Changyou.com (NASDAQ:CYOU)

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Monday, April 30, 2012

Comments & Business Outlook

First Quarter 2012 Highlights

Total revenues were US$136.8 million, a decrease of 1% quarter-over-quarter and an increase of 30% year-over-year, exceeding the high end of the Company's guidance by US$2.8 million.
Online game revenues reached a record US$127.4 million, an increase of 3% quarter-over-quarter and 34% year-over-year, exceeding the high end of the Company's guidance by US$3.4 million.
Net income attributable to Changyou.com Limited was US$65.3 million, or US$1.22 per fully diluted ADS[1]. Net income attributable to Changyou.com Limited increased 1% quarter-over-quarter and 12% year-over-year.
Non-GAAP[2] net income attributable to Changyou.com Limited was US$66.5 million, or US$1.24 per fully diluted ADS. Non-GAAP net income attributable to Changyou.com Limited decreased 7% quarter-over-quarter and increased 10% year-over-year and exceeded the high end of the Company's guidance byUS$6.5 million.

Mr. Tao Wang, Changyou's chief executive officer, commented, "We've started the year with progress in both MMO games and Web-based games, reflecting the solid execution of our "users first" strategy. During the quarter, we integrated the 17173 Business, which includes the assets and business operations associated with the popular game information portal based in China that is operated through the 17173.com Website. The 17173 Business will be the platform around which we will introduce new services and products targeted for gamers over the coming year. We believe that the 17173 Business has the potential to become China's key online games platform and is an integral part of our commitment to meeting the ever-evolving needs of the world's largest online game-playing community."

Business Outlook

For the second quarter of 2012, Changyou expects:

Total revenues to be between US$139.5 million and US$143.5 million, including online game revenues ofUS$130.0 million to US$133.0 million and online advertising revenues of US$8.5 million to US$9.5 million.
Non-GAAP net income attributable to Changyou.com Limited to be between US$58.0 million and US$60.0 million.
Non-GAAP fully diluted earnings per ADS attributable to Changyou.com Limited to be between US$1.08 and US$1.12.
Assuming no new grants of share-based awards, share-based compensation expense to be betweenUS$1.0 million and US$1.5 million, reducing fully diluted earnings per ADS attributable to Changyou.com Limited by US$0.02 to US$0.03.

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Monday, February 6, 2012

Comments & Business Outlook

Fourth Quarter 2011 Results

Total revenues reached a record US$137.7 million and increased 7% quarter-over-quarter and 39% year-over-year. Excluding revenues from the recently acquired game information portal operated through the 17173.com Website (the "17173 Business"), total revenues increased 5% quarter-over-quarter and 37% year-over-year to US$125.2 million and exceeded the high end of the Company's guidance by US$0.2 million.
Net income attributable to Changyou.com Limited was US$64.3 million, or US$1.21 per fully diluted ADS(2). Net income attributable to Changyou.com Limited increased 4% quarter-over-quarter and 20% year-over-year. Excluding net income from the 17173 Business, net income attributable to Changyou.com Limited increased 3% quarter-over-quarter and 14% year-over-year to US$54.3 million, or US$1.02 per fully diluted ADS.
Non-GAAP(3) net income attributable to Changyou.com Limited was US$71.2 million, or US$1.33 per fully diluted ADS. Non-GAAP net income attributable to Changyou.com Limited increased 13% quarter-over-quarter and 28% year-over-year. Excluding non-GAAP net income from the 17173 Business, non-GAAP net income attributable to Changyou.com Limited increased 13% quarter-over-quarter and 23% year-over-year to US$61.0 million, and exceeded the high end of the Company's guidance by US$1.0 million. Excluding non-GAAP net income from the 17173 Business, non-GAAP fully diluted earnings per ADS attributable to Changyou.com Limited were US$1.14.

