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Changyou Reports First Quarter 2019 Unaudited Financial Results

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BEIJING, April 29, 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 first quarter ended March 31, 2019.

Changyou.com Logo. (PRNewsFoto/Changyou.com Limited)

First Quarter 2019 Highlights

  • Total revenue was US$123 million, a decrease of 10% year-over-year and an increase of 5% quarter-over-quarter, exceeding the Company's guidance.
  • Online game revenue was US$99 million, a decrease of 6% year-over-year and an increase of 5% quarter-over-quarter, exceeding the Company's guidance.
  • GAAP net income attributable to Changyou.com Limited was US$37 million, compared with a net loss of US$13 million[1] in the first quarter of 2018 and net income of US$10 million[2] in the fourth quarter of 2018.
  • Non-GAAP[3] net income attributable to Changyou.com Limited was US$37 million, compared with a net loss of US$16 million[1] in the first quarter of 2018 and net income of US$11 million[2] in the fourth quarter of 2018.

[1] GAAP and non-GAAP net loss attributable to Changyou.com Limited included the accrual of additional withholding income taxes of US$47 million recognized in relation to a change in policy for the Company's PRC subsidiaries with respect to their distribution of cash dividends.


[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.


[3] 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".

Mr. Dewen Chen, CEO, commented, "During the quarter, TLBB PC performed better than our expectations, which demonstrates that players are happy with the current in-game environment and the long-term outlook for the game. Legacy TLBB Mobile also showed its resilience and did better than we expected due to new content and other improvements that we made to the game. In 2019, we will continue to manage player engagement through our long-term oriented operational strategies. With our tireless efforts to improve game quality, we believe we are well prepared to roll out exciting new games in the future."

Mr. Qing Wei, Chief Games Development Officer, added, "During the quarter, Legacy TLBB Mobile's revenue remained relatively stable, mainly due to the various in-game holiday events and promotions that we launched. We also reduced the number of daily quests so that players did not have to commit as much time to repetitive tasks. For the second quarter of 2019, we will launch an expansion pack for Legacy TLBB Mobile's 2-year anniversary with a new clan and various celebratory events to further promote player engagement."

Mr. Yaobin Wang, CFO of Changyou, added, "We got off to a good start in 2019 thanks to the solid performance of our online games. For the first quarter of 2019, both our total revenue and net income came in ahead of our expectations. Given our ongoing profitability and strong operating cash flow, we will continue to invest in the development of high-end games as we look to enhance our leading position in the industry."

First Quarter 2019 Operational Results

  • Total average monthly active accounts[4] of the Company's PC games were 1.9 million, a decrease of 24% year-over-year and 5% 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 2.7 million, flat year-over-year and a decrease of 7% quarter-over-quarter. The quarter-over-quarter decrease reflected the natural declining life cycles of the Company's older games, including Legacy TLBB Mobile.
  • Total quarterly aggregate active paying accounts[5] of the Company's PC games were 0.9 million, an increase of 13% year-over-year and flat quarter-over-quarter. The year-over-year increase was mainly driven by the greater willingness of TLBB PC players to pay as the Company launched some anticipated in-game promotional events in the first quarter of 2019.
  • Total quarterly aggregate active paying accounts of the Company's mobile games were 0.6 million, a decrease of 25% year-over-year and 14% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases reflected the natural declining life cycles of the Company's older games.

[4] Monthly Active Accounts refers to the number of registered accounts that are logged in to these games at least once during the month.


[5] Quarterly Aggregate Active Paying Accounts refers to the number of accounts from which game points are utilized at least once during the quarter.

First Quarter 2019 Unaudited Financial Results

Revenue

Total revenue was US$123 million, a decrease of 10% year-over-year and an increase of 5% quarter-over-quarter.

Online game revenue was US$99 million, a decrease of 6% year-over-year and an increase of 5% 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. The quarter-over-quarter increase was largely due to better-than-expected performance of TLBB PC as a result of in-game promotional events that were launched around the Chinese Spring Festival in the first quarter of 2019.

Online advertising revenue was US$3 million, a decrease of 33% year-over-year and 19% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases were mainly due to fewer games being marketed on the 17173.com Website.

Cinema advertising revenue was US$20 million, a decrease of 19% year-over-year and an increase of 12% 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 was a result of a recovery in revenue following the strategy adjustment, as well as the release of several popular movies in the first quarter of 2019.

Internet value-added services ("IVAS") revenue was US$1 million, a decrease of 58% year-over-year and 51% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases were mainly because the RaidCall business was wound down in the first quarter of 2019.

