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Executives

Xiangdong Zhang - CEO and Chief Producer

Richard Wei - CFO

Ellen Chiu - IR

Analysts

Timothy Chan - Morgan Stanley

Dick Wei - JPMorgan

Jiong Shao - Macquarie

Andy Yeung - Oppenheimer

Thomas Chong - BOCI

Alex Yao - Deutsche Bank

Jialong Shi - CLSA

Shanda Games Ltd. (GAME) Q3 2012 Earnings Conference Call November 26, 2012 8:00 PM ET

Operator

Good evening everyone. On behalf of Shanda Games I would like to welcome everyone to our 2012 Third Quarter Financial Results Conference Call. With me today are Mr. Xiangdong Zhang, our CEO and Mr. Richard Wei, our CFO.

Before we begin, I would like to remind you that management comments during the call will include forward-looking statements that are based on our current expectations, and are intended to qualify for the Safe Harbor liability for such statements established in the US Private Securities Litigation Reform Act of 1995. All statements are the statements of historical fact during the conference call are forward-looking statements, which are subject to significant risks and uncertainties.

Actual results may differ materially from those contained in the forward-looking statements. So you are please recommended to read the Safe Harbor statement and Shanda Games’ third quarter 2012 earnings release. In addition, please note for discussion purposes all numbers are translated in to US numbers based on exchange rate of 6.341 RMB per US dollar.

Now I would like to turn the call over to our CEO Mr. Xiangdong Zhang.

Xiangdong Zhang

Thank you and thank you all for joining us today. Our third quarter results were broadly in line with our guidance. We continue to work hard to improve our competitive position and focus on providing the better (inaudible) experience to our players. Our effort to create a greater content is expected to generate positive result and improve our pipeline.

Our commercial launches Age of Wushu and [Woool 2] has attracted new users, monthly active users or MAUs to 6.2% quarter-over-quarter, and will serve as the base for future revenue growth. Our ability to identify compelling opportunity and a leading franchise continue to enhance our portfolio as we develop a new generation of games for a wide range of players especially in our MMO segment which has traditionally been our area of strength.

At the same time, we have streamlined our business by consolidating supported centers to enhance product support and have incentivized our games [division] to create more appealing games. I would now like to reiterate our Triple-A credit, which continues to serve as our cornerstone for our business strategy.

The Triple-A stands for three critical elements that are comprised of All-Star, All-Region and All-Platform. Let me start with All-Star. Our All-Star strategies are focused on securing high quality game titles through in-house development, investment and acquisition by licensing and partnership. This has allowed us to create a device by game portfolio to attract new players into the virtual world.

During the third quarter, we continued to strengthen our two franchises Mir II and Woool. We still run meaningful innovations and updates as expected. The upgrade of Woool that was launched last quarter Woool 2 has successfully increased these active user numbers. We believe that Woool 2 provides the user thickness that will eventually turn these active users into playing users. And we expect to see ARPU rise as well.

We are also excited about the new version of Mir II which is an on trade to be launched during the fourth quarter. So an upgraded version of Mir II will introduce a newly created cross server functions which will allow player to play against the people who are not using the same subsystem.

To maintain the existing user base, we will begin rolling out a new game version focusing on bad user experience and improve the customer service. We believe such upgrades and expenses will have extended the life cycle of our key franchise.

The launch of Age of Wushu during the third quarter has received a positive feedback from players and has been successful in terms of both user base and the revenue contribution.

Total revenue from Age of Wushu before revenue sharing between the two partners is comparable to the revenue generated by one of our top five games. The new call of recent model not only opens new ways for us to operate the MMO games, but also greatly boost our margins.

We are also working hard on our (inaudible) games to ensure our future growth of RIFT a 3D MMORPG licensed from Trion World received government of full last quarter.

The game just began its first phase launch of closed-beta testing last month and is currently ranked among one of the top 10 most anticipated games on (inaudible), where [zero] has just to finished another round of testing and the intention of users has set (inaudible) increase as we adjust the games based on users experience.

Final Fantasy XIV 2.0 just began internal testing in Japan and depending on the feedback it’s received, we expect to begin another round of testing in China zone. Look out to 2013 and beyond; we are planning to another round of testing in China zone. And we are planning to release additional games including Dungeon Striker from our (inaudible) a title we licensed from (inaudible) and [Age of Dawn] in-house develop the game.

