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Giant Interactive Group, Inc. (GA)

Q4 2011 Earnings Call

March 5, 2012 8:00 p.m. EST


Rich Chiang – IR Director

Jazy Zhang – CFO

Wei Liu – President

Xuefeng Ji – VP of R&D


Timothy Chan – Morgan Stanley

Gary Ngan – UBS

Mark Marostica – Piper Jaffray

Steve Zhang – Macquarie

Jialong Shi – CLSA

Vicky Lin – Merrill Lynch

[Shayan Yang] – Nomura

Adam Krejcik – Roth Capital Partners

Andy Yeung – Oppenheimer

[William Wong] – Barclays Capital

Martin Bao – CICC

Chao Wang – Merrill Lynch



Good morning and good evening, ladies and gentlemen. I would like to welcome everyone to Giant Interactive Group’s fourth quarter and fiscal year 2011 earnings conference call. (Operator Instructions).

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

Rich Chiang

Good morning, ladies and gentlemen. Welcome to the fourth quarter and fiscal year 2011 earnings conference call for Giant Interactive Group. With me today are Wei Liu, President; Ms. Jazy Zhang, Chief Financial Officer; and Mr. Xuefeng Ji, Vice President of Research and Development.

As we proceed through our 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, expect, anticipates, future, intends, plans, believes, estimates, and other similar statements, and include, among others, statements regarding our expectation of sequential top-line growth for the first quarter 2012, continued improvement of our operating metrics, the continued growth of ZT Online 2, the effects of our studio reorganization, and the timetable for engineering testing, closed beta testing, open beta testing, introduction, and commercial launch of various products in the company’s game pipeline.

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 the historical results or from any results expressed or implied by such forward-looking statements. These factors include but are not limited to the risks discussed in filings with the Securities and Exchange Commission, including our annual report on Form 20-F filed on June 17, 2011. All forward-looking statements are qualified in their entirety by this cautionary statement and Giant undertakes no obligation to revise or update this information to reflect events or circumstances the date hereof.


Ladies and gentlemen, your speaker is currently experiencing some technical difficulties with their line. Please stand by while we address this situation. Your lines will be placed on music hold until the conference resumes. Thank you for your patience.

Rich Chiang

Hi, everyone. Sorry about that.

Continuing from where I left off, all forward-looking statements are qualified in their entirety by this cautionary statement and Giant undertakes no obligation to revise or update this information to reflect events or circumstances after the date hereof. In addition, please note that references in the presentation to dollars refer to US dollars.

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

Jazy Zhang

Thank you, Rich. Good morning and good evening everyone. First, I would like to 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 efforts.

We concluded 2011 with solid fourth-quarter results and delivered another year of consistent growth from both the financial and operational perspective. Our progress throughout 2011 was made possible by our long-term strategy of focusing on developing games with passion and creativity, games that are of the highest quality and games that are fun to play and that engage and broaden paying user base.

ZT Online 2, our new flagship game, has been the main growth driver over the past year, supporting the steady increase in paying accounts and average user -- sorry, average revenue per user. The success of ZT Online 2 has proved the merits of our game segmentation strategy and our strong internal development capability. We’re very proud of ourselves, that even in this increasingly competitive MMORPG market in China, we were able to produce another hit MMO game. We’re highly confident that with its first expansion pack expected to be released in April 2012, ZT Online 2 will continue to grow and achieve greater success in 2012.

With respect to our growth strategy, first, we will continue to focus on MMORPG as we believe it’s still the most profitable segment of the online game market in China, and this is our core competence. Meanwhile, we’re actively working to enter new game genres and new growth areas in China’s online game market. For example, Elsword, our first action casual game which we licensed from South Korea, entered into new open beta testing in December, and our first-person shooter game continues to progress through our development pipeline. Both games represent new genres that are complementary to our core MMORPG competence.

Secondly, as we indicated on our last quarter earnings call, we have a new strategic focus, and this is web game development. As social media and web-based gaming platform usage rapidly expands in China, we are aggressively working to position Giant as a future leader in this segment. We recently hired a senior industry expert in web game development and have allocated significant internal RMB resources to web game development this year and beyond. Given our years of extensive experience in developing and operating MMO games, our deep understanding of web game characteristics and user preferences and our progress made in web game graphics and technology, we believe we are well-positioned to deliver a few hit games in the near future.

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