Published:
Giant Interactive Announces First Quarter 2008 Results
Giant Interactive Announces First Quarter 2008 Results
SHANGHAI, China, May 15 /Xinhua-PRNewswire/ -- Giant Interactive Group Inc.
(NYSE: GA) ("Giant" or the "Company"), one ofChina's leading online game
developers and operators, announced today its unaudited financial results for
the first quarter ended March 31, 2008.
First Quarter 2008 Highlights:
-- Net revenue was RMB471.6 million (US$67.3 million), an increase of
48.7% over the first quarter 2007 and an increase of 8.5% over the
fourth quarter 2007.
-- Gross profit was RMB420.8 million (US$60.0 million), an increase of
45.5% over the first quarter 2007 and an increase of 12.9% over the
fourth quarter 2007. Gross profit margin for the first quarter 2008 was
89.2%.
-- Net income was RMB338.7 million (US$48.3 million), an increase of 36.5%
over the first quarter 2007 and an increase of 1.5% over the fourth
quarter 2007. Net income margin for the first quarter 2008 was 71.8%.
Net income grew at a slower rate than net revenue mainly due to the
occurrence of income tax expenses in the first quarter 2008.
-- Non-GAAP net income excluding non-cash share-based compensation for the
first quarter 2008 was RMB350.8 million (US$50.0 million), an increase
of 40.0% over the first quarter 2007 and 1.0% over the fourth quarter
2007. Non-GAAP net income margin excluding non-cash share-based
compensation was 74.4%.
-- Net income per American Depositary Share ("ADS") was RMB1.38
(US$0.20), compared to RMB1.24 for the first quarter 2007 and RMB1.39
for the fourth quarter 2007. Each ADS represents one ordinary share.
-- Non-GAAP net income excluding non-cash share-based compensation per ADS
was RMB1.43 (US$0.20), compared to RMB1.25 for the first quarter 2007
and RMB1.44 for the fourth quarter 2007.
-- Active Paying Accounts ("APA") for online games(1) in the first
quarter 2008 reached 1,447,000, an increase of 46.7% from the first
quarter 2007 and an increase of 3.0% from the fourth quarter 2007.
-- Average Revenue Per User ("ARPU") for online games(1) was RMB325.1,
an increase of 1.7% from the first quarter 2007 and an increase of 5.3%
from the fourth quarter 2007.
-- Average Concurrent Users ("ACU") for online games(1) was 546,000, an
increase of 21.4% from the first quarter 2007 and an increase of 6.8%
from the fourth quarter 2007.
-- Peak Concurrent Users ("PCU") for online games(1) was 1,646,000, an
increase of 88.4% from the first quarter 2007 and an increase of 67.4%
from the fourth quarter 2007.
(1) Online games include ZT Online, ZT Online PTP and Giant Online.
Mr. Yuzhu Shi, Giant Interactive Chairman and Chief Executive Officer
commented, "Our growth in the first quarter 2008 was driven by the addition of
offline interactive community features and by our sales and marketing
expansion efforts. Throughout the first quarter, we witnessed positive
reactions to ZT Online's 'Neighboring Friends' expansion pack, which completed
roll out in January and is aimed at increasing interactivity among players,
which in turn enhances the stickiness of the in-game community. This expansion
pack played an integral role in increasing the popularity of ZT Online, which
reached a record high of over 1.5 million peak concurrent users on March 1,
2008. These achievements are a testimony to our gamer-first ideology and the
continued growth momentum of our flagship game. In addition, our newly
self-developed game, Giant Online, was launched into open beta testing on
March 28, 2008, garnering a very encouraging market response, attaining a PCU
of over 237,000 within the first 24 hours of launch. This mark surpassed even
that of ZT Online, following its launch into open beta in April 2006. The
success of both of these self-developed games in the first quarter can be
attributed to our strong R&D capabilities, focused strategy and innovative
community-building efforts; our team is dedicated to providing constant
enhancements to game content in order to match our players' evolving
preferences. Finally, during the quarter, we continued to expand our
nationwide marketing and distribution network in order to support our
advertising campaigns and initiatives to continue to grow our player base."