We plan to broaden our user base for web based and micro client games by leveraging our existing game content. But these developments are still in the early stage and have yet to contribute in meaningful way. We expect that they will boost (inaudible) and portfolio over time.

We have already put out micro-client and web game version for most of our major titles including Woool, Mir III and Latale. This new versions have already attracted new users and have generated revenue contribution of around 7% and 11% of games revenue for Woool and Mir III in third quarter respectively.

In our effort (inaudible) this success, we (inaudible) launched a web version of Woool (inaudible) which we expect to expand the user base for the Woool franchise. In addition we launched a Championship Manager, a web game for our own platform, as well as third party platforms and we have seen increase in users and revenues. We will maintain the new revenue stream we have picked up from these launches, as we continue to nurture and grow the user base.

For the third quarter, games with revenue contribution over 10% of total revenue included Mir II, Woool and Dragon Nest, which contributed 33%, 16% and 15% of total revenue respectively. Since the implementation of the All-Star package (inaudible) on Mir II and Woool has steadily decreased, as we have been able to successfully launch and maintain a number of our new games as we moved into fourth quarter of 2014 and early 2013, we expect our diversified portfolio and strong game pipeline to lay down a solid foundation for future growth.

Moving to our revenue strategy; we believe penetration into new market globally is an important driver for our future growth. We continue to leverage the success Dragon Nest has achieved globally to beat our brand name and have exported new popular titles such as Dragon Striker, Championship Manager and Legend of Immortals to more countries.

We have introduced Dragon Nest to new market outside China following our acquisition of majority stake in eFusion last quarter. Dragon Nest is on track to be launched in Europe during the first quarter of 2013.

During the third quarter as we introduced the second game, Dungeon Striker was later introduced into Japan and South Korea, where it has become one of the most anticipated [titles] and is scheduled to be long during the first quarter of 2013 in South Korea. According to surveys taken during this years (inaudible) Dungeon Striker was voted as the number one most inspiring game by gamers who played a demo.

It brings all these games out as geographical areas to build on the momentum we already have on Dragon Nest. We believe overseas revenue is critical to our long term sustainable ability as the markets have become important fact when we plan to launch new games. Key game such as World Zero, Dungeon Strike, [Age of Dawn] and the [Rising of Dragon] all have planned to be launched overseas. We believe our intent and (inaudible) strategy will help out in places (inaudible).

We have achieved (inaudible) four games over the past decade in this new market. Finally our platform strategy, our capacity to upgrade game on mobile platforms has increased, as we adopted to leveraging the market. We must continue to disperse to mobile device and we plan to take advantage of significant opportunity this represents.

We recently sold mobile games through a multiple channel including the in-house development and licensing, investment and partnership. In addition to mobile version of Woool. Woool of Paladin is now developing the mobile version of Dragon Nest which will adopt similar fast paced action features and multiplayer game play to enhance the game experience for mobile platforms.

We also found a strategy [shape] ways for our earnings to jointly development the mobile version of Final Fantasy one, two, three and a Diffusion Million Arthur. In addition, we have invested in various mobile game developments in South Korea. We entered into the mobile game market; we believe that we are able to seize future growth opportunities and further strengthen our core brand and franchise.

In summary, our (inaudible) strategy has delivered the innovation and the [criteria] that is required for us to create a diversified and a growing portfolio of game and a strong pipeline for the 2013 our high quality of games so not only have growth engine for our attrition in China but also open up new opportunities for our support. We are also creating our success in MMO games in the mobile field where our brand name, operational excellence (inaudible) distribution channels and the financial strength continues to access our core competitive strengths.

With that, I would like to conclude my remarks and turn the call to Richard.

Richard Wei

Thank you, Xiangdong. As always our earnings release supplement is available on our website as well as most major financial quarters. I would now briefly review the highlights of our third quarter results and provide an outlook for the fourth quarter of this year. We will take questions afterwards.

During the third quarter of 2012, our net revenues decreased 4.4% quarter-over-quarter and 20.1% year-over-year to RMB1.08 billion equivalent to US$170 million, in line with our previous guidance of a quarter-over-quarter decrease of 4% to 5%.

