Changyou.com (NASDAQ:CYOU)

BEIJING, May 2, 2013 /PRNewswire/ -- Changyou.com Limited ("Changyou") (NASDAQ: CYOU), a leading online game developer and operator in China, and its majority shareholder, Sohu.com Inc. ("Sohu") (NASDAQ: SOHU), China's leading online media, search, gaming, community and mobile service group, today jointly announced that on May 1, 2013, Changyou entered into a definitive agreement to acquire all of the ordinary shares of its majority-owned Web games subsidiary 7Road.com Limited ("7Road") held by the minority shareholders, representing 28.074% of the outstanding share capital of 7Road, for aggregate fixed cash consideration of approximately US$78 million. Following the closing of the acquisition, 7Road will be a wholly-owned subsidiary of Changyou.

Effective with Changyou's entering into the acquisition agreement, Mr. Dewen Chen, Changyou's president, has been appointed as the Chairman and acting chief executive officer of 7Road. Mr. Kai Cao has resigned as a director and as chief executive officer of 7Road.

Mr. Dewen Chen, Changyou's president, commented, "With this acquisition, Changyou is deepening our investment in Web games, and we look forward to creating even more higha？？quality Web games for our players to enjoy."

The acquisition is expected to be completed by May 31, 2013, subject to regulatory approvals and other customary conditions specified in the agreement.

First quarter 2013 Financial Results

• Total revenues reached a record US$177.6 million, an increase of 2% quarter-over-quarter and 30% year-over-year, exceeding the high end of the Company's guidance by US$3.6 million.
• Non-GAAP[2] net income attributable to Changyou.com Limited was US$77.9 million, or US$1.45 per fully diluted ADS. Non-GAAP net income attributable to Changyou.com Limited increased 3% quarter-over-quarter and 17% year-over-year, exceeding the high end of the Company's guidance by US$0.9 million.

Mr. Tao Wang, Changyou's chief executive officer, commented, "We are committed to building sustainable gaming communities around our core MMO games and Web games through regular game updates, while actively exploring the fast-growing mobile games sector. In the first quarter, we continued to deepen our player segmentation strategy, rolling out game features for different levels of players in our flagship MMO game TLBB, which led to growth. For our popular web games, DDTank and Wartune, we continued to develop new audiences, launching a brand-new customized version of DDTank for players who prefer single player modes and releasing more language versions for Wartune. These games once again helped us to deliver solid financial results that topped our expectations for the quarter. With the steady growth of existing games, and the launch of new games in the latter half of the year, we are in a solid position to take advantage of growth opportunities inChina, one of the world's largest online gaming markets."

Mr. Dewen Chen, Changyou's president, continued, "We are seeing solid demand for our online advertising business in 2013 as leading game companies and web game companies continue to make the 17173 website their top choice for online game advertising. First quarter online advertising revenues met our expectations and we made solid progress on our initiative to develop the 17173 website into a popular community for gamers. We have made a number of technological upgrades to the website to support its news content and allow for better functionality, interactivity and user experience. Over the next few quarters, we expect to develop more Internet value-added services for gamers on the 17173 website."

Mr. Alex Ho, Changyou's chief financial officer, added, "During the first quarter, we set new records for both top-line and bottom-line performance. Our strong cash flows from operations provides us with the financial flexibility to invest in product development and in human resources when needed, as we work towards increasing shareholder value over the long term."

Business Outlook

For the second quarter of 2013, Changyou expects:

• Total revenues to be between US$179.0 million and US$185.0 million, including online game revenues of US$165.0 million to US$170.0 million and online advertising revenues of US$10.0 million to US$11.0 million.
• Non-GAAP net income attributable to Changyou.com Limited to be between US$71.0 million and US$74.0 million.
• Non-GAAP fully diluted earnings per ADS attributable to Changyou.com Limited to be between US$1.33 and US$1.38.
• Assuming no new grants of share-based awards, share-based compensation expense to be between US$0.5 million and US$1.0 million, reducing fully diluted earnings per ADS attributable to Changyou.com Limited by US$0.01 to US$0.02.

