BEIJING, March 2 /PRNewswire-Asia/ -- Perfect World Co., Ltd. (Nasdaq: PWRD) ("Perfect World" or the "Company"), a leading online game developer and operator in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2008.
Fourth Quarter 2008 Highlights(1)
-- Total revenues were RMB417.8 million (USD61.2 million), an increase of
9.4% from 3Q08 and 61.7% from 4Q07
-- Gross profit was RMB368.5 million (USD54.0 million), an increase of
10.1% from 3Q08 and 67.7% from 4Q07
-- Operating profit was RMB149.5 million (USD21.9 million), a decrease of
25.2% from 3Q08 and an increase of 8.8% from 4Q07. Excluding share-
based compensation charge and a non-recurring charge related to the
InterServ acquisition in October 2008, operating profit (non-GAAP) was
RMB244.7 million (USD35.9 million), an increase of 14.7% from 3Q08 and
an increase of 73.0% from 4Q07
-- Net income was RMB124.8 million (USD18.3 million), a decrease of 37.2%
from 3Q08 and a decrease of 14.7% from 4Q07. Excluding share-based
compensation charge and a non-recurring charge related to the InterServ
acquisition in October 2008, net income (non-GAAP) was RMB220.0 million
(USD32.2 million), an increase of 3.7% from 3Q08 and an increase of
46.4% from 4Q07
-- Basic and diluted earnings per ADS(2) were RMB2.21 (USD0.32) and
RMB2.12 (USD0.31), respectively, as compared to RMB3.53 and RMB3.34,
respectively, in 3Q08, and RMB2.62 and RMB2.48, respectively, in 4Q07.
Excluding share-based compensation charge and a non-recurring charge
related to the InterServ acquisition in October 2008, basic and diluted
earnings per ADS (non-GAAP) were RMB3.90 (USD0.57) and RMB3.74
(USD0.55), respectively, as compared to RMB3.77 and RMB3.56,
respectively, in 3Q08, and RMB2.69 and RMB2.55, respectively, in 4Q07
-- Launched open beta testing for "Pocketpet Journey West" on October 16,
2008
-- Launched small-scale closed beta testing for "Battle of the Immortals"
on December 1, 2008
-- Rolled out expansion packs, including "Horseback Fighters" for "Chi Bi"
on October 23, 2008, "You Are My Destiny" for "Hot Dance Party" on
November 20, 2008, and "Special Year-End Edition" for "Zhu Xian" on
December 9, 2008
-- Conducted "2008 Gratitude to Gamers" marketing campaign in 26 provinces
and 166 cities
-- Entered into agreements with respective overseas operators to license
"Chi Bi" in Japan and Korea, and "Zhu Xian" in Korea
-- Launched "Legend of Martial Arts" in Thailand in October 2008 and in
Vietnam in November 2008, "Zhu Xian" in Japan, Malaysia and Singapore
in November 2008 and in the Philippines in December 2008, and an
English version of "Perfect World II" in Europe in December 2008
through various overseas operators
(1) The U.S. dollar (USD) amounts disclosed in this press release are
presented solely for the convenience of the reader. The conversion
of Renminbi (RMB) into USD in this release is based on the noon
buying rate in The City of New York for cable transfers in RMB per
USD as certified for customs purposes by the Federal Reserve Bank
of New York as of December 31, 2008, which was RMB6.8225 to USD1.00.
The percentages stated are calculated based on RMB.
(2) Each ADS represents five ordinary shares.
Fiscal Year 2008 Financial Highlights
-- Total revenues were RMB1,437.2 million (USD210.7 million), an increase
of 108.6% from fiscal year 2007
-- Gross profit was RMB1,261.9 million (USD185.0 million), an increase of
121.3% from fiscal year 2007
-- Operating profit was RMB677.1 million (USD99.2 million), an increase of
93.3% from fiscal year 2007. Excluding share-based compensation charge
and a non-recurring charge related to the InterServ acquisition in
October 2008, operating profit (non-GAAP) was RMB805.4 million
(USD118.1 million), an increase of 124.6% from fiscal year 2007
-- Net income was RMB646.5 million (USD94.8 million), an increase of 78.6%
from fiscal year 2007. Excluding share-based compensation charge and a
non-recurring charge related to the InterServ acquisition in October
2008, net income (non-GAAP) was RMB774.8 million (USD113.6 million), an
increase of 109.2% from fiscal year 2007
-- Basic and diluted earnings per ADS were RMB11.50 (USD1.69) and RMB10.91
(USD1.60), respectively, as compared to RMB8.63 and RMB6.77,
respectively, in fiscal year 2007. Excluding share-based compensation
charge and a non-recurring charge related to the InterServ acquisition
in October 2008, basic and diluted earnings per ADS (non-GAAP) were
RMB13.78 (USD2.02) and RMB13.07 (USD1.92), respectively, as compared to
RMB8.83 and RMB6.93, respectively, in fiscal year 2007
"Despite the global economic slowdown, 2008 was a great year for us and I am very proud of our continued growth," commented Mr. Michael Chi, Chairman and Chief Executive Officer of Perfect World. "In the past year, we successfully launched three new games including, 'Chi Bi,' 'Pocketpet Journey West' and our first 3D online casual game, 'Hot Dance Party'. These games have been well received by online game players, and we will continue to leverage our strong research and development to enhance our game players' experience."
