Perfect World Announces Second Quarter 2013 Unaudited Financial Results

Aug 19, 2013, 17:00 ET from Perfect World Co., Ltd.

BEIJING, Aug. 19, 2013 /PRNewswire/ -- Perfect World Co., Ltd. (NASDAQ: PWRD) ("Perfect World" or the "Company"), a leading online game developer and operator based in China, today announced its unaudited financial results for the second quarter ended June 30, 2013.

(Logo: http://photos.prnewswire.com/prnh/20090416/CNTH023LOGO )

Second Quarter 2013 Highlights[1]

  • Total revenues were RMB708.5 million (USD115.4 million), compared with RMB624.5 million in the previous quarter and RMB676.4 million in the same quarter last year.
  • Gross profit was RMB535.0 million (USD87.2 million), compared with RMB477.9 million in the previous quarter and RMB549.8 million in the same quarter last year.
  • Operating profit was RMB67.1 million (USD10.9 million), compared with RMB133.1 million in the previous quarter and RMB155.2 million in the same quarter last year.  Non-GAAP operating profit[2] was RMB84.2 million (USD13.7 million), compared with RMB149.8 million in the previous quarter and RMB172.5 million in the same quarter last year.
  • Net income attributable to the Company's shareholders was RMB80.7 million (USD13.2 million), compared with RMB131.0 million in the previous quarter and RMB158.2 million in the same quarter last year.  Non-GAAP net income attributable to the Company's shareholders[2] was RMB97.8 million (USD15.9 million), compared with RMB147.6 million in the previous quarter and RMB175.5 million in the same quarter last year.
  • Basic and diluted earnings per American Depositary Share ("ADS")[3] were RMB1.66 (USD0.27) and RMB1.65 (USD0.27), respectively, compared with RMB2.70 and RMB2.69, respectively, in the previous quarter, and RMB3.28 and RMB3.25, respectively, in the same quarter last year.  Non-GAAP basic and diluted earnings per ADS[2] were RMB2.01 (USD0.33) and RMB2.00 (USD0.33), respectively, compared with RMB3.05 and RMB3.03, respectively, in the previous quarter, and RMB3.64 and RMB3.60, respectively, in the same quarter last year.
  • Launched open beta testing for "Neverwinter" in North America and Europe in April 2013
  • Launched open beta testing for "Saint Seiya Online" in China in May 2013
  • Launched open beta testing for "Swordsman Online" in China in June 2013

[1] The U.S. dollar (USD) amounts disclosed in this press release, except for those transaction amounts that were actually settled in U.S. dollars, are presented solely for the convenience of the reader. The conversion of Renminbi (RMB) into USD in this release is based on the noon buying rate in The City of New York for cable transfers in RMB per USD as certified for customs purposes by the Federal Reserve Bank of New York as of June 28, 2013, which was RMB6.1374 to USD1.00. The percentages stated in this press release are calculated based on the RMB amounts.

[2] As used in this press release, non-GAAP operating profit, non-GAAP net income attributable to the Company's shareholders and non-GAAP earnings per ADS are defined to exclude share-based compensation charge from operating profit, net income attributable to the Company's shareholders and earnings per ADS, respectively. See "Non-GAAP Financial Measures" and "Reconciliation of GAAP and Non-GAAP Results" at the end of this press release.

[3] Each ADS represents five ordinary shares.

Mr. Robert Xiao, CEO of Perfect World commented, "We are pleased to announce our results for the second quarter of 2013.  Our revenues rose by 13.5% quarter-over-quarter, beating the high end of our expectations.  Our strong second quarter performance was mainly driven by the successful launches of two of our new games, namely 'Saint Seiya Online,' a 3D comic-based MMORPG launched in China in mid-May, and 'Neverwinter,' a widely-acclaimed MMORPG launched in North America and Europe at the end of April.  In addition, we also launched a number of web and mobile games during the quarter and are working on more varied titles which will further diversify our deep game pipeline."

