BEIJING, Feb. 1, 2019 /PRNewswire/ -- 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 fourth
quarter and fiscal year ended December
31, 2018.
Fourth Quarter 2018 Highlights
- Total revenue[1] was US$118 million, a decrease of 18% year-over-year
and flat quarter-over-quarter, in line with the Company's
guidance.
- Online game revenue was US$94
million, a decrease of 14% year-over-year and 2%
quarter-over-quarter, in line with the Company's guidance.
- GAAP net income attributable to Changyou.com Limited was
US$10 million[2], compared
with net income of US$34 million in
the fourth quarter of 2017 and net income of US$55 million[3] in the third
quarter of 2018.
- Non-GAAP[4] net income attributable to
Changyou.com Limited was US$11
million[2], compared with net income of
US$34 million in the fourth quarter
of 2017 and net income of US$54
million[3] in the third quarter of 2018.
[1] The
Company adopted ASU No. 2014-09, "Revenue from Contracts with
Customers" on January 1, 2018. Adoption did not have a material
impact on the Company's consolidated financial
statements.
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[2] GAAP
and non-GAAP net income attributable to Changyou.com Limited
included impairment charges of US$16 million on goodwill recognized
in relation to the 17173.com Website business.
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[3] GAAP
and non-GAAP net income attributable to Changyou.com Limited
included a one-time tax benefit of US$23 million that was
recognized for preferential enterprise income tax rates of some of
the Company's subsidiaries upon their receipt of 2017 Key National
Software Enterprise status or 2017 Software Enterprise
status.
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[4] Non-GAAP results exclude
share-based compensation expense. 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 of Non-GAAP Results of Operations
Measures to the Nearest Comparable GAAP Measures".
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Fiscal Year 2018 Highlights
- Total revenue was US$486 million,
compared with US$580 million in
2017.
- Online game revenue was US$390
million, compared with US$450
million in 2017.
- GAAP net income attributable to Changyou.com Limited was
US$84 million, compared with
US$109 million in 2017.
- Non-GAAP net income attributable to Changyou.com Limited was
US$78 million, compared with
US$126 million in 2017.
Mr. Dewen Chen, CEO, commented,
"In 2018, we stayed focused on the development of high-end mobile
games. We carefully reviewed our previous experience in mobile game
development and made a number of changes that should help lay a
solid foundation for producing hit games in the future. For 2019,
we will continue to execute our core strategy of "Top Games" and
focus on greatly improving our R&D capabilities and
efficiencies. Leveraging our cumulative knowledge and innovations,
we believe we are well-positioned to once again roll out new
blockbusters."
Mr. Qing Wei, Chief Games Development Officer, added, "We were
happy to report that Legacy TLBB Mobile turned in a solid
performance in 2018. This is mainly due to the continuous
improvements that we make to both the content and gameplay of the
game as we continually focus on maximizing the longevity of the
franchise. During the quarter, we launched a new expansion pack
that included a new clan and new gameplay, both of which received
positive feedback from players. For the first quarter and full year
2019, we will continue to update the game content and make further
optimizations to ensure user retention and maximize the longevity
of the game."
Mr. Yaobin Wang, CFO of Changyou,
added, "Excluding the impairment charges related to the 17173.com
Website business, both total revenue and non-GAAP net income
performed well for the quarter, both in line with our guidance. For
the full year 2018, we maintained solid revenue contribution from
our core existing games, including TLBB PC, by continually
implementing proactive and effective operational adjustments, which
enabled us to achieve solid financial performance amid a rapidly
changing industry environment in 2018."
Fourth Quarter 2018 Operational Results
- Total average monthly active accounts[5] of the
Company's PC games were 2 million, a decrease of 17% year-over-year
and 13% quarter-over-quarter. The year-over-year and
quarter-over-quarter decreases reflected the natural declining
life cycles of the Company's older games, including TLBB PC.
- Total average monthly active accounts of the Company's mobile
games were 2.9 million, a decrease of 6% year-over-year and 22%
quarter-over-quarter. The year-over-year and quarter-over-quarter
decreases reflected the natural declining life cycles of the
Company's older games, including Legacy TLBB Mobile.
- Total quarterly aggregate active paying
accounts[6] of the Company's PC games were 0.9
million, an increase of 13% year-over-year and 13%
quarter-over-quarter. The year-over-year and quarter-over-quarter
increases were mainly driven by an increase in the willingness of
TLBB PC users to pay as the Company provided more benefits to
players through daily in-game promotional events in the fourth
quarter of 2018.
- Total quarterly aggregate active paying accounts of the
Company's mobile games were 0.7 million, a decrease of 42%
year-over-year and flat quarter-over-quarter. The year-over-year
decrease reflected the natural declining life cycles of the
Company's older games, including Legacy TLBB Mobile.
[5]
Monthly Active Accounts refers to the number of registered accounts
that are logged in to these games at least once during the
month.
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[6] Quarterly Aggregate Active Paying
Accounts refers to the number of accounts from which game points
are utilized at least once during the quarter.
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Fourth Quarter 2018 Unaudited Financial Results
Revenue
Total revenue was US$118 million,
a decrease of 18% year-over-year and flat quarter-over-quarter.
Online game revenue was US$94
million, a decrease of 14% year-over-year and 2%
quarter-over-quarter. The year-over-year decrease was due to the
natural decline in revenue of the Company's older games, including
Legacy TLBB Mobile.
Online advertising revenue was US$4
million, a decrease of 32% year-over-year and 14%
quarter-over-quarter. The year-over-year and quarter-over-quarter
decreases were mainly due to fewer PC and web games being marketed
on the 17173.com Website.
