TechWeb

Shanda Reports First Quarter 2011 Unaudited Results

Jun 01, 2011 (08:06 PM EDT)
URL: http://www.techweb.com/show-press-release/X848528/shanda-reports-first-quarter-2011-unaudited-results.html

- 1Q11 Net Revenues Increased 25% YoY to US$248.7 Million

- Non-GAAP Diluted Earnings per ADS were US$0.36

SHANGHAI, June 1, 2011 /PRNewswire-Asia/ -- Shanda Interactive Entertainment Limited (NasdaqGS: SNDA), or Shanda, a leading interactive entertainment media company in China, today announced its unaudited consolidated financial results for the first quarter ended March 31, 2011.

First Quarter 2011 Highlights

  • Consolidated net revenues increased 7% quarter-over-quarter and increased 25% year-over-year to RMB1,630.9 million (US$248.7 million).
  • Shanda Games' revenues increased 9% quarter-over-quarter and increased 10% year-over-year to RMB1,252.6 million (US$191.0 million).
  • Shanda Online's revenues increased 12% quarter-over-quarter and increased 19% year-over-year to RMB301.3 million (US$46.0 million).
  • Other revenues increased 3% quarter-over-quarter and increased 129% year-over-year to RMB406.6 million (US$62.0 million).
  • Non-GAAP operating income was RMB196.1 million (US$29.9 million), compared with RMB181.2 million in the fourth quarter of 2010 and RMB386.6 million in the first quarter of 2010.
  • Non-GAAP net income attributable to ordinary shareholders was RMB133.5 million (US$20.5million), compared with RMB174.4 million in the fourth quarter of 2010 and RMB264.7 million in the first quarter of 2010. Non-GAAP earnings per diluted ADS were RMB2.32 (US$0.36), compared with RMB3.02 in the fourth quarter of 2010 and RMB3.86 in the first quarter of 2010.

"We continue to step up our efforts to expand the breadth and depth of our content offerings while enhance our integrated service platform in the first quarter," said Tianqiao Chen, Chairman, Chief Executive Officer and President of Shanda. "This will help reinforce our ability to aggregate and distribute interactive entertainment, catering to the demands of an increasingly diverse user base. We believe our strategic initiatives and investments together with our continuous focus on technological improvements provide us with the agility required to adapt to the rapidly changing industry landscape as we continue towards our goal of becoming a leading global interactive entertainment group."

Conference Call and Webcast Notice


Shanda will host a conference call at 10:30 a.m. on June 2, 2011 Beijing/Hong Kong time (10:30 p.m. on June 1, 2011 Eastern Time), to present an overview of the Company's financial performance and business operations. A live webcast of the conference call will be available on the Company's corporate website at http://www.snda.com.

First Quarter 2011 Financial Results

Net Revenues. Net revenues were RMB1,630.9 million (US$248.7 million), representing an increase of 7% from RMB1,530.1 million in the fourth quarter of 2010 and an increase of 25% from RMB1,299.6 million in the first quarter of 2010. The quarter-over-quarter increase was primarily driven by an increase in revenues from Shanda Games and Shanda Online.

Shanda Games' revenues, including MMORPGs and advanced casual games, were RMB1,252.6 million (US$191.0 million), representing an increase of 9% from RMB1,152.5 million in the fourth quarter of 2010 and an increase of 10% from RMB1,143.2 million in the first quarter of 2010.

Shanda Online's revenues were RMB301.3 million (US$46.0 million), representing an increase of 12% from RMB267.9 million in the fourth quarter of 2010 and an increase of 19% from RMB253.1 million in the first quarter of 2010.

Other revenues, including Ku6 (formerly named Hurray! Holding Co., Ltd.), Cloudary (formerly known as Shanda Literature Corporation), social network games, and other businesses were RMB406.6 million (US$62.0 million), representing an increase of 3% from RMB393.3 million in the fourth quarter of 2010 and an increase of 129% from RMB177.5 million in the first quarter of 2010.