Mr. Tao Wang, Changyou's chief executive officer, commented, "Tian Long Ba Bu, or TLBB, continues to be a winner for us, based on its loyal fan base and our ability to deliver high-quality innovations that keep the game attractive. For TLBB, our latest major expansion pack, TLBB3, was a big factor in our record-breaking results for the fourth quarter and for the full year. DDTank, the flagship game of our new subsidiary 7Road, continues to be one of the top-ranked Web-based games on game portals and social networking sites in China. During the year, we completed a strategic review and implemented a number of changes reflecting the diversity of our business going forward, with separate teams and roadmaps for MMO games, Web-based games, mobile and social games, user platforms, and the international market. We expect these expanded strategies to carry us into the next phase as we evolve reflecting new story lines, new technology and changing user preferences for online games in China and the world."

Mr. Dewen Chen, president and chief operating officer, continued, "Late in the year, we jumpstarted our platform-based strategy with the acquisition of 17173.com, one of China's leading portals for news and information about online games. We plan to invest in 17173 to make it even more user friendly by adding services and access to a variety of games designed for different platforms and user communities. We regard 17173 as both a brand builder and a building block to developing our platform business, offering a one-stop-shop for gamers of all types, which will help to deepen and expand the Changyou community online."

Mr. Alex Ho, Changyou's chief financial officer, added, "A strong fourth quarter helped to make 2011 a record-breaking year, in terms of total revenues and full year non-GAAP net income. We were able to exceed our expectations for the quarter. We owe this to the continuing strong performance of our MMORPG business, which we expect will give us the cash flows and financial leverage to execute our strategic plans. With a rich cash reserve and a debt-free balance sheet, we are well-positioned to invest in emerging opportunities in other fast-growing segments of the industry and to enhance shareholder value over the long term."

Business Outlook

For the first quarter of 2012, Changyou expects:

Total revenues to be between US$130.0 million and US$134.0 million, including online game revenues of US$121.0 million to US$124.0 million and online advertising revenues of US$7.0 million to US$8.0 million.
Non-GAAP net income attributable to Changyou.com Limited to be between US$58.0 million and US$60.0 million.
Non-GAAP fully diluted earnings per ADS attributable to Changyou.com Limited to be between US$1.08 and US$1.12.
Assuming no new grants of share-based awards, share-based compensation expense to be between US$1.0 million and US$1.5 million, reducing fully diluted earnings per ADS attributable to Changyou.com Limited by US$0.02 to US$0.03.

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Monday, October 31, 2011

Comments & Business Outlook

Third Quarter 2011 Results

Total revenues reached a record US$119.0 million and exceeded the high end of the Company's guidance by US$1.0 million. Total revenues increased 13% quarter-over-quarter and 39% year-over-year.
Net income attributable to Changyou.com Limited was US$52.8 million, or US$0.99 per fully diluted ADS(1). Net income attributable to Changyou.com Limited decreased 3% quarter-over-quarter and increased 17% year-over-year.
Non-GAAP(2) net income attributable to Changyou.com Limited (i.e., excluding share-based compensation expenses) was US$53.8 million, or US$1.01 per fully diluted ADS, and exceeded the high end of the Company's guidance by US$1.3 million. Non-GAAP net income attributable to Changyou.com Limited decreased 3% quarter-over-quarter and increased 14% year-over-year.

Mr. Tao Wang, Changyou's Chief Executive Officer, commented, "Our blockbuster Tian Long Ba Bu, or TLBB, continues to expand player numbers with the release of each new expansion pack that adds sought-after new game play that is requested by our players. After the release of the major expansion pack TLBB3 on October 20th, the number of users and the number of active paying accounts increased. Meanwhile, our new self-developed 3D MMO game, Duke of Mount Deer, or DMD, which launched on July 22nd, appeals to hard-core game players with its new technologies and advanced cross-server game play. We believe these results once again demonstrate our ability to understand and fulfill gamers' needs and showcase our content development and game operation strengths. We anticipate bringing a greater variety of games to market in the following quarter and next year to further advance our leading position in the online game industry."