"As our results from this quarter show, our deep and diversified portfolio continues to be one of our main strengths and we have made steady progress on providing new content to players with multiple launches of new games and releases of expansion packs for existing games.  In addition to the successful debut of 'Saint Seiya Online' and 'Neverwinter,' we also launched the highly-anticipated 3D MMORPG 'Swordsman Online,' which is adapted from one of Louis Cha's most famous martial arts novels, in China at the end of the second quarter.  This game has generated positive feedback from gamers and we are optimistic about its prospects to turn into another strong growth driver for us.  We are also excited about a variety of titles in our pipeline, including the highly-anticipated 'Dota 2,' our 3D MMORPGs 'Holy King' and 'Legend of the Condor Heroes,' as well as a number of web games and mobile games.  Additionally, we are also working on localizing 'Neverwinter,' which has gained popularity among players in North America and Europe, for its launch in China soon."

"As a hit title developed by our U.S. subsidiary Cryptic Studios, 'Neverwinter' clearly demonstrates our strong overseas R&D capabilities, which, along with our experienced R&D teams in China, is an important aspect of our effective globalization strategy.  Meanwhile, we also focus on continuously enhancing our extensive overseas operating network, which is the other important component of our strong globalization strategy.  Contributing more than one-fourth of our total revenue, our well-established global operating network covers over 100 countries and regions worldwide and consists of both our own overseas subsidiaries and our overseas partners.  This bolsters our position as a leading Chinese online gaming company in the overseas market.  Lately, we continued to deepen our global presence by launching more games through our overseas subsidiaries in North America, Europe, Korea and Southeast Asia, and also by launching our games through overseas partners in various overseas markets.  Our proven track record and our commitment to continuously enhance and develop our business in China and overseas have enabled us to provide high-quality gaming experiences and deliver world-class services to players around the world."

"While we experienced additional pressure on our margins in the short term from promoting several recently-launched major new games, we are confident in our long-term outlook given the strong performance of our new games as well as the varied line-up of titles in our pipeline.  We have built a solid foundation with our diversified portfolio, strong global R&D capabilities and extensive operating network worldwide, and we will continue to leverage our core strengths and resources to further bolster our position in the global gaming market in an effort to maximize shareholder value over the long term."

Second Quarter 2013 Financial Results

Total Revenues

Total revenues were RMB708.5 million (USD115.4 million), compared with RMB624.5 million in the previous quarter and RMB676.4 million in the same quarter last year. 

Online game operation revenues, which include both domestic and overseas online game operations, were RMB650.1 million (USD105.9 million), compared with RMB556.2 million in the previous quarter and RMB626.4 million in the same quarter last year.  The sequential growth in online game operation revenues was primarily attributable to the strong performance of the Company's new games including "Saint Seiya Online" launched in China and "Neverwinter" launched in North America and Europe.

The aggregate average concurrent users (ACU) for games under operation in mainland China was approximately 742,000, compared with 554,000 in the previous quarter and 739,000 in the same quarter last year.  The increase from the previous quarter was mainly attributable to the strong performance of a couple of the Company's major new games.

Licensing revenues were RMB31.5 million (USD5.1 million), compared with RMB30.1 million in the previous quarter and RMB46.9 million in the same quarter last year. 

Other revenues were RMB26.9 million (USD4.4 million), compared with RMB38.2 million in the previous quarter and RMB3.0 million in the same quarter last year.  The decrease from the previous quarter was primarily associated with less installation of "Torchlight 2" in 2Q13.  "Torchlight 2" is a popular pay-per-install game developed by Runic Games, the Company's majority-owned subsidiary based in the U.S.

Cost of Revenues

The cost of revenues was RMB173.5 million (USD28.3 million), compared with RMB146.6 million in the previous quarter and RMB126.6 million in the same quarter last year.  The increase from the previous quarter was mainly due to increases in staff cost, royalty cost, sales-related taxes and internet data center cost in connection with several new games launched in 2Q13.

Gross Profit and Gross Margin

Gross profit was RMB535.0 million (USD87.2 million), compared with RMB477.9 million in the previous quarter and RMB549.8 million in the same quarter last year.  Gross margin was 75.5%, compared with 76.5% in the previous quarter and 81.3% in the same quarter last year.  