Gross profit/ (loss)

GAAP and non-GAAP gross profit were both US$88 million, a decrease of 7% year-over-year and an increase of 14% quarter-over-quarter. GAAP and non-GAAP gross margin were both 71%, compared with 69% in the first quarter of 2018, and 66% in the fourth quarter of 2018.

GAAP and non-GAAP gross profit of the online games business were both US$85 million, a decrease of 4% year-over-year and an increase of 6% quarter-over-quarter. GAAP and non-GAAP gross margin of the online games business were both 86%, compared with 84% in the first quarter of 2018 and 85% in the fourth quarter of 2018.

GAAP and non-GAAP gross profit of the online advertising business were both US$2 million, a decrease of 39% year-over-year and 26% quarter-over-quarter. GAAP and non-GAAP gross margin of the online advertising business were both 65%, compared with 71% in the first quarter of 2018 and 70% in the fourth quarter of 2018. The year-over-year and quarter-over-quarter decreases in gross margin were mainly due to lower online advertising revenue in the first quarter of 2019.

GAAP and non-GAAP gross profit of the cinema advertising business were both US$1 million, compared with a gross profit of US$2 million in the first quarter of 2018 and a gross loss of US$6 million in the fourth quarter of 2018. GAAP and non-GAAP gross margin of the cinema advertising business were both 7%, compared with 9% in the first quarter of 2018 and negative 31% in the fourth quarter of 2018. The quarter-over-quarter increase in gross margin was mainly due to a decrease in cinema advertising costs as the Company partnered with fewer cinemas, as well as an increase in cinema advertising revenue in the first quarter of 2019. In the coming months the Company will look to add a number of additional higher-quality cinema resources.

GAAP and non-GAAP gross loss of the IVAS business were both US$0.3 million, compared with gross profit of US$0.2 million in the first quarter of 2018 and gross profit of US$0.2 million in the fourth quarter of 2018.

Operating expenses

Total operating expenses were US$47 million, a decrease of 18% year-over-year and 32% quarter-over-quarter.

Product development expenses were US$31 million, a decrease of 8% year-over-year and 5% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases were mainly due to a decline in salary and benefit expenses as a result of a reduction in bonus expenses that mainly related to Legacy TLBB Mobile.

Sales and marketing expenses were US$11 million, a decrease of 31% year-over-year and 12% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases were mainly because of lower marketing and promotional spending for online games in the first quarter of 2019.

General and administrative expenses were US$5 million, a decrease of 33% year-over-year and 35% quarter-over-quarter. The year-over-year decrease was mainly due to a decline in salary and benefit expenses as a result of a reduction in bonus expenses and workforce. The quarter-over-quarter decrease was mainly due to a decline in salary and benefit expenses as a result of a reduction in bonus expenses.

Operating profit

Operating profit was US$41 million, compared with an operating profit of US$37 million in the first quarter of 2018 and an operating profit of US$8 million in the fourth quarter of 2018.

Non-GAAP operating profit was US$41 million, compared with a non-GAAP operating profit of US$35 million in the first quarter of 2018 and a non-GAAP operating profit of US$9 million in the fourth quarter of 2018.

The quarter-over-quarter change in operating profit due in part to impairment charges related to the 17173.com Website business that were recognized during the fourth quarter of 2018.  

Other income, net

Other income was US$4 million, compared with US$5 million in the first quarter of 2018 and US$3 million in the fourth quarter of 2018.

Income tax expense

Income tax expense was US$11 million, compared with income tax expense of US$61 million in the first quarter of 2018 and income tax expense of US$8 million in the fourth quarter of 2018.

The income tax expense for the first quarter of 2018 included the accrual of additional withholding income taxes of US$47 million that were recognized in relation to a change in policy for the Company's PRC subsidiaries with respect to their distribution of cash dividends.

Net income/ (loss)

Net income was US$37 million, compared with a net loss of US$13 million in the first quarter of 2018 and net income of US$10 million in the fourth quarter of 2018.

Non-GAAP net income was US$37 million, compared with a non-GAAP net loss of US$16 million in the first quarter of 2018 and non-GAAP net income of US$11 million in the fourth quarter of 2018.

