Second Quarter 2009 Highlights:
-- Net revenue was RMB364.1 million (US$53.3 million), compared to
RMB373.5 million in the first quarter 2009 and RMB504.8 million in the
second quarter 2008.
-- Gross profit was RMB309.5 million (US$45.3 million), compared to
RMB313.9 million in the first quarter 2009 and RMB447.0 million in the
second quarter 2008. Gross profit margin for the second quarter 2009
was 85.0%.
-- Net income attributable to the Company's shareholders was
RMB231.9 million (US$34.0 million), compared to RMB231.9 million in the
first quarter 2009 and RMB350.6 million in the second quarter 2008. The
margin of net income attributable to the Company's shareholders for the
second quarter 2009 was 63.7%.
-- Basic and diluted earnings per American Depositary Share ("ADS") were
RMB1.03 (US$0.15) and RMB0.99 (US$0.15), respectively, compared to
basic and diluted earnings per ADS of RMB1.45 and RMB1.40, respectively,
for the second quarter 2008, and basic and diluted earnings per ADS of
RMB1.03 and RMB0.99, respectively, for the first quarter 2009. Each ADS
represents one ordinary share.
-- Non-GAAP net income attributable to the Company's shareholders
excluding non-cash share-based compensation was RMB239.8 million
(US$35.1 million), compared to RMB240.2 million in the first quarter
2009 and RMB362.5 million in the second quarter 2008. The margin of
non-GAAP net income attributable to the Company's shareholders
excluding non-cash share-based compensation was 65.9%.
-- Basic and diluted non-GAAP earnings excluding non-cash share-based
compensation per ADS were RMB1.06 (US$0.16) and RMB1.03 (US$0.15),
respectively, compared to basic and diluted non-GAAP earnings per ADS
of RMB1.50 and RMB1.45, respectively, for the second quarter 2008, and
basic and diluted non-GAAP earnings per ADS of RMB1.06 and RMB1.03,
respectively, for the first quarter 2009.
-- Active Paying Accounts ("APA") for online games(1) in the second
quarter 2009 reached 1,204,000, a decrease of 2.6% from the first
quarter 2009 and a decrease of 31.6% from the second quarter 2008.
-- Average Revenue Per User ("ARPU") for online games(1) was RMB300.0, an
increase of 0.1% from the first quarter 2009 and an increase of 4.9%
from the second quarter 2008.
-- Average Concurrent Users ("ACU") for online games(1) was 453,000, a
decrease of 14.7% from the first quarter 2009 and a decrease of 26.9%
over the second quarter 2008.
-- Peak Concurrent Users ("PCU") for online games(1) was 1,440,000, a
decrease of 8.3% from the first quarter 2009 and a decrease of 38.4%
from the second quarter 2008.
Mr.
"As we work to extend the life cycle of the ZT Online series via new updates and expansion packs, we are also actively pursuing exciting new opportunities to broaden our overall game portfolio. Throughout the second quarter, we began reorganizing our R&D teams according to their respective projects and tasks, in an effort to raise their creativity and entrepreneurship. Efficiency has improved and our R&D talents have been continuously focusing on and testing new internally developed games, such as King of Kings III, ZT Online II, My Sweetie and XT Online. Within one year, we hope to introduce eight new games into the marketplace.
"Despite near term challenges, we believe our robust development pipeline, focused and strong R&D capabilities, extensive sales and marketing network, and healthy balance sheet help us to remain well positioned to drive long-term growth."
