our renewed revenue and profit growth from previous quarters is a strong demonstration of our ability to execute in a challenging operating environment. We are confident that we will be able to minimize the negative impact of new operator policies in the third quarter and resume revenue and profit growth in the near future.

Now I would like to turn to Jesse Liu for more detailed financial results in Q2.

Jesse Liu

Good morning and good evening to all of you in Asia, as well as in North America. Without going through the details this time, I would like to just highlight a few key progresses we have made. Wireless value-added services generated from China Mobile, China Telecom and China Netcom grew 26% quarter-over-quarter and 157% year-over-year to $11 million, representing 67% of our total wireless value-added services revenue, an increase from 61% in the previous quarter and 32% in the second quarter of 2005.

Wireless value-added services revenues generated from SMS, IVR, ringback tones, MMS and Java grew 24.6% quarter-over-quarter and 133% year-over-year to $11 million, representing 67% of our total wireless value-added services revenues, an increase from 61% in the previous quarter and 35% in the second quarter.

Also, wireless value-added services revenues generated from operator independent margin promotion, distribution such as Internet marketing and licenses, direct media advertising and handset vendor partnerships reached approximately 28% from $4.2 million of our total wireless value-added services revenues for the quarter.

Also, I would like to give the business outlook for the third quarter of 2006. Hurray! expects the total consolidated revenues to be between $16 million and $17 million. This reflects our latest assessment of the impact of new operator policies implemented starting from the third quarter. This also represents about 7% to 15% decline from the second quarter of this year.

I also want to comment on the share repurchase program that we have announced at the last earnings release call. In April 2006 Hurray! shareholders authorized the repurchase of up to $15 million worth of the Company’s ADS. As of August 17, Hurray! has repurchased 709,000 ADS following such authorization at an average cost of $6.27 per ADS, for about a total of $5 million. At this time, we are putting this a little bit on hold and assessing the situation before we move forward with the remainder of the program.

The Company is going through a business optimization program. Hurray! will continue investing in areas with promising and sustainable revenue growth, while further reducing cost and expenses in areas that are significantly affected by new regulations and operator policies in the third quarter. In short, we emphasize businesses that are less vulnerable to regulatory changes.

Now I would like to turn back to QD and Shaojian for the business highlights and strategy updates.

QD Wang

Thank you, Jesse. Now I would like to share with you our business highlights. In the second quarter of 2006, Hurray! has taken the following counter measures in anticipation of new operator policies to be implemented in the third quarter. We boosted up our per use based services in terms of interactiveness, freshness, and promotion effort, to increase user ARPU. Strengthened quality, stickiness, and the brand name of our subscription services, to encourage continued subscriptions by our users. Stepped up our effort on operator independent marketing and promotions such as direct TV advertising and TV interactive programs. Implemented effective costs and expense control to improve profitability.

We already began to see breakthroughs and a positive impact from the above measures and are confident that our wireless value-added services business will withstand impact of new operator policies in the third quarter and resume growth afterward.

In the second quarter, Hurray! continued executing its music production and distribution strategy, with the following highlights:

Hurray! released a series of new songs, including: "Smells Good All Over" by Xiang Xiang; "Hurt Me No More" by Zhang Zhenyu; "Give Me Up For Your Love" by Jane Zhang; "Looking For Li Huizhen" by Li Huizhen, and so on.

Simultaneously, Hurray! signed up a number of new and top tier artists, including: Ai Dai, a very popular MTV hostess from Viacom China; Zhou Xun, a famous TV, movie star and singer in China; Xie Na, a popular TV hostess from the Hunan Satellite TV.

Hurray! launched successful marketing programs to promote the new releases simultaneously over Internet and wireless platforms. Consequently, "Smells Good All Over", "Hurt Me No More", and "Give Me Up For Your Love" became popular hits in the second quarter and ranked top 10 for many consecutive weeks in the second quarter on both China Mobile's music portal and Baidu's music search platform.

