Changyou Reports Fourth Quarter and Fiscal Year 2009 Results
the “Company”) (Nasdaq: CYOU), a leading online game developer and operator in
and fiscal year ended
(Logo: http://www.newscom.com/cgi-bin/prnh/20090402/CNTH020 )
Fourth Quarter 2009 Highlights
-- Total revenues reached a record US$70.7 million, an increase of 3%
quarter-over-quarter and 21% year-over-year, within the Company's
guidance.
-- Net income reached a record US$38.9 million, or US$0.73 per fully
diluted ADS(1). Net income increased by 3% quarter-over-quarter and 34%
year-over-year.
-- Non-GAAP(2) net income (i.e. excluding share-based compensation
expenses) reached a record US$42.2 million, or US$0.79 per fully
diluted ADS. Non-GAAP net income increased by 2% quarter-over-quarter
and 39% year-over-year, within the Company's guidance.
-- Aggregate registered accounts for the Company's games(3) grew 8%
quarter-over-quarter and 41% year-over-year to 80.9 million.
-- Aggregate peak concurrent users ("PCU") for the Company's games grew 9%
quarter-over-quarter and 19% year-over-year to 990,000.
-- Average revenue per active paying account ("ARPU") for the Company's
games increased 3% quarter-over-quarter and 1% year-over-year to RMB196.
(1) Each American depositary share ("ADS") represents two Class A
ordinary shares.
(2) Explanation of the Company's non-GAAP financial measures and
related reconciliations to GAAP financial measures are included in
the accompanying "Non-GAAP Disclosure" and "Reconciliations to
Unaudited Condensed Consolidated Statements of Operations."
(3) Comprised of Tian Long Ba Bu ("TLBB"), Blade Online, and
Blade Hero 2
Fiscal Year 2009 Highlights
-- Total revenues reached a record US$267.6 million, up 33% year-over-year.
-- Net income reached a record US$144.7 million, or US$2.81 per fully
diluted ADS. Net income increased 34% year-over-year.
-- Non-GAAP net income (i.e. excluding share-based compensation expenses)
reached a record US$158.1 million, or US$3.05 per fully diluted ADS.
Non-GAAP net income increased 39% year-over-year.
“I am pleased that Changyou has delivered another quarter of solid results
to close out an historic year,” said Mr. Tao Wang, Changyou’s chief executive
officer. “In 2009, we executed on our strategies and enhanced our brand value
through a successful IPO while experiencing consistent growth in our existing
games, investing in and strengthening our game pipeline, and making various
advances in game development technologies. Our user-centric development model
and commitment to building our business for the long-term have generated
record performances and have made Changyou one of the leaders in
online gaming industry.”
Mr. Wang continued, “Throughout 2010, in addition to releasing new game
content, we have several pipeline games slated for release that we expect will
further diversify our game roster and attract new users by appealing to a
variety of gamers. We believe that our pipeline games and new technologies
will firmly establish Changyou in new market sub-segments and serve as
catalysts for growth.”
Mr.
fourth quarter and full year performances are a result of the successful
execution of our business strategies and our continuous focus on the in-game
experience of our users. With continued growth in the operational and
financial metrics of our existing games, a robust game pipeline,
industry-leading margins, rich cash flows, and a track record of meeting our
guidance targets, we continue to inspire confidence while further enhancing
shareholder value.”
Fourth Quarter 2009 Operational Results
Aggregate registered accounts for the Company’s games as of
2009
Aggregate PCU for the Company’s games was approximately 990,000, an
increase of 9% quarter-over-quarter and an increase of 19% year-over-year.
Aggregate active paying accounts (“APA”) for the Company’s games was flat
quarter-over-quarter and increased 21% year-over-year to 2.4 million.
ARPU for the Company’s games increased 3% quarter-over-quarter and 1%
year-over-year to
affordable for the majority of Chinese game players.