Gross Profit. Consolidated gross profit was RMB950.0 million (US$144.9 million), representing an increase of 3% from RMB925.6 million in the fourth quarter of 2010 and an increase of 12% from RMB845.1 million in the first quarter of 2010. Gross margin was 58.3% in the first quarter of 2011, compared with 60.5% in the fourth quarter of 2010 and 65.0% in the first quarter of 2010.

Shanda Games gross profit was RMB761.2 million (US$116.0 million), representing an increase of 9% from RMB701.0 million in the fourth quarter of 2010 and an increase of 13% from RMB674.0 million in the first quarter of 2010. Shanda Games gross margin was 60.8% in the first quarter of 2011, compared with 60.8% in the fourth quarter of 2010 and 59.0% in the first quarter of 2010.

Shanda Online gross profit was RMB218.0 million (US$33.3 million), representing an increase of 8% from RMB201.6 million in the fourth quarter of 2010 and an increase of 7% from RMB203.4 million in the first quarter of 2010. Shanda Online gross margin was 72.3% in the first quarter of 2011, compared with 75.3% in the fourth quarter of 2010 and 80.4% in the first quarter of 2010.

Other businesses gross profit was RMB90.4 million (US$13.9 million), representing an increase of 2% from RMB88.4 million in the fourth quarter of 2010 and an increase of 351% from RMB20.0 million in the first quarter of 2010. Other businesses' gross margin was 22.2% in the first quarter of 2011, compared with 22.5% in the fourth quarter of 2010 and 11.3% in the first quarter of 2010.

Operating Income. Operating income was RMB148.1 million (US$22.6 million), compared with RMB132.5 million in the fourth quarter of 2010 and RMB343.8 million in the first quarter of 2010. Operating margin was 9.1% in the first quarter of 2011, compared with 8.7% in the fourth quarter of 2010 and 26.5% in the first quarter of 2010.

Non-GAAP Operating Income. Non-GAAP operating income was RMB196.1 million (US$29.9 million), compared with RMB181.2 million in the fourth quarter of 2010 and RMB386.6 million in the first quarter of 2010. Non-GAAP operating margin was 12.0% in the first quarter of 2011, compared with 11.8% in the fourth quarter of 2010 and 29.7% in the first quarter of 2010.

Share-based compensation was RMB48.0 million (US$7.3 million) in the first quarter of 2011, compared with RMB48.7 million in the fourth quarter of 2010 and RMB42.8 million in the first quarter of 2010.

Income Tax Expense. Income tax expense was RMB94.7 million (US$14.4 million), compared with RMB118.7 million in the fourth quarter of 2010 and RMB123.7 million in the first quarter of 2010.

Net Income from Continuing Operations. Net income from continuing operations was RMB129.7 million (US$19.9 million), compared with RMB179.7 million in the fourth quarter of 2010 and RMB275.2 million in the first quarter of 2010.

Net Income from Discontinued Operations. Net income from discontinued operations reflects the operating results of Beijing Huayi Brothers Music Co., Ltd, which Hurray! (now known as Ku6 Media Co., Ltd.), sold to Huayi Brothers Media Corporation in May 2010.

There was no income or loss from discontinued operations in the first quarter of 2011 and fourth quarter of 2010. The net loss from discontinued operations in the first quarter of 2010 was RMB0.9 million.

Net Income Attributable to Ordinary Shareholders. Net income was RMB85.5 million (US$13.2 million), compared with RMB125.7 million in the fourth quarter of 2010 and RMB221.9 million in the first quarter of 2010. Earnings per diluted ADS in the first quarter of 2011 were RMB1.48 (US$0.22), compared with RMB2.18 in the fourth quarter of 2010 and RMB3.22 in the first quarter of 2010.

Non-GAAP Net Income Attributable to Ordinary Shareholders. Non-GAAP net income was RMB133.5 million (US$20.5 million), compared with RMB174.4 million in the fourth quarter of 2010 and RMB264.7 million in the first quarter of 2010. Non-GAAP earnings per diluted ADS in the first quarter of 2011 were RMB2.32 (US$0.36), compared with RMB3.02 in the fourth quarter of 2010 and RMB3.86 in the first quarter of 2010.