Hurray! started exploring offline distribution of digital music through retail shops and CD stores, to supplement existing wireless and Internet music distribution and promotion platforms. Furthermore, music-related revenues from ringtone, ringbacktone, and truetone downloads or playbacks embedded in our WAP, MMS, SMS, IVR and RBT services have grown to nearly 47%, or $7.8 million, of total wireless value-added services revenues for the quarter.

Total music-related revenues, representing revenues from our recorded music and our wireless value-added services with music content, were $9.2 million or about 50% of total revenues for the quarter.

Finally I would like to say, Hurray! has made remarkable progress toward becoming a leading digital music production and distribution house in China. The challenging operating environment for wireless value-added services will motivate us even more to accelerate our music strategy. We will drive hard for continued organic and non-organic growth of our music business going forward.

Thank you very much. That is all of our presentations. Now we would like to open for Q&A.

Question-and-Answer Session

Operator

Our first question comes from Michael Zhang – ThinkEquity Partners.

Michael Zhang – ThinkEquity Partners

Good morning. Congratulations on a great quarter. Basically three questions. The first one is on your guidance. The quarter-over-quarter decline, is less than what we thought, which is good. I think your music and software revenues would help. Can you elaborate on how much the wireless revenue will decline in 3Q? Do you expect 4Q to be worse or slightly better?

Jesse Liu

Let me try to answer this. I think the decline is mostly related to our wireless value-added services revenues. I think it is probably going to be between 10% and 15%.

QD Wang

In Q4, we do suppose that the revenue will resume growth.

Michael Zhang – ThinkEquity Partners

I am sorry, in Q4?

QD Wang

Q4, the revenue will resume growth.

Michael Zhang – ThinkEquity Partners

Okay, so basically Q3 could be the worst in terms of total revenue?

QD Wang

We suppose so.

Michael Zhang – ThinkEquity Partners

That is very helpful. My second question is for the margins. Hurray! 2G gross margin was very low compared to your peers and your historical level. Do you expect some improvements? What is your target growth margin for 2G and 2.5G revenues?

Jesse Liu

First of all, I assume you are referring to gross margin. My impression is that it is really not an apples-to-apples comparison because different companies classify costs and expenses differently. So we have all of our revenue-generating promotional activities, related expenses in the cost of revenue category, while competitors probably put it in the operating expenses category. This is most relevant to our 2G services, because those services rely more on direct media advertising and other operating-dependent marketing and promotion approaches.

We believe the 2G services, in the long run, could maintain probably 30%, 25% to 30% gross margin as revenues scale, we will see a meaningful margin expansion. At the same time, I think the 2.5G services, in particular the WAP services, probably margin will be lower given the operator policies regarding subscription services which are normally of higher gross margin revenues.

Overall, we think the margins should be around this level with potential for improvement after Q3.

Michael Zhang – ThinkEquity Partners

That’s great. Lastly, about your optimization program. How was the severance pay in Tokyo? How much advantages could we expect in the coming quarters? I mean the expense in Q2 and in Q3 and Q4, how much benefit we should see?

QD Wang

The optimization plan is under the final stage. Basically, we will pay a certain cost if we actually restructure and lay off people in the short term and the policy impact. Simultaneously, like Jesse mentioned before, we will continue to invest in the medium-term and long-term revenue growing sectors and continue investing in our strategic directions.

So in Q3 you may see probably the expenses will increase a little. We expect less than 10%. In Q4, actually, you can expect our cost structure and expense structure is more optimized. You can see we save at least 10% to 20% starting from Q4.

Michael Zhang – ThinkEquity Partners

10 to 20% from Q3, right? In Q4?

QD Wang

Yes. Q3 actually, you have to compensate. If you have people laid off, you have to compensate for it.

Michael Zhang – ThinkEquity Partners

Yes, I understand, because you said in Q4 the band could be 10% to 20% -- that is compared to Q3, right?

QD Wang

Q4, yes.