Operating Expenses

Operating expenses were RMB468.0 million (USD76.2 million), compared with RMB344.9 million in the previous quarter and RMB394.6 million in the same quarter last year.  The increase in operating expenses from the previous quarter was mainly due to increases in sales and marketing expenses and R&D expenses in 2Q13.

R&D expenses were RMB199.4 million (USD32.5 million), compared with RMB181.0 million in the previous quarter and RMB189.7 million in the same quarter last year.  The increase from the previous quarter was primarily due to an increase in staff cost.

Sales and marketing expenses were RMB194.9 million (USD31.8 million), compared with RMB96.6 million in the previous quarter and RMB121.8 million in the same quarter last year.  The increase from the previous quarter was primarily due to an increase in advertising and promotional expenses associated with several new games launched in 2Q13.

General and administrative expenses were RMB73.6 million (USD12.0 million), compared with RMB67.3 million in the previous quarter and RMB83.1 million in the same quarter last year.

Operating Profit

Operating profit was RMB67.1 million (USD10.9 million), compared with RMB133.1 million in the previous quarter and RMB155.2 million in the same quarter last year.  Non-GAAP operating profit was RMB84.2 million (USD13.7 million), compared with RMB149.8 million in the previous quarter and RMB172.5 million in the same quarter last year.

Total Other Income

Total other income was RMB33.5 million (USD5.5 million), compared with RMB34.2 million in the previous quarter and RMB38.9 million in the same quarter last year.

Income Tax Expense

Income tax expense was RMB20.2 million (USD3.3 million), compared with RMB33.5 million in the previous quarter and RMB38.1 million in the same quarter last year.  The decrease from the previous quarter was primarily due to the decrease in the operating profit in 2Q13.

Net Income Attributable to the Company's Shareholders

Net income attributable to the Company's shareholders was RMB80.7 million (USD13.2 million), compared with RMB131.0 million in the previous quarter and RMB158.2 million in the same quarter last year.  Non-GAAP net income attributable to the Company's shareholders was RMB97.8 million (USD15.9 million), compared with RMB147.6 million in the previous quarter and RMB175.5 million in the same quarter last year.

Basic and diluted earnings per ADS were RMB1.66 (USD0.27) and RMB1.65 (USD0.27), respectively, compared with RMB2.70 and RMB2.69, respectively, in the previous quarter, and RMB3.28 and RMB3.25, respectively, in the same quarter last year.  Non-GAAP basic and diluted earnings per ADS were RMB2.01 (USD0.33) and RMB2.00 (USD0.33), respectively, compared with RMB3.05 and RMB3.03, respectively, in the previous quarter, and RMB3.64 and RMB3.60, respectively, in the same quarter last year.

Cash and Cash Equivalents

As of June 30, 2013, the Company had RMB1.0 billion (USD168.1 million) of cash and cash equivalents, compared with RMB904.8 million as of March 31, 2013.  The increase was mainly due to the net cash inflow generated from the Company's online game operations.

Business Outlook

Based on the Company's current operations, total revenues for the third quarter of 2013 are expected to be between RMB779 million and RMB815 million, representing an increase of 10% to 15% on a sequential basis.  This takes into consideration the anticipated additional revenue contribution from "Swordsman Online" and "Saint Seiya Online" recently launched in China.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States, or GAAP, this press release presents non-GAAP operating profit, non-GAAP net income attributable to the Company's shareholders and non-GAAP earnings per ADS by excluding share-based compensation charge from operating profit, net income attributable to the Company's shareholders and earnings per ADS, respectively.  The Company believes these non-GAAP financial measures are important to help investors understand the Company's operating and financial performance, compare business trends among different reporting periods on a consistent basis and assess the Company's core operating results, as they exclude certain expenses that are not expected to result in cash payments.  The use of the above non-GAAP financial measures has certain limitations.  Share-based compensation charge has been and will continue to be incurred in the future and is not reflected in the presentation of the non-GAAP financial measures, but should be considered in the overall evaluation of the Company's results.  None of the non-GAAP measures is a measure of net income attributable to the Company's shareholders, operating profit, operating performance or liquidity presented in accordance with GAAP.  The Company compensates for these limitations by providing the relevant disclosure of its share-based compensation charge in the reconciliations to the most directly comparable GAAP financial measures, which should be considered when evaluating the Company's performance.  These non-GAAP financial measures should be considered in addition to financial measures prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP.  Reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure are set forth at the end of this release.