First Quarter 2008 Unaudited Financial Results
Net revenues. Net revenues for the first quarter 2008 were RMB471.6
million (US$67.3 million), representing an 8.5% increase compared to RMB434.8
million in the fourth quarter 2007, and a 48.7% increase compared to RMB317.2
million in the first quarter 2007.
Online game net revenues were RMB470.2 million (US$67.1 million), an
increase of 8.5% from RMB433.6 million in the fourth quarter 2007, and an
increase of 49.1% from RMB315.3 million in the first quarter 2007. The
sequential rise in online game net revenues was primarily attributable to the
strong performance achieved by ZT Online, supported by the newly launched
"Neighboring Friends" expansion pack.
APA for online games(1) in the first quarter 2008 grew by 3.0% from the
fourth quarter 2007 and by 46.7% over the first quarter 2007. ARPU for online
games(1) in the first quarter 2008 increased 5.3% from the fourth quarter 2007
and 1.7% over the first quarter 2007. ACU for online games(1) in the first
quarter 2008 increased 6.8% over the fourth quarter 2007 and 21.4% over the
first quarter 2007. PCU for online games(1) in the first quarter 2008 showed
an increase of 67.4% from the fourth quarter 2007 and an increase of 88.4%
over the first quarter 2007. The year-over-year increases resulted from the
success of our online games, namely ZT Online, which continues to attract new
players through constant updates and expansion packs, allowing for increased
interactivity among players, which encourages community cohesion.
Cost of Services. Cost of services was RMB50.8 million (US$7.2 million),
representing an 81.5% increase over the same period last year, and a decrease
of 18.1% from the fourth quarter 2007. The quarter-over-quarter decrease in
cost of services was mainly due to a RMB6.7 million decline in business taxes,
following a one-time rise in business tax in the fourth quarter 2007 due to
distributors boosting their prepayments for stocking of prepaid game cards at
year end. Our continuous focus on efficiency and stringent cost controls also
contributed to the decrease in cost of services. The year-over-year increase
in cost of services was a result of the expansion of our business, including
the purchase of additional servers to provide better service and performance
for current game players and the expansion of our infrastructure capabilities
for the launch of both ZT Online expansion packs and Giant Online.
Gross Profit and Gross Margin. Gross profit increased sequentially by
RMB48.0 million and year-over-year by RMB131.6 million to RMB420.8 million
(US$60.0 million). Gross margin for the first quarter 2008 was 89.2%, down
slightly from 91.2% in the first quarter 2007 and an increase of 3.5% over the
fourth quarter 2007. The increase in gross margin quarter-over-quarter was
mainly due to the decrease in cost of services and the continuous rise in our
revenue.
Operating Expenses. Total operating expenses of RMB99.8 million (US$14.2
million) represented an increase of 6.3% from RMB93.9 million in the fourth
quarter 2007, and an increase of 139.5% from RMB41.7 million in the first
quarter 2007. The sequential increase in operating expenses is mainly
attributable to the rise in sales and marketing expenses and general and
administrative expenses, while the year-over-year increase in operating
expenses was primarily a result of continued R&D and sales and marketing
infrastructure expansion to accelerate our business growth.
Research and product development expenses for the first quarter 2008 were
RMB11.8 million (US$1.7 million), a decrease of 9.4% from RMB13.1 million in
the previous quarter, and up 254.3% from RMB3.3 million in the first quarter
2007. The sequential decrease in R&D expenses is mainly attributable to a
decrease of RMB1.0 million in the share-based compensation expenses due to the
accelerated amortization method. The year-over-year increase resulted from the
hiring of additional senior game architects and engineers to further
strengthen our R&D capabilities to enrich our game designs and generate
innovative game ideas.