"Our strong results during the period continue to be driven by our ability to successfully execute our strategy. We have a strong track record of developing and launching new games to the market in a timely manner, while continuing to maintain game players' interest in our existing portfolio. We have a strong pipeline for year 2009 and beyond, including seven MMORPGs under development. One of which, 'Battle of the Immortals,' is currently under small-scale closed beta testing and we target to launch large-scale closed beta testing on March 5, 2009. Given this solid pipeline, and our portfolio of existing games, we have decided to fine-tune our strategy. While we will continue to quickly develop new games in the short and medium term, we will focus on enhancing the sustainability of our business by devoting more resources to longer-term projects."
"During the past year, we also saw a number of great overseas achievements. We successfully broadened our geographic coverage in Asia and Europe via overseas licensing. We also established a wholly-owned subsidiary in the United States that operates our own games in North America. Since the launch of open beta testing for 'Perfect World II' in North America, where the game was released under the name 'Perfect World International,' we have seen a positive response from game players in the region. We also launched closed beta testing for 'Pocketpet Journey West' in North America under the name 'Ether Saga Online' in February 2009 and are looking forward to the launch of open beta testing soon."
"Pursuing strategic acquisitions has always been another one of our focuses. The successful completion of our deals with Global InterServ (B.V.I.) Inc. ("InterServ") has expanded our game pipeline by adding two games, namely, XiaoAoJiangHu and Meteor Online, and has also further strengthened our research and development team. We are working to integrate the newly acquired Shanghai and Chengdu subsidiaries from InterServ with our existing team and further expand our business there."
"Moving forward, we expect that our strong management team and extensive experience in developing and operating online games will continue to enhance value for our shareholders. By implementing a longer term view on our pipeline and expanding the resources needed for developing these games, we will be well positioned to further expand our presence globally and continue to drive sustainable business growth."
Fourth Quarter 2008 Financial Results
Total Revenues
Total revenues were RMB417.8 million (USD61.2 million) in 4Q08, an increase of 9.4%, or RMB36.0 million, from RMB381.8 million in 3Q08 and an increase of 61.7%, or RMB159.4 million, from RMB258.4 million in 4Q07.
Online game operation revenues were RMB362.6 million (USD53.1 million) in 4Q08, an increase of 11.7%, or RMB38.1 million, from RMB324.5 million in 3Q08 and an increase of 57.5%, or RMB132.4 million, from RMB230.2 million in 4Q07. The sequential increase in online game operation revenues was primarily attributable to the successful launch of open beta testing for "Pocketpet Journey West," the successful launch of expansion packs for a number of the Company's existing games and the positive market response from recent marketing campaigns.
The aggregate average concurrent users (ACU) for games under operation in mainland China was approximately 690,000 in 4Q08, as compared to 717,000 in 3Q08 and 624,000 in 4Q07. The active paying customers (APC) for games operated in mainland China under the item-based revenue model was approximately 1,546,000 in 4Q08, as compared to 1,610,000 in 3Q08 and 1,565,000 in 4Q07. The average revenue per active paying customer (ARPU) for games operated in mainland China under the item-based revenue model was RMB225 in 4Q08, an increase of 14.8%, or RMB29, from RMB196 in 3Q08 and an increase of 59.6%, or RMB84, from RMB141 in 4Q07. The increase in ARPU from 3Q08 was mainly due to a series of successful promotions and the launch of new expansion packs. The slight decrease in ACU and APC from 3Q08 was mainly due to the more aggressive anti-cheating efforts carried out by the Company.
Overseas licensing revenues were RMB55.2 million (USD8.1 million) in 4Q08, a decrease of 3.7%, or RMB2.1 million, from RMB57.3 million in 3Q08 and an increase of 95.8%, or RMB27.0 million, from RMB28.2 million in 4Q07. The slight decrease from 3Q08 was mainly due to a decrease in initial license fees, partially offset by an increase in usage-based royalty fees.
Cost of Revenues
The cost of revenues was RMB49.3 million (USD7.2 million) in 4Q08, an increase of 4.4%, or RMB2.0 million, from RMB47.3 million in 3Q08 and an increase of 27.8%, or RMB10.7 million, from RMB38.6 million in 4Q07. The increase from 3Q08 was mainly due to an increase in VAT and other related taxes.
Gross Profit and Gross Margin
Gross profit was RMB368.5 million (USD54.0 million) in 4Q08, an increase of 10.1%, or RMB34.0 million, from RMB334.5 million in 3Q08, and an increase of 67.7%, or RMB148.7 million, from RMB219.8 million in 4Q07. Gross margin was 88.2% in 4Q08, as compared to 87.6% in 3Q08 and 85.1% in 4Q07.
Operating Expenses
Operating expenses were RMB218.9 million (USD32.1 million) in 4Q08, an increase of 62.7%, or RMB84.4 million, from RMB134.5 million in 3Q08, and an increase of 165.7%, or RMB136.5 million, from RMB82.4 million in 4Q07. The increase from 3Q08 in operating expenses was mainly attributed to higher R&D expenses and general and administrative expenses, partially offset by a decrease in sales and marketing expenses.
R&D expenses increased by 167.6%, or RMB78.8 million, from RMB47.0 million in 3Q08 to RMB125.9 million (USD18.4 million) in 4Q08. The increase from 3Q08 was primarily due to the non-recurring charge of approximately RMB78.4 million (USD11.5 million) resulting from the October 2008 InterServ acquisition which was related to two online games under development, i.e., Meteor Online and an online game developed based on the famous book XiaoAoJiangHu authored by Louis Cha. Based upon certain recognized valuation principles, the two games under development were valued at approximately RMB78.4 million (USD11.5 million) and were expensed as in process research and development under U.S. GAAP.