Cinema advertising revenue was US$18
million, a decrease of 30% year-over-year and an increase of
13% quarter-over-quarter. The year-over-year decrease reflected the
impact of a strategy adjustment in the second quarter of 2018
related to the acquisition and sale of advertising resources. The
quarter-over-quarter increase reflected a recovery in revenue
following the strategy adjustment.
Internet value-added services ("IVAS") revenue was US$2 million, a decrease of 55% year-over-year
and an increase of 19% quarter-over-quarter. The year-over-year
decrease was a result of lower revenue from PC and mobile internet
products and the quarter-over-quarter increase was due to higher
revenue from PC Internet products.
Gross profit/ (loss)
GAAP and non-GAAP gross profit were both US$77 million, a decrease of 22% year-over-year
and 2% quarter-over-quarter. GAAP and non-GAAP gross margin were
both 66%, compared with 68% in the fourth quarter of 2017, and 67%
in the third quarter of 2018.
GAAP and non-GAAP gross profit of the online games business were
both US$80 million, a decrease of 14%
year-over-year and 2% quarter-over-quarter. GAAP and non-GAAP gross
margin of the online games business were both 85%, compared with
84% in both the fourth quarter of 2017 and the third quarter of
2018.
GAAP and non-GAAP gross profit of the online advertising
business were both US$3 million, a
decrease of 34% year-over-year and 19% quarter-over-quarter. GAAP
and non-GAAP gross margin of the online advertising business were
both 70%, compared with 73% in the fourth quarter of 2017 and 75%
in the third quarter of 2018. The quarter-over-quarter decrease in
gross margin was mainly due to lower online advertising
revenue in the fourth quarter of 2018, while costs remained stable
compared with the third quarter of 2018.
GAAP and non-GAAP gross loss of the cinema advertising business
were both US$6 million, compared with
a gross profit of US$1 million in the
fourth quarter of 2017 and a gross loss of US$6 million in the third quarter of 2018. GAAP
and non-GAAP gross margin of the cinema advertising business were
both negative 31%, compared with 4% in the fourth quarter of 2017
and negative 37% in the third quarter of 2018. The year-over-year
decrease and the quarter-over-quarter increase in gross margin were
mainly due to changes in cinema advertising revenue.
GAAP and non-GAAP gross profit of the IVAS business were both
US$0.2 million, compared with gross
profit of US$1 million in the fourth
quarter of 2017 and gross profit of US$0.2
million in the third quarter of 2018.
Operating expenses
Total operating expenses were US$69
million, an increase of 9% year-over-year and 37%
quarter-over-quarter.
Product development expenses were US$33
million, a decrease of 1% year-over-year and an increase of
11% quarter-over-quarter. The quarter-over-quarter increase was
mainly due to an increase in outsourcing and licensing fees in the
fourth quarter of 2018.
Sales and marketing expenses were US$12
million, a decrease of 40% year-over-year and 6%
quarter-over-quarter. The year-over-year decrease was mainly
because of lower marketing and promotional spending for online
games in the fourth quarter of 2018.
General and administrative expenses were US$8 million, a decrease of 23% year-over-year
and 1% quarter-over-quarter. The year-over-year decrease was mainly
due to a decrease in office-related fees, as well as a decrease in
salary and benefit expenses as a result of a reduction in
headcount.
Goodwill impairment was US$16
million. The impairment was mainly related to the 17173.com
Website business, which was acquired in 2011. The launch of new
initiatives for the 17173.com Website fell behind schedule in the
fourth quarter of 2018, and the profit outlook of the business
remained uncertain. In addition, due to more stringent regulations,
there was a significant decline in the number of new game launches
in the market, so the number of games marketed on 17173.com Website
also fell. As a result, the Company determined that the future
performance of 17173.com Website would likely fall short of
expectations, and that impairment charges were required.
Operating profit
Operating profit was US$8 million,
compared with an operating profit of US$35
million in the fourth quarter of 2017 and an operating
profit of US$29 million in the third
quarter of 2018.
Non-GAAP operating profit was US$9
million, compared with a non-GAAP operating profit of
US$35 million in the fourth quarter
of 2017 and a non-GAAP operating profit of US$28 million in the third quarter of 2018.
Other income, net
Other income was US$3 million,
compared with US$4 million in the
fourth quarter of 2017 and US$9
million in the third quarter of 2018.
Income tax expense/ (benefit)
Income tax expense was US$8
million, compared with income tax expense of US$11 million in the fourth quarter of 2017 and
income tax benefit of US$12 million
in the third quarter of 2018. The income tax benefit in the third
quarter of 2018 was mainly due to some of the Company's
subsidiaries having been granted preferential tax rates upon their
receipt of 2017 Key National Software Enterprise status or 2017
Software Enterprise status.
Net income
Net income was US$10 million,
compared with net income of US$34
million in the fourth quarter of 2017 and net income of
US$55 million in the third quarter of
2018.
Non-GAAP net income was US$11
million, compared with non-GAAP net income of US$34 million in the fourth quarter of 2017 and
non-GAAP net income of US$54 million
in the third quarter of 2018.
Net loss attributable to non-controlling
interests
GAAP and non-GAAP net loss attributable to non-controlling
interests were both US$0.1 million.
This compares with a GAAP and non-GAAP net loss of US$0.1 million in the fourth quarter of 2017 and
US$0.02 million in the third quarter
of 2018. Non-controlling interests include the non-controlling
interests in RaidCall, which provides online music and
entertainment services primarily in Taiwan; a joint venture that operates Korean
comics online in China; and a
joint venture that is engaged in intellectual property
authorization, game production and distribution in China.
Net income attributable to Changyou.com
Limited
Net income attributable to Changyou.com Limited was US$10 million[2], compared with net
income of US$34 million in the fourth
quarter of 2017 and net income of US$55
million[3] in the third quarter of 2018.