Conference Call

Perfect World will host a conference call and live webcast at 9:00pm Eastern Daylight Time on Monday, August 19, 2013 (9:00am Beijing time on Tuesday, August 20, 2013).

Dial-in numbers for the live conference call are as follows:

    - U.S. Toll Free Number

1-855-298-3404

    - International Dial-in Number

+61-2-8524-5042

    - Mainland China Toll Free Number

4001-200-539

    - Hong Kong Toll Free Number

800-905-927

    - U.K. Toll Free Number

0800-015-9725

Conference ID: PWRD

A live and archived webcast of the conference call will be available on the Investor Relations section of Perfect World's website at http://www.pwrd.com.

A telephone replay of the call will be available beginning two hours after the conclusion of the conference call through 11:59pm Eastern Time, August 26, 2013.

Dial-in numbers for the replay are as follows:

    - U.S. Toll Free Number

1-866-846-0868

    - International Dial-in Number

+61-2-9641-7900

Conference ID: 1188020

About Perfect World Co., Ltd. (http://www.pwrd.com)

Perfect World Co., Ltd. (NASDAQ: PWRD) is a leading online game developer and operator based in China.  Perfect World primarily develops online games based on proprietary game engines and game development platforms.  Perfect World's strong technology and creative game design capabilities, combined with extensive knowledge and experiences in the online game market, enable it to frequently and promptly introduce popular games designed to cater changing customer preferences and market trends.  Perfect World's current portfolio of self-developed online games includes massively multiplayer online role playing games ("MMORPGs"): "Perfect World," "Legend of Martial Arts," "Perfect World II," "Zhu Xian," "Chi Bi," "Pocketpet Journey West," "Battle of the Immortals," "Fantasy Zhu Xian," "Forsaken World," "Dragon Excalibur," "Empire of the Immortals," "Return of the Condor Heroes," "Saint Seiya Online" and "Swordsman Online;" an online casual game: "Hot Dance Party;" and a number of web games and mobile games.  While a majority of the revenues are generated in China, Perfect World operates its games in North America, Europe, Japan, Korea and Southeast Asia through its own subsidiaries.  Perfect World's games have also been licensed to leading game operators in a number of countries and regions in Asia, Latin America, Australia, New Zealand, and the Russian Federation and other Russian speaking territories.  Perfect World intends to continue to explore new and innovative business models and is committed to maximizing shareholder value over time.

Safe Harbor Statements

This press release contains forward-looking statements.  These statements constitute forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995.  These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements.  Among other things, the management's quotations and "Business Outlook" contain forward-looking statements.  Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.  Potential risks and uncertainties include, but are not limited to, Perfect World's limited operating history, its ability to develop and operate new games that are commercially successful, the growth of the online game market and the continuing market acceptance of its games and in-game items in China and elsewhere, its ability to protect intellectual property rights, its ability to respond to competitive pressure, its ability to maintain an effective system of internal control over financial reporting, changes of the regulatory environment in China, and economic slowdown in China and/or elsewhere.  Further information regarding these and other risks is included in Perfect World's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F.  All information provided in this press release and in the attachments is as of August 19, 2013, and Perfect World does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

For further information, please contact

Perfect World Co., Ltd. Vivien Wang -- Vice President, Investor Relations & Corporate Communications Joanne Deng -- Investor Relations Manager  Tel: +86-10-5780-5700  Fax: +86-10-5780-5713 Email: ir@pwrd.com http://www.pwrd.com

Christensen Investor Relations Patty Bruner Tel: +1-480-614-3036 Fax: +1-480-614-3033 Email: pbruner@christensenir.com

Jung Chang Tel: +852-2117-0861 Fax: +852-2117-0869 Email: jchang@christensenir.com

 

