GAME

Shanda Games Limited (GAME)

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Shanda Games (GAME)

Q3 2009 Earnings Call Transcript Introductory Remarks

December 1, 2009 08:00 pm ET

Executives

Maggie Zhou – Investor Relations Manager

Diana Li – CEO

Richard Wei – CFO

Presentation

Operator

Welcome to Shanda Games Limited third quarter 2009 results conference call. The conference call will be recorded and available for reply in its entirety. A copy of Shanda Games’ third quarter 2009 results announcement can be found and downloaded from its corporate website, www.shandagames.com. At this time, all lines have been placed on listen only mode and the floor will be open for questions following today's presentation.

I would now like to turn the call over to Ms. Maggie Zhou, Shanda Games’ IR Manager. Please proceed, ma’am.

Maggie Zhou

Thank you. Good morning and good evening to all participants. On behalf of Shanda Games, I would like to welcome everyone to our third quarter 2009 results conference call. Here with us today are Ms. Diana Li, our Chief Executive Officer, and Mr. Richard Wei, our Chief Financial Officer.

Before we begin, I would also like to remind you that management comments during the call will include forward-looking statements that are based on our current expectation and are intended to qualify for the Safe Harbor from liability for such statements established in the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact during the conference call are forward-looking statements which are subject to significant risks and uncertainties. Actual results may differ materially from those contained in the forward looking statements. So please do take a minute to read the Safe Harbour Statement in Shanda Games’ third quarter 2009 press release. In addition, please note for discussion purpose, all numbers were translated into US$ based on the exchange rate of RMB6.8290 per US$.

Now, with that, I would like to turn the call over to our Chief Executive Officer, Ms. Diana Li.

Diana Li

Thank you, Maggie. Hello to everyone on the call, and thank you for joining us today.

I'm delighted to be here today to discuss our earnings results with you for the first time after Shanda Games’ Nasdaq IPO. As a standalone public company with solid strategies for growth, a leading portfolio and pipeline of games, huge user base and strategic synergies with our parent company, Shanda Interactive, we are very excited about the opportunities ahead.

Our September IPO came on the heels of another quarter of solid growth. In the third quarter, strong top line growth of 45% year-over-year and 10% quarter-over-quarter was driven by successful expansion of existing games as well as several new game launches, and benefited from the favorable seasonality of the summer holiday. APA and ARPU increased sequentially, both for MMORPGs and for advanced casual games. And the bottom line saw healthy growth as well. These results reflect our ability to both attract new users and deliver a great experience to our existing users.

As you know, Shanda Games has long been a leader in China’s online game market. Our success is based on several key pillars. One, we run a portfolio of leading game franchises that continue to grow and attract new generations of users. Two, we have a deep ability to source new games through multiple channels. Three, we possess unrivaled expertise in managing game operations through our years of experience in understanding the local market and continual R&D investment in technology. Four, as a pure-play gaming company we are able to attract and retain top talent through creative incentive methods.

Let me take a few minutes to discuss each of these areas in more detail before handing the call to Richard Wei, our CFO, who will take you through the financials.

As of today, with 32 games in operation, including 21 MMORPGs and 11 advanced casual games – Shanda Games has by far the most diverse, robust portfolio in our market. Since 2001, when we launched our first game, we have been introducing several new games every year across a range of segments and genres, and our capacity to develop and launch new games has increased accordingly. In the past we were only able to introduce one new game per year, and we are now able to introduce as many as four per quarter.

In the third quarter we continued to leverage and expand upon the success of our most popular franchises, Mir and Woool. We launched Mir2 Return, the second major follow-up to our perennial hit franchise Mir2. We also continued to invest in the Woool franchise, and I am pleased to announce that the new game in the Woool series, called Legend of Heroes, started testing in the fourth quarter. In developing our game franchises we spend lots of time researching the needs and wants of our users, and the expansion packs and game sequels we release as a result specifically address our users' preferences. Moreover, consistently introducing creative new elements to games and expansion packs allow us to enter new genres, thus attracting new user segments and minimizing cannibalization with our existing popular games. We believe these are key to maintaining and increasing our long-term base of loyal users. The fact that we can keep our older series alive and fresh speaks to our ability to innovate and expand and underlines our profound user insight.

Also important to our success is our ability to develop and operate new hit games which demonstrates our execution ability and creativity as well as the benefits of our multi-sourcing strategy. During the third quarter we fully commercialized four new MMORPGs: Ghost Raider, a side-scrolling 3D action game, Luvinia, a 3D fantasy game, ZU Online, a 3D martial arts adventure game, and Yuyan Online, a 2.5D martial arts adventure game.

Read the rest of this transcript for free on seekingalpha.com