Sales and marketing expenses were RMB64.9 million (US$9.3 million), an
increase of 11.9% from RMB58.0 million in the previous quarter and up 136.5%
from RMB27.4 million in the first quarter 2007. We expanded our liaison
personnel from approximately 2,500 as of December 31, 2007 to over 3,000 as of
March 31, 2008 as part of our strategy to accelerate our marketing campaigns
aimed at increasing penetration inChina's medium and small cities. We also
increased our advertising initiatives to support our sales and marketing
efforts to promote the open beta launch of our new game Giant Online.
General and administrative expenses for the quarter were RMB28.1 million
(US$4.0 million), representing a sequential increase of 22.7% from RMB22.9
million. The sequential rise and the year-over-year increase of general and
administrative expenses were mainly attributable to the expansion of
managerial personnel focusing on strategic management, accounting and finance.
Income Tax Expense. Income tax expense for the first quarter 2008 was
RMB40.0 million (US$5.7 million).
Net Income. Net income for the first quarter 2008 was RMB338.7 million
(US$48.3 million), a year-over-year increase of 36.5% from RMB248.1 million,
and a sequential increase of 1.5% from RMB333.8 million. Net income margin was
down slightly to 71.8% for the first quarter 2008, as compared to 78.2% in the
first quarter 2007 and 76.8% in the preceding quarter. The lower rate of net
income growth compared to previous quarters and the decrease in net margin
were mainly attributed to the occurrence of income tax expenses in the first
quarter 2008.
Cash and Cash Equivalents. Cash and cash equivalents as of March 31, 2008
fell to RMB5,835.0 million (US$832.1 million) from RMB7,295.5 million as of
December 31, 2007. This significant decrease was mainly used to fund the
repurchase of US$200 million of our ADS.
Business Highlights and Outlook
ZT Online -- As social networking communities converge with online games,
we completed the roll out of the new ZT Online expansion pack, Neighboring
Friends, in January to meet this trend. This expansion pack allows gamers from
the same neighborhood to gather in the same shard, creating opportunities to
develop real-life relationships between gamers. Due to the in-game community
expanding from online to offline, Neighboring Friends has helped the
popularity of ZT Online grow and reach a record high of over 1.5 million PCU
in the first quarter 2008. Our team is actively engaged in preparing our next
expansion pack, which will incorporate real time strategy gameplay, more
micromanagement in battles, and innovative roles and skills. Additional in-
game relationships and more teamplay opportunities will further focus on
community building. We expect to launch the next expansion pack at the end of
the second quarter 2008.
Giant Online -- We launched open beta testing of Giant Online, the
Company's second internally developed game, at the end of the first quarter
2008. Giant Online was designed from the beginning with gamers' feedback in
mind. Every aspect of the game, from its modern military theme to the
inclusion of a wide variety of casual game components, was developed by
analyzing and incorporating commentary from gamers. During the closed beta
process, we continued to receive gamers' feedback, analyzed their concerns,
and turned their opinions into revisions or new features. As a result, the
open beta launch of Giant Online, which reached a PCU of over 237,000 on the
first day of its launch, achieved an even higher PCU than that of ZT Online
during its open beta launch in April 2006.
King of Kings III -- King of Kings III, a 3D free-to-play medieval magical
MMORPG, is currently undergoing engineering testing for various gameplay
elements inTaiwan. Features such as the battle interface, role balancing and
questing system are being individually tested. We formed an in-house
development team and recruited high level managers inShanghai to collaborate
with the developers inTaiwan to localize the game for mainlandChina. We plan
to begin closed beta testing inChina in the fourth quarter 2008, and open
beta testing in early 2009.
Empire of Sports -- Empire of Sports is a 3D MMORPG featuring a wide range
of sporting events. At the end of the first quarter 2008, the developers,
Switzerland-based Empire of Sports Ltd., began a European Private Launch
initially limited to 5,000 players. The developers expect to progressively
enlarge the number of players to 50,000 in six months and to unlock additional
features on a regular basis. The developers and our internal development team
are currently adapting the game for theGreater China market. We expect to
launch the game inChina in the second half 2008.