Fourth Quarter 2012 Highlights  

• Total revenues reached a record US$173.5 million, an increase of 5% quarter-over-quarter and 26% year-over-year, exceeding the high end of the Company's guidance by US$3.5 million.
• Online game revenues reached a record US$158.9 million, an increase of 5% quarter-over-quarter and 29% year-over-year, exceeding the high end of the Company's guidance by US$3.9 million.
• Net income attributable to Changyou.com Limited reached a record US$75.2 million, or US$1.41 per fully diluted ADS[1]. Net income attributable to Changyou.com Limited increased 3% quarter-over-quarter and 17% year-over-year.
• Non-GAAP[2] net income attributable to Changyou.com Limited was US$75.8 million, or US$1.42 per fully diluted ADS. Non-GAAP net income attributable to Changyou.com Limited was flat quarter-over-quarter and increased 7% year-over-year, exceeding the high end of the Company's guidance by US$4.8 million.

Mr. Tao Wang, Changyou's chief executive officer, commented, "Long ago, we started creating a corporate culture that focuses entirely on developing games based on gamer preferences and consistently following through on such demand with each new game and expansion pack that we release.  Our success in this can be seen not only in the thriving roster of games that we have launched, such as our flagship MMO game TLBB, and our popular web games DDTank and Wartune, but also in the record-breaking financial results that we continue to produce. In the year ahead, through growing our portfolio of MMO, web, and mobile games, and enhancing our game-related news and advertising services, we will take advantage of emerging opportunities and build on our leading position in the market."

Mr. Dewen Chen, Changyou's president, continued, "17173.com continues to be the portal of choice for online game advertising. Fourth quarter online advertising revenues met our expectations and we continue to expect solid demand from our advertisers in the year ahead. As part of our ongoing commitment to extend 17173's media influence and user reach, a key focus in the fourth quarter was to expand new coverage and enhance the news content on our site, as well as our recently launched news channels for web games and mobile games. Longer term, we are dedicated to reinforcing 17173's leading position in online game news media and raising the bar on the standards of services we provide to gamers and advertisers."

Mr. Alex Ho, Changyou's chief financial officer, added, "A strong fourth quarter helped to make 2012 another record-breaking year, in terms of total revenues and non-GAAP net income. With the strong cash inflow generated from our businesses, we have been able to make important ongoing investments in our products and in talent.  We look forward to a return on these investments that we believe will enhance shareholder value over the long term."

Business Outlook

For the first quarter of 2013, Changyou expects:

• Total revenues to be between US$168.0 million and US$174.0 million, including online game revenues of US$160.0 million to US$165.0 million and online advertising revenues of US$6.0 million to US$7.0 million. 
• Non-GAAP net income attributable to Changyou.com Limited to be between US$74.0 million and US$77.0 million. 
• Non-GAAP fully diluted earnings per ADS attributable to Changyou.com Limited to be between US$1.38 and US$1.44. 
• Assuming no new grants of share-based awards, share-based compensation expense to be between US$0.5 million and US$1.0 million, reducing fully diluted earnings per ADS attributable to Changyou.com Limited by US$0.01 to US$0.02.

Third quarter 2012 Highlights 

• Total revenues reached a record US$165.8 million, an increase of 13% quarter-over-quarter and 29% year-over-year, exceeding the high end of the Company's guidance by US$8.8 million.
• Net income attributable to Changyou.com Limited reached a record US$72.9 million, or US$1.37 per fully diluted ADS[1]. Net income attributable to Changyou.com Limited increased 6% quarter-over-quarter and 18% year-over-year.
• Non-GAAP[2] net income attributable to Changyou.com Limited reached a record US$75.9 million, or US$1.42 per fully diluted ADS. Non-GAAP net income attributable to Changyou.com Limited increased 5% quarter-over-quarter and 20% year-over-year, exceeding the high end of the Company's guidance by US$3.9 million.
• On August 6, 2012, the Company's board of directors declared a special one-time cash dividend of US$1.9 per Class A or Class B ordinary share, or US$3.8 per American Depositary Share ("ADS"). The total amount of this dividend was approximately US$201 million. The dividend was paid to shareholders on September 21, 2012.