Mr. Dewen Chen, president and chief operating officer, continued, "During the quarter, we completed the integration of Shenzhen 7Road Technologies Co., Ltd., or 7Road, one of the leading players in the rapidly expanding Web-based game market in China. 7Road's hit game, DDTank, continues to top the charts on different social platforms and game portals in China, and is attracting interest from players overseas. In the next few quarters, we will be working closely with 7Road's management team on new products and initiatives to develop the Web-based game business."

Mr. Alex Ho, Changyou's chief financial officer, added, "Our business was strong and resilient in the third quarter. Once again, we exceeded our top-line and bottom-line financial goals for the quarter, while making planned investments in the marketing and promotion of DMD. In addition, both our existing and acquired businesses generated solid cash flows in the third quarter. With solid cash reserves and a debt-free balance sheet, we are well-positioned to capture new opportunities in the industry as they arise and to increase returns to shareholders over the long term."

Business Outlook

For the fourth quarter of 2011, Changyou expects:

Total revenues to be between US$122.0 million and US$125.0 million, including online game revenues of US$119.0 million to US$122.0 million.
Non-GAAP net income attributable to Changyou.com Limited to be between US$58.0 million and US$60.0 million.
Non-GAAP fully diluted earnings per ADS attributable to Changyou.com Limited to be between US$1.09 and US$1.12.
Assuming no new grants of share-based awards, share-based compensation expense to be between US$1.5 million and US$2.0 million, reducing fully diluted earnings per ADS attributable to Changyou.com Limited by US$0.03 to US$0.04.

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Monday, August 1, 2011

Comments & Business Outlook

BEIJING, Aug. 1, 2011 /PRNewswire-Asia/ -- Changyou.com Limited ("Changyou" or the "Company") (NASDAQ: CYOU), a leading online game developer and operator in China, today announced its unaudited financial results for the second quarter ended June 30, 2011.

Second Quarter 2011 Highlights

Total revenues reached a record US$105.0 million, an increase of 8% quarter-over-quarter and 35% year-over-year, and exceeded the high end of the Company's guidance by US$5.0 million.
GAAP net income attributable to Changyou.com Limited reached a record US$54.2 million, up 3% quarter-over-quarter and 29% year-over-year, or US$1.02 per fully diluted ADS(1).
Non-GAAP(2) net income attributable to Changyou.com Limited (i.e., excluding share-based compensation expenses) reached a record US$55.6 million, or US$1.04 per fully diluted ADS, exceeding the high end of the Company's guidance by US$5.1 million. Non-GAAP net income attributable to Changyou.com Limited was up 2% quarter-over-quarter and 26% year-over-year.
On May 11, 2011, the Company completed the acquisition of 68.258% of the equity in Shenzhen 7Road Technology Co., Ltd. ("7Road"), a Web-based game company in China. 7Road's financial statements were consolidated in the Company's financial statements starting on June 1, 2011

(1) Each American depositary share ("ADS") represents two Class A ordinary shares.
(2) Explanation of the Company's non-GAAP financial measures and related reconciliations to GAAP financial measures are included in the accompanying "Non-GAAP Disclosure" and "Reconciliations to Unaudited Condensed Consolidated Statements of Operations."

Mr. Tao Wang, Changyou's Chief Executive Officer, commented, "We posted record performance in the second quarter as total revenues exceeded $100 million. The continued success of our blockbuster Tian Long Ba Bu, or TLBB, has been supported by and carefully nurtured with the release of new content in mid-March and in early July that incorporates user feedback. A major expansion pack, TLBB3, is scheduled to be released in the latter half of this year as we aim to further extend its popularity and life cycle. On July 22nd, after four years of meticulous planning and development, we launched Duke of Mount Deer, or DMD, our second inhouse-developed game. The extensive work that we put into the game has led to its good reception, and its user base has continued to increase after its open beta. Cutting-edge graphic design, groundbreaking server technology and innovative new gameplay were made possible by the tight collaboration between the various teams within our business and we believe will further escalate our leading position in the online game industry."