Net revenues from online games in China decreased 2.4% quarter-over-quarter to RMB1.02 billion equivalent to US$160 million. The sequential decrease was primarily due to a decline in revenue from AION as the initial attraction surrounding the launch of its 3.0 expansion back in March subsided and a decline in revenue from Woool as the company continued last quarter’s strategy to decelerate the monetization of the game to ensure a longer and healthier life cycle.

This was partially offset by the first full quarter of revenue contribution from the Age of Wushu, an increase in revenue from Dragon Nest following the launch of an expansion pack in August and positive seasonal effects on games during the third quarter of this year.

During the third quarter, driven by the release of content updates for our major games, our average monthly active users or MAUs for all games operated in China increased 6.2% quarter-over-quarter to 18.4 million. Average monthly paying users or MPUs for all games operated in China, on the other hand decreased 7.9% quarter-over-quarter to 3.5 million mainly as the content updates released for major games introduced a number of free functions and game plays to users resulting in a decline in low-spending paying accounts. As a result, monthly ARPU for all games operated in China increased 6.0% quarter-over-quarter to RMB95.7.

Other revenues, which primarily include overseas revenues generated from game licensing and game operations and advertising in China were RMB65 million equivalent to US$10 million compared with RMB90 million in the second quarter of this year and RMB72 million in the third quarter of last year.

The sequential decrease was mainly due to a decrease in advertising revenue related to cross-marketing activities in China during the third quarter. Gross profit in Q3 decreased 2.9% quarter-over-quarter and 17.5% year-to-year to RMB684 million equivalent to US$108 million. Gross margin was 63.4%, up from 62.4% in Q2 of this year and 61.3% in Q3 last year.

Operating income was RMB281 million equivalent to US$44 million, a decrease of 20.8% quarter-over-quarter and 22.4% year-over-year. Operating margin was 26.0% compared with 31.4% in the previous quarter and 26.7% for the same period last year.

Non-GAAP operating income was RMB324 million equivalent to US$51 million, a decrease of 17% quarter-over-quarter and 25.1% year-over-year. Non-GAAP operating margin was 30.0% compared with 34.6% in Q2 this year and 32.0% in Q3 last year.

Our non-GAAP operating margin was lower than our previous guidance of approximately 33% mainly due to an impairment charge of certain assets in Q3 as the company initiated a series of restructuring measures and streamlined out previous investments during the quarter.

As always, our non-GAAP calculation excludes the impact of share based compensation, amortization of acquisition-related intangible assets, and the related income tax effects. Income tax expenses were RMB92 million equivalent to US$14 million compared to RMB99 million in the preceding quarter and RMB94 million in the year-ago period.

Effective tax rate was 26.0% compared with 23.9% in Q2 this year and 21.2% in Q3 last year. The increase in effective tax rate was mainly due to an increase in the proportion of profits from subsidiaries with higher tax rates, and an increase in share based compensation which is a non-deductible expense before tax in the third quarter of this year.

Income attributable to ordinary shareholders was RMB254 million equivalent to US$40 million compared with RMB308 million in Q2 and RMB343 million in Q3 last year. Earnings per diluted ADS were RMB0.92 equivalent to US$0.15 compared with RMB1.10 in second quarter of this year and RMB1.20 in the third quarter of last year.

Non-GAAP net income attributed to online shareholders totaled RMB290 million equivalent to $46 million compared with RMB230 million in Q2 of this year and RMB404 million in Q3 last year. Non-GAAP earnings per diluted ADS were RMB1.04 equivalent to US$0.17 compared with RMB1.20 in the second quarter of this year and RMB1.42 in the same period last year.

Turning to balance sheet and cash flow positions, the company's cash and cash equivalent, short-term investments, restricted cash and time deposits, net of loans and dividend payable was RMB3.07 billion equivalent to US$485 million compared with RMB3.04 billion as of June 30, 2012. The increase was primarily due to operating cash flow of RMB208 million equivalent to US$33 million generated during the third quarter offset by the share repurchase expenses of $157 million.

Now turning to guidance for the fourth quarter of 2012, we expect our revenues in Q4 to be flat compared with Q3 levels and expect our non-GAAP operating margin, which excludes the impact of share based compensation expense, amortization of acquisition related intangible assets, and the related income tax effects to see a very modest improvement from Q3’s level. Share based compensation expense in Q4 is projected to be approximately RMB14 million. We also expect to book approximately RMB50 million in government subsidies in Q4.

That concludes my discussion. I would now turn the call back to Ellen.