Fully-diluted net income attributable to Changyou.com Limited per
ADS[7] was US$0.19,
compared with net income of US$0.64
in the fourth quarter of 2017 and net income of US$1.03 in the third quarter of 2018.
Non-GAAP net income attributable to Changyou.com Limited was
US$11 million[2], compared
with net income of US$34 million in
the fourth quarter of 2017 and net income of US$54 million[3] in the third quarter
of 2018. Non-GAAP fully-diluted net income attributable to
Changyou.com Limited per ADS was US$0.21, compared with net income of US$0.64 in the fourth quarter of 2017 and net
income of US$1.01 in the third
quarter of 2018.
[7] Each
ADS represents two Class A ordinary shares.
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Liquidity
As of December 31, 2018, Changyou
had net cash[8] of US$673
million, compared with US$978
million as of December 31,
2017. The decrease was mainly due to the distribution of a
special cash dividend in the second quarter of 2018.
Operating cash flow for the fourth quarter of 2018 was a net
inflow of US$47 million.
[8] Net
cash is calculated as the sum of cash and cash equivalents,
short-term investments, current restricted cash and non-current
restricted time deposits, minus long-term bank loans. See "Bank
Loan Agreement."
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Fiscal Year 2018 Unaudited Financial Results
Revenue
Total revenue in 2018 was US$486
million, representing a decrease of 16% year-over-year.
Online game revenue decreased 13% year-over-year to US$390 million. The year-over-year decrease was
mainly due to the natural declining life cycles of Legacy TLBB
Mobile, which was launched in the second quarter of 2017, and TLBB
3D.
Online advertising revenue decreased 22% year-over-year to
US$20 million. The year-over-year
decrease was mainly due to fewer Web games and PC games being
marketed on the 17173.com Website.
Cinema advertising revenue decreased 23% year-over-year to
US$70 million. The year-over-year
decrease was a result of a strategy adjustment related to the
acquisition and sale of advertising resources during second quarter
of 2018.
IVAS revenue decreased 57% year-over-year to US$6 million. The decrease was due to lower
revenue from both PC and mobile Internet products.
Gross profit/ (loss)
GAAP and non-GAAP gross profit were both US$325 million, representing a decrease of 22%
year-over-year. GAAP and non-GAAP gross margin were both 67%,
compared with 72% in 2017.
GAAP and non-GAAP gross profit of the online games business were
both US$329 million, representing a
decrease of 15% year-over-year. GAAP and non-GAAP gross margin of
the online games business were both 84%, compared with 86% in
2017.
GAAP and non-GAAP gross profit of the online advertising
business were both US$14 million,
representing a decrease of 22% year-over-year. GAAP and non-GAAP
gross margin of the online advertising business were both 74%,
compared with 73% in 2017.
GAAP and non-GAAP gross loss of the cinema advertising business
were both US$19 million, compared
with a gross profit of US$6 million
in 2017. GAAP and non-GAAP gross margin of the cinema advertising
business were both negative 27%, compared with 7% in 2017. The
year-over-year decrease in gross margin was due to a decrease in
cinema advertising revenues, while costs remained relatively
flat.
GAAP and non-GAAP gross profit of IVAS were both US$1 million, compared with a gross profit of
US$5 million in 2017.
Operating expenses
Total operating expenses were US$225
million, representing a decrease of 31% year-over-year.
Product development expenses were US$124
million, representing a decrease of 5% year-over-year. The
decrease was mainly due to a decrease in share-based compensation
expenses as a result of the decrease in the market price of the
Company's ADSs in 2018.
Sales and marketing expenses were US$54
million, representing a decrease of 11% year-over-year. The
decrease was mainly due to a decrease in salary and benefit
expenses as a result of a reduction in marketing headcount, as well
as a decrease in share-based compensation expenses due to
the decrease in the market price of the Company's ADSs in 2018.
General and administrative expenses were US$30 million, representing a decrease of 36%
year-over-year. The decrease was mainly due to a decrease in
share-based compensation expenses as a result of the decrease in
the market price of the Company's ADSs in 2018.
Goodwill impairment was US$16
million. The impairment was mainly related to the 17173.com
Website business, which was acquired in 2011. The launch of new
initiatives for the 17173.com Website fell behind schedule in the
fourth quarter of 2018, and the profit outlook of the business
remained uncertain. In addition, due to more stringent regulations,
there was a significant decline in the number of new game launches
in the market, so the number of games marketed on 17173.com Website
also fell. As a result, the Company determined that the future
performance of 17173.com Website would likely fall short of
expectations, and that impairment charges were required. Goodwill
impairment and impairment of intangible assets acquired as part of
acquisition of a business in 2017 were mainly related to the
MoboTap business, which was acquired in 2014. The Company
determined that it was unlikely that MoboTap would gain users and
grow its revenue in China as a
result of heightened restrictions that Chinese regulators imposed
on card and board games, which were MoboTap's main focus at the
time, and that impairment charges of US$87
million were required to reflect the fair value of the
MoboTap business in the third quarter of 2017.
Operating profit
Operating profit was US$100
million, compared with an operating profit of US$90 million in 2017.
Non-GAAP operating profit was US$94
million, compared with an operating profit of US$108 million in 2017.
Other income, net
Other income was US$23 million,
compared with US$9 million in
2017.
Income tax expense
Income tax expense was US$64
million, compared with US$41
million in 2017. The year over year increase was mainly due
to the accrual of additional income tax withholdings in the first
quarter of 2018, partially offset by the tax benefit that was
recognized in the third quarter of 2018.
Net income
Net income was US$84 million,
compared with net income of US$82
million in 2017.
Non-GAAP net income was US$77
million, compared with non-GAAP net income of US$99 million in 2017.