Fourth Quarter 2009 Unaudited Financial Results
Revenues
Total revenues for the fourth quarter of 2009 increased 3%
quarter-over-quarter and 21% year-over-year to
Revenues from game operations for the fourth quarter of 2009 increased 3%
quarter-over-quarter and 22% year-over-year to
increase primarily reflects the growing popularity of our games. The
year-over-year increase was mainly due to increased popularity of the
Company’s flagship game, TLBB.
Overseas licensing revenues for the fourth quarter of 2009 increased 15%
quarter-over-quarter and 5% year-over-year to
were mainly due to increased momentum of TLBB in
Gross Profit
Gross profit for the fourth quarter of 2009 increased 2%
quarter-over-quarter and 21% year-over-year to
in the fourth quarter of 2009 was 92%, compared to 93% in the previous quarter
and 92% in the fourth quarter of 2008. Non-GAAP gross profit for the fourth
quarter of 2009 increased 2% quarter-over-quarter and 21% year-over-year to
compared to 93% in both the previous quarter and the fourth quarter of 2008.
Operating Expenses
For the fourth quarter of 2009, total operating expenses decreased 3%
quarter-over-quarter and increased 4% year-over-year to
Non-GAAP operating expenses totaled
quarter-over-quarter and 6% year-over-year.
Non-GAAP product development expenses increased 5% sequentially and
decreased 12% year-over-year to
primarily attributable to an increase in salaries and benefits due to hiring
of more game engineers. The year-over-year decrease was primarily the result
of a change in the Company’s bonus program for key engineers, for whom the
Company lessened cash bonuses after share-based awards previously granted
increased in value after the Company’s IPO.
Non-GAAP sales and marketing expenses increased 3% sequentially and
decreased 5% year-over-year to
primarily due to an increase in marketing and promotional activities for new
content releases of the Company’s existing games. The year-over-year decrease
was primarily because of savings in marketing and promotional spending due to
the Company’s optimization of marketing campaigns in 2009 offset by an
increase in salaries and benefits from the expansion of our sales and
marketing team.
Non-GAAP general and administrative expenses decreased 25% sequentially
and 2% year-over-year to
due to an increase in legal expenses to enforce the Company’s intellectual
property rights in the previous quarter. The year-over-year decrease was
primarily the result of a change in our bonus program for management, for whom
we lessened cash bonuses after share-based awards previously granted increased
in value after the IPO.
Operating Profit
Operating profit for the fourth quarter of 2009 increased 5%
quarter-over-quarter and 31% year-over-year to
margin in the fourth quarter of 2009 was 63%, up from 62% in the previous
quarter and 58% in the fourth quarter of 2008. Non-GAAP operating profit for
the fourth quarter of 2009 increased 4% quarter-over-quarter and 36%
year-over-year to
quarter of 2009 was 67%, unchanged from the previous quarter and up from 60%
in the fourth quarter of 2008.
Net Income
For the fourth quarter of 2009, net income increased 3%
quarter-over-quarter and 34% year-over-year to
income increased 2% quarter-over-quarter and 39% year-over-year to
million
previous quarter and
diluted earnings per ADS were
and
of 2009 was 55%, unchanged from the previous quarter and up from 50% in the
fourth quarter of 2008. Non-GAAP net margin for the fourth quarter was 60%,
unchanged from the previous quarter and up from 52% in the fourth quarter of
2008.
Cash Balances
As of
million
flow for the quarter was a net inflow of
The decrease in the net cash balance is due to the payment of a
million
wholly-owned subsidiary of Sohu, during the fourth quarter of 2009. This
dividend was declared on
described in the Company’s IPO prospectus.
Fiscal Year 2009 Unaudited Financial Results
Revenues
Total revenues for the fiscal year 2009 were
of 33% from
Revenues from game operations for the fiscal year 2009 were
million
The increase was mainly due to increased popularity of the Company’s flagship
game, TLBB.
Overseas licensing revenues for the fiscal year 2009 were
an increase of 8% from
was mainly due to increased momentum of TLBB in
Gross Profit
Gross profit for the fiscal year 2009 was
34% from
fiscal year 2009 was 93%, unchanged from 93% for the fiscal year 2008.