Michael Zhang – ThinkEquity Partners

Okay. That's very helpful. Thank you very much. I will go back to the queue. Thanks.

Michael Zhang – ThinkEquity Partners

Thank you, Michael.

Operator

Our next question comes from Catherine Young - Citigroup.

Catherine Young – Citigroup

Hi. Good morning. Congratulations on a good quarter. I have a follow-up question on the Q3 guidance. QD mentioned in your presentation some of the measures that you're taking to sustain your revenues and we're wondering if you could please elaborate more on how you're strengthening the stickiness of your subscription services and how you're boosting your user-based services?

The second question is on the cost control. What are the specific areas you're targeting for this cost control? How do you balance the paying position for the long term and optimizing your cost structure in the short term?

Just lastly, we see that your WAP revenues have sustained pretty strong growth with 54% sequential growth. Can you give some more color behind what contributes to this strength? Thank you.

Shaojian Wang

Yes, this is Shao Wang. I'm going to talk about your first question. We have re-emphasized on the product quality and also user experience with our products in the last couple months; especially under the pressure of China Mobile's new policy. I think we have greatly improved our product. We made, especially at that mass product, ours more interactive and also user-friendly. We have achieved modest success in especially the last two months.

We expect in third quarter we should be doing even better with our new supply for better products. More important, we emphasize a lot on the youth experience with our products and we want them to come back, continue to enjoy the product and also continue their subscription. To do that we have upgraded our product team by adding new expertise to it and also by just putting more effort in it.

QD Wang

I would like to address your second question. Let me understand your second question is that you say cost and expenses, how we can maintain long term growth, right?

Catherine Young – Citigroup

Yes, well I'm kind of trying to understand how you were rationalizing which areas to target for your cost cutting?

QD Wang

Basically and like Jesse mentioned during the presentation, our cost targeting pretty much relate to the new revelation and the new carrier policy service impacts area. For example, the carrier actually will limit the automatic cost savings that WAP push, MMS push; such cannot be promotion channels and we are no longer to grow or even limit the resource in these areas. We will actually put resources pretty much to the carrier independent marketing and the promotion channel like with traditional media advertising channels, that's just one example.

Another examples is the carriers, some work with content providers directly, and we actually will have some temporary content cooperation with the content providers, to start to build up a long-term exclusive agreement with some of the major content providers.

The third one is actually China Mobile, China Unicom and China Telecom are now starting to try to actually improve the province business more aggregate through the national platform. We would like to emphasize our capabilities but simultaneously reduce the provincial presence in certain levels.

A whole bunch of things, actually, are pretty much focused and targeted on the medium-term and the long-term substantial growth areas. We will continue to invest in these areas to maintain long-term sustainable growth. But for the short-term things, there was the impact by the policies, which will significantly reduce it.

Catherine Young – Citigroup

Okay. Thank you.

Jesse Liu

The third question is about the reason behind growth of WAP. I think probably there is a mistake here that WAP[ actually declined from last quarter, despite at a slower pace compared to previous quarters. It is contributed by the renewed growth of our WAP revenues on China Mobile side and the slight decline of WAP revenue on the China Unicom side.

Catherine Young – Citigroup

Okay, let me check that. Thanks.

Operator

Our next question comes from Ming Zhao - Susquehanna.

Ming Zhao – Susquehanna

Congratulations on a very solid execution in Q2, especially the 2G products did very, very well. I have two questions here. You just mentioned the WAP. Can you comment on the trend you see on the China Unicom platform? Did you see the business slow down and stop over there? That's my first question.

Jesse Liu

We expect WAP will continue going down trend at this point. Mainly because China Mobile and in that respect maybe China Unicom will continue their consolation of subscriptions for silent users. With this in mind, we expect WAP revenue will continue going downward. We don't see any time this trend will stop, at this point.