Sales and marketing expenses decreased by 4.5%, or RMB2.7 million, from RMB61.4 million in 3Q08 to RMB58.6 million (USD8.6 million) in 4Q08. This was primarily attributable to a reduction in advertising and promotional expenses associated with a more effective marketing campaign strategy.
General and administrative expenses increased by 31.7%, or RMB8.3 million, from RMB26.1 million in 3Q08 to RMB34.4 million (USD5.0 million) in 4Q08. This was primarily attributable to an increase in staff costs and professional fees.
Operating Profit
Operating profit was RMB149.5 million (USD21.9 million) in 4Q08, a decrease of 25.2%, or RMB50.5 million, from RMB200.0 million in 3Q08, and an increase of 8.8%, or RMB12.2 million, from RMB137.4 million in 4Q07. Excluding share-based compensation charge of RMB16.8 million (USD2.5 million) and a non-recurring charge of approximately RMB78.4 million (USD11.5 million) related to the InterServ acquisition in October 2008, operating profit (non- GAAP) was RMB244.7 million (USD35.9 million) in 4Q08, an increase of 14.7%, or RMB31.4 million, from RMB213.4 million in 3Q08, and an increase of 73.0%, or RMB103.3 million, from RMB141.4 million in 4Q07.
Income Tax Expense
Income tax expense was RMB33.6 million (USD4.9 million) in 4Q08, an increase of 283.3%, or RMB24.8 million, from RMB8.8 million in 3Q08 and an increase of 688.1%, or RMB29.4 million, from RMB4.3 million in 4Q07. The Board decided to distribute RMB520.0 million (USD76.2 million) earnings of Beijing Perfect World Software Co., Ltd. ("PW Software"), the Company's wholly-owned subsidiary in Beijing to its direct parent, Perfect Online Holding Ltd. ("PW Hong Kong"), which is the Company's wholly-owned subsidiary in Hong Kong. As such, a withholding tax of RMB26.0 million (USD3.8 million) was accrued and recorded as deferred tax liabilities as of December 31, 2008. Such U.S. dollar distribution will enable the Company to fund the share repurchase program. Under U.S. GAAP, all undistributed earnings are presumed to be transferred to the parent company and are subject to withholding tax, therefore, the Company will accrue 5% withholding tax for the earnings made from PW Software going forward.
Net Income
Net income was RMB124.8 million (USD18.3 million) in 4Q08, a decrease of 37.2%, or RMB74.0 million, from RMB198.8 million in 3Q08, and a decrease of 14.7%, or RMB21.4 million, from RMB146.2 million in 4Q07. Excluding share- based compensation charge and a non-recurring charge related to the InterServ acquisition in October 2008, net income (non-GAAP) was RMB220.0 million (USD32.2 million) in 4Q08, an increase of 3.7%, or RMB7.8 million, from RMB212.2 million in 3Q08, and an increase of 46.4%, or RMB69.7 million, from RMB150.3 million in 4Q07.
Basic and diluted earnings per ADS were RMB2.21(USD0.32) and RMB2.12(USD0.31), respectively, in 4Q08, as compared to RMB3.53 and RMB3.34, respectively, in 3Q08, and RMB2.62 and RMB2.48, respectively, in 4Q07. Excluding share-based compensation charge and a non-recurring charge related to the InterServ acquisition in October 2008, basic and diluted earnings per ADS (non-GAAP) were RMB3.90(USD0.57) and RMB3.74(USD0.55), respectively, in 4Q08, as compared to RMB3.77 and RMB3.56, respectively, in 3Q08, and RMB2.69 and RMB2.55, respectively, in 4Q07.
Commitment
In December 2008, the Company entered into an agreement with InterServ to acquire its subsidiaries in China with established game development capabilities for approximately USD23 million. Approximately USD22 million related to this InterServ acquisition had been deposited into an escrow account and recorded as restricted cash as of December 31, 2008. This InterServ acquisition was completed in February 2009.
In December 2008, the Company entered into an agreement to repurchase a total of 18,750,000 shares of the Company's Class A ordinary shares for approximately USD56.6 million from SB Asia Investment Fund II, L.P. ("SAIF") and an affiliate of SAIF. The share repurchase was completed in January 2009.
Fiscal Year 2008 Financial Results
Total Revenues
Total revenues were RMB1,437.2 million (USD210.7 million) in fiscal year 2008, an increase of 108.6%, or RMB748.1 million, from RMB689.1 million in fiscal year 2007. The year-over-year increase was primarily due to the expansion of the Company's game portfolio, the successful launch of a series of expansion packs and marketing campaigns, and a significant expansion in overseas licensing business. Online game operation revenues were RMB1,251.0 million (USD183.4 million) in fiscal year 2008, an increase of 103.2%, or RMB635.2 million, from RMB615.7 million in fiscal year 2007. Overseas licensing revenues were RMB186.2 million (USD27.3 million) in fiscal year 2008, an increase of 153.8%, or RMB112.8 million, from RMB73.4 million in fiscal year 2007.
Gross Profit and Gross Margin
Gross profit was RMB1,261.9 million (USD185.0 million) in fiscal year 2008, an increase of 121.3%, or RMB691.8 million, from RMB570.1 million in fiscal year 2007. Gross margin was 87.8% in fiscal year 2008, which increased from 82.7% in fiscal year 2007. The year-over-year increase in gross margin was primarily due to the greater economy of scale generated from the Company's significant revenue growth.
