Perfect World's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Perfect World Co., Ltd. (PWRD)

Q4 2011 Earnings Call

March 15, 2012 9:00 pm ET

Executives

Joanne Deng – Investor Relations Manager

Michael Yufeng Chi – Founder, Chairman and Chief Executive Officer

Kelvin Wing Kee Lau – Chief Financial Officer

Vivien Wang – Vice President, Investor Relations and Corporate Communications

Analysts

Mark Marostica – Piper Jaffray

Jialong Shi – CLSA

Wendy Huang – Royal Bank of Scotland

Eddie Leung – Bank of America/Merrill Lynch

Nick Ning – Roth Capital

Ming Zhao – SIG

Martin Bao – CICC

Andy Yeung – Oppenheimer

Vincent Sun – Mirae Asset Securities

Atul Bagga – Lazard Capital

Stephen Zhang – Macquarie Funds Group

Jake Lee – Citigroup_

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Perfect World’s Fourth and Fiscal Year 2011 Conference Call. At this time, all participants are in a listen-only mode. Today’s presentation will be followed by a question-and-answer session (Operator Instructions). I must advise you that this conference is being recorded today Friday, March 16, 2012.

I would now like to hand the conference over to your host today Investor Relations Manager at Perfect World, Ms. Joanne Deng. Thank you, please go ahead.

Joanne Deng

Thank you, operator and thank you everyone for joining us today for Perfect World’s fourth quarter and fiscal year 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 update on our business. Mr. Kelvin Lau, our CFO, will then provide an overview of the quarter and the full-year and also an update of our dividend distribution plan. Ms. Vivien Wang, our Vice President of Investor Relations and Corporate Communications will then take us through some of our latest operational developments. And then she will pass the call back to Mr. Lau to go through our financial performance in the fourth quarter of fiscal year 2011. Following the prepared remarks, Mr. Chi, Mr. Lau and Ms. Wang would 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 risks and uncertainties 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 include discussions of certain non-GAAP financial measures. Our earnings release contains in a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures and is available on our website at www.pwrd.com under the Investor Relations section.

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

Michael Yufeng Chi

Okay. Thank you, Joanne. Thank you all for joining our call today. Our performance in the fourth quarter of 2011 was solid with quarter-over-quarter revenues increasing by 9.5%, rising above our expectations. This was largely due to strong performance from our existing games and the continued strength of our overseas business.

A key growth driver for us is our ability to successfully maintain user interest and the engagement in our existing games. In the fourth quarter, we continued to release a steady stream of expansion packs and content updates as well as extend our diversified portfolio of games.

We have been excited about our deep and well-rounded pipeline, which includes a number of attractive titles of different types, ranging from MMORPGs to web games and (inaudible) games. We recently unveiled a new upcoming title, a cartoon-style martial arts MMORPG for the Fantasy Condor Heroes. This game is adapted from the highly acclaimed Chinese novel, Return of the Condor Heroes, by Louis Cha. In addition to our highly anticipated Swordsman Online and Saint Seiya Online, we believe Fantasy Condor Heroes will also catch the attention of many players.

Our effective globalization strategy continues to serve as another key driver behind our growth. Our specialized production studios in China and worldwide support our well-established R&D capabilities, which in term bolster our industry-leading position. Our U.S. subsidiaries are developing several new world-class titles, including Neverwinter by Cryptic Studios. We are also actively expanding our deep global outreaching network.

During the fourth quarter, we partnered with Nexon to jointly establish a new company in Korea. The new company will manage and operate online games in Korea, and we expect this to further enhance our global operational capabilities and allow us to provide enhanced services to our users in the Korean market.

In order to further strengthen our position in the global gaming market, we will continue to leverage our overseas resources and the growing worldwide appeal of our brand.

In spite of our continuous efforts to provide high quality games and service to players, we will further enhance our execution capabilities. As such, I’m pleased to announce that the Company has appointed a Senior Vice President, Mr. Robert Xiao, as our Chief Operating Officer.

In this new role, Robert will oversee our business operations and business support functions. Robert joined The Perfect World as a Senior Vice President in charge of our human resources and administration in 2008. We are grateful for his significant contribution to our global business operations and the strategic development over the past few years.

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