Non-GAAP gross profit for the fiscal year 2009 was
increase of 34% from
margin for the fiscal year 2009 was 94%, up from 93% for the fiscal year 2008.
Operating Expenses
Total operating expenses for the fiscal year 2009 were
increase of 20% from
operating expenses for the fiscal year 2009 totaled
increase of 10% from
Non-GAAP product development expenses for the fiscal year 2009 were
2008. The increase was primarily attributable to a doubling of the Company’s
R&D workforce in 2009 offset by changes in the Company’s bonus program for key
engineers, for whom the Company lessened cash bonuses after share-based awards
previously granted increased in value after the Company’s IPO.
Non-GAAP sales and marketing expenses for the fiscal year 2009 were
2008. The increase was primarily attributable to an increase in salaries and
benefits due to expansion in sales and marketing headcount offset by savings
in marketing and promotional spending due to the Company’s optimization of
marketing campaigns in 2009.
Non-GAAP general and administrative expenses for the fiscal year 2009 were
2008. The increase was primarily due to the expansion of back-office headcount
and an increase in legal expenses to enforce the Company’s intellectual
property rights.
Operating Profit
Operating profit for the fiscal year 2009 was
increase of 42% from
margin for the fiscal year 2009 was 61%, up from 57% for the fiscal year 2008.
Non-GAAP operating profit for the fiscal year 2009 was
increase of 47% from
operating margin for the fiscal year 2009 was 66%, up from 60% for the fiscal
year 2008.
Net Income
Net income for the fiscal year 2009 was
34% from
the fiscal year 2009 was
million
fiscal year 2009 were
Non-GAAP fully diluted earnings per ADS for the fiscal year 2009 were
up from
was 54%, up from 53% for the fiscal year 2008. Non-GAAP net margin for the
fiscal year 2009 was 59%, up from 56% for the fiscal year 2008.
Other Business Developments and Awards
Newly Licensed Game
The Company licensed and received the exclusive operating rights for Da
Hua Shui Hu in
development studio. Da Hua Shui Hu is a 2D turn-based cartoon-style MMORPG
based on Outlaws of the Marsh, one of the four great classical novels of
Chinese literature. The game is currently in closed beta testing.
The Asset’s Triple A Regional Award for Best ADR Equity Deal/IPO of 2009
In
2009″ in The Asset’s 2009 Triple A Regional Awards. The Asset magazine’s
annual Triple A awards recognize institutions and individuals that have made a
significant contribution to the development of the finance industry in
and are highly regarded due to their rigorous assessment process. Changyou was
awarded “Best ADR Equity Deal/IPO of 2009″ based on a number of factors,
including the execution, size, pricing and after-market performance of the
Company’s IPO.
Business Outlook
Changyou estimates total revenues for the first quarter of 2010 to be
between
Changyou estimates non-GAAP net income for the first quarter of 2010 to be
between
Changyou estimates non-GAAP fully diluted earnings per ADS for the first
quarter of 2010 to be between
Assuming no new grants of share-based awards, Changyou estimates
share-based compensation expense for the first quarter of 2010 to be between
Non-GAAP Disclosure
To supplement the unaudited consolidated financial information prepared in
accordance with United States Generally Accepted Accounting Principles
(“GAAP”), Changyou’s management uses non-GAAP measures of cost of revenues,
operating expenses, net income and net income per ADS, which are adjusted from
results based on GAAP to exclude the compensation cost of share-based awards
granted to employees. These measures should be considered in addition to
results prepared in accordance with GAAP, but should not be considered a
substitute for, or superior to, GAAP results.
Changyou’s management believes that excluding the share-based compensation
expense from its non-GAAP financial measure is useful for itself and investors.