Operating Expenses
Operating expenses were RMB584.8 million (USD85.7 million) in fiscal year 2008, an increase of 166.0%, or RMB364.9 million, from RMB219.9 million in fiscal year 2007. The year-over-year increase in operating expenses was mainly due to the Company's overall operational expansion in 2008.
Operating Profit
Operating profit was RMB677.1 million (USD99.2 million) in fiscal year 2008, an increase of 93.3%, or RMB326.9 million, from RMB350.2 million in fiscal year 2007. Excluding share-based compensation charge of RMB49.9 million (USD7.3 million) and a non-recurring charge of approximately RMB78.4 million (USD11.5 million) related to the InterServ acquisition in October 2008, operating profit (non-GAAP) was RMB805.4 million (USD118.1 million) in fiscal year 2008, an increase of 124.6%, or RMB446.8 million, from RMB358.6 million in fiscal year 2007.
Net Income
Net income was RMB646.5 million (USD94.8 million) in fiscal year 2008, an increase of 78.6%, or RMB284.5 million, from RMB361.9 million in fiscal year 2007. Excluding share-based compensation charge and a non-recurring charge related to the InterServ acquisition in October 2008, net income (non-GAAP) was RMB774.8 million (USD113.6 million) in fiscal year 2008, an increase of 109.2%, or RMB404.5 million, from RMB370.3 million in fiscal year 2007.
Basic and diluted earnings per ADS were RMB11.50(USD1.69) and RMB10.91(USD1.60), respectively, in fiscal year 2008, as compared to RMB8.63 and RMB6.77, respectively, in fiscal year 2007. Excluding share-based compensation charge and a non-recurring charge related to the InterServ acquisition in October 2008, basic and diluted earnings per ADS (non-GAAP) were RMB13.78(USD2.02) and RMB13.07(USD1.92), respectively, in fiscal year 2008, as compared to RMB8.83 and RMB6.93, respectively, in fiscal year 2007.
Recent Developments
Update on InterServ Acquisitions
The Company successfully completed two transactions with InterServ. The first transaction to acquire rights related to two online games, i.e., Meteor Online and an online game developed based on the famous book XiaoAoJiangHu authored by Louis Cha, and a license to use InterServ's cross-platform game development engine for a total purchase price of approximately USD15 million in cash was completed in October 2008. The second acquisition of the two InterServ subsidiaries located in Shanghai and Chengdu at a consideration of approximately USD23 million in cash was completed in February 2009.
The successful completion of the transactions with InterServ has further diversified the Company's game pipeline by adding two online games with great potential, and has further strengthened the Company's solid research and development capability. The Company is working to integrate the newly acquired Shanghai and Chengdu subsidiaries from InterServ with the existing team and further expand business in Shanghai and Chengdu.
New Overseas Licensing Agreement
The Company entered into a new overseas licensing agreement in January 2009 with HI-WIN Co., Ltd. to license "Pocketpet Journey West" in Korea.
New Overseas Launches
The Company launched "Zhu Xian" in Thailand through Cubinet Interactive(s) Pte. Ltd. in January 2009, and in Vietnam through Cubinet Interactive(s) Pte. Ltd. in February 2009. The Company also launched closed beta testing for "Pocketpet Journey West" in North America under the name "Ether Saga Online" through its U.S. subsidiary in February 2009.
Upgraded to NASDAQ Global Select Market
The Company's ADSs were listed on the NASDAQ Global Select Market starting from January 2, 2009.
ADS and Share Repurchases
In October 2008, the Company's Board authorized an ADS repurchase program to repurchase up to USD100 million of the Company's ADSs from October 2008 to October 2009. As of March 1, 2009, the Company had repurchased an aggregate of 977,492 ADSs on the open market.
In addition to and separate from the above ADS repurchase program, in December 2008, the Company entered into an agreement to repurchase a total of 18,750,000 shares of the Company's Class A ordinary shares for approximately USD56.6 million from SB Asia Investment Fund II, L.P. ("SAIF") and an affiliate of SAIF. The transaction was completed in January 2009, and will be recorded on the financial statements for the first quarter of 2009.
Business Outlook
Based on the Company's current operations, total revenues for the first quarter of 2009 are expected to be between RMB376 million and RMB397 million. This represents an increase of 24% - 31% on a year-over-year basis and a decrease of 5% - 10% on a sequential basis, which reflects seasonality factors and takes into consideration that the Company has been devoting more resources into upcoming new games.
In terms of pipeline, the Company currently has seven MMORPGs under development. Large-scale closed beta testing for "Battle of the Immortals" is expected to be launched on March 5, 2009.
Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with generally accepted accounting principals in the United States, or GAAP, this press release presents non-GAAP operating profit, non-GAAP net income, non-GAAP net income attributable to ordinary shareholders and non-GAAP earnings per ADS by excluding share-based compensation charge and a non-recurring charge related to the InterServ acquisition in October 2008 from operating profit, net income, net income attributable to ordinary shareholders and earnings per ADS, respectively. The Company believes these non-GAAP financial measures are important to help investors understand the Company's operating and financial performance, compare business trends among different reporting periods on a consistent basis and access the Company's core operating results, as they exclude certain expenses that are (i) not expected to result in cash payments or (ii) non-recurring in nature. The use of the above non-GAAP financial measures has certain limitations. Share-based compensation charge has been and will be incurred and is not reflected in the presentation of the non-GAAP financial measures. It should be considered in the overall evaluation of our results. None of the non-GAAP measures is a measure of net income, operating profit, operating performance or liquidity presented in accordance with GAAP. We compensate for these limitations by providing the relevant disclosure of our share-based compensation charge and a non-recurring charge related to the InterServ acquisition in October 2008 in our reconciliations to the GAAP financial measures, which should be considered when evaluating our performance. 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. Reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure are set forth at the end of this release.