Share Repurchase Program. During the first quarter of 2011, Shanda repurchased an aggregate of 151,793 ADSs.

Recent Business Highlights

On April 1, 2011, Shanda announced that it agreed to invest US$100,000,000 in Ku6 Media Company, Ltd., a leader in online video portal operations in China, in the form of ordinary shares and senior convertible bonds. The transaction is subject to the approval of the shareholders of Ku6.

On April 7, 2011, Shanda announced the appointment of Mr. Tuoc Luong as Co-Chief Executive Officer of Shanda Online Holdings Limited, a wholly-owned subsidiary of Shanda, and the Head of Shanda Innovation Institute America. Mr. Luong has more than two decades of software engineering and product development management experience.

On May 26, 2011, Shanda announced that Shanghai Shengfutong Electronic Business Co., Ltd. ("ShengPay"), a wholly owned subsidiary of Shanda, was amongst China's first non-financial institutions to receive a payment business license issued by the People's Bank of China.

*Please visit Shanda's website (http://www.snda.com) for details about these and other announcements.

1. The conversion of Renminbi (RMB) into U.S. dollars in this release is based on RMB6.5564 to US$1.00 as published by the People's Bank of China on March 31, 2011. The percentages stated in this press release are calculated based on the RMB amounts.

Note to the Financial Information

The unaudited financial information disclosed above is preliminary. The audit of the financial statements and related notes to be included in the Company's annual report on Form 20-F for the year ended December 31, 2010 is still in progress. Adjustments to these preliminary financial statements may be identified during the audit, which could result in significant differences from this preliminary unaudited financial information.

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 includes non-GAAP financial measures of adjusted operating income, adjusted net income and adjusted earnings per ADS, each of which is adjusted to exclude share-based compensation. The Company believes these non-GAAP financial measures are important to help investors understand the Company's current financial performance and future prospects, compare business trends among different reporting periods on a consistent basis and assess the Company's core operating results. 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. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see the financial statements included with this press release.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent only the Company's beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that the Company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Statements in this announcement that are not historical facts, including but not limited to statements regarding the continuous growth of the Company, the success of any acquisitions or investments by the Company or any subsidiaries, the introduction of expansion packs to existing titles, the introduction and timing of new MMORPG game titles and the introduction of new casual game titles, the success of our online literature platform, the success of our online video operations, the signing and development of successful artist for our music business, and the success of our wireless value added business, represent only the Company's current expectations, assumptions, estimates and projections and are forward-looking statements.  Important risks and uncertainties that could cause the Company's actual results to be materially different from expectations include but are not limited to the risk that there are delays in the localization and/or development of the MMORPGs and casual games to be released in 2011, the risk that such MMORPGs and casual games are not well received by users in China, the risk that the games fail to be commercialized or the commercialized results fail to meet the expectations of end users, the risk that our contract writers do not deliver appealing literature products, the risk that our online video website fails to attract advertisers or content providers, the risk that we fail to sign popular music artists or fail to continue to successfully promote our existing artists, the risk that the laws and regulations in the PRC continue to prohibit or restrict offering of wireless valued added products, the risk that the Company fails to deliver continuous growth in 2011, and the risks set forth in the Company's filings with the U.S. Securities and Exchange Commission, including the Company's annual report on Form 20-F. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, except as required under applicable laws.

About Shanda Interactive Entertainment Limited

Shanda Interactive Entertainment Limited (Nasdaq: SNDA) ("Shanda") is a leading interactive entertainment media company in China, offering a broad array of online entertainment content on an integrated service platform to a large and diverse user base. Shanda offers its high quality entertainment content through its subsidiaries and affiliates, including Shanda Games, Cloudary, Ku6 Media, and various other online community and business units. The broad variety of content ranges from massively multi-player online role-playing games (MMORPGs) and advanced casual games, to social network games, e-sports, literature, film, television, music, and video etc. By providing a centralized platform through which Shanda can deliver its own content as well as third-party content, Shanda allows its users to interact with thousands of other users while enjoying some of the best entertainment content available in China today. Shanda: "Interaction enriches your life". For more information about Shanda, please visit http://www.snda.com.