Ellen Chiu

Thank you Richard. We will now take your questions. Operator, please go ahead.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from the line of Timothy Chan from Morgan Stanley. Please ask your question.

Timothy Chan - Morgan Stanley

Could you maybe talk about the timeline of your game launch next year and also if you could give us more color as to the reception of RIFT on the closed-beta testing that would be great, thank you.

Ellen Chiu

[Foreign language]

Xiangdong Zhang

[Foreign language]

Ellen Chiu

Tim, for your first question, for the new games that we are going to launch next year, in Q1, we will officially launch RIFT, which is currently under testing, and also for other games, we will apply for the [government] approvals and put them out in the next year and those games including World Zero, Final Fantasy XIV, those two bigger games and also another in-house developed game called [Grin] of Dragon.

Xiangdong Zhang

[Foreign language]

Ellen Chiu

We just recently started the first round of testing of RIFT, and currently we are basing on the users feedback to do modification for this game. We will focus especially for new users better usability and we are going to start a new round of testing pretty soon hopefully to increase the retention rate of new users.

Operator

Your next question comes from the line of Dick Wei from JPMorgan.

Dick Wei - JPMorgan

My first question is on the third quarter guidance. I wonder if you can give us some color on which are the games you expect to see increase in revenue or user versus those that are going to see decline, and second question is that maybe you can talk about the mobile game distribution strategy in China. That will be helpful. Thank you.

Richard Wei

Sure. I think in Q4 we are expecting - I won't go through every game. I'll just talk about the major ones. I think Mir II, we are likely to be about flattish maybe up slightly, and I think the Woool franchise should see flattish to maybe a very small decline. We are expecting Dragon Nest to still decline in Q4 because the update was done in August, and so the next update will be in early next year and Mir III should be about stable compared to prior quarters. We are expecting overseas revenue to be modestly higher compared to Q3.

Ellen Chiu

[Foreign language]

Xiangdong Zhang

[Foreign language]

Ellen Chiu

For mobile games, we entered market earlier this year and have put out a couple one-time download games. We have launched item based mobile games such as Woool of Paladin. Instead of quantity, we will put more focus on the quality and also we want to be more focused on the Android market.

Xiangdong Zhang

[Foreign language]

Ellen Chiu

We currently source mobile games through a multiple channels including in-house development, licensing, investments, and partnerships, and all subsidiaries actors in Korea currently focused on mobile games businesses including the development in investments. It currently has six games under operations, and we will continue to work on the mobile game sourcing in Korea and also in Japan.

Dick Wei - JPMorgan

Just a quick follow up on that, is it like a pre-installation on handset is one of the strategy or it is mainly distributed to app store or APP store, thanks?

Xiangdong Zhang

[Foreign language]

We have all our mobile game platform called GEO game [plays] and also we are going to cooperate with third party problems such as (inaudible) Mobile and that's only the two distribution channels for us.

Operator

Your next question comes from the line of Jin Yoon from Nomura Securities. We have your next question from the line of Jiong Shao from Macquarie.

Jiong Shao - Macquarie

Could you please elaborate a bit on your web game strategy in terms of the development, the type of genre you tried to develop the distribution in terms of third party platforms versus your own if you tried to publish that on your own. Thank you very much for the thought.

Xiangdong Zhang

[Foreign language]

For (inaudible) game; currently we have already launched two in-house web games. One is Championship Manager and the second one is [Woool] which we just launched, and we look forward to leveraging our current existing game titles and leveraging their brand name and also our (inaudible) in [MOO] operation to put out better quality games and to differentiate from currently the shorter life cycle of game in the market right now.

For our other games, we will continue leverage our brand name to put out good title such as Woool, Latale, version and also we look forward to further expand to one-time versions to the micro client technology for our one-time users to also be able to experience the game play of our MMO new micro client version.

Jiong Shao - Macquarie

Just a follow up, earlier I meant by asking if you intend to work with the third party platforms to distribute or publish your games or your web games?

Xiangdong Zhang

[Foreign language]

Yes, currently top Asian manager has already being operated in couple of third party platforms and we will continue to work on the cooperation with the third party platforms for other game titles.

Jiong Shao - Macquarie

My next question is on your monthly paying users, it seems it dropped again, it seems to be a new low, correct me if I am wrong. So I was just wondering what were some of the drivers behind. Is that because sort of the age of your game or is that because of the cannibalization from for example mobile games or web games and how do you foresee when you think you may see a rebound in this particular metric? Thank you.