Perfect World Co., Ltd. Unaudited Condensed Consolidated Balance Sheets

December 31,

June 30,

June 30,

2012

2013

2013

RMB

RMB

USD

Assets

Current assets

    Cash and cash equivalents 

799,632,647

1,031,837,328

168,122,874

    Restricted cash and time deposits

891,462,180

338,688,627

55,184,382

    Short-term investments

1,508,884,886

1,165,689,384

189,932,118

    Accounts receivable, net

110,286,428

144,604,898

23,561,263

    Due from related parties

7,542,600

3,866,000

629,908

    Prepayment and other assets

156,083,903

218,943,125

35,673,595

    Deferred tax assets

41,585,847

32,587,317

5,309,629

Total current assets

3,515,478,491

2,936,216,679

478,413,769

Non current assets

    Equity investments

227,832,057

410,494,058

66,884,032

    Time deposits

51,465,395

52,715,495

8,589,223

    Restricted time deposits

7,814,450

7,690,788

1,253,102

    Property, equipment, and software, net

1,206,485,419

1,313,321,263

213,986,584

    Construction in progress

20,326,428

12,212,837

1,989,904

    Intangible assets, net

229,013,555

262,073,918

42,701,130

    Goodwill

408,829,417

410,523,513

66,888,831

    Prepayments and other assets

87,332,624

113,958,523

18,567,883

    Deferred tax assets

42,427,797

43,361,393

7,065,108

Total assets

5,797,005,633

5,562,568,467

906,339,566

Liabilities and Shareholders' Equity

Current liabilities

    Accounts payable

70,696,803

140,653,417

22,917,425

    Short-term bank loans

747,974,500

302,756,300

49,329,732

    Advances from customers

133,949,512

84,098,405

13,702,611

    Salary and welfare payable

232,137,936

155,716,345

25,371,712

    Taxes payable

49,898,625

61,965,304

10,096,344

    Accrued expenses and other liabilities

58,016,741

69,169,675

11,270,192

    Due to related parties

150,000

830,460

135,311

    Deferred revenues

365,705,044

504,369,781

82,179,715

    Deferred tax liabilities

61,219,290

66,571,670

10,846,885

    Deferred government grants

458,287

5,100,000

830,971

Total current liabilities

1,720,206,738

1,391,231,357

226,680,898

Non current liabilities

    Deferred revenues

56,503,584

56,749,333

9,246,478

    Deferred tax liabilities

6,875,864

8,066,681

1,314,348

    Other long-term liabilities

1,619,438

1,620,948

264,110

Total liabilities

1,785,205,624

1,457,668,319

237,505,834

Shareholders' Equity

Ordinary shares (US$0.0001 par value, 10,000,000,000             shares authorized, 29,671,195 Class A ordinary shares             issued and outstanding, 212,376,660 Class B ordinary             shares issued and outstanding as of December 31, 2012;             10,000,000,000 shares authorized, 29,671,195 Class A             ordinary shares issued and outstanding, 213,991,700 Class             B ordinary shares issued and outstanding as of June 30,             2013)

193,960

194,963

31,766

Additional paid-in capital

329,804,508

376,261,640

61,306,358

Statutory reserves

272,938,726

287,775,726

46,888,866

Accumulated other comprehensive loss

(80,543,186)

(123,442,575)

(20,113,171)

Retained earnings

3,466,189,747

3,526,143,464

574,533,754

Total Perfect World Shareholders' Equity

3,988,583,755

4,066,933,218

662,647,573

Non-controlling interests

23,216,254

37,966,930

6,186,159

Total Shareholders' Equity

4,011,800,009

4,104,900,148

668,833,732

Total Liabilities and Shareholders' Equity

5,797,005,633

5,562,568,467

906,339,566

 

Perfect World Co., Ltd. Unaudited Condensed Consolidated Statements of Operations

Three months ended

June 30,

March 31,

June 30,

June 30,

2012

2013

2013

2013

RMB

RMB

RMB

USD

Revenues

Online game operation revenues

626,444,057

556,192,368

650,106,240

105,925,349

Licensing revenues

46,923,638

30,131,068

31,489,188

5,130,705

Other revenues

3,042,555

38,186,260

26,931,191

4,388,046

Total Revenues

676,410,250

624,509,696

708,526,619

115,444,100

Cost of revenues

(126,649,248)