Further, the amount of share-based compensation expense cannot be anticipated
by management, and these expenses are not built into the Company’s annual
budgets and quarterly forecasts, which generally will be the basis for
information Changyou provides to analysts and investors as guidance for future
operating performance. As share-based compensation expense does not involve
any upfront or subsequent cash outflow, Changyou does not factor this in when
evaluating and approving expenditures or when determining the allocation of
its resources to its business operations. As a result, in general, the monthly
financial results for internal reporting and any performance measure for
commissions and bonuses are based on non-GAAP financial measures that exclude
share-based compensation expense.
The non-GAAP financial measures are provided to enhance investors’ overall
understanding of Changyou’s current financial performance and prospects for
the future. A limitation of using non-GAAP cost of revenues, operating
expenses, net income and net income per ADS, excluding share-based
compensation expense, is that the share-based compensation charge has been and
will continue to be a significant recurring expense in the Company’s business
for the foreseeable future. In order to mitigate these limitations the Company
has provided specific information regarding the GAAP amounts excluded from
each non-GAAP measure. The accompanying tables include details on the
reconciliation between GAAP financial measures that are most directly
comparable to the non-GAAP financial measures the Company has presented.
Notes to Financial Information
Financial information in this press release other than the information
indicated as being non-GAAP is extracted from Changyou’s unaudited financial
statements prepared in accordance with GAAP.
Safe Harbor Statement
It is currently expected that the Business Outlook will not be updated
until the release of Changyou’s next quarterly earnings announcement; however,
Changyou reserves the right to update its Business Outlook at any time for any
reason.
This announcement contains forward-looking statements. Statements that are
not historical facts, including statements about the Company’s beliefs and
expectations, are forward-looking statements. These statements are based on
current plans, estimates and projections, and therefore you should not place
undue reliance on them. Forward-looking statements involve inherent risks and
uncertainties. The Company cautions that a number of important factors could
cause actual results to differ materially from those contained in any
forward-looking statement. Potential risks and uncertainties include, but are
not limited to, the current global financial and credit markets crisis and its
potential impact on the Chinese economy, the slower growth the Chinese economy
experienced during the latter half of 2008 and in 2009, which could continue
through 2010, the uncertain regulatory landscape in
China
historical and possible future losses and limited operating history, and the
Company’s reliance on
information regarding these and other risks is included in Changyou’s
Registration Statement on Form F-1 originally filed on
amended through
Exchange Commission.
Conference Call Information
Changyou’s management team will host an earnings conference call today at
Kong
dial in numbers below:
US: +1-866-713-8563
Hong Kong: +852-3002-1672
International: +1-617-597-5311
Please dial in 10 minutes before the call is scheduled to begin and
provide the passcode to join the call. The passcode is “CYOU.”
A replay of the conference call may be accessed by phone at the following
number until
International: +1-617-801-6888
Passcode: 39188151
The conference call will be available on webcast live and available for
replay at: http://www.changyou.com/ir/ .
About Changyou
Changyou.com Limited’s (“Changyou”) (NASDAQ: CYOU) massively multi-player
online role-playing games (“MMORPG”) business began operations as a business
unit within Sohu.com Inc. (NASDAQ: SOHU) in 2003. Changyou was carved out as a
separate, stand-alone company in
offering on
online games in
including the in-house developed
online games in
Changyou has a diversified pipeline of games with various graphic styles and
themes, including the licensed Da Hua Shui Hu,
Faith, Legend of the Ancient World, and the in-house developed Duke of Mount
Deer, which received an award as one of
Changyou’s leading technology platform includes advanced 2.5D and 3D graphics
engines, a uniform game development platform, effective anti-cheating and
anti-hacking technologies, proprietary cross-networking technology and
advanced data protection technology. For more information about Changyou,
please visit http://www.changyou.com/en/.
