SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF AUGUST 2005
SHANDA INTERACTIVE ENTERTAINMENT LIMITED
NO. 1 OFFICE BUILDING, NO. 690 BIBO ROAD
PUDONG NEW AREA, SHANGHAI, CHINA 201203
(Address of principal executive offices)
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(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F [X] Form 40-F [ ]
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes [ ] No [X]
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82- ___ .)
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SHANDA INTERACTIVE ENTERTAINMENT LIMITED
Form 6-K
Table of Content
Page
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Signature Page 3
Press release regarding Shanda reports second quarter 2005 financial
results, dated August 9, 2005. Page 4
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SHANDA INTERACTIVE ENTERTAINMENT LIMITED
By: /s/ Shujun Li
------------------------------------
Name: Shujun Li
Title: Chief Financial Officer
Date: August 16, 2005
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SHANDA REPORTS SECOND QUARTER 2005 FINANCIAL RESULTS
- RECORD NET REVENUES OF US$65.2 MILLION, UP 88.0% YOY AND 8.5% SEQUENTIALLY -
(Shanghai, China, August 9, 2005) Shanda Interactive Entertainment Limited
(Nasdaq: SNDA), or Shanda, a leading interactive entertainment media company and
the largest operator of online games in China, today announced its unaudited
financial results for the second quarter ended June 30, 2005.
SUMMARY OF THE SECOND QUARTER 2005:
o Net revenues increased 88.0% year-over-year and 8.5% quarter-over-quarter
to RMB539.5 million (US$65.2 million);
o Online games revenues, including MMORPG and casual games, increased 72.0%
year-over-year and 5.7% quarter-over-quarter to RMB466.7 million (US$56.4
million), accounting for 86.5% of total revenues;
o Other revenues, which primarily include revenues from online advertising
and other value-added services and products, increased 365.1%
year-over-year and 31.3% quarter-over-quarter to RMB72.7 million (US$8.8
million), accounting for 13.5% of total revenues;
o Total peak concurrent users for all Shanda games in commercial service
reached 2.5 million; and
o Net income increased 58.2% year-over-year to RMB223.0 million
(US$26.9 million), and diluted earnings per ADS increased 50.0%
year-over-year to RMB3.06 (US$0.36).
"Shanda continued to see healthy growth momentum in the second quarter,
lifted by MMORPG growth and strong online advertisement sales," said Tianqiao
Chen, Chairman and CEO of Shanda. "As we look at the remainder of this year, we
feel very confident that our diversified portfolio of content and our strong
online game pipeline will continue to generate sustainable user and revenue
growth. In addition to our MMORPG pipeline, which includes RO and Dungeons &
Dragons(TM), we also have four casual games next in line. At the same time, we
continue to expand the appeal and reach of our interactive entertainment
platform by carrying out our home strategy."
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FINANCIAL RESULTS (PRELIMINARY UNAUDITED)
Net Revenues. In the second quarter of 2005, Shanda reported record net
revenues of RMB539.5 million (US$65.2 million), representing a 88.0% increase
compared to RMB287.0 million in the second quarter of 2004 and a 8.5% increase
compared to RMB497.0 million in the first quarter of 2005.
Online game revenues increased 72.0% year-over-year and 5.7%
quarter-over-quarter to RMB466.7 million (US$56.4 million) in the second quarter
of 2005. Total peak concurrent users for all Shanda games in commercial service
in the second quarter of 2005 increased to 2.5 million from 2.1 million in the
first quarter of 2005.
Revenues from MMORPGs in the second quarter of 2005 increased 60.3%
year-over-year and 9.3% quarter-over-quarter to RMB362.0 million (US$43.7
million), accounting for 67.1% of total revenues. The increase in revenues from
MMORPGs was primarily due to continued content enhancements, such as the
expansion pack of Mir II released in March. The average concurrent users of
Shanda's MMORPGs in commercial service increased to approximately 763,000 in the
second quarter of 2005 from 748,000 in the previous quarter. The average revenue
per user hour, calculated based on net revenues, for Shanda's MMORPGs increased
to RMB 0.22 in the second quarter of 2005 compared to RMB0.20 in the previous
quarter.
Revenues from casual games in the second quarter increased 130.1%
year-over-year and declined 5.1% quarter-over-quarter to RMB104.7 million
(US$12.7 million). The quarter-over-quarter revenue decline for casual games was
mainly a result of weaker seasonality.