QD Wang
It's probably a question to go to two parts. First part is China Unicom part, like, Shaojian mentioned the China Unicom part. Basically WAP was going down in Q3, and probably Q2 are going down very slowly, or reach around the bottom. Just one good news we would like to share with all of you is China Unicom they now have the construction job to upgrade their GSM network to GPRS network. So the construction will be complete by the end of this year to cover around 150 cities located in the Southeast region, a pretty rich area. But you cannot expect to see significant growth, the 2.5G WAP user growth until the first half of next year. That's one thing.

The second thing is for the SMS and IVR, they pretty much have a significant impact by the new carrier policy in Q3 and Q4 and pretty much stabilize and sometime next year, you will see some recovery of growth.

Ming Zhao – Susquehanna

My second question is on your music business. Just specifically talking about recorded music, this business line. Could you give color, for example in Q2, what percentage of the revenue is from the traditional music distribution channel, and what's the percentage from the wireless value-added service channel?

My purpose is to understand, because many SPs will be negatively impacted by the WVAS policies. Are we going to see, also, the revenue from the WVAS channel also being impacted on your recorded music side?

Jesse Liu

Let me try to answer this question. Typically the record companies revenues come from four streams. The CD sales through the traditional offline distribution, concert tours the artists make year round to different parts of the country and also the third stream is corporate sponsorships. So artists will serve as image ambassadors or featured in the advertising by businesses. The fourth stream is digital sales from the Internet as well as mobile sales.

Our two record labels have a different composition of these four revenue streams. Freeland has a much higher component of digital sales, while YE Brothers has slightly lower. On average, these four streams are roughly equal, but with Freeland it is probably more than one-third of their total revenues, while probably YE Brothers is slightly lower than one-fourth of the total revenues.

Nonetheless we see going forward, there is the continued trend of increased digital sales revenue. We believe there is still significant room in terms of collection from the wireless value-added service providers on the record label side for the digital sales revenue. As the digital rights protection, as the intellectual rights protection gets more and more attention by everybody in the marketplace we will be able to generate more revenue from the fourth stream.

Ming Zhao – Susquehanna

Thanks a lot. That's very helpful.

Operator

Next question comes from the line of William Bean - Deutsche Bank.

Eddie Liang – Deutsche Bank

This is Eddie Liang asking for William. We have two questions here. First one is, could you talk a little bit about the outlook of your software and system integration features? The second question is, could you talk about some of the challenges you see on the China Unicom platform? Thanks.

Jesse Liu

Perhaps I will speak on the software issue, and I would like QD and Shaojian to address the second issue regarding Unicom's platform trends. I think, as we indicated for the past two quarters, the software business is still experiencing a sort of bottoming process, as operators delayed their CapEx spending for capacity expansion as well as system upgrades in anticipation of 3G licenses, probably toward the end of the year or the very beginning of next year.

Nonetheless, we begin to see renewed activities on the China Unicom side in particular, at a provincial level as well as at a headquarter level, in terms of system upgrade, capacity expansion or system upgrades. We are right now having multiple projects, small and big, working in the pipeline hopefully that, toward the end of year, we will see more contracts to be signed. And that will have big implications for next year's software revenue.

QD Wang

Actually you are talking about the Unicom platform trend. Do you simply mean their WAPs platform trend, right? How the CDMA network. The CDMA network, the user growth is pretty limited and you can see in the past one year the CDMA platform actually was for a while, enough capacity for near future growth.

Now China Unicom’s they pretty much focus on the upgrades to their GSM into the GPRS network. So they need a new decoding. WAS platform to cover its GPRS operation. We are one of the vendors to both these platforms and we are the only vendor that have a rich experience and a real application and platform built into China Unicom.

Now we compete with around eight vendors in the second half of this year. By year end they will make their final decisions, which two or three vendors can join the final construction. This construction will start from national platforms and follow in with 31 province sub-platforms. It's sort of a big project and will start from the end of this year and beginning of next year.

I would like to see Hurray! have a better position, have opportunities to be one of the vendors by China Unicom headquarters to the national platform and all of the 31 province sub-platforms.