Mr. Dewen Chen, president and chief operating officer, continued, "The addition of 7Road immediately diversifies our business and establishes us as one of the leading players in the rapidly expanding Web-based game market in China. 7Road's hit game, DDTank, continues to be one of China's most popular web-based games and attracts user interest. We share a philosophy with 7Road's management team that it is vital to create games that users want to play, and it is this mutual belief that gives us great confidence in our long-term outlook together."

Mr. Alex Ho, Changyou's chief financial officer, added, "Our track record of delivering record top-line and bottom-line results continued in the second quarter. DMD and Web-based games add new sources of revenues to an already highly profitable and cash-rich business, and leave us well positioned to accelerate growth and increase shareholder value over the long term."

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Monday, April 25, 2011

Comments & Business Outlook

First Quarter 2011 Results:

Total revenues reached a record US$97.1 million, an increase of 6% quarter-over-quarter and 35% year-over-year, and exceeded the high end of the Company's guidance by US$2.1 million.
Net income reached a record US$52.8 million, or US$0.99 per fully diluted ADS(1). Net income increased by 11% quarter-over-quarter and 33% year-over-year.
Non-GAAP(2) net income (i.e., excluding share-based compensation expenses) reached a record US$54.6 million, or US$1.02 per fully diluted ADS, exceeding the high end of the Company's guidance by US$3.6 million. Non-GAAP net income increased by 10% quarter-over-quarter and 28% year-over-year.

Mr. Tao Wang, Changyou's Chief Executive Officer, commented, "2011 is an exciting year for Changyou as we prepare for the launch of new games, such as Duke of Mount Deer, or DMD, while our current games continue to generate solid returns. Our leading game franchise, Tian Long Ba Bu, or TLBB, has continued to attract new, existing and returning players to its thriving community as we constantly update the game with new content. Similarly, we are seeing growing interest from players for our upcoming game. DMD, which entered a new round of closed beta testing today, is slated for a launch this summer. In this round of testing, game testers will also be able to carry over user accounts through the full launch period. With the updated version, we have unveiled a new, self-developed server technology and a host of unique gameplay not found in any other existing massively multiplayer online games. With the continued strength of the online games industry in China, the imminent launch of DMD, and the ongoing success of our TLBB franchise, we look to accelerate our position as a leading online game company in China."

For the second quarter of 2011, Changyou estimates:

Total revenues to be between US$97.0 million and US$100.0 million, including online games revenues of US$95.0 million to US$97.0 million.
Non-GAAP net income to be between US$49.0 million and US$50.5 million.
Non-GAAP fully diluted earnings per ADS to be between US$0.92 and US$0.95.
Assuming no new grants of share-based awards, share-based compensation expense to be between US$1.0 million and US$1.5 million, reducing fully diluted earnings per ADS by US$0.02 to US$0.03.

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Liquidity Requirements

We believe that our existing cash is sufficient to sustain our operations for at least the next twelve months. We have financed our operations primarily through cash flows from equity contributions by Sohu and cash flows from operations. We also received loans in the amount of $5.0 million and $3.5 million, respectively, from Sohu.com Limited in September 2007 and December 2008. Such loans were repaid to Sohu in April 2009.