Contact

Shanda Interactive Entertainment Limited

Dahlia Wei, IR Associate Director

Elyse Liao, IR Senior Manager

Phone: +86-21-6058-8688 (Shanghai)

Email: IR@snda.com


Christensen Investor Relations

China:

Christian Arnell

Phone: +86-10-5826-4939

Email: carnell@christensenir.com


United States:

Linda Bergkamp

Phone: +1-480-614-3004

Email: lbergkamp@ChristensenIR.com




SHANDA INTERACTIVE ENTERTAINMENT LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)








As of December 31, 2010


     As of March 31, 2011








RMB


RMB


US$

ASSETS







Current assets:






Cash and cash equivalents

5,550.2


5,709.3


870.8

Restricted cash

5.4


4.5


0.7

Short-term investments

2,257.9


2,066.1


315.1

Marketable securities

16.9


18.3


2.8

Accounts receivable

260.3


318.9


48.6

Inventories

130.8


146.1


22.3

Due from related parties

0.0


0.1


0.0

Deferred licensing fees and related costs

48.3


57.7


8.8

Prepayments and other current assets

425.7


420.6


64.1

Deferre    Deferred tax assets

115.6


132.4


20.2

Total current assets

8,811.1


8,874.0


1,353.4








Time deposit with maturity over one year

1,215.3


1,117.2


170.4

Investment in equity and cost method investees

237.5


242.3


37.0

Investment in securities

41.6


57.6


8.8

Property, equipment and software

715.4


737.6


112.5

Intangible assets

2,020.3


1,962.2


299.3

Goodwill


1,142.9


1,142.5


174.3

Long-term deposits

62.8


63.0


9.6

Long-term prepayments

390.4


395.5


60.3

Long-term assets

235.6


507.5


77.4

Non-current deferred tax assets

19.8


21.1


3.2

Total assets


14,892.7


15,120.5


2,306.2








LIABILITIES AND EQUITY






Current liabilities:






Accounts payable

415.5


425.1


64.8

Licensing fees payable

246.9


225.5


34.4

Taxes payable

211.0


224.1


34.2

Deferred revenue

729.5


806.4


123.0

Due to related parties

3.1


3.0


0.5

Short term loan

0.0


524.6


80.0

Other payables and accruals

826.9


851.1


129.8

Deferred tax liabilities

92.7


93.9


14.3

Convertible debt within one year

1,052.8


521.5


79.5

Total current liabilities

3,578.4


3,675.2


560.5








Non-current deferred tax liabilities

391.2


380.6


58.1

Non-current income tax liabilities

9.4


9.4


1.4

Long-term liabilities

49.4


74.6


11.4

Non-current deferred revenue

76.3


68.5


10.4

Total liabilities

4,104.7


4,208.3


641.8







Redeemable non-controlling interests

25.3


26.0


4.0







Equity






Ordinary shares

9.8


9.8


1.5

Additional paid-in capital

6,976.8


6,941.9


1,058.7

Statutory reserves

207.6


207.6


31.7

Accumulated other comprehensive loss

(191.1)


(205.0)


(31.2)

Retained earnings

1,704.7


1,767.8


269.6

Total Shanda shareholder' equity

8,707.8


8,722.1


1,330.3

Non-controlling interests

2,054.9


2,164.1


330.1

Total equity

10,762.7


10,886.2


1,660.4

Total liabilities and shareholders' equity

14,892.7


15,120.5


2,306.2





SHANDA INTERACTIVE ENTERTAINMENT LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except for share and per share data)












For the three months period ended,



March 31,


December 31,


March 31,





2010(Adjusted) (1)


2010


2011

 

 



RMB


RMB


RMB


US$

Net revenues









Shanda Games


1,143.2


1,152.5


1,252.6


191.0

Shanda Online


253.1


267.9


301.3


46.0

Others


177.5


393.3


406.6


62.0

Elimination


(274.2)


