Shanda Games Limited (GAME) Q2 2012 Earnings Conference Call August 26, 2012, 21:00 p.m. ET Executives Ellen Chiu - Director, IR Xiangdong Zhang - CEO Richard Wei - CFO Analysts Timothy Chan - Morgan Stanley Dick Wei - J.P. Morgan Muzhi Li - Citigroup Thomas Chong - BOCI Martin Bao - CICC Andy Yeung - Oppenheimer Mark Marostica - Piper Jaffray Presentation Operator
In addition, please note, for discussion purposes, all numbers will translate into U.S. dollars based on the exchange rate of RMB6.3249 per U.S. dollar.Now I’d like to turn the call over to our CEO, Mr. Xiangdong Zhang. Xiangdong Zhang Thank you, Ellen, and thank you all for joining us today. Especially, those of you who are taking time from your Sunday evening. Before we begin I’d like to command an announcement issued earlier on the resignation of Mr. Alan Tan as company’s Chairman and CEO. I’d like to thank Alan for his tremendous contribution to the company over past several years in his help for us. We do have a strong management system and a team to execute the company’s corporate strategy. We wish him success in his future endeavor. In the meantime I’m honor to take over Alan’s duty as CEO during this period of time. I look forward to leading the company to solidify its position as one of the premier online game companies in China and drive its long-term growth. Our second quarter results were in line with our guidance. However, we remained cautious given the current macroeconomic conditions. We believe we are moving into the third quarter with improved games and healthier volume. In the second quarter of 2012, total net revenue declined 14.4 percentage year-over-year and 18.6 percentage quarter-over-quarter. Net revenue from online games operated in China decreased 16.6 percentage year-over-year and 19.3 percentage quarter-over-quarter. Other revenues primarily representing net overseas revenues increased 23.3 percentage year-over-year and decreased 10.6 percentage quarter-over-quarter. The decline of overseas revenues is mainly due to the sale of Mochi Media in the first quarter. Slow down in the second quarter occurred primarily because we reduced a level of monetization in our legacy games in order to lengthen our life cycles in Beijing.
We delayed the released schedule for server expansion packs in order to take advantage and a push through a number of other initiatives that we believe could help revive our performance in the second half and down. Overall, we continue to enhance and to verify our portfolio of games and franchise. We believe it is critical for long-term success of our business and continue to believe creative and compelling new game content. We remained focused on the games that we expelled to drive growth in the quarters to come.I’d like to reiterate our AAA strategy which will continue to serve as the cornerstone of our approach to grow our business. The three As stand for three critical element: All-Star, All-Platform and All-Region. All-Star, interest that we have a strong pipeline of games and that we are able to successfully launch these games. All-Platform enables us to take our successful clan-based titles and port them to other platforms and the developers are really interested that we extend our successful games to other geographic areas. Let me start with All-Star component of our strategy tends to provide game players with rich content derived from our pipeline of new games and franchise. Our pipeline is anchored by numerous titles or in various strategic stage of development, Age of Wushu. And exciting 3D MMORPG jointly operated with Snail Game finished open-beta testing early this month and has received a positive feedback. The collaboration with Snail Game represents a new channel of game surfing. We are also excited about the first quarter launch of RIFT, a 3D fantasy MMORPG we licensed from Trion Worlds. We have just received government approval and are the final stage of localization. For World Zero we plan to conduct another round of testing in the fourth quarter. For Final Fantasy XIV we plan to commence localization of its new version in the fourth quarter. Read the rest of this transcript for free on seekingalpha.com