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Monday, January 31, 2011

Comments & Business Outlook

Fourth Quarter 2010 Highlights

Total revenues reached a record US$91.7 million, an increase of 7% quarter-over-quarter and 30% year-over-year, and exceeded the high end of the Company's guidance by US$2.7 million.
Net income reached a record US$47.8 million, or US$0.90 per fully diluted ADS(1). Net income increased by 6% quarter-over-quarter and 23% year-over-year.
Non-GAAP(2) net income (i.e. excluding share-based compensation expenses) reached a record US$49.7 million, orUS$0.93 per fully diluted ADS, exceeding the high end of the Company's guidance by US$1.7 million. Non-GAAP net income increased by 5% quarter-over-quarter and 18% year-over-year.
Aggregate registered accounts for the Company's games(3) grew 6% quarter-over-quarter and 38% year-over-year to 111.4 million.
Aggregate peak concurrent users ("PCU") for the Company's games grew 5% quarter-over-quarter and 7% year-over-year to 1,030,000.
Aggregate active paying accounts ("APA") for the Company's games grew 3% quarter-over-quarter and 13% year-over-year to 2.7 million.
Average revenue per active paying account ("ARPU") for the Company's games increased 2% quarter-over-quarter and 12% year-over-year to RMB219.

Fiscal Year 2010 Highlights

Total revenues reached a record US$327.1 million, up 22% year-over-year.
Net income reached a record US$174.9 million, or US$3.29 per fully diluted ADS. Net income increased 21% year-over-year.
Non-GAAP net income (i.e. excluding share-based compensation expenses) reached a record US$183.5 million, orUS$3.43 per fully diluted ADS. Non-GAAP net income increased 16% year-over-year.

Mr. Tao Wang, Changyou's chief executive officer, commented, "2010 was another year of growth and progress. Our ongoing focus on content creation and meeting the needs of our customers paid off and enabled us to end the quarter and the year with record financial and operational results. After three years and the release of a series of expansion packs, TLBB's community remains vibrant and growing, and the game continues to be one of the most popular online game titles in China today. We have also finalized the marketing plan for Duke of Mount Deer, our next in-house developed game, and target to officially start a nationwide marketing campaign for the game in March 2011. With the marketing campaign, the full version of DMD will, for the first time, be available to players to try out. The full version contains many times the amount of content found in the existing version and features technical innovations within the global online games industry. Through these efforts, we aim to capture new growth opportunities for our business and reaffirm our position as one of the leading online game companies in China."

For the first quarter of 2011, Changyou expects:

Total revenues to be between US$92.0 million and US$95.0 million, of which revenues from online games, which are revenues exclusive of revenues from Jing Mao, are expected to be between US$91.0 million and US$93.0 million.

Non-GAAP net income to be between US$49.5 million and US$51.0 million.

Non-GAAP fully diluted earnings per ADS to be between US$0.93 and US$0.96.

Assuming no new grants of share-based awards, share-based compensation expense to be between US$1.5 million and US$2.0 million, reducing fully diluted earnings per ADS by US$0.03 to US$0.04.

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Monday, October 25, 2010

Comments & Business Outlook

Third Quarter 2010 Highlights

Total revenues reached a record US$85.6 million, an increase of 10% quarter-over-quarter and 25% year-over-year, exceeding the high end of the Company's guidance.

Net income reached a record US$45.3 million, or US$0.85 per fully diluted ADS. Net income increased by 8% quarter-over-quarter and 20% year-over-year.

Non-GAAP net income (i.e. excluding share-based compensation expenses) reached a record US$47.1 million, or US$0.88 per fully diluted ADS, exceeding the high end of the Company's guidance vs. $0.77. Non-GAAP net income increased 7% quarter-over-quarter and 14% year-over-year.

Mr. Alex Ho, Changyou's chief financial officer, added, "Our record third quarter financial performance demonstrates our continued ability to attract new users to our core games. With a debt-free balance sheet and strong cash flows, we have sufficient capital to sustain investments in our R&D teams and physical facilities as we push the development of our existing and pipeline games and position ourselves for future growth."

Business Outlook

For the fourth quarter of 2010, Changyou expects:

Total revenues to be between US$86.0 million and US$89.0 million.
Non-GAAP net income to be between US$46.5 million and US$48.0 million.
Non-GAAP fully diluted earnings per ADS to be between US$0.87 and US$0.90.
Assuming no new grants of share-based awards, share-based compensation expense to be between US$1.5 million and US$2.0 million, reducing fully diluted earnings per ADS by US$0.03 to US$0.04.

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