Highlights From SNDA's Q3 Conference Call: Each Business Segment Expanding; Games Year-Over-Year Revenues Up 45%

FREE Breaking News Alerts from StreetInsider.com!

More News related to SNDA

Shanda Interactive Entertainment Limited Announces Extraordinary General Meeting of Shareholders
Deutsche Bank on Chinese Internet Sector: 'Online Ads to Maintain Robust Growth in 2012;' BIDU, SINA Top Picks
Shanghai Nutshell, Seller of Bambook Branded e-Readers, and Qualcomm Bring First mirasol Display Technology to China
Halter USX China Index Announces 2011 Year End and 4Q Results and Adds New Constituents
Shanda Interactive (SNDA) Misses Q3 Views

More News related to Corporate News

December 2, 2009 10:21 AM EST

Shanda Interactive Entertainment Ltd. (NYSE: SNDA) reports Q3 EPS of $0.90, 2 cents better than the analyst estimate of $0.88. Revenue for the quarter was $202.5 million, which compares to the estimate of $197.69 million.

Highlights From SNDA's Q3 Conference Call:

(CTO) This past quarter saw the successful IPO of Shanda Games on the NASDAQ Global Market on September 25. We believe the capital raised by this listing will help us continue to develop and grow as we continue to expand and diversify our business lines and explore M&A and investment opportunities with the potential partners in order to achieve sustainable growth.
During Q3 of 2009, our subsidiary Shanda Music successfully acquired a major stake in Hurray! The transaction has enabled us to further expand the process and the depth of our entertainment content offerings and have Shanda to lay the groundwork for future 3G development in China.
In the middle of November, Shanda Pictures one of our wholly owned subsidiary allowed joint venture with Hunan Broadcasting and Television Group, one of the most successful Chinese media and entertainment group.
Moving on to the Literature side of our business, Shanda Literature sustained its growth momentum well in to Q3 of 2009.
At the end of Q3 of 2009, Shanda Literature's three literary products had a combined average daily page view of over 400 million and combined average of 56 million updated Chinese characters per day. The number accumulated registered subscribers at more than 35 million.
Shanda Literature has established long-term strategic partnerships with several publishers to explore offline publishing. By the end of Q3, Shanda Literature has offered 132 titles for offline publication.
In the past quarter, Shanda Online has been starting the scope of its promotion-payment community services. This new panel added over the quarter, we now have signed cooperation agreement with 35 banks to provide online payment services, including direct payment through credit and debit cards.
Meanwhile, Shanda Online network of 320,000 offline sales, all of it provide convenient purchasing opportunities and cash value starting services for our subscribers.
We are also working on cloud services. Cloud services combines advanced technology and the Internet service. We use cloud services to integrate resources and services for computing, storage, security, technology, payment, logging modification, customer service, data analysis, and promotion, and marketing.
Second, Internet, Internet refers to a network of objects such as wireless offerings and sensors.
Third, virtual reality, we have been coming to bring exciting entertainment user experience with latest virtual reality technology. Shanda Interjoy, a subsidiary of Shanda has established a joint with Chinese Academy of Science to carryout research on the technology on virtual reality and application intelligence in order to explore the possibilities of visual system in the entertainment area.
(CFO) Consolidated net revenues increased 48% year-over-year and 12% quarter-over-quarter to 202.5 million.
The company started to consolidate Hurray! financials from September 2009 and its revenue contribution to Shanda in 3Q was close to 1%.
Shanda Games revenue increased 45% year-over-year and 10% quarter-over-quarter to 186.3 million while Shanda Online revenue increased 38% year-over-year and 9% quarter-over-quarter to 41.5 million.
Other revenues include business lines such as Shanda Literature advertising, online chess and board game platforms, e-sports platform as well as Hurray! September revenues increased 43% year-over-year and 24% quarter-over-quarter to 19.5 million.
Gross margin was 71.1% in Q3 compared with 72.7% in the second quarter of 2009 and 73% in the same period a year ago. Gross profit related to Shanda Games was 110.4 million in Q3, instead increased 9% quarter-over-quarter and 45% year-over-year.
Shanda Games gross margin was 59.3% for Q3 compared with 59.7% in the second quarter and 59.1% in Q3 of 2008.
Gross profit related to Shanda Online was 33.7 million in Q3, increased 8% sequentially and 34% year-over-year.
Shanda Online gross margin was 81.3% for Q3 compared with 81.9% in the second quarter and
84.2% in Q3 of 2008.
Other business gross profit was 8.3%, sorry, 8.3 million in Q3 remained relatively flat quarter-over-quarter and increased 43% year-over-year.
Gross margin for other business was 42.3% for Q3 compared with 52.5% in Q2 and 42.2% in Q3 of 2008.
Product development expenses increased 10.6% quarter-over-quarter to 14.6 million in Q3 '09 mainly due to a performance-based salary adjustment in Q3 '09 that was distributed to Shanda Games R&D staff.
Sales and marketing expenses were 21.5 million, increased by 17.3% sequentially, primarily due to increased expenses related to marketing efforts during China Joy and for the launch of new games as well as expansion packs for existing titles under Shanda Games.
Turning to our balance sheet cash and cash equivalents as of September 30th totaled 1.6 billion mainly resulted from the IPO proceeds received from the sale of the secondary shares in Shanda Games during its IPO during Q3.
Long-term liabilities were 151.5 million reflecting the convertible notes issued by us in September 2008.
(Q&A) Just following on Dick's questions regarding your, I guess, the recent acquisition of the video sharing business. Right now, on a standalone basis is that business profitable incrementally and if so, how do you make the business scalable once you bring it into the Shanda fold? And I'll have a followup question after that. (A)As we actually discussed earlier, the proposed merger of Hurray! and Ku6 is actually a transaction recommended by Hurray!'s management team and Board to its shareholders. So although we actually their shareholders at this moment, we actually are not in position to comment on the specifics of Hurray! business performance and prospects. If possible, we will likely defer that to Hurray!'s management to discuss.
And second of all, your, I just wanted to talk a little bit about your operating expenses going forward, in the third quarter R&D expenses were relatively flat, are we going to see any kind of R&D expenditures or significant growth in expenses associated just outside of gaming, so with the platform or the Literature business, are we going to see any kind of growth or significant growth in operating expense there, especially on the R&D side? I'll get back into the queue. (A) Okay, as Alan already mentioned in his section, Shanda is fully committed to the new technology development and we, it is our mission to adopt new technology together with innovative business model to reshape the quarter landscape. Therefore it is our long term objective to continue to invest in new technologies and also supported by that kind of mission, we also mentioned the different areas that Shanda Literature Research Institute for the innovative technologies we're focused on. Therefore, over the next couple of quarters, we expect to see the R&D related expenses will continue to spend.