Changyou.com Limited (CYOU) Q2 2012 Earnings Call August 06, 2012 7:00 am ET Executives Angie Chang Alex Ho - Chief Financial Officer and Principal Accounting Officer Wang Tao - Chief Executive Officer and Director Analysts Dick Wei - JP Morgan Chase & Co, Research Division Eddie Leung - BofA Merrill Lynch, Research Division Timothy Chan - Morgan Stanley, Research Division Alicia Yap - Barclays Capital, Research Division Atul Bagga - Lazard Capital Markets LLC, Research Division Alex Yao - Deutsche Bank AG, Research Division Presentation Operator
Forward-looking statements involve inherent risk and uncertainty. The company cautions that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risk and uncertainties include, but are not limited to, the current global financial and credit market crisis and its potential impact on China's economy; the uncertain regulatory landscape in the People's Republic of China; fluctuations in Changyou's quarterly operating results; Changyou's historical and possible future losses and limited operating history; and the company's reliance on Tian Long Ba Bu as its major revenue source. Further information regarding these and other risks is included in Changyou's annual report on Form 20-F filed on February 28, 2012, and other filings with the Securities and Exchange Commission.Now let me turn the call over to our CFO, Mr. Alex Ho. Alex? Alex Ho Thanks, Angie. Hello, everyone, and thank you for joining us today. We have continued to deliver strong financial results on the back of the performance of our core MMO games, web games and online advertising business during the quarter. Both of our top line and bottom line results have reached record high and exceeded our guidance by a wide margin. Total revenues for the second quarter reached a record $147.3 million, an increase of 8% quarter-over-quarter and 30% year-over-year, exceeding the high end of our guidance by $3.8 million. Online games revenue for the second quarter increased to 8% quarter-over-quarter and 35% year-over-year to $137.2 million, exceeding the high end of our guidance by $4.2 million. Online advertising revenue, which consists of revenue generated from the 17173 business, increased 11% quarter-over-quarter and 10% year-over-year to $9.1 million. Non-GAAP net income attributable to Changyou.com Limited reached a record $72.3 million, an increase of 9% quarter-over-quarter and 16% year-over-year, exceeding the high end of our guidance by $12.3 million.
Our strong performance reflect the resilience of the online games industry in China despite the weakening global macroeconomic environment and economic slowdown in China. Also, we flag the ongoing strength of our online games content and the successful expansion into other fast-growing segments of the industry.I will now review briefly our online game business, starting with our MMO games, our web games and the pipelines we have for both segments and then wrap up with an overview of our online advertising business. Turning first to our MMO games. Our flagship game, Tian Long Ba Bu or TLBB, continued a smooth momentum and maintained its leading position among MMO games in China. In order to further extend the game's lifespan and to thank players for their continued support of our game, we ran a series of promotions, offering rewards and giveaway items to players as part of the game's fifth-year anniversary celebration. As a result, we saw a slight increase in the number of concurrent player in the second quarter. We also worked on promoting participation and reinforcing user loyalty by hosting competitions and releasing a new expansion pack. In the latter half of June, we organized a better challenging event, which received a great deal of player interest and will last through September. We launched an expansion pack on July 12 that introduced a new cast and reward systems that provide players with new activities to take part in. We also released a new micro-client option for TLBB that has made the game more accessible and faster to download for new users. Based on our testing, the micro-client can be downloaded in less than 5 minutes on a 1-megabyte broadband connection. In the fourth quarter, we plan to release TLBB's annual major expansion pack, which we expect to further enhance user loyalty and enthusiasm as these advertisements have done. Read the rest of this transcript for free on seekingalpha.com