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Perfect World Co., Ltd. (PWRD)

Q2 2011 Earnings Conference Call

August 22, 2011 9:00 PM EST


Vivien Wang – VP, IR and Corporate Communications

Michael Chi – Chairman and CEO

Kelvin Lau – CFO


Timothy Chan – Morgan Stanley

Mark Marostica – Piper Jaffray

Wendy Huang – RBS

Andy Yeung – Oppenheimer

Jialong Shi – CLSA

Nick Ning – ROTH Capital

Chao Wang – Merrill Lynch

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Vincent Sun – Mirae Asset

Wallace Cheung – Credit Suisse

Nan Lee – SIG

Atul Bagga – ThinkEquity



Ladies and gentlemen, thank you for standing by, and welcome to the Perfect World second quarter 2011 earnings call.

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At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session (Operator Instructions). I must advise you that this conference is being recorded today, Tuesday, the 23


of August, 2011.

I'd now like to hand the conference over to your first speaker today, Ms. Vivien Wang, VP, Investor Relations and Corporate Communications. Please go ahead, ma’am.

Vivien Wang

Thank you, operator, and thank you, everyone for joining us today for Perfect World second quarter 2011 earnings release conference call.

We distributed our unaudited earnings release earlier today. You may find a copy of the press release on our official website or through the Newswire.

Today, you will hear from Mr. Michael Chi, our Chairman and CEO, who will give us a brief introduction and overview. Mr. Kelvin Lau, our CFO, will then discuss some of our latest business and operational developments and take us through our financial performance in the second quarter’s 2011. Following the prepared remarks, Mr. Chi, Mr. Lau and I will be available to answer your questions.

Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor Provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risk and uncertainty that may cause actual results to differ materially from our current expectations.

Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC, including our Annual Report on Form 20-F. For more information about these risks and uncertainties, please refer to our filings with the SEC. Perfect World does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

Our earnings release and this call includes discussion of certain non-GAAP financial measures. Our earnings release contains a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures and is available on our website at

under the Investor Relations section.

I would now like to turn the call over to Michael.

Michael Chi

Thank you, Vivien, and thanks everyone for joining us today.

The second quarter was another strong quarter for us, as both top and the bottom line number was strong. Our results came in above our expectations, even though there was no big promotional holiday in this quarter similar to the Chinese New Year. The revenue growth was mainly due to solid performance of the recently launched new games, including Forsaken World and Empire of the Immortals and the continued strength from our existing portfolio. In addition, we also showed strong growth in our overseas operations.

As many of you may have noticed, a few days ago, we launched unlimited closed beta testing for our Heaven Sword and Dragon Saber. This is our first 2D martial-arts MMORPG, which is based on classic martial arts novel by Louis Cha, a famous Chinese writer. So far we have been receiving positive feedback from gamers and traffic is still growing. We look forward to launching full-scale open data testing for this game soon. We are confident in the games’ future growth, but as part of the games’ growth trajectory we do not see that significant revenue contribution from these games until later this year.

Looking ahead, we are pleased with our diverse pipeline, which is a big strong point of our company. In addition to Heaven Sword and Dragon Saber, Swordsman Online and a number of other exciting titles in our pipeline, we recently announced that we are working on Saint Seiya Online. This is a 3D MMORPG based on a world famous comic Saint Seiya. Saint Seiya is a classic series that millions of Chinese know from years ago and it will definitely attract new fans in China soon.

In the near future, we look forward to launching over a dozen of exciting games that are currently under development, spanning a variety of types, including MMORPGs, web games and SNS games. At the same time we are also very happy to see that signature titles, including Zhu Xian and Perfect World II, performing consistently well as we regularly release new expansion packs. We will continue to energize our existing titles with a steady stream of new content in order to keep gamers involved and attract new gamers.

In the overseas market, we continued to expand our reach globally. This quarter was saw strong performance from our subsidiaries in the United States, Europe and Japan. In particularly, we received a very positive feedback from players in the US and the Europe, for Forsaken World, which was designed for global players. Our overseas licensing activities also progressed very well and facilitates our expansion around the world. Additionally, we acquired Cryptic Studios in the US recently. This is a reputable online game company based in California. This strategic acquisition brings world-class games like Champions Online, Star Trek Online and Neverwinter Nights, as well as other projects into our diversified portfolio and pipeline. It will also help us grow in the US and the Europe and further strengthen our R&D and operations around the world.

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