Shanda Games, Ltd. ( GAME) Q4 2011 Earnings Call February 21, 2012 8:00 p.m. EST Executives Ellen Chiu -- IR Director Alan Tan -- Chairman and CEO Richard Wei -- CFO Xiangdong Zhang -- COO and Chief Producer Analysts Timothy Chan -- Morgan Stanley Dick Wei -- JPMorgan Catherine Leung -- Goldman Sachs Eddie Leung -- Merrill Lynch Jialong Shi -- CLSA Ming Zhao -- UBS Thomas Cheng -- RBS Mark Marostica -- Piper Jaffray Alex Yao -- Deutsche Bank Presentation Operator
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In addition, (inaudible) for discussion purposes, all numbers will translate into US dollars based on the exchange rate of RMB6.3009 per US dollar.Now I would like to turn the call over to our Chairman and Chief Executive Officer, Mr. Alan Tan. Alan Tan Thank you, Ellen, and thank you all for joining us today. Over 10 years ago, Shanda Games began to become one of the largest online game companies in China. Over time our strategic vision developed as we leveraged our strategies and developed a platform along with content to support it. Eventually we emerged as [the power] in the industry that we are today. During this time, we have become (inaudible) from our strong portfolio of games and franchises as we continue to grow our pipeline to expand into new markets. The year 2011 was not exception. We had a solid fourth quarter to finish up another good year as Shanda Games sustained its success continually in a rapidly changing market environment in China. Our industry-leading capabilities to develop, license and distribute appealing, innovative content allowed us to generate our new historic high for first quarter revenues which increased 17.7% year over year and 0.2% quarter over quarter. Full-year net revenues increased 17.3% year over year to $838 million, which was also a new net high for us. Our strong results give us the confidence and determination to continue to push our boundaries. We have emerged a stronger, more adaptive company as we continue to focus on opportunities that will deliver good financial returns as we diversify our revenue stream and enrich our content offering. The consistency and success that we have [elicited] during the past year can be seen by the consecutive quarters of revenue growth which has (inaudible) after successful execution from our AAA strategy, which I will now review briefly and provide an update on.
As a reminder, the three areas stand for the three critical elements, All-Star, All-Platform and All-Region. Let me start with an update on the All-Star component of our strategy.Our All-Star strategy has continued to allow us to provide our games with high-quality and innovative content. It has enabled us to focus our efforts and resources on developing the creative talent and (inaudible) needed to diversify our business away from just (inaudible) a new generation of franchisees. Last quarter we successfully launched Mir III which has already begun to meaningfully contribute to our revenue despite having been released midway through the quarter. We were able to not only recognize our regional (inaudible) players into returning to the game but also attract new ones. We hope to replicate our success with Mir III as we release and develop new content to strengthen and diversify our ever-expanding portfolio of games. Aside from the positive feedback from (inaudible) players, the performance of Dragon Nest in the first quarter also validate this strategy as we continue to capture a larger share of our revenue, demonstrating our incredible reach and audience engagement. For the fourth quarter Mir II, Woool and Dragon Nest contributed 38% (inaudible) 17% and 17% of total revenue (inaudible). Our All-Star strategy allows us to keep a laser-like focus on securing the best catalog through licensing agreements, in-house development and the investments. This quarter we strengthened our content offering by cooperating with content providers both inside and outside channels. Next month we will launch a partnership with Snail Game leading online game developer and operator in China. Leveraging each other’s expertise in online game operations, Shanda Games and Snail Game will jointly operate Age of Wushu, one of the most anticipated 3D MMORPGs in China in 2012. The game has already received positive (inaudible) during its closed beta testing in fourth quarter of 2011. Read the rest of this transcript for free on seekingalpha.com