Ellen Chiu

[Foreign Language]

Xiangdong Zhang

[Foreign Language]

Ellen Chiu

We indeed in the third quarter the content updates release for a couple of our major games introduced more free function and also game play to users resulting in a decline of low-spending users. So that's the main reason for a huge drop in Q3 and in Q4 we continue to put out new versions for our game introducing new game plays and functions which we expect to increase the user base and hopefully we can increase their paying ratio which translates into the MPU going forward.

Jiong Shao - Macquarie

Just a follow-up. I think some of your competitors have reason to be talked about a similar trend as well the low paying users become free sort of to play users. Is that something going on in the industry that has made the gaming company start to push more sort of free to play, game play or it’s just that internal competition amongst different players any comment or color you can provide would be great?

Ellen Chiu

[Foreign Language]

Xiangdong Zhang

[Foreign Language]

Ellen Chiu

For us, most of our new games are scheduled to be launched in the year 2013, so currently the games in our portfolio are games that have already been operated for a certain period. So our main focus right now is really to increase the users’ activity inside of game for prolonging the life cycle of those games. So that's why you see we are probably not focusing on the increase of paying users.

Operator

Next question comes from the line of Andy Yeung from Oppenheimer. Please ask your question.

Andy Yeung - Oppenheimer

I actually have a follow-up question on mobile side. Can you give us more inside the product pipeline and what’s the overall share, how do you distribute your games there, and with your new product development (inaudible) what’s the intact on operating expenses? Thank you.

Ellen Chiu

[Foreign language]

Xiangdong Zhang

[Foreign language]

Ellen Chiu

So for our mobile game pipeline, currently under operation we have two games including Woool of Paladin and also My Country. Those two are online mobile games and also our (inaudible) are planning to launch mobile version of Dragon Nest which has currently been under development by identity and we expect the development to be finish in Q1 next year. In addition, we are cooperating with (inaudible) to put out four mobile games including Final Fantasy 1, 2 and 3 as well as the Diffusion Million Arthur, those four products we plan to put out both Korean version and Chinese version in year 2013. For other games under development right now we have around four and we will (inaudible) development process to schedule the launch of that.

Richard Wei

In terms of the financial impacts, I think the mobile games in general have so far have slightly lower margins compared to our MMO games and so we think that these games will probably have a modestly negative impact on margins. But at the same time some of the distribution should be done by third parties and so they also have to share some of the marketing expenses but I think in general it should be a modest negative impact.

Operator

Your next question comes from the line of Thomas Chong from BOCI. Please ask the question.

Thomas Chong - BOCI

I have two questions. The first question is regarding the total number of headcounts in third quarter and my second question is regarding the impairment charge in the third quarter. Can you give us a bit color about how much was it in the third quarter? Thanks.

Richard Wei

Thomas our headcount at the end of the Q3 was 2,340 out of that about close to 1,900 was R&D personnel, compared to Q2 headcount total headcount was 2,371. So there was a very slight decrease in total headcount. Regarding the impairment charges, it was approximately RMB18 million that was taken in Q3.

Operator

Your next question comes from the line of William (inaudible) from Barclays Capital. Please ask your question.

Unidentified Analyst

My question was about your new games given that you have a couple of new games World Zero, Final Fantasy and RIFT, how do you internally rank these games based on your maybe users and monetizing expectation? And also the second question is on the mobile side; can comment that you’re focused on Android market, but did you see payment as one of the challenges and what is the current solution for Shanda, thank you?

Xiangdong Zhang

[Foreign language]

Ellen Chiu

[Foreign Language]

Xiangdong Zhang

[Foreign Language]

Ellen Chiu

Okay, we have an internal type model to evaluate the game that are in our pipeline, and our marketing dollars are based on our expectations to those game titles. After we put into our resources, we will monitor the performance of the games during the testing, and currently Drift has a pretty good performance during the testing periods. We will also apply the same model to Final Fantasy XIV which just launched the testing in Japan and also we are going to do the same for World Zero.

Xiangdong Zhang

[Foreign Language]

Well, currently rely on Shengfutong for our Android based mobile games, and basically the mobile game acquisition right now is as good as the monetization of (inaudible) game in terms of the payment solution.