Net loss attributable to non-controlling interests

GAAP and non-GAAP net loss attributable to non-controlling interests were both US$0.2 million. This compares with a GAAP and non-GAAP net loss of US$0.3 million in the first quarter of 2018 and US$0.1 million in the fourth 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/ (loss) attributable to Changyou.com Limited

Net income attributable to Changyou.com Limited was US$37 million, compared with a net loss of US$13 million1 in the first quarter of 2018 and net income of US$10 million2 in the fourth quarter of 2018. Fully-diluted net income attributable to Changyou.com Limited per ADS[6] was US$0.69, compared with a net loss of US$0.25 in the first quarter of 2018 and net income of US$0.19 in the fourth quarter of 2018.

Non-GAAP net income attributable to Changyou.com Limited was US$37 million, compared with a net loss of US$16 million1 in the first quarter of 2018 and net income of US$11 million2 in the fourth quarter of 2018. Non-GAAP fully-diluted net income attributable to Changyou.com Limited per ADS was US$0.69, compared with a net loss of US$0.30 in the first quarter of 2018 and net income of US$0.21 in the fourth quarter of 2018.

Liquidity

As of March 31, 2019, Changyou had net cash[7] of US$676 million, compared with US$673 million as of December 31, 2018.

Operating cash flow for the first quarter of 2019 was a net inflow of US$31 million.

[6] Each ADS represents two Class A ordinary shares.


[7] 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.

Business Outlook

For the second quarter of 2019, Changyou expects:

  • Total revenue to be between US$110 million and US$120 million, including online game revenue of US$90 million to US$100 million;
  • Non-GAAP net income attributable to Changyou.com Limited to be between US$22 million and US$27 million, and non-GAAP net income per fully-diluted ADS to be between US$0.41 and US$0.50. Gain on share-based compensation to be around US$1 million, assuming no new grants of share-based awards, and considering the impact of the payment of special cash dividend. 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$23 million and US$28 million, and GAAP net income per fully-diluted ADS to be between US$0.43 and US$0.52.

For the second quarter of 2019 guidance, the Company has adopted a presumed exchange rate of RMB6.80 = US$1.00, which compares with the actual exchange rate of approximately RMB6.38 = US$1.00 for the second quarter of 2018, and RMB6.74 = US$1.00 for the first quarter of 2019.

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 March 28, 2019, 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, April 29, 2019 (6:30 p.m. Beijing/Hong Kong, April 29, 2019).

The dial-in details for the live conference call are:

US:

1-866-519-4004

Hong Kong:

800-906-601

China Mainland:

400-620-8038

International:

+1-845-675-0437

Passcode:

CYOU

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 April 29, 2019 through May 5, 2019. The dial-in details for the telephone replay are:

International:      

+61-2-8199-0299

Passcode:

4339549

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 Limited (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
Phone: +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




Mar. 31, 2019


Dec. 31, 2018


Mar. 31, 2018










Revenue:








      Online game

$

99,054

$

94,106

$

105,461


      Online advertising


3,382


4,198


5,077


      Cinema advertising


20,109


17,917


24,870


      IVAS


763


1,550


1,797


                  Total revenue


123,308


117,771


137,205










Cost of revenue:








      Online game (includes share-based compensation expense/ 
          (benefit) of $0, $7 and $(12), respectively)


 

14,362


 

14,499


 

17,119


      Online advertising


1,194


1,239


1,491


      Cinema advertising


18,683


23,520


22,729


      IVAS


1,043


1,310


1,603


Total cost of revenue


35,282


40,568


42,942


Gross profit


88,026


77,203


94,263










Operating expenses:








Product development (includes share-based
    compensation expense/ (benefit) of $0, $492
    and $(935), respectively)


 

 

30,961


 

 

32,566


 

 

33,793


Sales and marketing (includes share-based
    compensation expense/ (benefit) of $0,
    $121 and $(199),  respectively)


 

 

 

10,579


 

 

 

11,990


 

 

 

15,237


General and administrative (includes share-based
    compensation expense/ (benefit) of $9, $620
    and $(1,279),  respectively)


 

 

5,311


 

 

8,129


 

 

7,890


Goodwill impairment and impairment of intangible
    assets  acquired as part of acquisition of a
    business


 

 

-


 

 

16,369


 

 

-


Total operating expenses


46,851


69,054


56,920










Operating profit


41,175


8,149


37,343


Interest income, net


2,473


6,655


7,647


Foreign currency exchange gain/ (loss)


137


67


(2,811)


Other income, net


3,609


3,172


5,441


Income before income tax expense


47,394


18,043


47,620


Income tax expense


10,698


7,981


61,059


Net income/ (loss)


36,696


10,062


(13,439)


      Less: Net loss attributable to non-controlling interests


(203)