Second Quarter 2008 Guidance -- Based on the current outlook, Giant
expects to generate total net revenues for the second quarter in the range of
RMB495 million to RMB505 million.
Conference Call
Giant's senior management will host a conference call on Friday, May 16,
2008 at 8:00 am (US Eastern Time) / 5:00 am (US Pacific Time) / 8:00 pm
(Beijing Time) to discuss its 2008 first quarter financial results and recent
business activity. The conference call may be accessed by calling +1 (866)
510-0704 (for callers in the US), +86 10 800 130 0399 (for callers inChina)
or +1 (617) 597-5362 (for callers outside of the US andChina) and entering
pass code 24395264.
A live webcast of the conference call and replay will be available on the
investor relations page of Giant Interactive Group's website at
http://www.ga-me.com/earningsannouncements.php .
Currency Convenience Translation
This release contains translations of certain Renminbi (RMB) amounts into
US dollars (US$) at the rate of US$1.00 to RMB7.012, which was the noon buying
rate as of March 31, 2008 in theCity of New York for cable transfers in
Renminbi per US dollar as certified for customs purposes by the Federal
Reserve Bank ofNew York. We make no representation that the Renminbi or US
dollar amounts referred to in this release could have been, or could be,
converted into US dollars at such rate or at all.
Use of Non-GAAP Financial Measures
Giant has reported for the first quarter 2008 net income on a non-GAAP
basis excluding non-cash share-based compensation. Giant believes that both
management and investors benefit from referring to these non-GAAP financial
measures in assessing the performance of Giant and when planning and
forecasting future periods. Giant computes its non-GAAP financial measures
using the same consistent method from quarter to quarter.
Readers are cautioned not to view non-GAAP results on a stand-alone basis
or as a substitute for results under GAAP, or as being comparable to results
reported or forecasted by other companies, and should refer to the
reconciliation of GAAP results with non-GAAP results in the attached financial
information.
The table below sets forth the reconciliation of GAAP measures to non-GAAP
measures for the indicated periods:
Giant Interactive Group, Inc.
Reconciliation of GAAP to Non-GAAP (Unaudited)
Three months ended
March 31, December 31, March 31, March 31,
2007 2007 2008 2008
(RMB) (RMB) (RMB) (US$)
GAAP net
income: 248,081,193 333,804,425 338,652,208 48,296,094
Share-based
compensation 2,449,822 13,515,602 12,164,018 1,734,743
Non-GAAP net
income: 250,531,015 347,320,027 350,816,226 50,030,837
Non-GAAP
earnings per
share:
Basic 1.25 1.44 1.43 0.20
Diluted 1.25 1.39 1.38 0.20
Weighted
average
ordinary
shares:
Basic 200,000,000 240,379,692 244,556,746 244,556,746
Diluted 200,589,139 250,120,341 253,845,788 253,845,788
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is preliminary and
subject to adjustments. Adjustments to the financial statements may be
identified when audit work is performed for the year-end audit, which could
result in significant differences from this preliminary unaudited financial
information.
About Giant Interactive Group Inc.
Giant Interactive Group Inc. (NYSE: GA) is one ofChina's leading online
game developers and operators in terms of revenues, focusing on massively
multiplayer online role playing games. Giant's first game, ZT Online, was
voted the most popular online game inChina in 2006 according to the
International Data Corporation. The Company's second game, Giant Online,
entered into open beta testing on March 28, 2008. Giant has two additional
online games that it intends to launch, including King of Kings III and Empire
of Sports. Giant has built a nationwide distribution network to sell the
prepaid game cards and game points required to play its games, which as of
March 31, 2008 consisted of over 270 distributors, and reached over 116,500
retail outlets, including internet cafes, software stores, supermarkets,
bookstores, newspaper stands, and convenience stores located throughoutChina.