Net loss attributable to non-controlling
interests
Both GAAP and non-GAAP net loss attributable to non-controlling
interests were US$0.4 million,
compared with net loss of US$27
million in 2017. Non-controlling interests include the
non-controlling interests in RaidCall, which provides online music
and entertainment services primarily in Taiwan; a joint venture which operates Korean
comics online in China; and a
joint venture which operates intellectual property authorization,
game production and distribution in China. The year-over-year change was mainly
due to impairment charges related to the MoboTap business that were
recognized during the third quarter of 2017.
Net income attributable to Changyou.com
Limited
Net income attributable to Changyou.com Limited was US$84 million, compared with US$109 million in 2017. Fully-diluted net income
attributable to Changyou.com Limited per ADS was US$1.57, compared with US$2.04 in 2017.
Non-GAAP net income attributable to Changyou.com Limited was
US$78 million, compared with
US$126 million in 2017. Non-GAAP
fully-diluted net income attributable to Changyou.com Limited per
ADS was US$1.45, compared with
US$2.36 in 2017.
Business Outlook
For the first quarter of 2019, Changyou expects:
- Total revenue to be between US$105
million and US$115 million,
including online game revenue of US$80
million to US$90 million;
- Non-GAAP net income attributable to Chanyou.com Limited to be
between US$23 million and
US$28 million, and non-GAAP net
income per fully-diluted ADS to be between US$0.43 and US$0.52. Share-based compensation expense to be
around US$1 million, assuming no new
grants of share-based awards. Taking into account the elimination
of the impact of these share-based awards, GAAP net income
attributable to Changyou.com Limited to be between US$22 million and US$27
million, and GAAP net income per fully-diluted ADS to be
between US$0.41 and US$0.50.
For the first quarter of 2019 guidance, the Company has adopted
a presumed exchange rate of RMB6.90 =
US$1.00, as compared with the actual
exchange rate of approximately RMB6.36 = US$1.00
for the first quarter of 2018, and RMB6.91 = US$1.00
for the fourth quarter of 2018.
Bank Loan Agreement
In October 2018, to roll over
matured offshore financing facilities, Changyou entered into a bank
loan agreement pursuant to which it has drawn down U.S.
dollar-denominated loans in the aggregate amount of US$220 million that are secured by non-current
restricted time deposits of RMB1.7
billion (approximately US$244
million). All of the loans carry a floating rate of interest
based on the LIBOR. All of the loans are due to be repaid, and
accordingly the restricted time deposits released, in 2021.
Loan Agreement and Share Pledge Agreement with Sohu.com
Limited ("Sohu")
On October 24, 2016, Changyou
entered into a loan agreement with a PRC subsidiary of Sohu,
Changyou's parent company, pursuant to which the PRC subsidiary is
entitled to borrow up to RMB1 billion
(or approximately US$148.64 million)
from a PRC subsidiary of Changyou from time to time, with the first
advance request to occur prior to December
31, 2016 and Sohu's right to request advances continuing for
one year after the first advance, subject to extension for
additional years with Changyou's consent. Principal amounts
outstanding under the loan agreement bear interest at an annual
rate of 6%, accruing and payable on each one-year anniversary of
each advance. The outstanding principal of each advance is due one
year from the date of the advance, subject to extension for
additional years with Changyou's consent. Advances under the loan
agreement are secured by a pledge to Changyou under a share pledge
agreement of an agreed-upon number of Class B ordinary shares of
Changyou held by Sohu. The share pledge agreement gives Changyou
the right to apply the outstanding principal and accrued interest
on the loan to the repurchase of Changyou Class B ordinary shares
from Sohu in the event such principal and interest are not paid
when due. Sohu has used amounts drawn down under the loan
agreement to finance Sohu's operations, excluding the operations of
Changyou and of Sohu's subsidiary Sogou Inc.
As of December 31, 2018, Changyou
had outstanding loans to the PRC subsidiary of Sohu in an aggregate
principal amount of RMB1 billion
(approximately $145.70 million), and
the maturity dates for all of the outstanding loans had been
extended for two successive additional years, to the second
anniversary dates of the original maturity dates of the loans.
Non-GAAP Disclosure
To supplement the unaudited consolidated financial information
prepared in accordance with generally accepted accounting
principles in the United States of
America ("GAAP"), Changyou's management uses non-GAAP
measures of gross profit, operating profit, net income, net income
attributable to Changyou.com Limited and diluted net income
attributable to Changyou.com Limited per ADS, which are adjusted
from results based on GAAP to exclude the compensation cost of
share-based awards granted, non-cash tax benefits from excess tax
deductions related to share-based awards and income/expense from
the adjustment of contingent consideration previously recorded for
acquisitions. These measures should be considered in addition to
results prepared in accordance with GAAP, but should not be
considered a substitute for, or superior to, GAAP results.
Changyou's management believes that excluding share-based
compensation expense, non-cash tax benefits from excess tax
deductions related to share-based awards and income/expense from
the adjustment of contingent consideration previously recorded for
acquisitions from its non-GAAP financial measures is useful for
itself and investors. Further, the amount of share-based
compensation expense, non-cash tax benefits from excess tax
deductions related to share-based awards and income/expense from
the adjustment of contingent consideration previously recorded for
acquisitions cannot be anticipated by management, and these
expenses and benefits are not built into the Company's annual
budgets and quarterly forecasts, which generally will be the basis
for information Changyou provides to analysts and investors as
guidance for future operating performance. As share-based
compensation expense, non-cash tax benefits from excess tax
deductions related to share-based awards and income/expense from
the adjustment of contingent consideration previously recorded for
acquisitions do not involve subsequent cash outflow, Changyou does
not factor these in when evaluating and approving expenditures or
when determining the allocation of its resources to its business
operations. As a result, in general, the monthly financial results
for internal reporting and any performance measure for commissions
and bonuses are based on non-GAAP financial measures that exclude
share-based compensation expense, non-cash tax benefits from excess
tax deductions related to share-based awards and income/expense
from the adjustment of contingent consideration previously recorded
for acquisitions.
