GAME

Shanda Games Limited (GAME)

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Shanda Games Limited (GAME)

Q2 2011 Earnings Call

August 23, 2011 9:00 AM ET

Executives

Ellen Chiu – Director, IR

Alan Tan – Chairman and CEO

Richard Wei – CFO

Analysts

Timothy Chiang – Morgan Stanley

Dick Wei – J.P. Morgan

Thomas Cheung – UBS

Ming Zhao – SIG

Mark Marostica – Piper Jaffray

Alex Yao – Deutsche Bank

Presentation

Operator

Welcome to Shanda Games Limited’s 2011 Second Quarter Results Conference Call. The conference call will be recorded and available for replay in its entirety. A copy of the Shanda Games 2011 second quarter results announcement can be found and downloaded from its Investor Relations website, ir.shandagames.com. At this time all lines have been placed in a 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 Ellen Chiu, Shanda Games’ Investor Relations Director. Please proceed, ma’am.

Ellen Chiu

Thank you. Good morning and good evening, everyone. On behalf of Shanda Games, I would like to welcome everyone to our 2011 second quarter results conference call. With me today are Mr. Alan Tan, our Chairman and 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 expectations and 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 are statements of historical facts 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 Harbor statement in Shanda Games’ second quarter 2011 earnings release.

In addition, please note for discussion purposes, all numbers were translated into U.S. dollar based on the exchange rate of RMB6.4716 per U.S. dollar.

Now, I’d like to turn the call over to our Chairman and Chief Executive Officer, Mr. Alan Tan.

Alan Tan

Thank you, Ellen, and welcome everyone. Shanda Games delivered another quarter of solid financial and operational results. The delay came in head of our expectations for potential revenue growth. In the second quarter of 2011, our total net revenues increased 5.4% quarter-on-quarter and 18.7% year-over-year.

Our long term sustainable growth has been served by our continued ability to leverage Shanda Games unique operational experience, innovative technology and a strong pipeline and we believe we are now especially well positioned in the heavy volume online gaming industry.

During the second quarter we continue to implement our Triple-A strategy which has been contributing to our farther than expanding growth over the past few quarters. As a remainder, the three As stand for the three critical elements, All-Stock, All-Platform, and All-Region.

Let me start with our All-Star updates. Consistently delivering new groundbreaking and innovative content helps insure that our games grow into long-term franchises that cater to our users’ different tastes. The All-Star strategy not only allow us to better organize our resources to secure the best titles from aboard but also successfully roll out multiple in-house developed

Our performance this quarter was a continued demonstration of our All-Star strategy. Our revenues continues to be driven by our diverse portfolio of multiple games including Dragon Nest, Realm II, Woool, Mir II, and Legend of Immortals. Players were drawn to these games as we enhance the in-game content with multiple expert impacts and facilitated better social interaction.

In particular major remodels which recently went live are starting to contribute meaningfully as well. For the quarter, Mir II, Woool, and the Dragon Nest contributed 39%, 18% and 17% of total revenue in the second quarter respectively.

We are happy to see this numbers because it shows that we are continuing to diversify our portfolio. In September, an expansion pack with the enhanced features and game play mood will be released for major remodels. The expansion pack will continue to improve the game by adding new words, store reliance, and keep our gamers and engaged.

This game has – this game has already gained traction among every gamer that has started to contribute, continue to lead as a way to energize and innovate the way in which our users communicate in games with one and another. I will touch more on this later.

In addition to the innovation we are bringing to the major remodels model, we have built amiable game development pipeline for the coming second half of the year that we are perhaps proved to be the most exciting interactive and socially collected internet entertainment we have ever offered.

Our product sales for the remainder of the year are consistent with the 12-prong approach for sourcing and developing games that we articulated last quarter.

Sudden Attack is a highly anticipated first person shooter that we licensed for operation in China that have begun open beta testing last week. Bubble Fighter, another shooting base title game expense will be for beginning open beta testing this week. In addition we are preparing to re-launch Mir III in China in the first quarter and expect the game to revitalize the Mir II series by galvanizing original Mir III players.

During last multi China Joy exhibition in Shanghai we had our All-Star event where we showcased our highly anticipated game pipeline for the upcoming 12 months. The games present include 3D games Sudden Attack, the Ring of Dragons, Dragon Ball online, and the Final Fantasy for teen. Due to the popularity of major remodels, the Ring of the Dragons is adapted from another novel written by the same author and it started to have similar market impact.

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