For more information, please visit Giant Interactive Group on the web at
http://www.ga-me.com .
Safe Harbor Statement
Statements in this release contain "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 terminology such as "will," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates" and
similar statements and among others, include our anticipated revenue for the
second quarter 2008, our continued efforts to successfully develop and launch
our new games and expand our distribution and marketing network, anticipated
success of our ZT Online expansion packs, our ability to successfully operate
ZT Online PTP and Giant Online, commercially launch and operate King of Kings
III and Empire of Sports and our ability to continue to grow our business and
build long-term shareholder value. These forward-looking statements are not
historical facts but instead represent only our belief regarding future events,
many of which, by their nature, are inherently uncertain and outside of our
control. Our actual results and financial condition and other circumstances
may differ, possibly materially, from the anticipated results and financial
condition indicated in these forward-looking statements. Among the factors
that could cause our actual results to differ from what we currently
anticipate may include our ability to develop, purchase or license additional
online games that are attractive to our players, our ability to develop and
successfully launch expansion packs for our online games, our dependence on
one online game, which currently accounts for the majority of our historical
net revenues, our ability to respond to competition, our need to implement and
maintain effective internal control over financial reporting, our limited
operating history and unproven long-term potential of our online game business
model and our uncertainties with respect to the PRC legal and regulatory
environments. The financial information contained in this release should be
read in conjunction with the consolidated financial statements and notes
thereto included in our prospectus filed with the Securities and Exchange
Commission on November 1, 2007, and is available on the Securities and
Exchange Commission's website at http://www.sec.gov . For additional
information on these and other important factors that could adversely affect
our business, financial condition, results of operations and prospects, see
"Risk Factors" beginning on page 12 of our prospectus. Our actual results of
operations for the first quarter 2008 are not necessarily indicative of our
operating results for any future periods. Any projections in this release are
based on limited information currently available to us, which is subject to
change. Although such projections and the factors influencing them will likely
change, we undertake no obligation to update or revise these forward-looking
statements, whether as a result of new information, future events or otherwise,
after the date of this press release. Such information speaks only as of the
date of this release.
For more information, please contact:
Investor Contact:
Eric He, CFO
Giant Interactive Group Inc.
Tel: +86-21-6451-5001
Investor Relations (US):
Mahmoud Siddig, Director
Taylor Rafferty
Tel: +1-212-889-4350
Investor Relations (HK):
Ruby Yim, Managing Director
Taylor Rafferty
Tel: +852-3196-3712
Media Contact:
John Dudzinsky, Director
Taylor Rafferty
Tel: +1-212-889-4350
GIANT INTERACTIVE GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
Unaudited Unaudited Unaudited Unaudited
March 31 December 31 March 31 March 31
2007 2007 2008 2008
(RMB) (RMB) (RMB) (US$)
ASSETS
Current assets:
Cash and cash
equivalents 204,992,082 7,295,469,843 5,834,952,767 832,138,158
Prepayments and
other current
assets 16,708,418 40,721,896 53,169,914 7,582,703
Due from related
parties 504,481,987 6,005,661 6,329,175 902,621
Inventories 364,351 385,876 633,452 90,338