Eddie Liang – Deutsche Bank

That would be great. Thanks.

Operator

Our next question comes from Tian Hou – CE Unterberg.

Tian Hou – CE Unterberg

Good morning. Nice to talk to you again.

QD Wang

Could you speak a little more loudly?

Tian Hou – CE Unterberg

This is Tian.

QD Wang

Hi Tian, how are you?

Tian Hou – CE Unterberg

Good, I am sorry for that. I am interested in some mid and long-term issues. I know all SPs have to face the current challenge, but we all have to plan for the future: where we are going, how we will get there. I understand the Company wants to grow through organic and non-organic.

I would like to know in the non-organic way, what is the right acquisition? What exactly are you planning to do in that area? Can we get some more color on that?

QD Wang

Sure. Like we mentioned during our presentation, we will continue our efforts to make both organic and non-organic growth in the music strategy. We currently are exploring multiple opportunities and options in these areas.

We are approached also by a number of the music labels, including both international and local music labels, and we are in the very intense negotiation stage. Based on the negotiations, we simply cannot make any announcement at this stage. But we are in the very intense negotiating stage and we will continue our efforts to make sure we can grow in the music strategy and our vision, very clear, in the future two years we want to be the largest and leading digital music company.

Just one area, even China Mobile has also recognized the strategy, all of the SPs are looking for the future growth and the future values. Hurray! choose its music strategy, and currently it is recognized by the carrier also.

Tian Hou – CE Unterberg

That’s great. The second question is, you had formed a relationship with MTV channel. Have you put in place any program to leverage on that channel?

Shaojian Wang

For the MTV program, we are still working with them. We have several projects going on with them and we haven’t officially launched any particular one yet. We should expect we will have a program on in the next month or so.

QD Wang

We actually have two major products. One is the Music Club and everybody can join the Music Club and program from Hurray!, and as Shaojian mentioned, it is still under the final R&D stage. Another one, we are going to have some interactive programs developed with MTV. People can listen to music and simultaneously can interact with most of the music provided by Hurray! joint venture, or Hurray!'s music company. Yes, you will see this kind of program one or two months later.

Tian Hou – CE Unterberg

That sounds really good. The last question will be also the acquisition. Currently I guess a lot of the smaller entities have been squeezed. Do you think it's a good to acquire some of the smaller SPs to consolidate that part of the market?

QD Wang
If you are actually purchasing a company that has more presence in each province and it makes sense. But for the smaller sized or medium-sized SPs, we have to review that they still have a value under the new carrier policies or revelations. We are taking it very seriously and don't have any solid plans.

Shaojian Wang

The key here is we're not going buy any SP just for the sake of buying revenues. We have to see what value they can bring to our company and also we want to see whether they have anything to offer now to contribute to our long-term plans. So it's not okay, now SPs are under pressure and we just go out and buy some smaller ones and push out our revenues.

Tian Hou – CE Unterberg

Yes. Okay. That's a great answer. I think the last question would be you did some TV independent non-operator related marketing. Several SPs, when they did their conference calls, they indicated currently the TV marketing doesn't generate proportional returns in terms of income, so they scale back down their marketing dollars. So what is your plan in that area?

Jesse Liu

One thing is we launched our TV program in July and relatively speaking, compared to our peers, we are still small. Though we have achieved modest success and we do expect we can grow even bigger and we have more room to really grow and so far the program has been good in terms of both top line and bottom line.

We are going to continue to grow this area and we are going to give more effort. We feel pretty good, pretty confident with our TV advertising program.

Tian Hou – CE Unterberg

That concludes my questions. Congratulations on the great execution on Q2.

Operator

Our next question comes from Michael Zhang - ThinkEquity Partners.

Michael Zhang - ThinkEquity Partners

Thank you. I just want to clarify one point you just mentioned, when you talk about SMS, you said Hurray! improved the quality of the products, and in 3Q you expect it will be better. I assume you're saying the quality will be better, instead of the revenue, right?