Also we are cooperating with a lot of third party platforms which also have their own payment system and we will cooperated with those payment system as well.

Operator

Your next question comes from the line of Alex Yao from Deutsche Bank. Please ask your question.

Alex Yao - Deutsche Bank

The first question is on your demonetization strategy of the core games. We understand you are shifting the monetization from relatively low end user to relatively high end users. Just want to understand on an apples-to-apples basis are the high end users still paying the similar amount versus a few quarters ago or are they also paying less amount to the company.

Xiangdong Zhang

[Foreign Language]

We have talked a lot about our strategy increasing the activity and also increasing the one time games, for our high end users we currently are introducing our customer service system where we will has personnel about which in particulars of those high end users, for me to what we have a certain special team of pattern service personnel to serve those high end users and we will get feedback from them and based on those feedback to further increased our game titles and hopefully we can attract back some of the user who already left the game part to those games.

Alex Yao - Deutsche Bank

Just I want to follow up, (inaudible) so we expect that the game will remain largely driven by the relatively high end users?

Ellen Chiu

[Foreign language]

In our all games we have high end, low end and also free gamers and we believe balance of those gamers, different layers of gamers is a key to sustain the sustainability of those all games. And so therefore we will try to remain more balanced in the economy in all games and through the launch of expansion packs and we will continue to do so for most of our key games.

Alex Yao - Deutsche Bank

And secondly is a housekeeping question can you share with us the revenue contribution of top five games in the quarter? Thank you.

Richard Wei

Sure the ones that were over 10% were MIR II at 33% in total and Woool at 16% and Dragon Nest at 15%. The rest were below 10% of revenue.

Operator

Due to time constraint, we will be taking our last two questions from our participants. Your next question comes from the line of Jialong Shi from CLSA. Please ask your question.

Jialong Shi - CLSA

My first question is about the MAU, just wondering if your MAU, 3Q MAU included that of Age of Wushu? How is the latest trend for the game and could you provide the revenue percentage from that game in 3Q?

Ellen Chiu

[Foreign Language]

Xiangdong Zhang

[Foreign Language]

Ellen Chiu

Yes, the MAU number that we disclosed include the MAU of Age of Wushu in Q3 is the first full quarter contribution for Age of Wushu and we also launched the commercial launch for Age of Wushu which helped users to further grow compared with the open-beta type testing phase and currently the revenue contribution of (inaudible) is pretty stable for us. And in Q4, we are going to launch a couple of expansion packs to further increase user base growth revenue.

Jialong Shi - CLSA

Thanks, and first on moderate part your parent company Shanda Interactive seems to be undergoing some sort of reorganization, and just wondering whether or not the restructuring will involve Shanda Games, EPS, what is the potential impact on your business, thank you?

Ellen Chiu

[Foreign language]

Xiangdong Zhang

Sorry what reorganization that you are referring to?

Ellen Chiu

Jialong, can you further extend what reorganization that you are referring to?

Jialong Shi - CLSA

Well, unfortunate I do not have to many videos, what I have on media basically like your parent company recently hired a banker, who will take charge of the whole restructuring, (inaudible) so that is why I am asking whether or not that restructuring will involve Shanda Games given Shanda Games is a core business to Shanda Interactive?

Richard Wei

We are not aware of any of reorder on Shanda Games, I think as we said earlier we've taken some impairment charges on some of the assets we have, so we are still focused on (inaudible) our business and doing the best games we can. I think any reorder outside of our business, that's really the parent company's business, you should ask them.

Jialong Shi - CLSA

May I ask a quick follow-up, given the very low key multiple for your company just wondering if your major shareholders consider to maybe (inaudible) the company from the US market and in Hong Kong or China where multiple (inaudible) in company is much higher. Thank you.

Richard Wei

Well, I, you know I think none of our shareholders are happy with the low key multiple and so we are always looking for ways to improve our evaluation but I do not know what our largest shareholders are going to do in terms of the questions you posed. I think on, you probably need to ask them.

Operator

Ladies and gentlemen we have now come to the end of our question-and-answer session. I will now turn the call back to Ms. Ellen Chiu for closing remarks.

Ellen Chiu

Once again I would like to thank you for joining us today. And if you have any follow-up questions please feel free to contact us. Have a nice day.

Operator

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation. You may all disconnect.

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