Second Quarter 2009 Unaudited Financial Results
Net Revenue. Net revenue for the second quarter 2009 was
Revenue from online games(1) totaled
ACU for online games(1) in the second quarter 2009 was 453,000,
representing a 14.7% sequential decrease and a 26.9% decrease over the second
quarter 2008. PCU for online games(1) in the second quarter 2009 was 1,440,000,
representing a 8.3% sequential decrease and a 38.4% decrease over the second
quarter 2008. ACU and PCU trended down pending introduction and acceptance of
our pipeline games and as we reduced the number and scale of our marketing
campaigns during the quarter. ARPU for online games(1) in the second quarter
2009 increased 0.1% sequentially and 4.9% year-over-year to
Cost of Services. Cost of services was
Gross Profit and Gross Margin. Gross profit for the second quarter 2009
was
Operating Expenses. Total operating expenses for the second quarter 2009
were
Research and product development expenses (R&D) for the second quarter
2009 decreased 10.2% sequentially to
Sales and marketing expenses were
General and administrative expenses (G&A) for the second quarter 2009 were
Financial Incentive. The financial incentive received in the second
quarter 2009, which represents a sales tax refund from the municipal
government, was
Interest Income. Interest income for the second quarter 2009 was
Income Tax. Income tax expense for the second quarter 2009 was
Net Income Attributable to the Company's shareholders. Net income
attributable to the Company's shareholders for the second quarter 2009 was
Cash, Cash Equivalents and Short-Term Investments. As of
Share Repurchase Program. In
Business Highlights and Outlook
ZT Online -- Giant has continued to introduce new features and activities
for ZT Online. In July, an expansion pack called Parenthood Simulation began
being tested and has since been gaining traction. ZT Online Classic Edition
continues to perform steadily, and will be enhanced via its own expansion pack
called Unparalleled Martial Arts. The Company is also developing a new ZT
Online version called ZT Online Green Edition. Green Edition will be operated
concurrently and independently of the existing ZT Online games, and will
employ an enhanced in-game economy to benefit lower spending and non-paying
accounts, along with additional maps, skills, items, and other gameplay
features. In
Giant Online -- In the second quarter of 2009, the Company released a feature-set for Giant Online that encourages exploration and the pursuit of additional equipment. Giant is currently unlocking the next military rank for players to achieve, and this feature will be available beginning in the third quarter 2009.
King of Kings III -- King of Kings III is a 3D free-to-play medieval magical MMORPG. During the second quarter 2009, Giant received feedback from gamers as a result of the limited closed beta testing of the game. In July, the Company launched the second phase of the closed beta testing and is now fine-tuning the game in accordance with the initial feedback, in preparation for the closed beta testing expected to be launched in the fourth quarter 2009.
ZT Online II -- The sequel to the Company's flagship game will be differentiated by new and improved 2D graphics. New features and a revised economic system will level the playing field for lower spending gamers, with the aim of attracting more users. ZT Online II is slated to undergo engineering testing towards the end of 2009.
Dragon Soul -- Dragon Soul is a 3D ancient Chinese PK MMORPG developed by
Giant's internal R&D team based in
The Golden Land - The Golden Land is a medieval strategy webgame. During the third quarter Giant began engineering testing and optimizing the client-side and server-side engines, as well as with the questing system. The Company will continue to adjust and optimize the balancing of the game. The Golden Land is expected to enter limited closed beta testing in the third quarter and closed beta testing in the fourth quarter 2009.
Win@Giant Program --
-- My Sweetie is a 2.5D free-to-play casual MMORPG that allows players to create virtual characters and raise virtual pets on their PC desktops, and interact online with other virtual pet-owners. During the second quarter 2009, Giant overhauled My Sweetie's website, introduced maps for higher level players, and improved the general gaming experience. The game is currently under closed beta testing and will continue to be enhanced.
-- XT Online is a 2.5D ancient Chinese martial arts MMORPG. Users practice different schools/styles of martial arts to become masters, with a focus on brotherhood and trust-building among other martial artists. During the second quarter, Giant worked on enriching the content, improving the artwork, and patching up various functionalities. XT Online is currently expected to begin limited closed beta testing in the third quarter and closed beta testing in the fourth quarter 2009.
Empire of Sports -- Empire of Sports is a 3D MMORPG game featuring a wide range of sporting events. During the second quarter 2009, Giant began limited engineering testing with gamers and is now revising the economic system, quantitative balancing, and improving the user interface.
