Giant Interactive Group Management Discusses Q2 2012 Results - Earnings Call Transcript

Giant Interactive Group Inc. (GA)

Q2 2012 Earnings Call

August 6, 2012 9:00 PM ET


Richard Chiang – IR

Jazy Zhang – CFO

Wei Liu – President

Xuefeng Ji – VP, R&D


Timothy Chan – Morgan Stanley

Tom Chong – BOCI

Eddie Leung – Merrill Lynch

Steve Zhang – Macquarie

Mark Marostica – Piper Jaffray

Ruby Zhang – Nomura Securities

Atul Bagga – Lazard Capital

Martin Bao – CICC

Wendy Huang – CIFB

Adam Krejcik – ROTH Capital Partners

Andy Yeung – Oppenheimer

William Huang – Barclays

Wallace Cheung – Credit Suisse

Jia Long Shi – CLSA



Good morning and good evening, ladies and gentlemen. I would like to welcome everyone to the Giant Interactive Group’s Second Quarter 2012 Earnings Conference Call. I must advice that this conference is being recorded today, Tuesday, the 7th August, 2012. After the presentation, there will be a questions-and-answer session. Please follow the instructions given at that time, if you would like to ask a question.

Now, I would like to transfer the call to the moderator, Mr. Richard Chiang, Investor Relations Director of Giant Interactive.

Richard Chiang

Good morning, ladies and gentlemen. Welcome to the Second Quarter 2012 Earnings Conference call for Giant Interactive Group. With me today are Ms. Wei Liu, President; Ms. Jazy Zhang, Chief Financial Officer; and Mr. Xuefeng Ji, Vice President of Research and Development.

As we proceed there are prepared remarks, we will refer to our results presentation, which can be downloaded from our website at Following the remarks, Ms. Liu, Ms. Zhang and Mr. Ji will be happy to take your questions.

Before we continue, I would like to remind you that statements on this call that are not strictly historical in nature constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995.

These forward-looking statements can be identified by terminologies such as will, expects, anticipates, future, intend, plans, beliefs, estimates and similar statements, and among others, include statements regarding the ability of the company to cooperate with online platforms in addition to Qihoo 360, the sustained progress and performance of ZT Online 2 after the launch of its first expansion pack and the Micro-Client version, the sustained growth and diversity of the company’s user base asset launch and the testing of pipeline games, the capacity of World of Xianxia to become another blockbuster MMORPG of the company, the ability of the company to capture new growth opportunities in domestic and international online game markets as it implements of the company strategy in connection with web games, the company’s moderate sequential growth in the third quarter of 2012 and a time table for testing and release of new games and expansion packs in the company’s game pipeline.

These forward-looking statements are not historical facts, but are instead represent only our belief regarding future events, many of which by their nature are inherently uncertain and outside of our control. Our actual results and financial condition and other circumstances may differ possibly materially from the results, anticipated results and financial conditions indicated in these forward-looking statements.

Among the factors that could cause our actual results to differ from what we currently anticipate may include a deterioration in the performance of ZT Online 1 series, failure of ZT Online 2 to grow as expected, unexpected delays in developing expansion packs or in the timetable for testing and launching our gains, our dependence on ZT Online 1 series and ZT Online 2, which currently account for the majority of our historical net revenues, failure of our web games and our first FPS game to grow as successful as expected, our uncertainties with respect to the PRC legal and regulatory environments and the volatility of the markets in which we operate.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results of Giant to be materially different from historical results or from any results expressed and implied by such forward-looking statements. These factors include but are not limited to risk discussed in filings with the Securities and Exchange Commission including our annual report on Form 20-F filed on April 23, 2012.

All forward-looking statements are qualified by this cautionary statement, and Giant undertakes no obligation to revise or update this information to reflect events or circumstances after today.

In addition, please note that references in the presentation to dollars refer to U.S. dollars.

Now, I would like to turn the call over to our CFO, Jazy Zhang. Jazy?

Jazy Zhang

Thank you, Rich. Good morning to those of you in Asia and good evening to those of you in the West. I will first read the prepared remarks from our President, Ms. Wei Liu, and then I will walk you through our financial highlights and update you on our game development progress.

We are pleased to report that our strong start in 2012 has continued to gain momentum this quarter with continuous sequential growth in both our top and bottom line, which was mainly driven by sustained performance from ZT Online 2. We’re also pleased that the successful release of ZT Online 2 first expansion pack has led the game to new heights and as a result we continue to see an improvement in both active paying accounts and average revenue per user this quarter.

We also made a breakthrough in terms of game offering through our collaboration with Qihoo 360 to launch the Micro-Client version of ZT Online 2 changing online on Qihoo 360 platform. This Micro-Client version provides opportunities for less (inaudible) to experience the core element of ZT Online 2 through a much smaller installation game file. Our collaboration with Qihoo 360 will enable us to tap into its large and diverse user base, which will provide us with opportunities to draw new gamers to our titles. Going beyond this collaboration, we look forward to forming more business partnerships and strategic alliances with online platforms in China in the future.

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