(84)


(281)


Net income/ (loss) attributable to Changyou.com Limited

$

36,899

$

10,146

$

(13,158)


Basic net income/ (loss) attributable to Changyou.com Limited 
      per ADS

$

0.69

$

0.19

$

(0.25)










ADSs used in computing basic net income/ (loss) attributable to
      Changyou.com Limited per ADS


53,251


53,233


52,734










Diluted net income/ (loss) attributable to Changyou.com Limited
      per ADS

$

0.69

$

0.19

$

(0.25)










ADSs used in computing diluted net income/ (loss) attributable to
      Changyou.com Limited per ADS


53,665


53,656


52,734










 

CHANGYOU.COM LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS)




As of Mar. 31, 2019


As of Dec. 31, 2018






ASSETS





Current assets:





Cash and cash equivalents

$

439,211

$

454,534

Restricted cash


4,866


4,775

Accounts receivable, net


56,363


57,389

Short-term investments


193,925


190,068

Prepaid and other current assets


904,148


721,059

Total current assets


1,598,513


1,427,825

Non-current assets:





Fixed assets, net


171,870


170,746

Goodwill


10,257


10,257

Intangible assets, net


12,673


13,904

Deferred tax assets


13,721


13,467

Restricted time deposits


178,213


243,910

Other assets, net


60,387


85,375

Total non-current assets


447,121


537,659

TOTAL ASSETS

$

2,045,634

$

1,965,484






LIABILITIES





Current liabilities:





Receipts in advance and deferred revenue

$

41,045

$

45,343

Accounts payable and accrued liabilities


845,600


753,071

Tax payables


21,908


18,211

Total current liabilities


908,553


816,625

Long-term liabilities:





Deferred tax liabilities


86,039


83,026

Long-term tax payable


13,696


13,438

Long-term bank loans


139,980


220,000

Other long-term liabilities


2,461


751

Total long-term liabilities


242,176


317,215

Total liabilities


1,150,729


1,133,840

SHAREHOLDERS' EQUITY





Changyou.com Limited shareholders' equity


893,199


829,735

Non-controlling interests


1,706


1,909

Total shareholders' equity


894,905


831,644

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

2,045,634

$

1,965,484

 

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 Mar. 31, 2019






Non-GAAP adjustments (a)






GAAP


Share-based
compensation
expense (b)


Non-GAAP


Online game gross profit

$

84,692


-


84,692


Online advertising gross profit


2,188


-


2,188


Cinema advertising gross profit


1,426


-


1,426


IVAS gross loss


(280)


-


(280)


Gross profit

$

88,026


-


88,026


  Gross margin


71%




71%


Operating  expenses


46,851


(9)


46,842


Operating profit

$

41,175


9


41,184


  Operating margin


33%




33%


Income tax expense


10,698




10,698


Net income

$

36,696


9


36,705


Less: Net loss attributable to non-controlling interests


(203)


-


(203)


Net income attributable to Changyou.com Limited

$

36,899


9


36,908


  Net margin attributable to Changyou.com Limited


30%




30%


Diluted net income attributable to Changyou.com Limited per ADS

$

0.69




0.69


ADSs used in computing diluted net income attributable to 
    Changyou.com Limited per ADS


53,665




53,680




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 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


 

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 Mar. 31, 2018






Non-GAAP adjustments (a)






GAAP


Share-based
compensation
expense (c)


Non-GAAP


Online game gross profit

$

88,342


(12)


88,330


Online advertising gross profit


3,586


-


3,586


Cinema advertising gross profit


2,141


-


2,141


IVAS gross profit


194


-


194


Gross profit

$

94,263


(12)


94,251


   Gross margin


69%




69%


Operating  expenses


56,920


2,413


59,333


Operating profit

$

37,343


(2,425)


34,918


   Operating margin


27%




25%


Income tax expense


61,059




61,059


Net loss

$

(13,439)


(2,425)


(15,864)


Less: Net loss attributable to non-controlling interests


(281)


-


(281)


Net loss attributable to Changyou.com Limited

$

(13,158)


(2,425)


(15,583)


   Net margin attributable to Changyou.com Limited


(10%)




(11%)


Diluted net loss attributable to Changyou.com Limited per ADS

$

(0.25)




(0.30)


ADSs used in computing diluted net loss attributable to
Changyou.com Limited per ADS


52,734




52,734



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.

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/changyou-reports-first-quarter-2019-unaudited-financial-results-300839550.html

SOURCE Changyou.com Limited

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