(283.6)


(329.6)

 

(50.3)

Total


1,299.6


1,530.1


1,630.9

 

248.7










Cost of services









Shanda Games


(469.2)


(451.5)


(491.4)


(75.0)

Shanda Online


(49.7)


(66.3)


(83.3)


(12.7)

Others


(157.5)


(304.9)


(316.2)


(48.1)

Elimination


221.9


218.2


210.0

 

32.0

Total


(454.5)


(604.5)


(680.9)

 

(103.8)



 


 


 


 

Gross profit


 


 


 


 

Shanda Games


674.0


701.0


761.2


116.0

Shanda Online


203.4


201.6


218.0


33.3

Others


20.0


88.4


90.4


13.9

Elimination


(52.3)


(65.4)


(119.6)

 

(18.3)

Total overall gross profit margin


845.1


925.6


950.0

 

144.9





 


 


 

Operating expenses:




 


 


 

Product development


(131.7)


(221.8)


(246.8)


(37.6)

Sales and marketing


(141.7)


(246.3)


(221.6)


(33.8)

General and administrative


(227.9)


(325.0)


(333.5)

 

(50.9)

Total operating expenses


(501.3)


(793.1)


(801.9)

 

(122.3)










Income from operations


343.8


132.5


148.1


22.6










Interest (expenses)/income, net


2.8


19.5


35.2


5.4

Other income/(expenses), net


54.5


146.7


48.2

 

7.4

Income before income tax expenses, equity in loss of affiliates


401.1


298.7


231.5


35.4










Income tax expense


(123.7)


(118.7)


(94.7)


(14.4)

Equity in loss of affiliates


(2.2)


(0.3)


(7.1)

 

(1.1)

Net income from continuing operations


275.2


179.7


129.7

 

19.9










Discontinued operations:









Net income(loss) from discontinued operations, net of tax


(0.9)


-


-


-

Gain from disposal of discontinued operations, net of tax


-


-


-

 

-

Net income (loss) from discontinued operations, net of tax

(0.9)


-


-

 

-










Net income


274.3


179.7


129.7

 

19.9










Less: Net income attributable to non-controlling interests and redeemable preferred shares issued by a subsidiary

(52.4)


(54.0)


(44.2)

 

(6.7)

Net income attributable to Shanda Interactive Entertainment Limited

221.9


125.7


85.5

 

13.2





































Earnings per share:









Basic


1.66


1.11


0.76


0.12

Diluted


1.61


1.09


0.74


0.11

Earnings per ADS:









Basic


3.44


2.22


1.52


0.24

Diluted


3.22


2.18


1.48


0.22

Weighted average ordinary shares outstanding:


 







Basic


133,445,884


113,152,579


112,555,090


112,555,090

Diluted


137,415,075


115,450,646


115,404,101


115,404,101

Weighted average ADS outstanding:









Basic


66,722,942


56,576,290


56,277,545


56,277,545

Diluted


68,707,538


57,725,323


57,702,051


57,702,051










Reconciliation from Non-GAAP measures to GAAP measures:







Non-GAAP operating income


386.6


181.2


196.1


29.9

Share-based compensation cost


(42.8)


(48.7)


(48.0)

 

(7.3)

GAAP operating income


343.8


132.5


148.1

 

22.6










Non-GAAP net income attributable to Shanda Interactive Entertainment Limited

264.7


174.4


133.5


20.5

Share-based compensation cost


(42.8)


(48.7)


(48.0)

 

(7.3)

GAAP net income attributable to Shanda Interactive Entertainment Limited

221.9


125.7


85.5

 

13.2










Non-GAAP diluted earnings per ADS


3.86


3.02


2.32


0.36

Share-based compensation cost per ADS


(0.64)


(0.84)


(0.84)

 

(0.14)

GAAP diluted earnings per ADS


3.22


2.18


1.48

 

0.22

(1) Reflects the results from transaction of disposal of Huayi Music in accordance with the disclosure requirement of the U.S. GAAP.



SOURCE Shanda Interactive Entertainment Ltd.