Changyou Reports Strong Results; Stock Inches Up

Changyou, creator of TLBB, or Dragon Oath, said its revenue grew 14 percent, but expected slower growth in the second quarter.

Anna Vodopyanova
    Apr 25, 2018 5:51 PM  PT
Changyou Reports Strong Results; Stock Inches Up
author: Anna Vodopyanova Ltd. (Nasdaq: CYOU) announced today its revenue for the first quarter increased to $137 million, up 14 percent from the same period last year, sending the stock up 2 percent to $29.41 per American depositary share in New York trading.

The company, a game developer in Beijing, reported a net loss for the first three months of 2018 of $13 million, compared with net income of $30 million a year ago. Net loss per ADS was 25 cents, compared with net income of 56 cents in the first quarter of 2017.

The loss was mainly driven by an income tax expense, which was reported at $61 million, compared with $8 million a year ago. The company said it set aside the additional funds to cover a $47 million tax liability from last year.

Excluding the impact of the charge for taxes, the company reported operating profit of $37.3 million compared with $31.5 million a year ago.

The company also said the active paying accounts of Changyou decreased by 11 percent year-over-year in a natural declining lifecycle of the company's older games, including the mobile games.

Changyou said the decline in its mobile gaming platform could have been worse if the company hadn't launched several expansion packs featuring new content and enhanced functionality in the mobile version of Legacy TLBB. Tian Long Ba Bu, or Dragon Oath, launched in 2007, remains Changyou's most successful game, based on a novel titled Demi-Gods and Semi-Devils by Louis Cha.

"We will continue to focus on maximizing the longevity of our legacy games with ongoing improvements to the in-game content and functionality as we look to sustain user interest and engagement," said chief executive officer of Changyou, Dewen Chen.

In the second quarter of 2018, the company will celebrate TLBB's 11-year anniversary, Chen announced at the teleconference today.

"We also remain laser-focused on producing top quality games. While MMORPG [massively multiplayer online role-playing] games will continue to be our primary focus, we are also exploring the development of other advanced casual and SLG [simulated life] games that meet our high standards for innovation and quality," said Chen.

Total operating expense for the first quarter was $57 million, representing an increase of 16 percent year-over-year. The majority of the expense, $34 million, was attributed to product development of its mobile platform.

Looking ahead, the company said it expected a decline in the second-quarter results, with revenue ranging from $110 million to $120 million, a drop of 12 to 20 percent compared with the first quarter.

Changyou started in 2003 as a unit of Inc. (Nasdaq: SOHU). Sohu, one of China's top internet portals, remains Changyou's controlling shareholder and holds 95 percent of the voting power at the company.

Earlier this month, Changyou declared a cash dividend of $9.40 per ADS to be paid on April 26 to shareholders of record as of April 20. Some analysts said the dividend may be an indication of the company's possible buyout by Charles Zhang, a chairman of Changyou and Sohu, who offered to privatize the company at $42.10 per ADS in February. The offer was a reaffirmation of Zhang's similar proposal last May. In response, the company said it would form a review committee, but it has made no subsequent announcement.


Shares in the company closed up 2 percent at $29.41 per share. (Source: Thomson Reuters Eikon)