Third Quarter 2009 Guidance -- Based on the current estimates, Giant
expects to generate total net revenue for the third quarter 2009 in the range
of
Conference Call
Giant's senior management will host a conference call on
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
Use of Non-GAAP Financial Measures
Giant has reported net income attributable to the Company's shareholders for the period indicated below 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
June 30, March 31, June 30, June 30,
2008 2009 2009 2009
(RMB) (RMB) (RMB) (US$)
GAAP net income
attributable to the
Company's
shareholders: 350,581,570 231,891,563 231,900,506 33,952,228
Share-based
compensation 11,880,964 8,328,351 7,896,476 1,156,112
Non-GAAP net income
attributable to the
Company's
shareholders: 362,462,534 240,219,914 239,796,982 35,108,340
Non-GAAP earnings per
share:
Basic 1.50 1.06 1.06 0.16
Diluted 1.45 1.03 1.03 0.15
Weighted average
ordinary shares:
Basic 241,522,046 225,953,673 225,962,544 225,962,544
Diluted 250,669,716 233,704,160 233,923,536 233,923,536
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is preliminary and subject to adjustments. Adjustments to the financial statements may be identified when audit work is performed for the year-end audit, which could result in significant differences from this preliminary unaudited financial information.
About Giant Interactive Group Inc.
Giant Interactive Group Inc. (NYSE: GA) is a leading online game developer
and operator in
Safe Harbor Statement
Statements in this release contain "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and as defined in the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by terminology such as "will," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates" and
similar statements and among others, include our estimated total net revenues
for the third quarter of 2009, the ability of ZT Online to attract players and
extend its life cycle with the expansion pack introduced in
(1) Online games include ZT Online, ZT Online PTP, ZT Online Classic
Edition, and Giant Online.
GIANT INTERACTIVE GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
Unaudited Unaudited Unaudited Unaudited
June 30, March 31, June 30, June 30,
2008 2009 2009 2009
(RMB) (RMB) (RMB) (US$)
ASSETS
Current
assets:
Cash and
cash
equivalents 1,834,175,667 2,140,894,601 2,256,439,481 330,362,139
Prepayments
and other
current
assets 91,577,935 50,713,103 50,845,363 7,444,198
Accounts
receivable -- 614,094 1,257,511 184,110
Due from
related
parties 6,744,530 -- -- --
Inventories 1,163,390 903,188 832,660 121,909
Deferred tax
assets 68,707,325 77,818,007 70,227,540 10,281,916
Short-term
investments 3,895,399,859 3,070,208,096 2,777,975,000 406,719,423
Available-
for-sale
investment -- -- 35,978,013 5,267,490
Secured
promissory
note 34,295,500 -- -- --
Total
current
assets 5,932,064,206 5,341,151,089 5,193,555,568 760,381,185
Non-current
assets:
Property and
equipment,
net 180,565,890 207,988,660 200,573,072 29,365,622
Intangible
assets, net 87,576,747 98,747,823 110,406,132 16,164,407
Goodwill -- -- 6,224,587 911,333
Available-
for-sale
investment -- 460,968,657 444,341,125 65,055,361
Deferred tax
assets -- 6,762,138 7,942,688 1,162,878
Other assets -- -- 85,100,136 12,459,392
Total non-
current
assets 268,142,637 774,467,278 854,587,740 125,118,993
Total assets 6,200,206,843 6,115,618,367 6,048,143,308 885,500,178
LIABILITIES
AND EQUITY
Current
liabilities:
Payables and
accrued
expenses 159,717,408 68,380,299 112,112,791 16,414,279
Tax payable 65,988,462 17,025,092 3,089,732 452,363
Advance from
distributors 58,990,575 66,891,012 63,696,908 9,325,775
Deferred
revenue 419,776,021 403,920,349 345,580,565 50,595,966
Dividends
payable -- 277,591,293 -- --
Deferred tax
liability -- -- 300,367 43,976
Unrecognized
tax