The non-GAAP financial measures are provided to enhance
investors' overall understanding of Changyou's current financial
performance and prospects for the future. A limitation of using
non-GAAP gross profit, operating profit, net income, net income
attributable to Changyou.com Limited and diluted net income
attributable to Changyou.com Limited per ADS, excluding share-based
compensation expense, non-cash tax benefits from excess tax
deductions related to share-based awards and income/expense from
the adjustment of contingent consideration previously recorded for
acquisitions, is that the share-based compensation charge has been
and will continue to be a significant recurring expense in the
Company's business for the foreseeable future, non-cash tax
benefits from excess tax deductions related to share-based awards
and income/expense from the adjustment of contingent consideration
previously recorded for acquisitions may recur in the future. In
order to mitigate these limitations, the Company has provided
specific information regarding the GAAP amounts excluded from each
non-GAAP measure. The accompanying tables include details on the
reconciliation of GAAP financial measures that are most directly
comparable to the non-GAAP financial measures the Company has
presented.
Notes to Financial Information
Financial information in this press release other than the
information indicated as being non-GAAP is derived from Changyou's
unaudited financial statements prepared in accordance with
GAAP.
Safe Harbor Statement
It is currently expected that the Business Outlook will not be
updated until the release of Changyou's next quarterly earnings
announcement; however, Changyou reserves the right to update its
Business Outlook at any time for any reason.
This announcement contains forward-looking statements.
Statements that are not historical facts, including statements
about the Company's beliefs and expectations, are forward-looking
statements. These statements are based on current plans, estimates
and projections, and therefore you should not place undue reliance
on them. Forward-looking statements involve inherent risks and
uncertainties. The Company cautions that a number of important
factors could cause actual results to differ materially from those
contained in any forward-looking statement. Potential risks and
uncertainties include, but are not limited to, continuing
volatility in global financial and credit markets and its potential
impact on the Chinese economy; exchange rate fluctuations in
general and possible continued devaluation of the RMB in
particular, including their potential impact on the Chinese economy
and on the Company's reported U.S. dollar results; slowing growth
in the Chinese economy; the uncertain regulatory landscape in
the People's Republic of China;
fluctuations in Changyou's quarterly operating results; the
possibility that Changyou will be unable to develop a series of
successful games for mobile platforms or successfully monetize
mobile games it develops or acquires; the possibility that the
Company's margins will decline as a result of the need for
revenue-sharing with mobile game platform operators; and the
Company's reliance on TLBB as its major revenue source. Further
information regarding these and other risks is included in
Changyou's Annual Report on Form 20-F filed on February 28, 2018, and other filings with the
Securities and Exchange Commission.
Conference Call Information
Changyou's management team will host an earnings conference call
today at 6:30 a.m. U.S. Eastern Time,
February 1, 2019 (7:30 p.m. Beijing/Hong
Kong, February 1, 2019).
The dial-in details for the live conference call are:
US:
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1-866-519-4004
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Hong Kong:
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800-906-601
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China
Mainland:
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400-620-8038
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International:
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+1-845-675-0437
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Passcode:
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CYOU
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Please dial in 10 minutes before the call is scheduled to begin
and provide the passcode to join the call.
A telephone replay of the call will be available after the
conclusion of the conference call at 9:30
a.m. U.S. Eastern Time on February 1,
2019 through February 8, 2019.
The dial-in details for the telephone replay are:
International:
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+61-2-8199-0299
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Passcode:
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9586886
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The live Webcast and archive of the conference call will be
available on the Investor Relations section of Changyou's Website
at http://ir.changyou.com/.
About Changyou
Changyou.com Limited (NASDAQ: CYOU) is a leading developer and
operator of online games in China
with a diverse portfolio of popular online games, such as
Tian Long Ba Bu ("TLBB"), one of the
most popular PC games in China, as
well as a number of mobile games. Changyou also owns and operates
the 17173.com Website, a leading game information portal in
China. Changyou began operations
as a business unit within Sohu.com Inc. (NASDAQ: SOHU) in 2003, and
was carved out as a separate, stand-alone company in December 2007. It completed an initial public
offering on April 7, 2009. Changyou
has an advanced technology platform that includes advanced 2.5D and
3D graphics engines, a uniform game development platform, effective
anti-cheating and anti-hacking technologies, proprietary
cross-networking technology and advanced data protection
technology. For more information, please visit
http://ir.changyou.com/.