Mr. Tao Wang, Changyou's chief executive officer, commented, "The third quarter is a testimony to our corporate philosophy of putting our customers first. Our key operational metrics and financial results demonstrate that we have a solid base of players who are engaged and willing to spend in our games as we continue to invest the resources to keep them fresh and exciting. In our flagship MMO game, Tian Long Ba Bu, or TLBB, we saw higher player engagement levels and spending from our core players after the release of the July 12^th expansion pack and the October 25th major expansion pack. Meanwhile, our new web game Wartune continued to build momentum as it was launched on more platforms and in more countries during the quarter. Changyou is one of the few online game companies in China with a leading presence in all three key markets of the online games industry, MMO games, web games and online game media. With the talents, customer base and marketing networks accumulated in each of these three areas, we believe we can take our businesses further, both in China and globally, and build the company into an even greater success."

Mr. Dewen Chen, president and chief operating officer, continued, "Our online advertising business benefited from the traditionally strong summer season for online games advertising in the third quarter. 17173.com is the portal of choice for online game advertisers and we achieved higher utilization rates of our advertising resources due to strong demand. We are building 17173.com into an even better portal for game-related news. We launched two brand-new news channels in the third quarter, one dedicated to web games and the other to mobile games, and have plans to deliver news for international gamers as well."

Mr. Alex Ho, Changyou's chief financial officer, added, "In the third quarter, we once again topped past quarters' financial performance, in both GAAP and non-GAAP terms, on our top-line and bottom-line results. Both our online games business and online advertising business grew in terms of revenues and are highly profitable and cash-generative. With the strong and stable cash flows from our operations, we plan to keep investing in people and products to take advantage of the many growth opportunities we see in the market and create greater shareholder value over the long term."

Business Outlook

For the fourth quarter of 2012, Changyou expects:

• Total revenues to be between US$166.0 million and US$170.0 million, including online game revenues of US$152.0 million to US$155.0 million and online advertising revenues of US$12.0 million to US$13.0 million.
• Non-GAAP net income attributable to Changyou.com Limited to be between US$69.0 million and US$71.0 million.
• Non-GAAP fully diluted earnings per ADS attributable to Changyou.com Limited to be between US$1.29 and US$1.33.
• Assuming no new grants of share-based awards, share-based compensation expense to be between US$0.5 million and US$1.0 million, reducing fully diluted earnings per ADS attributable to Changyou.com Limited by US$0.01 to US$0.02.

BEIJING, August 6, 2012 /PRNewswire-Asia/ -- Changyou.com Limited ("Changyou" or the "Company") (NASDAQ: CYOU), a leading online game developer and operator in China, today announced that its board of directors declared a special one-time cash dividend of US$1.9 per Class A or Class B ordinary share, or US$3.8 per American Depositary Share ("ADS"). The total amount of the special cash dividend is approximately US$201 million.

Record holders of the Company's Class A and Class B ordinary shares at the close of business U.S. Eastern Time on August 17, 2012 (the "Record Date") will be entitled to receive the special cash dividend. Holders of the Company's ADSs, each representing two Class A ordinary shares, as of the Record Date will be entitled to the special cash dividend. Changyou expects, Bank of New York Mellon, depositary bank for Changyou's ADR program, to pay out dividends to ADS holders on or before September 30, 2012. The actual distribution date may change. The Company will issue another press release in the event that there is any significant change in the scheduled distribution date.