benefits 30,911,888 5,275,364 8,761,075 1,282,697
Total
current
liabilities 735,384,354 839,083,409 533,541,438 78,115,056
Total
liabilities 735,384,354 839,083,409 533,541,438 78,115,056
Commitments
and
contingencies
Shareholders'
equity
Ordinary shares
(par value
US$0.0000002
per share;
500,000,000
shares
authorized
as at June 30,
2008, March
31, 2009 and
June 30,
2009
respectively;
261,110,626
shares issued
and 241,899,526
shares
outstanding
at June 30,
2008,
263,110,626
shares issued
and
225,599,541
shares
outstanding
at March
31, 2009,
263,110,626
shares issued
and
226,441,541
shares
outstanding
at June
30, 2009) 416 417 417 61
Additional
paid-in
capital 5,962,424,775 5,996,197,965 6,016,036,430 880,799,454
Statutory
reserves 43,890,273 43,890,273 43,890,273 6,425,913
Accumulated
other
comprehensive
income (295,535,499) (166,005,942) (182,407,837) (26,706,076)
Retained
earnings 1,200,650,544 1,579,244,278 1,811,144,784 265,167,167
Treasury
stock (1,446,608,020) (2,176,792,033) (2,176,792,033) (318,701,068)
Total
shareholders'
equity 5,464,822,489 5,276,534,958 5,511,872,034 806,985,451
Non
controlling
interests -- -- 2,729,836 399,671
Total equity 5,464,822,489 5,276,534,958 5,514,601,870 807,385,122
Total
liabilities
and equity 6,200,206,843 6,115,618,367 6,048,143,308 885,500,178
GIANT INTERACTIVE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
Three months ended
June 30, March 31, June 30, June 30,
2008 2009 2009 2009
(RMB) (RMB) (RMB) (US$)
Net revenue:
Online game 503,270,285 370,540,346 361,187,903 52,881,014
Overseas licensing
revenue 963,175 2,890,463 2,886,593 422,622
Other revenue, net 534,849 89,710 15,108 2,212
Total net revenue 504,768,309 373,520,519 364,089,604 53,305,848
Cost of services (57,760,390) (59,649,488) (54,542,858) (7,985,543)
Gross profit 447,007,919 313,871,031 309,546,746 45,320,305
Operating (expenses)
income:
Research and product
development expenses (19,879,930) (32,277,980) (29,000,214) (4,245,881)
Sales and marketing
expenses (83,589,894) (30,248,358) (24,154,679) (3,536,453)
General and
administrative
expenses (30,340,315) (29,412,868) (31,943,066) (4,676,739)
Government financial
incentives 15,000,000 10,000,000 10,000,000 1,464,086
Total operating
expenses (118,810,139) (81,939,206) (75,097,959) (10,994,987)
Income from
operations 328,197,780 231,931,825 234,448,787 34,325,318
Interest income 43,382,988 26,067,320 22,960,826 3,361,662
Other (expense)
income (3,537,388) 5,732,693 343,347 50,269
Investment loss -- (5,970,898) -- --
Income before income
tax expenses 368,043,380 257,760,940 257,752,960 37,737,249
Income tax expenses (17,461,810) (25,869,377) (25,880,718) (3,789,160)
Net income 350,581,570 231,891,563 231,872,242 33,948,089
Loss attributable to
non controlling
interests -- -- 28,264 4,138
Net income
attributable to the
Company's
shareholders 350,581,570 231,891,563 231,900,506 33,952,227
Other comprehensive
income (loss)
Unrealized holding
gain (loss) -- 10,961,804 (14,808,606) (2,168,107)
Foreign currency
translation (82,588,161) (9,730,918) (1,593,289) (233,271)
Total other
comprehensive loss
(income) (82,588,161) 1,230,886 (16,401,895) (2,401,378)
Comprehensive income 267,993,409 233,122,449 215,498,611 31,550,849
Earnings per share:
Basic 1.45 1.03 1.03 0.15
Diluted 1.40 0.99 0.99 0.15
Weighted average
ordinary shares:
Basic 241,522,046 225,953,673 225,962,544 225,962,544
Diluted 250,669,716 233,704,160 233,923,536 233,923,536
For further information, please contact:
Investor Contact:
Giant Interactive Group Inc.
Rich Chiang, IR Manager
Tel: +86-21-6451-1258
Investor Relations (US):
Taylor Rafferty
Mahmoud Siddig, Director
Tel: +1-212-889-4350
Investor Relations (HK):
Taylor Rafferty
Ruby Yim, Managing Director
Tel: +852-3196-3712
Media Contact:
Taylor Rafferty
Michael Henson, Director
Tel: +1-212-889-4350
SOURCE Giant Interactive Group Inc.