Conference Call
Perfect World will host a conference call and live webcast at 8:00 a.m. Eastern Standard Time (EST) (9:00 p.m., Beijing time) on Monday, March 2, 2009.
The dial-in details for the live conference call are as follows:
- U.S. Toll Free Number: 1-866-519-4004
- International Dial-in Number: +65-6735-7955
- Mainland China Toll Free Number: 10-800-819-0121
- Hong Kong Toll Free Number: 80-093-3053
- U.K. Toll Free Number: 080-8234-6646
Conference ID: PWRD
A live and archived webcast of the conference call will be available on the Investor Relations section of Perfect World's website at http://www.pwrd.com .
A telephone replay of the call will be available after the conclusion of the conference call through 10:00 a.m. Eastern Standard Time, March 10, 2009.
The dial-in details for the replay are as follows:
- U.S. Toll Free Number: 1-866-214-5335
- International Dial-in Number: +61-2-8235-5000
Conference ID: 7973 (PWRD)
About Perfect World Co., Ltd. (http://www.pwrd.com )
Perfect World Co., Ltd. (Nasdaq: PWRD) is a leading online game developer and operator in China. Perfect World primarily develops three-dimensional ("3D") online games based on the proprietary Angelica 3D game engine and game development platform. The Company's strong technology and creative game design capabilities, combined with extensive local knowledge and experience, enable it to frequently and rapidly introduce popular games that are designed to cater to changing customer preferences and market trends in China. The Company's current portfolio of self-developed online games includes 3D massively multiplayer online role playing games ("MMORPGs"): "Perfect World," "Legend of Martial Arts," "Perfect World II," "Zhu Xian," "Chi Bi" and "Pocketpet Journey West"; and a 3D online casual game: "Hot Dance Party". While a substantial portion of the revenues are generated in China, the Company's games have been licensed to leading game operators in a number of countries and regions in Asia, Europe and South America. The Company also generates revenues from game operation in North America. The Company plans to continue to explore new and innovative business models and remains deeply committed to maximizing shareholder value over time.
Safe Harbor Statements
This press release contains forward-looking statements. These statements constitute forward-looking statements under the U.S. 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. Among other things, the management's quotations and "Business Outlook" contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include, but are not limited to, our limited operating history, our ability to develop and operate new games that are commercially successful, the growth of the online game market and the continuing market acceptance of our games and in-game items in China and elsewhere, our ability to protect our intellectual property rights, our ability to respond to competitive pressure, our ability to maintain an effective system of internal control over financial reporting, changes of the regulatory environment in China, and economic slowdown in China and/or elsewhere. Further information regarding these and other risks is included in Perfect World's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. All information provided in this press release and in the attachments is as of March 2, 2009, and Perfect World does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
Perfect World Co., Ltd.
Consolidated Balance Sheets
Audited Unaudited Unaudited
December 31, December 31, December 31,
2007 2008 2008
RMB RMB USD
Assets
Current assets
Cash and cash equivalents 1,496,032,993 1,333,075,731 195,394,024
Restricted cash -- 150,361,200 22,039,018
Short-term investment -- 50,000,000 7,328,692
Accounts receivable 16,796,527 38,822,355 5,690,342
Prepayment and other assets 22,112,949 36,269,524 5,316,163
Deferred tax assets 731,142 1,734,207 254,189
Total current assets 1,535,673,611 1,610,263,017 236,022,428
Non current assets
Equity investments -- 22,559,975 3,306,702
Property, equipment, and
software, net 107,331,206 169,399,817 24,829,581
Construction in progress -- 714,083,386 104,665,942
Intangible assets, net 1,723,048 26,188,873 3,838,604
Prepayments and other assets 20,283,302 18,702,700 2,741,326
Deferred tax assets 730,180 1,090,526 159,843
Total assets 1,665,741,347 2,562,288,294 375,564,426
Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable 23,464,378 13,629,262 1,997,693
Advances from customers 49,672,384 78,388,312 11,489,676
Salary and welfare payable 30,901,115 61,907,164 9,073,971
Taxes payable 13,374,892 20,771,786 3,044,600
Accrued expenses and other
liabilities 14,175,638 24,813,169 3,636,961
Deferred revenues 123,310,935 223,352,994 32,737,705
Deferred tax liabilities -- 26,000,000 3,810,920
Deferred government grants 1,100,000 620,000 90,876
Total current liabilities 255,999,342 449,482,687 65,882,402
Deferred revenues 19,365,787 32,554,670 4,771,663
Other long-term payable -- 28,000,000 4,104,067
Total liabilities 275,365,129 510,037,357 74,758,132
Commitments
Shareholders' Equity
Ordinary shares (US$0.0001 par
value, 10,000,000,000 shares
authorized, 91,309,730
Class A ordinary shares and
187,975,990 Class B
ordinary shares issued and
outstanding as of
December 31, 2007;
10,000,000,000 shares
authorized, 72,385,480 Class A
ordinary shares
issued and outstanding,
210,350,565 Class B
ordinary shares issued and
210,147,840 Class B
ordinary shares outstanding as
of December 31,
2008) 221,081 223,481 32,756
Additional paid-in capital 1,124,169,036 1,177,967,483 172,659,213
Treasury stock -- (4,575,649) (670,670)
Statutory reserves 29,919,175 94,945,533 13,916,531
Accumulated other
comprehensive loss (31,771,062) (65,577,655) (9,611,968)
Retained earnings 267,837,988 849,267,744 124,480,432
Total Shareholders' Equity 1,390,376,218 2,052,250,937 300,806,294
Total Liabilities and
Shareholders' Equity 1,665,741,347 2,562,288,294 375,564,426
Perfect World Co., Ltd.