Shanda's other revenues increased 31.3% to RMB72.7 million (US$8.8 million)
in the second quarter of 2005 from RMB55.4 million (US$6.7 million) in the first
quarter of 2005. The increase in Shanda's other revenues was primarily due to
the continued growth of online advertising revenues.
Gross Profit. Gross margin was 68.4% for the second quarter of 2005, up
from 62.8% in the second quarter of 2004 and down from 71.0% in the first
quarter of 2005. The sequential gross margin decline was due to increased cost
of services related to licensing fees for online games.
Income from Operations. Operating income for the second quarter of 2005 was
RMB243.8 million (US$29.5 million), representing a 118.2% increase compared to
RMB111.7 million in the second quarter of 2004 and a 4.0% decrease compared to
RMB253.9 million in the first quarter of 2005. Operating margin was 45.2% in the
second quarter of 2005, compared to 38.9% in the second quarter of 2004 and
51.1% in the first quarter of 2005. Operating margin increased year-over-year
primarily due to the growth and greater scale of the company's game platform and
user base, but decreased as compared with the first quarter primarily due to
both an increase in product development expenses caused by an increase in
research and development staff and an increase in sales and marketing expenses
related to the
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launch of new games in the second quarter of 2005.
Net Income. In the second quarter of 2005, Shanda had net income of
RMB223.0 million (US26.9 million), representing a 58.2% increase compared to net
income of RMB141.0 million (US$17.0 million) in the second quarter of 2004 and a
1.3% increase compared to net income of RMB220.1 million in the first quarter of
2005. Diluted earnings per ADS were RMB3.06 (US$0.36) for this quarter,
representing a 50.0% increase compared to diluted earnings per ADS of RMB2.04 in
the same period of 2004 and a 2.0% increase compared to diluted earnings per ADS
of RMB3.00 in the first quarter of 2005.
The quarter-over-quarter increase in Shanda's net income and diluted
earnings per ADS was partially offset by two generally non-recurring factors.
First, Shanda recorded an investment loss of RMB 4.6 million (US$0.6 million).
Second, Shanda incurred an expense related to the acquisition of Haofang, which
reflects a write-off of the valuation of in process research and development of
RMB 4.1 million (US$0.5 million) in the second quarter of 2005.
The conversion of Renminbi (RMB) into U.S. dollars in this release is based
on the noon buying rate in The City of New York for cable transfers in Renminbi
per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of
New York as of June 30, 2005, which was RMB8.2765 to US$1.00. The percentages
stated in this press release are calculated based on RMB.
RECENT BUSINESS HIGHLIGHTS
In the second quarter of 2005, Shanda continued to build its game pipeline
and expanding its content lineup. Shanda recently entered into a license
agreement with Gravity Co., Ltd., a developer and distributor of online games in
South Korea. Pursuant to the license agreement with Gravity, Shanda holds the
exclusive rights to operate Ragnarok Online, a cartoon-style MMORPG, in China.
In addition, in July 2005, Shanda commercially launched Magical Land, an
in-house developed fantasy cartoon-style MMORPG. These two games appeal more to
female and younger age group user segments, which are an important demographic
segment for Shanda's home entertainment strategy.
In the second quarter of 2005, Shanda completed the acquisition of the
82.1% of Shanghai Haofang Online Information Technology Co. Ltd., or Haofang,
that it did not already own. Haofang is the operator of the largest network PC
game platform in China. Shanda has held a minority interest in Haofang since
October 2004.
Shanda further strengthened its operational platform with the launch of
QuanQuan - a proprietary instant messaging application. Closed beta testing of
QuanQuan instant messenger began in July 2005. QuanQuan instant messenger is
uniquely bundled with Shanda's attractive online games and other interactive
entertainment applications and allows all of our users to communicate in
real-time over the Internet with text or voice messages and images. We believe
that the addition of QuanQuan instant messenger also will help to consolidate
and strengthen Shanda's user community.
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In addition, Shanda announced the formation of a strategic partnership with
Sichuan Changhong Electric Co., Ltd. and several leading content providers in
China and abroad, to jointly launch the Shanda Home Entertainment Station. The
Shanda Home Entertainment Station is an integrated device solution to bring home
users a portfolio of comprehensive entertainment content, including movies,
music, games, online shopping, lifestyle information, and educational content,
applications and services.
OTHER NEWS
We have been notified by certain of our executive officers and affiliates
that they have adopted pre-arranged stock trading plans in accordance with Rule
10b5-1 under the U.S. Securities Exchange Act of 1934, as amended, and the
Company's trading policy with respect to sales of the Company's securities by
insiders. The planned transactions under the 10b5-1 trading plans adopted by
senior executives and affiliates will periodically be publicly disclosed through
Form 144 filings with the U.S. Securities and Exchange Commission.