Deferred tax
assets 8,806,103 30,911,888 44,510,716 6,347,792
Short-term
investments -- -- 210,570,000 30,029,949
Total current
assets 735,352,941 7,373,495,164 6,150,166,024 877,091,561
Non-current
assets:
Property and
equipment, net 55,293,625 127,631,269 139,395,182 19,879,518
Intangible
assets, net 4,358,068 86,589,305 86,544,887 12,342,397
Long-term
deposits 10,600 7,600 -- --
Total
non-current
assets 59,662,293 214,228,174 225,940,069 32,221,915
Total assets 795,015,234 7,587,723,338 6,376,106,093 909,313,476
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Current
liabilities:
Payables and
accrued
expenses 42,822,139 191,301,964 71,648,711 10,218,014
Due to a related
party 2,472,574 13,710,697 -- --
Tax payable -- -- 52,872,231 7,540,250
Advance from
distributors 55,310,264 127,805,262 74,783,911 10,665,133
Deferred revenue 165,242,528 324,970,643 399,712,872 57,004,117
Dividends
payable -- 593,498,287 571,075,107 81,442,542
Unrecognized tax
benefits 8,806,103 30,911,888 30,911,888 4,408,427
Total current
liabilities 274,653,608 1,282,198,741 1,201,004,720 171,278,483
Non-current
liabilities:
Long-term loans 15,916,448 -- -- --
Total
liabilities 290,570,056 1,282,198,741 1,201,004,720 171,278,483
Commitments and
contingencies
Shareholders'
equity
Ordinary shares
(par value
US$0.0000002 per
share; 258,670,626
shares issued
and 257,241,526
shares outstanding
at December 31, 2007
and 258,670,626
shares issued
and 239,757,426
shares outstanding
at March 31, 2008) 318 411 411 59
Additional
paid-in capital 52,755,587 5,928,533,055 5,940,697,073 847,218,634
Statutory
reserves 43,890,273 43,890,273 43,890,273 6,259,309
Accumulated
other
comprehensive
income 297,207 (51,781,427) (212,947,338) (30,368,987)
Retained
earnings 407,501,793 511,416,766 850,068,974 121,230,601
Treasury stock -- (126,534,481) (1,446,608,020)(206,304,623)
Total
shareholders'
equity 504,445,178 6,305,524,597 5,175,101,373 738,034,993
Total
liabilities and
shareholders'
equity 795,015,234 7,587,723,338 6,376,106,093 909,313,476
GIANT INTERACTIVE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
Three months ended
March 31 December 31 March 31 March 31
2007 2007 2008 2008
(RMB) (RMB) (RMB) (US$)
Net revenue:
Online game 315,342,388 433,573,662 470,222,925 67,059,744
Overseas licensing
revenue 1,882,392 1,268,676 1,367,439 195,014
Total net revenue 317,224,780 434,842,338 471,590,364 67,254,758
Cost of services (27,984,994) (62,034,460) (50,799,032) (7,244,585)
Gross profit 289,239,786 372,807,878 420,791,332 60,010,173
Operating
(expenses) income:
Research and
product
development
expenses (3,338,872) (13,061,962) (11,828,715) (1,686,925)
Sales and marketing
expenses (27,424,585) (57,958,676) (64,871,743) (9,251,532)
General and
administrative
expenses (10,913,804) (22,913,536) (28,114,689) (4,009,510)
Government
financial
incentives -- -- 5,000,000 713,063
Total operating
expenses (41,677,261) (93,934,174) (99,815,147)(14,234,904)
Income from
operations 247,562,525 278,873,704 320,976,185 45,775,269
Interest income 492,838 51,948,504 53,763,142 7,667,305
Other income 25,830 420,217 2,602,967 371,216
Investment income -- 2,562,000 1,171,241 167,034
Income before
income tax
expenses 248,081,193 333,804,425 378,513,535 53,980,824
Income tax expenses -- -- (39,861,327) (5,684,730)
Net income 248,081,193 333,804,425 338,652,208 48,296,094
Other comprehensive
income
Foreign currency
translation 151,302 (54,178,614) (161,165,911)(22,984,300)
Comprehensive
income 248,232,495 279,625,811 177,486,297 25,311,794
Earnings per share:
Basic 1.24 1.39 1.38 0.20
Diluted 1.24 1.33 1.33 0.19
Weighted average
ordinary shares:
Basic 200,000,000 240,379,692 244,556,746 244,556,746
Diluted 200,589,139 250,120,341 253,845,788 253,845,788
SOURCE Giant Interactive Group Inc.
Copyright © 2008, PRNewswire
Copyright © 2008, NewsBlaze,
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