Consolidated Statements of Operations
Three months ended
December 31, September 30, December 31, December 31,
2007 2008 2008 2008
RMB RMB RMB USD
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Online game
operation
revenues 230,194,222 324,484,312 362,597,634 53,147,326
Overseas licensing
revenues 28,200,883 57,317,936 55,205,269 8,091,648
Total Revenues 258,395,105 381,802,248 417,802,903 61,238,974
Cost of revenues (38,618,961) (47,256,941) (49,344,155) (7,232,562)
Gross profit 219,776,144 334,545,307 368,458,748 54,006,412
Operating expenses
Research and
development
expenses (22,725,718) (47,033,562)(125,870,657) (18,449,345)
Sales and marketing
expenses (44,438,673) (61,371,931) (58,622,311) (8,592,497)
General and
administrative
expenses (15,215,509) (26,135,551) (34,416,638) (5,044,579)
Total operating
expenses (82,379,900)(134,541,044)(218,909,606) (32,086,421)
Operating profit 137,396,244 200,004,263 149,549,142 21,919,991
Other income/
(expenses)
Investment loss -- (414,026) (468,736) (68,704)
Interest income 14,156,626 7,724,046 7,915,676 1,160,231
Others, net (1,053,932) 259,476 1,430,694 209,702
Total other income 13,102,694 7,569,496 8,877,634 1,301,229
Profit before tax 150,498,938 207,573,759 158,426,776 23,221,220
Income tax expense (4,265,466) (8,770,012) (33,617,364) (4,927,426)
Net income 146,233,472 198,803,747 124,809,412 18,293,794
Cumulative unearned
dividends of
Series A Preferred
Shares -- -- -- --
Net income
attributable to
ordinary
shareholders 146,233,472 198,803,747 124,809,412 18,293,794
Net earnings per
share, basic 0.52 0.71 0.44 0.06
Net earnings per
share, diluted 0.50 0.67 0.42 0.06
Net earnings per ADS,
basic 2.62 3.53 2.21 0.32
Net earnings per ADS,
diluted 2.48 3.34 2.12 0.31
Shares used in
calculating basic
net earnings per
share 279,285,720 281,733,114 282,038,740 282,038,740
Shares used in
calculating diluted
net earnings per
share 294,945,237 297,574,386 294,335,560 294,335,560
Total share-based
compensation cost
included in:
Cost of revenues (38,209) (854,899) (1,082,339) (158,642)
Research and
development expenses (679,745) (5,885,419) (8,472,731) (1,241,881)
Sales and marketing
expenses (324,124) (1,315,404) (1,496,651) (219,370)
General and
administrative
expenses (2,995,652) (5,304,841) (5,717,413) (838,023)
Perfect World Co., Ltd.
Consolidated Statements of Operations (Cont.)
Year ended
December 31, December 31, December 31,
2007 2008 2008
RMB RMB USD
(Audited) (Unaudited) (Unaudited)
Revenues
Online game operation
revenues 615,740,988 1,250,959,689 183,357,961
Overseas licensing revenues 73,382,626 186,218,677 27,294,786
Total Revenues 689,123,614 1,437,178,366 210,652,747
Cost of revenues (118,982,981) (175,264,350) (25,689,168)
Gross profit 570,140,633 1,261,914,016 184,963,579
Operating expenses
Research and development
expenses (54,167,063) (227,836,657) (33,394,893)
Sales and marketing
Expenses (129,940,811) (254,484,542) (37,300,776)
General and administrative
expenses (35,783,802) (102,492,121) (15,022,663)
Total operating expenses (219,891,676) (584,813,320) (85,718,332)
Operating profit 350,248,957 677,100,696 99,245,247
Other income/(expenses)
Investment loss -- (1,175,025) (172,228)
Interest income 24,968,787 35,369,600 5,184,258
Others, net (1,681,718) (11,535,588) (1,690,815)
Total other income 23,287,069 22,658,987 3,321,215
Profit before tax 373,536,026 699,759,683 102,566,462
Income tax expense (11,587,441) (53,303,570) (7,812,909)
Net income 361,948,585 646,456,113 94,753,553
Cumulative unearned
dividends of
Series A Preferred Shares (1,739,759) -- --
Net income attributable to
ordinary shareholders 360,208,826 646,456,113 94,753,553
Net earnings per share,
basic 1.73 2.30 0.34
Net earnings per share,
diluted 1.35 2.18 0.32
Net earnings per ADS, basic 8.63 11.50 1.69
Net earnings per ADS,
diluted 6.77 10.91 1.60
Shares used in calculating
basic net earnings per
share 208,737,775 281,141,417 281,141,417
Shares used in calculating
diluted net earnings per
share 267,224,171 296,391,840 296,391,840
Total share-based
compensation cost
included in:
Cost of revenues (127,929) (3,000,334) (439,771)
Research and development
expenses (1,702,600) (22,365,703) (3,278,227)
Sales and marketing expenses (875,711) (4,733,152) (693,756)
General and administrative
expenses (5,637,887) (19,800,642) (2,902,256)
Perfect World Co., Ltd.