(146,560,852)

(173,504,663)

(28,270,059)

Gross profit

549,761,002

477,948,844

535,021,956

87,174,041

Operating expenses

Research and development expenses

(189,673,612)

(180,992,409)

(199,392,117)

(32,488,043)

Sales and marketing expenses

(121,773,658)

(96,574,651)

(194,941,687)

(31,762,911)

General and administrative expenses

(83,138,145)

(67,311,606)

(73,620,386)

(11,995,370)

Total operating expenses

(394,585,415)

(344,878,666)

(467,954,190)

(76,246,324)

Operating  profit

155,175,587

133,070,178

67,067,766

10,927,717

Other income / (expenses)

Share of loss from equity investments

(2,425,763)

(1,026,975)

(3,308,864)

(539,131)

Interest income

27,861,314

24,029,715

21,266,383

3,465,048

Interest expense

(7,847,932)

(4,300,530)

(1,645,346)

(268,085)

Others, net

21,309,632

15,496,975

17,198,395

2,802,228

Total other income

38,897,251

34,199,185

33,510,568

5,460,060

Profit before tax

194,072,838

167,269,363

100,578,334

16,387,777

Income tax expense

(38,113,968)

(33,456,058)

(20,201,537)

(3,291,546)

Net Income

155,958,870

133,813,305

80,376,797

13,096,231

Net loss / (income) attributable to the non-controlling interests

2,248,890

(2,851,834)

365,981

59,631

Net income attributable to the Company's shareholders

158,207,760

130,961,471

80,742,778

13,155,862

Net earnings per ordinary share, basic

0.66

0.54

0.33

0.05

Net earnings per ordinary share, diluted

0.65

0.54

0.33

0.05

Net earnings per ADS, basic

3.28

2.70

1.66

0.27

Net earnings per ADS, diluted

3.25

2.69

1.65

0.27

Shares used in calculating basic net earnings per ordinary share

241,209,046

242,089,199

243,080,784

243,080,784

Shares used in calculating diluted net earnings per ordinary share

243,529,117

243,852,774

245,014,367

245,014,367

Total share-based compensation cost included in:

Cost of revenues

(1,089,992)

(1,041,128)

(820,454)

(133,681)

Research and development expenses

(8,345,586)

(7,807,043)

(7,737,877)

(1,260,774)

Sales and marketing expenses

(2,654,574)

(2,673,345)

(2,748,356)

(447,805)

General and administrative expenses

(5,216,569)

(5,164,597)

(5,792,385)

(943,785)

 

Perfect World Co., Ltd.

Reconciliation of GAAP and Non-GAAP Results

Three months ended

June 30,

March 31,

June 30,

June 30,

2012

2013

2013

2013

RMB

RMB

RMB

USD

GAAP operating profit

155,175,587

133,070,178

67,067,766

10,927,717

Share-based compensation charge

17,306,721

16,686,113

17,099,072

2,786,045

Non-GAAP operating profit

172,482,308

149,756,291

84,166,838

13,713,762

GAAP net income attributable to the        Company's shareholders

158,207,760

130,961,471

80,742,778

13,155,862

Share-based compensation charge

17,306,721

16,686,113

17,099,072

2,786,045

Non-GAAP net income attributable to the       Company's shareholders

175,514,481

147,647,584

97,841,850

15,941,907

GAAP net earnings per ADS

      - Basic

3.28

2.70

1.66

0.27

      - Diluted

3.25

2.69

1.65

0.27

Non-GAAP net earnings per ADS

      - Basic

3.64

3.05

2.01

0.33

      - Diluted

3.60

3.03

2.00

0.33

ADSs used in calculating net earnings per ADS

      - Basic

48,241,809

48,417,840

48,616,157

48,616,157

      - Diluted

48,705,823

48,770,555

49,002,873

49,002,873

SOURCE Perfect World Co., Ltd.



RELATED LINKS

http://www.pwrd.com