For investor and media inquiries, please contact:
In China:
Ms. Angie Chang
Investors Relations Manager
Changyou.com Limited
Tel: +86-10-5956-3358
Email: ir@cyou-inc.com
Ms. Cathy Li
Ogilvy Financial, Beijing
Tel: +86-10-8520-6104
Email: cathy.li@ogilvy.com
In the United States:
Ms. Jessica Barist Cohen
Ogilvy Financial, New York
Tel: +1-646-460-9989
Email: jessica.cohen@ogilvypr.com
CHANGYOU.COM LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER ADS AMOUNTS)
Three Months Ended Twelve Months Ended
Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
2009 2009 2008 2009 2008
Revenues:
Game operation
revenues $ 68,621 $ 66,880 $ 56,410 $ 259,783 $ 194,607
Overseas
licensing
revenues 2,077 1,804 1,980 7,802 7,238
Total revenues 70,698 68,684 58,390 267,585 201,845
Cost of revenues
(includes share-
based compensation
expense of $57,
$169, $4, $324 and
$14, respectively) 5,420 4,714 4,380 17,518 14,633
Gross profit 65,278 63,970 54,010 250,067 187,212
Operating expenses:
Product
development
(includes
share-based
compensation
expense of
$1,763, $1,885,
$1,155, $7,404
and $4,919,
respectively) 6,888 6,788 6,965 27,353 23,862
Sales and
marketing
(includes
share-based
compensation
expense of
$77, $68, $2,
$261 and $10,
respectively) 9,551 9,280 9,949 40,048 38,917
General and
administrative
(includes
share-based
compensation
expense of
$1,432, $1,432,
$57, $5,412
and $404,
respectively) 4,556 5,614 3,253 18,759 9,053
Total operating
expenses 20,995 21,682 20,167 86,160 71,832
Operating profit 44,283 42,288 33,843 163,907 115,380
Interest expense -- -- (67) (104) (245)
Interest income and
foreign currency
exchange gain/loss 762 966 598 3,379 1,235
Other income
(expense) 125 34 13 158 (278)
Income before
income tax expense 45,170 43,288 34,387 167,340 116,092
Income tax expense (6,312) (5,494) (5,315) (22,656) (8,106)
Net income $ 38,858 $ 37,794 $ 29,072 $ 144,684 $ 107,986
Basic net income
per ADS $ 0.75 $ 0.74 $ 0.61 $ 2.87 $ 2.27
ADSs used in
computing basic
net income per
ADS 51,496 51,251 47,500 50,364 47,500
Diluted net income
per ADS $ 0.73 $ 0.71 $ 0.61 $ 2.81 $ 2.27
ADSs used in
computing diluted
net income per
ADS 52,999 53,001 47,500 51,526 47,500
CHANGYOU.COM LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
As of Dec. As of Dec.
31, 2009 31, 2008
ASSETS
Current assets:
Cash and bank deposits $ 226,901 $ 134,439
Accounts receivable, net 3,395 1,019
Prepaid and other current assets 4,720 22,187
Due from Sohu 340 8,535
Total current assets 235,356 166,180
Non-current assets:
Fixed assets, net 49,178 9,260
Intangible assets, net 3,221 57
Other assets, net 1,636 1,159
TOTAL ASSETS $ 289,391 $ 176,656
LIABILITIES AND SHAREHOLDERS' EQUITY
Receipts in advance and deferred revenue $ 30,244 $ 20,703
Accrued liabilities 26,618 22,834
Tax payables 6,628 9,163
Short-term loan from Sohu -- 8,450
Due to Sohu 5,046 10,812
Total liabilities 68,536 71,962
Total shareholders' equity 220,855 104,694
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 289,391 $ 176,656
CHANGYOU.COM LIMITED
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(IN THOUSANDS EXCEPT PER ADS AMOUNTS)
Three Months Ended Dec. 31, 2009
Non-GAAP
GAAP Adjustments Non-GAAP
Total revenues $70,698 $-- $70,698
Less: Cost of revenues 5,420 (57)(a) $5,363
Gross profit $65,278 $57 $65,335
Gross margin 92% 92%