CONFERENCE CALL
Shanda's management team will host a conference call on August 9, 2005 at
9:00 p.m. Eastern Time, corresponding with August 10, 2005 at 9:00 a.m.
Beijing/Hong Kong time, to present an overview of the company's financial
performance and business operations. To participate in the live call, U.S.
callers should dial 800-900-0012 and international callers should dial
973-935-2056. A live webcast of the presentation can also be accessed through
the company's corporate Web site at http://www.snda.com.
A replay of the conference call will be available through August 16, 2005
at midnight Eastern Time. The dial-in number is 877-519-4471 within the U.S. and
973-341-3080 internationally. The pass code for the replay is 6300874.
ABOUT SHANDA INTERACTIVE ENTERTAINMENT LIMITED
Shanda Interactive Entertainment Limited (Nasdaq: SNDA) is a leading
interactive entertainment media company in China and the largest operator of
online games in China. Shanda offers a portfolio of diversified entertainment
content including some of the most popular massively multi-player and casual
online games in China, along with online chess and board games, a network PC
game platform and a variety of cartoons, literature works and music. Shanda's
interactive entertainment platform attracts a large and loyal user base. Each
user can interact with thousands of others and enjoy the interactive
entertainment content that Shanda provides. Interaction enriches your life. For
more information about Shanda, please visit http://www.snda.com.
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SAFE HARBOR STATEMENT
This announcement contains forward-looking statements that are based on
current expectations, assumptions, estimates and projections about the company
and the industry. All statements other than statements of historical fact in
this announcement are forward-looking statements, including but not limited to
statements regarding future revenue and user growth, the launch of Dungeons &
Dragons,Ragnarok Online and additional casual games in China, the launch of the
Shanda Home Entertainment Station and Shanda's ability to deliver a diverse
portfolio of content, applications and services via the Shanda Home
Entertainment Station. These forward-looking statements involve various risks
and uncertainties. Although the Company believes that the expectations expressed
in these forward-looking statements are reasonable, it cannot assure you that
its expectations will turn out to be correct. Important risks and uncertainties
could cause actual results to be materially different from expectations include
but not limited to the risks that there are delays in the completion of Dungeons
& Dragons Online or any of the four additional casual games, Ragnarok Online
users in China do not smoothly migrate from the current Ragnarok Online
operator's service to Shanda's service, Shanda fails to enter into a legally
binding agreement regarding a partnership with any of the domestic and foreign
content providers, there are delays in the launch of the Shanda Home
Entertainment System and the risks set forth in Shanda's filings with the U.S.
Securities and Exchanges Commission, including Shanda's annual report on Form
20-F.
CONTACT:
Donglei Zhou
Director of Business Development & Investor Relations
Shanda Interactive Entertainment Limited
Phone: 8621-50504740
E-mail: IR@shanda.com.cn
Todd St.Onge (investors): stonge@braincomm.com
Nancy Zakhary (media): nancy@braincomm.com
Brainerd Communicators, Inc.
212-986-6667
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SHANDA INTERACTIVE ENTERTAINMENT LIMITED
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
AS OF DECEMBER 31, AS OF JUNE 30,
2004 2005
------------------ ---------------------------------
RMB RMB US$
(AUDITED) (UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents 3,123,971 1,260,202 152,263
Restricted cash - 152,951 18,480
Marketable securities 422,327 2,290,523 276,750
Accounts receivable 39,308 94,261 11,389
Inventories 6,039 12,732 1,538
Due from related parties 1,515 1,515 183
Deferred licensing fees and related
costs 48,716 40,330 4,873
Prepayments and other current assets 27,621 55,817 6,744
Deferred tax assets 29,632 56,677 6,848
---------- ---------- ----------
Total current assets 3,699,129 3,965,008 479,068
========== ========== ==========
Investments in affiliated companies 155,936 865,000 104,513
Property, equipment and software 159,170 207,988 25,130
Intangible assets 89,934 146,493 17,700
Goodwill 133,959 226,061 27,314
Long-term deposits 2,363 2,498 302
Other long-term assets 50,673 38,232 4,619
