Shanda (SNDA) beats consensus revenue and EPS estimates on strong gaming, ad and VAS growth (1Q05 earnings)

| About: Shanda Interactive (SNDA)

Shanda Interactive (ticker: SNDA), a Chinese developer and operator of online games beat Q1 2005 consensus EPS estimates by $0.03. Details:

Q1 Results:
(all percentage changes and comparisons are year on
year, unless stated otherwise, assumes conversion rate of RMB 8.2765 : US $1)

  • Net revenue increased 118.3% to $60.0 million, and rose 15.3% sequentially. Consensus estimate: $53.6 million (3 analysts)
  • Online game revenue, including MMORPG and casual games rose 96.7% to $53.3 million, and rose 13.2% sequentially.
  • Online game revenue accounted for 88.9% of total revenue.
  • MMORPG revenue rose 65.7% to $40.0 million, and rose 10.3% sequentially.
  • MMORPGs accounted for 66.7% of total revenue.
  • Casual game revenue rose 348.8% to $13.3 million, and rose 22.7% sequentially.
  • Casual game revenue accounted for 22.2% of total revenues.
  • Other revenue which primarily included revenue from online advertising, and other value-added services and products, increased 36.2% sequentially to $6.7 million.
  • Other revenue accounted for 11.1% of total revenue.
  • Gross margin was 71.0% versus 60.2%, and 67.1% in Q4.
  • Sales and marketing expenses rose 46.9% to $3.2 million, but declined 23.1% over Q4.
  • G&A rose 87.3% to $5.2 million, and rose 4.3% over Q4.
  • Operating income rose 262.7% to $30.7 million, and rose 35.6% over Q4.
  • Operating margin was 51.1% versus 30.8%, and 43.5% in Q4.
  • Net income rose 205.9% to $26.6 million, but decreased 4.9% sequentially.
  • Diluted earnings per ADS were $0.36 versus $0.14, and down from $0.38 in Q4. Consensus estimate: $0.33 (3 analysts).


  • The increase in revenues from MMORPGs was primarily due to an
    increase in the average concurrent users and average revenue per user
    hour, or ARPU for MMORPGs.
  • The sequential decrease in net income and diluted
    earnings per ADS was primarily due to non-recurring
    items - investment income in Q4, a write-off in Q1, and an increase of effective tax rate in Q1.

Balance Sheet

  • As of March 31, 2005, cash and cash equivalents were $136.5 million.

Chairman and CEO Tianqiao Chen

We continue to deliver strong growth in our online game business, which
in turn is driving higher profit margins as our platform enjoys the benefits
of scale. With new MMORPG
games like Magical Land in beta test and a solid pipeline of new content,
including Dungeons & Dragons® Online, we believe we are poised to continue
our momentum.  Meanwhile we continue to strategically diversify into new
revenue streams like online advertising and potential new platforms for
delivering content and services to a growing base of Chinese consumers."

SNDA Chart.