Operating expenses $20,995 $(3,272)(a) $17,723
Product development expenses $6,888 $(1,763)(a) $5,125
Sales and marketing expenses $9,551 $(77)(a) $9,474
General and administrative expenses $4,556 $(1,432)(a) $3,124
Operating profit $44,283 $3,329 $47,612
Operating margin 63% 67%
Net income $38,858 $3,329 $42,187
Net margin 55% 60%
Diluted net income per ADS $0.73 $0.79
ADSs used in computing diluted net
income per ADS 52,999 53,436
Three Months Ended Sep. 30, 2009
Non-GAAP
GAAP Adjustments Non-GAAP
Total revenues $68,684 $-- $68,684
Less: Cost of revenues 4,714 (169)(a) $4,545
Gross profit $63,970 $169 $64,139
Gross margin 93% 93%
Operating expenses $21,682 $(3,385)(a) $18,297
Product development expenses $6,788 $(1,885)(a) $4,903
Sales and marketing expenses $9,280 $(68)(a) $9,212
General and administrative expenses $5,614 $(1,432)(a) $4,182
Operating profit $42,288 $3,554 $45,842
Operating margin 62% 67%
Net income $37,794 $3,554 $41,348
Net margin 55% 60%
Diluted net income per ADS $0.71 $0.77
ADSs used in computing diluted net
income per ADS 53,001 53,436
Three Months Ended Dec. 31, 2008
Non-GAAP
GAAP Adjustments Non-GAAP
Total revenues $58,390 $-- $58,390
Less: Cost of revenues 4,380 (4)(a) $4,376
Gross profit $54,010 $4 $54,014
Gross margin 92% 93%
Operating expenses $20,167 $(1,214)(a) $18,953
Product development expenses $6,965 (1,155)(a) $5,810
Sales and marketing expenses $9,949 (2)(a) $9,947
General and administrative expenses $3,253 (57)(a) $3,196
Operating profit $33,843 $1,218 $35,061
Operating margin 58% 60%
Net income $29,072 $1,218 $30,290
Net margin 50% 52%
Diluted net income per ADS $0.61 $0.64
ADSs used in computing diluted net
income per ADS 47,500 47,500
Note:
(a) To eliminate share-based compensation expense as measured using the
fair value method.
CHANGYOU.COM LIMITED
RECONCILIATIONS TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(IN THOUSANDS EXCEPT PER ADS AMOUNTS)
Twelve Months Ended Dec. 31, 2009
Non-GAAP
GAAP Adjustments Non-GAAP
Total revenues $267,585 $-- $267,585
Less: Cost of revenues 17,518 (324)(a) $17,194
Gross profit $250,067 $324 $250,391
Gross margin 93% 94%
Operating expenses $86,160 $(13,077)(a) $73,083
Product development expenses $27,353 $(7,404)(a) $19,949
Sales and marketing expenses $40,048 $(261)(a) $39,787
General and administrative expenses $18,759 $(5,412)(a) $13,347
Operating profit $163,907 $13,401 $177,308
Operating margin 61% 66%
Net income $144,684 $13,401 $158,085
Net margin 54% 59%
Diluted net income per ADS $2.81 $3.05
ADSs used in computing diluted net
income per ADS 51,526 51,909
Twelve Months Ended Dec. 31, 2008
Non-GAAP
GAAP Adjustments Non-GAAP
Total revenues $201,845 $-- $201,845
Less: Cost of revenues 14,633 (14)(a) $14,619
Gross profit $187,212 $14 $187,226
Gross margin 93% 93%
Operating expenses $71,832 $(5,333)(a) $66,499
Product development expenses $23,862 $(4,919)(a) $18,943
Sales and marketing expenses $38,917 $(10)(a) $38,907
General and administrative expenses $9,053 $(404)(a) $8,649
Operating profit $115,380 $5,347 $120,727
Operating margin 57% 60%
Net income $107,986 $5,347 $113,333
Net margin 53% 56%
Diluted net income per ADS $2.27 $2.39
ADSs used in computing diluted net
income per ADS 47,500 47,500
Note:
(a) To eliminate share-based compensation expense as measured using the
fair value method.
SOURCE Changyou.com Limited