Shaojian Wang

Of course, once we improve our product quality we expect our revenue will benefit from the better quality product as well. So we adjust from just giving something to customers to now emphasizing on the users experience with our product. We really put in a lot of effort to improve, not only just the product quality and also our technical platform to deliver the products, so really it's all-around improvement, not just one area.

Hopefully with that effort, our SMS revenue will be increased as well, and so far the result has been quite encouraging.

Michael Zhang - ThinkEquity Partners

In 2Q your SMS revenue was really strong, $4.6 million up 47% quarter-over-quarter so it's likely 3Q SMS revenue will increase?

Jesse Liu

Basically, in 3Q our SMS revenues -- I would like to say it's not going to decline in Q3, you know actually Q3 is very flat obviously, new policy coming out from the carrier, they have a serious impact for the revenue growth. What we would like to see since we have a certain breakthrough, like Shaojian mentioned in terms of the product quality, in terms of the carrier independent marketing and distribution channel, like TV advertising. So we would like to see, we pretty much maintain our SMS revenues in Q3.

Michael Zhang - ThinkEquity Partners

Okay, in that case, which part of the business do you expect to decline: WAP, MMS, SMS and what else?

Jesse Liu

Basically, it's the three product lines seriously impacted by this new carrier policy, that's sub pricing base service, they come from the WAP, MMS, and SMS. Like we mentioned before, WAP, and MMS were seriously impacted by the policy. SMS, new promotion channel and product quality, help us to offset the decline in Q3.

For the IVR, CRBT and the Java business, they are a usage-based service, so we don't see a significant impact from the new policy. They're pretty much more maintained at the same level in Q3.

Michael Zhang - ThinkEquity Partners

Two housekeeping questions. Can you please breakdown the stock-based compensation by the expense line? How much is going to be product development, how much is going to the general?

Jesse Liu
That I may not have it right with me, but I promise to provide you with that information after the conference call.

Michael Zhang - ThinkEquity Partners

Do you have the CapEx and cash from operations number?

Jesse Liu

CapEx from operations, CapEx is a very small item for our nature of business. Last year, we had about $1.5 million in total CapEx for the whole year, which is the same level for the previous three years. I do not believe that for 2006 there will be significant fluctuation of our CapEx, except that we will continue to invest in terms of M&A of long-term content such as music labels, to sustain our long-term growth.

Michael Zhang - ThinkEquity Partners

The cash from operations, do you have that number?

Jesse Liu

In Q2, our EBITDA is about $2.2 million, about 40% growth from Q1 level.

Michael Zhang - ThinkEquity Partners

Okay, and then lastly about the tax rate, what tax rate do you expect for the remainder of the year?

Jesse Liu

I think we are paying income taxes at the local operating entity level, and we have a dozen or so different operating entities following different types of holiday schedule. It is impossible for us to give you a fixed income tax rate, but on average I think they will continue to fluctuate a little depending on our revenue collection and deferred tax estimates.

So far, I think it has been around $200,000 or $300,000 per quarter level of income taxes. You probably should expect the same level to continue for the rest of the year.

Michael Zhang - ThinkEquity Partners

Okay, that's great thank you.

Operator

Ladies and gentlemen this now concludes the question-and-answer session. At this time I will turn the call over to Mr. QD Wang for closing remarks.

QD Wang

Ladies and gentlemen, we are proud to have this opportunity to report record Q2 revenue and profitability. I would like to say that now we feel very confident to manage our business in Q3, and we still grow in Q4, and especially looking forward to next year. We would will like to seize a number of opportunities we can grow our business, and especially to moving forward our strategies to becoming a real value company in the future. Thank you very much for your attention to Hurray! Thank you, bye bye.

Operator

Thank you for your participation in today's conference. Ladies and gentlemen, this concludes the presentation, you may all disconnect and have a good day.

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