---------- ---------- ----------
Total assets 4,291,164 5,451,280 658,646
========== ========== ==========
LIABILITIES
Current liabilities:
Accounts payable 47,342 42,119 5,089
Licensing fees payable 70,365 92,557 11,183
Taxes payable 40,197 125,318 15,141
Deferred revenue 247,282 270,200 32,647
Due to related parties 1,758 91,795 11,091
Acquisition related obligation - 151,821 18,344
Other payables and accruals 91,268 97,990 11,839
---------- ---------- ----------
Total current liabilities 498,212 871,800 105,334
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Convertible debt 2,276,175 2,276,175 275,017
---------- ---------- ----------
Total liabilities 2,774,387 3,147,975 380,351
========== ========== ==========
Minority interests 6,879 2,250 272
Commitments and contingencies - - -
SHAREHOLDERS' EQUITY
Ordinary shares 11,585 11,780 1,424
Additional paid-in capital 1,300,454 1,389,006 167,825
Statutory reserves 40,025 40,025 4,836
Deferred share-based compensation (20,623) (11,188) (1,352)
Accumulated other comprehensive gain 133,815 383,754 46,367
Retained earnings 44,642 487,678 58,923
---------- ---------- ----------
Total shareholders' equity 1,509,898 2,301,055 278,023
---------- ---------- ----------
Total liabilities and shareholders' equity 4,291,164 5,451,280 658,646
========== ========== ==========
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SHANDA INTERACTIVE ENTERTAINMENT LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
FOR THE THREE MONTHS PERIOD ENDED,
---------------------------------------------------------------------
JUNE 30, MARCH 31, JUNE 30,
2004 2005 2005
------------ ------------ -------------------------------
RMB RMB RMB US$
(unaudited) (unaudited) (unaudited) (unaudited)
Net revenues
MMORPG 225,853 331,227 362,047 43,744
Casual game 45,477 110,339 104,664 12,646
Others 15,640 55,410 72,743 8,789
------------ ------------ ------------ ------------
Total net revenues 286,970 496,976 539,454 65,179
------------ ------------ ------------ ------------
Cost of services
Ongoing licensing fees for online games (55,117) (80,100) (96,050) (11,605)
Amortization of upfront licensing fees (6,346) (6,451) (6,425) (776)
Server leasing and maintenance fees (20,781) (19,819) (22,532) (2,722)
Salary and benefits (5,662) (7,541) (9,599) (1,160)
Depreciation of property, equipment and
software (6,660) (9,662) (9,406) (1,137)
Others (12,307) (20,383) (26,708) (3,227)
------------ ------------ ------------ ------------
Total cost of services (106,873) (143,956) (170,720) (20,627)
------------ ------------ ------------ ------------
Gross profit 180,097 353,020 368,734 44,552
Operating expenses
Product development (16,510) (26,522) (39,102) (4,724)
Sales and marketing (17,044) (26,644) (38,300) (4,628)
General and administrative (31,285) (42,902) (44,217) (5,343)
Share-based compensation (3,516) (3,028) (3,302) (399)
------------ ------------ ------------ ------------
Total operating expenses (68,355) (99,096) (124,921) (15,094)
------------ ------------ ------------ ------------
Income from operations 111,742 253,924 243,813 29,458
Interest income 1,854 9,650 5,665 685
Amortization of convertible debt issuance cost - (4,494) (4,527) (547)
Investment income (loss) 812 (3,408) (4,295) (519)
Other income (expenses), net 34,438 18,524 23,933 2,892
------------ ------------ ------------ ------------
Income before income tax expenses, equity in
earnings (loss) of affiliated companies and
minority interests 148,846 274,196 264,589 31,969
Income tax expenses (7,732) (42,123) (49,236) (5,949)
Equity in earnings (loss) of affiliated
companies - (13,846) 5,379 650
Minority interests (157) 1,849 2,227 269
------------ ------------ ------------ ------------
Net income 140,957 220,076 222,959 26,939
============ ============ ============ ============
Income attributable to Series A and Series A-1
preferred shareholders (14,911) - - -
------------ ------------ ------------ ------------
Net income attributable to ordinary shareholders 126,046 220,076 222,959 26,939
============ ============ ============ ============
Earnings per share:
Basic 1.07 1.57 1.59 0.19
Diluted 1.02 1.50 1.53 0.18
Earnings per ADS:
Basic 2.14 3.14 3.18 0.38
Diluted 2.04 3.00 3.06 0.36
Weighted average ordinary shares outstanding:
Basic 117,278,674 139,977,991 140,518,364 140,518,364
Diluted 123,974,994 147,087,994 145,255,626 145,255,626
Weighted average ADS outstanding:
Basic 58,639,337 69,988,996 70,259,182 70,259,182
Diluted 61,987,497 73,543,997 72,627,813 72,627,813
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