For investor and media inquiries, please contact:
In China:
Mr. Yujia Zhao
Investor Relations
Tel: +86 (10) 6192-0800
E-mail: ir@cyou-inc.com
In the United
States:
Ms. Linda Bergkamp
Christensen
Phone: +1-480-614-3004
E-mail: lbergkamp@ChristensenIR.com
CHANGYOU.COM
LIMITED
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(UNAUDITED, IN
THOUSANDS EXCEPT PER ADS AMOUNTS)
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
Dec. 31,
2018
|
|
Sep. 30,
2018
|
|
Dec. 31,
2017
|
|
Dec. 31,
2018
|
|
Dec. 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Online
game
|
$
|
94,106
|
$
|
95,971
|
$
|
109,383
|
$
|
389,790
|
$
|
449,533
|
Online
advertising
|
|
4,198
|
|
4,872
|
|
6,131
|
|
19,697
|
|
25,129
|
Cinema
advertising
|
|
17,917
|
|
15,811
|
|
25,492
|
|
70,202
|
|
91,419
|
IVAS
|
|
1,550
|
|
1,306
|
|
3,452
|
|
6,074
|
|
14,180
|
Total revenue
|
|
117,771
|
|
117,960
|
|
144,458
|
|
485,763
|
|
580,261
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenue:
|
|
|
|
|
|
|
|
|
|
|
Online
game (includes share-based compensation expense/
(benefit) of $7, $(3), $1, $(31) and $73, respectively)
|
|
14,499
|
|
14,902
|
|
17,097
|
|
60,983
|
|
62,774
|
Online
advertising
|
|
1,239
|
|
1,241
|
|
1,674
|
|
5,204
|
|
6,660
|
Cinema
advertising
|
|
23,520
|
|
21,629
|
|
24,509
|
|
89,233
|
|
84,944
|
IVAS
|
|
1,310
|
|
1,155
|
|
2,407
|
|
5,408
|
|
9,408
|
Total cost of
revenue
|
|
40,568
|
|
38,927
|
|
45,687
|
|
160,828
|
|
163,786
|
Gross
profit
|
|
77,203
|
|
79,033
|
|
98,771
|
|
324,935
|
|
416,475
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
Product development
(includes share-based
compensation expense/
(benefit) of $492,
$(267), $69, $(2,427) and
$6,163, respectively)
|
|
32,566
|
|
29,326
|
|
33,027
|
|
124,166
|
|
131,032
|
Sales and marketing
(includes share-based
compensation expense/
(benefit) of $121,
$(41), $29, $(497) and$1,212,
respectively)
|
|
11,990
|
|
12,735
|
|
19,949
|
|
54,303
|
|
60,917
|
General and
administrative (includes share-based
compensation expense/
(benefit) of $620,
$(533), $71, $(3,506) and
$9,945,
respectively)
|
|
8,129
|
|
8,178
|
|
10,520
|
|
30,116
|
|
47,163
|
Goodwill impairment
and impairment of
intangible assets
acquired as part of
acquisition of a
business
|
|
16,369
|
|
-
|
|
-
|
|
16,369
|
|
86,882
|
Total
operating expenses
|
|
69,054
|
|
50,239
|
|
63,496
|
|
224,954
|
|
325,994
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
8,149
|
|
28,794
|
|
35,275
|
|
99,981
|
|
90,481
|
Interest income,
net
|
|
6,655
|
|
3,138
|
|
7,687
|
|
24,212
|
|
27,947
|
Foreign currency
exchange gain/ (loss)
|
|
67
|
|
1,785
|
|
(1,312)
|
|
1,320
|
|
(5,196)
|
Other income,
net
|
|
3,172
|
|
9,155
|
|
3,940
|
|
22,879
|
|
9,374
|
Income before
income tax expense
|
|
18,043
|
|
42,872
|
|
45,590
|
|
148,392
|
|
122,606
|
Income tax expense/
(benefit)
|
|
7,981
|
|
(12,347)
|
|
11,489
|
|
64,467
|
|
40,767
|
Net
income
|
|
10,062
|
|
55,219
|
|
34,101
|
|
83,925
|
|
81,839
|
Less: Net loss
attributable to non-controlling interests
|
|
(84)
|
|
(20)
|
|
(105)
|
|
(407)
|
|
(26,995)
|
Net income
attributable to Changyou.com Limited
|
$
|
10,146
|
$
|
55,239
|
$
|
34,206
|
$
|
84,332
|
$
|
108,834
|
Basic net income
attributable to Changyou.com Limited per ADS
|
$
|
0.19
|
$
|
1.04
|
$
|
0.65
|
$
|
1.59
|
$
|
2.07
|
|
|
|
|
|
|
|
|
|
|
|
ADSs used in
computing basic net income attributable to
Changyou.com Limited per ADS
|
|
53,233
|
|
53,217
|
|
52,709
|
|
53,085
|
|
52,594
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
attributable to Changyou.com Limited per
ADS
|
$
|
0.19
|
$
|
1.03
|
$
|
0.64
|
$
|
1.57
|
$
|
2.04
|
|
|
|
|
|
|
|
|
|
|
|
ADSs used in
computing diluted net income attributable to
Changyou.com Limited per ADS
|
|
53,656
|
|
53,632
|
|
53,544
|
|
53,618
|
|
53,285
|
|
|
|
|
|
|
|
|
|
|
|
CHANGYOU.COM
LIMITED
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED, IN
THOUSANDS)
|
|
|
|
As of Dec. 31,
2018
|
|
As of Dec. 31,
2017
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
454,534
|
$
|
571,139
|
Restricted
cash
|
|
4,775
|
|
2,020
|
Accounts receivable,
net
|
|
57,389
|
|
91,636
|
Short-term
investments
|
|
190,068
|
|
404,584
|
Prepaid and other
current assets
|
|
721,059
|
|
528,085
|
Total current
assets
|
|
1,427,825
|
|
1,597,464
|
Non-current
assets:
|
|
|
|
|
Fixed assets,
net
|
|
170,746
|
|