Consolidated Statements of Cash Flows
Three months ended
December 31, September 30, December 31, December 31,
2007 2008 2008 2008
RMB RMB RMB USD
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows from
operating
activities:
Net income 146,233,472 198,803,747 124,809,412 18,293,794
Adjustments for:
Share-based
compensation
cost 4,037,730 13,360,563 16,769,134 2,457,916
Depreciation
and
amortization
expense 2,875,270 5,989,719 6,670,886 977,777
In-process
research and
development
charge
related to
the InterServ
acquisition -- -- 78,417,506 11,493,957
Exchange loss
/ (gain) 5,812,374 212,346 (114,698) (16,812)
Investment
loss -- 414,026 468,736 68,704
Loss from
disposal of
property,
equipment,
and software -- -- 176,354 25,849
Changes in
assets and
liabilities:
Accounts
receivable 2,036,676 (15,080,639) (4,485,757) (657,495)
Current
prepayments
and other
assets (2,592,287) 2,560,308 2,129,563 312,138
Deferred tax
assets (11,235) (107,018) (569,103) (83,416)
Due from/to
related
parties -- -- -- --
Non-current
prepayments
and other
assets 11,439 481,283 (16,217,564) (2,377,071)
Accounts
payable 3,936,603 (9,795,333) 5,912,994 866,690
Advances
from
customers (10,869,452) 19,223,380 2,280,085 334,201
Salary and
welfare
payable 15,480,337 18,471,056 18,314,010 2,684,355
Taxes
payable (688,092) 1,172,897 632,322 92,682
Accrued
expenses
and other
liabilities 4,231,479 3,573,703 (4,410,129) (646,410)
Deferred
revenues 34,112,590 26,051,626 23,553,120 3,452,271
Deferred tax
liabilities -- -- 26,000,000 3,810,920
Deferred
government
grants (1,400,000) 150,000 (980,000) (143,642)
Net cash
provided by
operating
activities 203,206,904 265,481,664 279,356,871 40,946,408
Cash flows from
investing
activities:
Purchase of
property,
equipment,
and software (83,979,972) (62,749,284) (18,767,278) (2,750,792)
Purchase of
intangible
assets -- -- (1,351,351) (198,073)
Cash paid for
the InterServ
acquisition -- -- (102,852,002) (15,075,412)
Increase of
restricted
cash -- -- (150,361,200) (22,039,018)
Purchase of
short-term
investments -- -- -- --
Cash paid for
equity
investments -- (3,000,000) -- --
Net cash used in
investing
activities (83,979,972) (65,749,284) (273,331,831) (40,063,295)
Cash flows from
financing
activities:
Payments made
by shareholders
for Shareholder's
receivable -- -- -- --
Exercise of
share options -- 264,090 1,393,628 204,269
Proceeds from
IPO, net of
issuance
costs (8,105,195) -- -- --
Repurchase of
Company
shares -- -- (4,575,649) (670,670)
Net cash (used
in)/provided by
financing
activities (8,105,195) 264,090 (3,182,021) (466,401)
Effect of
exchange rate
changes on cash
and cash
equivalents (28,657,671) (1,588,665) 424,155 62,170
Net increase /
(decrease) in
cash 82,464,066 198,407,805 3,267,174 478,882
Cash and cash
equivalents,
beginning of
the period 1,413,568,927 1,131,400,752 1,329,808,557 194,915,142
Cash and cash
equivalents,
end of the
period 1,496,032,993 1,329,808,557 1,333,075,731 195,394,024
Supplemental
schedule of
non-cash
financing
activities:
Conversion of
Series A
convertible
preferred
shares into
common shares -- -- -- --
Supplemental
disclosures of
cash flow
information:
Cash paid during
the period for
income taxes (4,290,112) (4,365,085) (7,814,467) (1,145,396)
Perfect World Co., Ltd.
Consolidated Statements of Cash Flows (Cont.)
Year ended
December 31, December 31, December 31,
2007 2008 2008
RMB RMB USD
(Audited) (Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income 361,948,585 646,456,113 94,753,553
Adjustments for:
Share-based compensation
cost 8,344,127 49,899,831 7,314,010
Depreciation and
amortization expense 7,162,045 22,130,218 3,243,711
In-process research and
development charge related
to the InterServ
acquisition -- 78,417,506 11,493,957
Exchange loss / (gain) 6,834,819 12,187,231 1,786,329
Investment loss -- 1,175,025 172,228
Loss from disposal of
property, equipment, and
software -- 176,354 25,849
Changes in assets and
liabilities:
Accounts receivable (11,225,771) (22,103,425) (3,239,784)
Current prepayments and
other assets (15,412,217) (11,922,267) (1,747,492)
Deferred tax assets (1,223,683) (1,365,895) (200,204)
Due from/to related
parties (126,900) -- --
Non-current prepayments
and other assets (1,245,047) (16,858,536) (2,471,020)
Accounts payable 7,133,260 (831,337) (121,852)
Advances from customers 29,222,940 28,715,928 4,209,004
Salary and welfare
payable 20,725,757 30,996,508 4,543,277
Taxes payable 8,044,194 7,396,894 1,084,191
Accrued expenses and
other liabilities 6,951,398 8,517,394 1,248,427
Deferred revenues 109,700,252 113,312,411 16,608,629
Deferred tax liabilities -- 26,000,000 3,810,920
Deferred government
grants 100,000 (480,000) (70,355)
Net cash provided by
operating activities 536,933,759 971,819,953 142,443,378
Cash flows from investing
activities:
Purchase of property,
equipment, and software (112,006,385) (759,612,288) (111,339,287)
Purchase of intangible
assets -- (1,351,351) (198,073)
Cash paid for the InterServ
acquisition -- (102,852,002) (15,075,412)
Increase of restricted cash -- (150,361,200) (22,039,018)
Purchase of short-term
investments -- (50,000,000) (7,328,692)
Cash paid for equity
investments -- (23,735,000) (3,478,930)
Net cash used in investing
activities (112,006,385) (1,087,911,841) (159,459,412)
Cash flows from financing
activities:
Payments made by
shareholders for
Shareholder's receivable 126,808 -- --
Exercise of share options -- 3,836,884 562,387
Proceeds from IPO, net of
issuance costs 1,008,227,800 -- --
Repurchase of Company
shares -- (4,575,649) (670,670)
Net cash (used in)/provided
by financing activities 1,008,354,608 (738,765) (108,283)
Effect of exchange rate
changes on cash and cash
equivalents (38,605,881) (46,126,609) (6,760,954)
Net increase / (decrease) in
cash 1,394,676,101 (162,957,262) (23,885,271)
Cash and cash equivalents,
beginning of the period 101,356,892 1,496,032,993 219,279,295
Cash and cash equivalents,
end of the period 1,496,032,993 1,333,075,731 195,394,024
Supplemental schedule of non-
cash financing activities:
Conversion of Series A
convertible preferred shares
into common shares 61,796,533 -- --
Supplemental disclosures of
cash flow information:
Cash paid during the period
for income taxes (10,439,931) (23,288,291) (3,413,454)
Perfect World Co., Ltd.