Mr. Tao Wang, chief executive officer of Changyou commented, "Our business is growing as our online games continue its popularity in China and we continue to generate strong free cash flows from operations each quarter. As we have accumulated a sizable cash reserve since our initial public offering, we are happy to announce this special cash dividend in an effort to return value to shareholders. Our strong balance sheet and robust free cash flows will allow us to keep investing in our businesses to strengthen our position as a leading game developer and operator in China and capture arising opportunities in the global online games market. We are confident in our long-term growth potential and ongoing ability to further increase shareholder value."

In order to expedite the payment of the special cash dividend, Changyou is expected to finance the payment through offshore bridging bank loans, which would be secured by an equivalent amount of Renminbi-denominated onshore bank deposits of our subsidiaries in China.

As of June 30, 2012, the Company had US$464.9 million in cash and cash equivalents and short-term investments. The Company generated US$276.6 million in cash inflows from operations for the year ended December 31, 2011, the most recent year for which financial results have been reported.

Second Quarter 2012 Results

• Total revenues reached a record US$147.3 million, an increase of 8% quarter-over-quarter and an increase of 30% year-over-year, exceeding the high end of the Company's guidance by US$3.8 million.
• Online game revenues reached a record US$137.2 million, an increase of 8% quarter-over-quarter and 35% year-over-year, exceeding the high end of the Company's guidance by US$4.2 million.
• Net income attributable to Changyou.com Limited was US$69.1 million, or US$1.29 per fully diluted ADS[1]. Net income attributable to Changyou.com Limited increased 6% quarter-over-quarter and 14% year-over-year.
• Non-GAAP[2] net income attributable to Changyou.com Limited reached a record US$72.3 million, or US$1.35 per fully diluted ADS. Non-GAAP net income attributable to Changyou.com Limited increased 9% quarter-over-quarter and 16% year-over-year, exceeding the high end of the Company's guidance by US$12.3 million.

Mr. Tao Wang, Changyou's chief executive officer, commented, "The second quarter has underscored once again the staying power of Tian Long Ba Bu and the early strong reception of our new web game, Wartune (also known as Shen Qu). Our strong financial performance demonstrates the resilience of the online games business to business cycles and the current economic slowdown. Looking ahead, the outlook for online games is strong, particularly as gamers globally increasingly demand quick access to games online and as new game formats, like web games, gain popularity. With the launch of several MMO and web games in the second half of the year, we look to acquire more users and capture market share to further strengthen our position as a leading game developer and operator in China."

Mr. Dewen Chen, president and chief operating officer, continued, "We have been working behind the scenes to turn our online games portal, 17173.com, into an even more important resource for the online games industry. In addition to MMO games, we will be covering the fast-evolving web game and mobile game markets. It takes time to build up the resources, including star quality journalists, to do this, but we are making solid progress. Meanwhile, we continue to see strong demand for advertising on 17173.com. As we work on enhancing the website and expanding news coverage, we look to further enhance the leading position of 17173.com within the game portals and online game communities in China."

Mr. Alex Ho, Changyou's chief financial officer, added, "We set new records for both top-line and bottom-line performance during the quarter. Our ongoing MMO games business and acquired web game and online advertising business generated higher returns and rich cash flows, while we implemented cost control measures that led to cost savings. With a strong cash position and a proven cash generative business, we have capacity to continue investing in the development and marketing of games and in emerging growth opportunities that can further increase shareholder value."

First Quarter 2012 Highlights

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

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

Business Outlook

For the second quarter of 2012, Changyou expects:

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

Fourth Quarter 2011 Results

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

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

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

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

Business Outlook

For the first quarter of 2012, Changyou expects:

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

Third Quarter 2011 Results

First Quarter 2011 Results:

Fourth Quarter 2010 Highlights

Third Quarter 2010 Highlights

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

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

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

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

Business Outlook

For the fourth quarter of 2010, Changyou expects:

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