189,947
|
Goodwill
|
|
10,257
|
|
27,504
|
Intangible assets,
net
|
|
13,904
|
|
8,460
|
Deferred tax
assets
|
|
13,467
|
|
10,100
|
Restricted time
deposits
|
|
243,910
|
|
-
|
Other assets,
net
|
|
85,375
|
|
88,548
|
Total non-current
assets
|
|
537,659
|
|
324,559
|
TOTAL
ASSETS
|
$
|
1,965,484
|
$
|
1,922,023
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Receipts in advance
and deferred revenue
|
$
|
45,343
|
$
|
42,917
|
Accounts payable and
accrued liabilities
|
|
753,071
|
|
494,934
|
Tax
payables
|
|
18,211
|
|
19,468
|
Total current
liabilities
|
|
816,625
|
|
557,319
|
Long-term
liabilities:
|
|
|
|
|
Deferred tax
liabilities
|
|
83,026
|
|
34,443
|
Long-term tax
payable
|
|
13,438
|
|
14,114
|
Long-term bank
loans
|
|
220,000
|
|
-
|
Other long-term
liabilities
|
|
751
|
|
790
|
Total long-term
liabilities
|
|
317,215
|
|
49,347
|
Total
liabilities
|
|
1,133,840
|
|
606,666
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Changyou.com Limited
shareholders' equity
|
|
829,735
|
|
1,312,005
|
Non-controlling
interests
|
|
1,909
|
|
3,352
|
Total
shareholders' equity
|
|
831,644
|
|
1,315,357
|
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY
|
$
|
1,965,484
|
$
|
1,922,023
|
CHANGYOU.COM
LIMITED
|
RECONCILIATIONS OF
NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE
NEAREST
|
COMPARABLE GAAP
MEASURES
|
(UNAUDITED, IN
THOUSANDS, EXCEPT PER ADS AMOUNTS)
|
|
|
|
Three Months Ended
Dec. 31, 2018
|
|
|
|
|
|
Non-GAAP adjustments
(a)
|
|
|
|
|
|
GAAP
|
|
Share-based
compensation
expense
(b)
|
|
Non-GAAP
|
|
Online game gross
profit
|
$
|
79,607
|
|
7
|
|
79,614
|
|
Online advertising
gross profit
|
|
2,959
|
|
-
|
|
2,959
|
|
Cinema advertising
gross loss
|
|
(5,603)
|
|
-
|
|
(5,603)
|
|
IVAS gross
profit
|
|
240
|
|
-
|
|
240
|
|
Gross
profit
|
$
|
77,203
|
|
7
|
|
77,210
|
|
Gross
margin
|
|
66%
|
|
|
|
66%
|
|
Operating
expenses
|
|
69,054
|
|
(1,233)
|
|
67,821
|
|
Operating
profit
|
$
|
8,149
|
|
1,240
|
|
9,389
|
|
Operating
margin
|
|
7%
|
|
|
|
8%
|
|
Income tax
expense
|
|
7,981
|
|
|
|
7,981
|
|
Net income
|
$
|
10,062
|
|
1,240
|
|
11,302
|
|
Less: Net loss
attributable to non-controlling interests
|
|
(84)
|
|
-
|
|
(84)
|
|
Net income
attributable to Changyou.com Limited
|
$
|
10,146
|
|
1,240
|
|
11,386
|
|
Net margin attributable
to Changyou.com Limited
|
|
9%
|
|
|
|
10%
|
|
Diluted net income
attributable to Changyou.com Limited per ADS
|
$
|
0.19
|
|
|
|
0.21
|
|
ADSs used in
computing diluted net income attributable to
Changyou.com Limited per ADS
|
|
53,656
|
|
|
|
53,682
|
|
|
Note:
|
(a) The Non-GAAP
adjustment does not have an impact on income tax
expense.
|
(b) To eliminate
share-based compensation expense measured using the fair value
method.
|
CHANGYOU.COM
LIMITED
|
RECONCILIATIONS OF
NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE
NEAREST
|
COMPARABLE GAAP
MEASURES
|
(UNAUDITED, IN
THOUSANDS, EXCEPT PER ADS AMOUNTS)
|
|
|
|
Three Months Ended
Sep. 30, 2018
|
|
|
|
|
|
Non-GAAP adjustments
(a)
|
|
|
|
|
|
GAAP
|
|
Share-based
compensation
expense (c)
|
|
Non-GAAP
|
|
Online game gross
profit
|
$
|
81,069
|
|
(3)
|
|
81,066
|
|
Online advertising
gross profit
|
|
3,631
|
|
-
|
|
3,631
|
|
Cinema advertising
gross loss
|
|
(5,818)
|
|
-
|
|
(5,818)
|
|
IVAS gross
profit
|
|
151
|
|
-
|
|
151
|
|
Gross
profit
|
$
|
79,033
|
|
(3)
|
|
79,030
|
|
Gross
margin
|
|
67%
|
|
|
|
67%
|
|
Operating
expenses
|
|
50,239
|
|
841
|
|
51,080
|
|
Operating
profit
|
$
|
28,794
|
|
(844)
|
|
27,950
|
|
Operating
margin
|
|
24%
|
|
|
|
24%
|
|
Income tax
benefit
|
|
(12,347)
|
|
|
|
(12,347)
|
|
Net income
|
$
|
55,219
|
|
(844)
|
|
54,375
|
|
Less: Net loss
attributable to non-controlling interests
|
|
(20)
|
|
-
|
|
(20)
|
|
Net income
attributable to Changyou.com Limited
|
$
|
55,239
|
|
(844)
|
|
54,395
|
|
Net margin attributable
to Changyou.com Limited
|
|
47%
|
|
|
|
46%
|
|
Diluted net income
attributable to Changyou.com Limited per ADS
|
$
|
1.03
|
|
|
|
1.01
|
|
ADSs used in
computing diluted net income attributable to
Changyou.com Limited per ADS
|
|
53,632
|
|
|
|
53,685
|
|
|
Note:
|
(c) To eliminate
share-based compensation expense measured using the fair value
method. The downward adjustment of share-based compensation expense
in the current period was a result of fluctuations in the market
price for the Company's ADS.