Reconciliation of GAAP and Non-GAAP Results
Three months ended
December 31, September 30, December 31, December 31,
2007 2008 2008 2008
RMB RMB RMB USD
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GAAP operating
profit 137,396,244 200,004,263 149,549,142 21,919,991
Share based
compensation
charge 4,037,730 13,360,563 16,769,134 2,457,916
Non-recurring
charge related
to the
InterServ
acquisition in
October 2008 -- -- 78,417,506 11,493,957
Non-GAAP
operating
profit 141,433,974 213,364,826 244,735,782 35,871,864
GAAP net income 146,233,472 198,803,747 124,809,412 18,293,794
Share based
compensation
charge 4,037,730 13,360,563 16,769,134 2,457,916
Non-recurring
charge related
to the
InterServ
acquisition in
October 2008 -- -- 78,417,506 11,493,957
Non-GAAP net
income 150,271,202 212,164,310 219,996,052 32,245,667
GAAP net income
attributable
to ordinary
shareholders 146,233,472 198,803,747 124,809,412 18,293,794
Share based
compensation
charge 4,037,730 13,360,563 16,769,134 2,457,916
Non-recurring
charge related
to the
InterServ
acquisition in
October 2008 -- -- 78,417,506 11,493,957
Non-GAAP net
income
attributable
to ordinary
shareholders 150,271,202 212,164,310 219,996,052 32,245,667
GAAP net
earnings per
ADS
- Basic 2.62 3.53 2.21 0.32
- Diluted 2.48 3.34 2.12 0.31
Non-GAAP net
earnings per
ADS
- Basic 2.69 3.77 3.90 0.57
- Diluted 2.55 3.56 3.74 0.55
ADSs used in
calculating
net earnings
per ADS
- Basic 55,857,144 56,346,623 56,407,748 56,407,748
- Diluted 58,989,047 59,514,877 58,867,112 58,867,112
Perfect World Co., Ltd.
Reconciliation of GAAP and Non-GAAP Results (Cont.)
Year ended
December 31, December 31, December 31,
2007 2008 2008
RMB RMB USD
(Audited) (Unaudited) (Unaudited)
GAAP operating profit 350,248,957 677,100,696 99,245,247
Share based compensation
charge 8,344,127 49,899,831 7,314,010
Non-recurring charge
related to the
InterServ acquisition
in October 2008 -- 78,417,506 11,493,957
Non-GAAP operating
profit 358,593,084 805,418,033 118,053,214
GAAP net income 361,948,585 646,456,113 94,753,553
Share based compensation
charge 8,344,127 49,899,831 7,314,010
Non-recurring charge
related to the
InterServ acquisition
in October 2008 -- 78,417,506 11,493,957
Non-GAAP net income 370,292,712 774,773,450 113,561,520
GAAP net income
attributable to
ordinary shareholders 360,208,826 646,456,113 94,753,553
Share based compensation
charge 8,344,127 49,899,831 7,314,010
Non-recurring charge
related to the
InterServ acquisition
in October 2008 -- 78,417,506 11,493,957
Non-GAAP net
income attributable
to ordinary shareholders 368,552,953 774,773,450 113,561,520
GAAP net earnings per ADS
- Basic 8.63 11.50 1.69
- Diluted 6.77 10.91 1.60
Non-GAAP net earnings
per ADS
- Basic 8.83 13.78 2.02
- Diluted 6.93 13.07 1.92
ADSs used in calculating
net earnings per ADS
- Basic 41,747,555 56,228,283 56,228,283
- Diluted 53,444,834 59,278,368 59,278,368
For further information, please contact
Perfect World Co., Ltd.
Vivien Wang
Investor Relations Officer
Tel: +86-10-5885-1813
Fax: +86-10-5885-6899
Email: ir@pwrd.com
http://www.pwrd.com
Christensen Investor Relations
Kathy Li
Tel: +1-480-614-3036
Fax: +1-480-614-3033
Email: kli@christensenir.com
Roger Hu
Tel: +852-2117-0861
Fax: +852-2117-0869
Email: rhu@christensenir.com