|
CHANGYOU.COM
LIMITED
|
RECONCILIATIONS OF
NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE
NEAREST
|
COMPARABLE GAAP
MEASURES
|
(UNAUDITED, IN
THOUSANDS, EXCEPT PER ADS AMOUNTS)
|
|
|
|
Three Months Ended
Dec. 31, 2017
|
|
|
|
|
|
Non-GAAP
adjustments(a)
|
|
|
|
|
|
GAAP
|
|
Share-based
compensation
expense (b)
|
|
Non-GAAP
|
|
Online game gross
profit
|
$
|
92,286
|
|
1
|
|
92,287
|
|
Online advertising
gross profit
|
|
4,457
|
|
-
|
|
4,457
|
|
Cinema advertising
gross profit
|
|
983
|
|
-
|
|
983
|
|
IVAS gross
profit
|
|
1,045
|
|
-
|
|
1,045
|
|
Gross
profit
|
$
|
98,771
|
|
1
|
|
98,772
|
|
Gross
margin
|
|
68%
|
|
|
|
68%
|
|
Operating
expenses
|
|
63,496
|
|
(169)
|
|
63,327
|
|
Operating
profit
|
$
|
35,275
|
|
170
|
|
35,445
|
|
Operating
margin
|
|
24%
|
|
|
|
25%
|
|
Income tax
expense
|
|
11,489
|
|
|
|
11,489
|
|
Net income
|
$
|
34,101
|
|
170
|
|
34,271
|
|
Less: Net loss
attributable to non-controlling interests
|
|
(105)
|
|
3
|
|
(102)
|
|
Net income
attributable to Changyou.com Limited
|
$
|
34,206
|
|
167
|
|
34,373
|
|
Net margin attributable
to Changyou.com Limited
|
|
24%
|
|
|
|
24%
|
|
Diluted net income
attributable to Changyou.com Limited per ADS
|
$
|
0.64
|
|
|
|
0.64
|
|
ADSs used in
computing diluted net income attributable to
Changyou.com Limited per ADS
|
|
53,544
|
|
|
|
53,701
|
|
|
|
|
|
|
|
|
|
|
CHANGYOU.COM
LIMITED
|
RECONCILIATIONS OF
NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE
NEAREST
|
COMPARABLE GAAP
MEASURES
|
(UNAUDITED, IN
THOUSANDS, EXCEPT PER ADS AMOUNTS)
|
|
|
|
Twelve Months Ended
Dec. 31, 2018
|
|
|
|
|
|
Non-GAAP adjustments
(a)
|
|
|
|
|
|
GAAP
|
|
Share-based
compensation
expense (c)
|
|
Non-GAAP
|
|
Online game gross
profit
|
$
|
328,807
|
|
(31)
|
|
328,776
|
|
Online advertising
gross profit
|
|
14,493
|
|
-
|
|
14,493
|
|
Cinema advertising
gross loss
|
|
(19,031)
|
|
-
|
|
(19,031)
|
|
IVAS gross
profit
|
|
666
|
|
-
|
|
666
|
|
Gross
profit
|
$
|
324,935
|
|
(31)
|
|
324,904
|
|
Gross
margin
|
|
67%
|
|
|
|
67%
|
|
Operating
expenses
|
|
224,954
|
|
6,430
|
|
231,384
|
|
Operating
profit
|
$
|
99,981
|
|
(6,461)
|
|
93,520
|
|
Operating
margin
|
|
21%
|
|
|
|
19%
|
|
Income tax
expense
|
|
64,467
|
|
|
|
64,467
|
|
Net income
|
$
|
83,925
|
|
(6,461)
|
|
77,464
|
|
Less: Net loss
attributable to non-controlling interests
|
|
(407)
|
|
-
|
|
(407)
|
|
Net income
attributable to Changyou.com Limited
|
$
|
84,332
|
|
(6,461)
|
|
77,871
|
|
Net margin attributable
to Changyou.com Limited
|
|
17%
|
|
|
|
16%
|
|
Diluted net income
attributable to Changyou.com Limited per ADS
|
$
|
1.57
|
|
|
|
1.45
|
|
ADSs used in
computing diluted net income attributable to
Changyou.com Limited per ADS
|
|
53,618
|
|
|
|
53,690
|
|
|
|
|
|
|
|
|
|
|
CHANGYOU.COM
LIMITED
|
RECONCILIATIONS OF
NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE
NEAREST
|
COMPARABLE GAAP
MEASURES
|
(UNAUDITED, IN
THOUSANDS, EXCEPT PER ADS AMOUNTS)
|
|
|
|
Twelve Months Ended
Dec. 31, 2017
|
|
|
|
|
|
Non-GAAP adjustments
(a)
|
|
|
|
|
GAAP
|
|
Share-based
compensation
expense (b)
|
|
Non-GAAP
|
Online game gross
profit
|
$
|
386,759
|
|
73
|
|
386,832
|
Online advertising
gross profit
|
|
18,469
|
|
-
|
|
18,469
|
Cinema advertising
gross profit
|
|
6,475
|
|
-
|
|
6,475
|
IVAS gross
profit
|
|
4,772
|
|
-
|
|
4,772
|
Gross
profit
|
$
|
416,475
|
|
73
|
|
416,548
|
Gross
margin
|
|
72%
|
|
|
|
72%
|
Operating
expenses
|
|
325,994
|
|
(17,320)
|
|
308,674
|
Operating
profit
|
$
|
90,481
|
|
17,393
|
|
107,874
|
Operating
margin
|
|
16%
|
|
|
|
19%
|
Income tax
expense
|
|
40,767
|
|
-
|
|
40,767
|
Net income
|
$
|
81,839
|
|
17,393
|
|
99,232
|
Less: Net loss
attributable to non-controlling interests
|
|
(26,995)
|
|
12
|
|
(26,983)
|
Net income
attributable to Changyou.com Limited
|
$
|
108,834
|
|
17,381
|
|
126,215
|
Net margin attributable
to Changyou.com Limited
|
|
19%
|
|
|
|
22%
|
Diluted net income
attributable to Changyou.com Limited per ADS
|
$
|
2.04
|
|
|
|
2.36
|
ADSs used in
computing diluted net income attributable to
Changyou.com Limited per ADS
|
|
53,285
|
|
|
|
53,476
|
|
|
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/changyou-reports-fourth-quarter-2018-and-fiscal-year-2018-unaudited-financial-results-300788044.html
SOURCE Changyou.com Limited