NetDragon Announces 2024 Interim Financial Results
Rhea-AI Summary
NetDragon reported its 2024 interim financial results, showing resilience amid challenges. Key highlights include:
- Revenue decreased 10.3% YoY to RMB3.30 billion
- Gaming revenue increased 2.1% YoY to RMB1.36 billion
- EBITDA increased 12.9% YoY to RMB1.04 billion
- Profit attributable to owners decreased 20.0% YoY to RMB400 million
The company saw growth in its domestic PC gaming business, driven by flagship IPs like Eudemons, Conquer, and Heroes Evolved. New game launches are expected to drive future growth. The education subsidiary Mynd.ai faced industry-wide softening demand but improved gross margins. NetDragon is pursuing cost optimization and evolving towards an integrated software and service model in education technology.
Positive
- Domestic PC gaming revenue increased 2.1% YoY to RMB1.36 billion
- EBITDA increased 12.9% YoY to RMB1.04 billion
- Non-GAAP EBITDA increased 33.1% YoY to RMB1.15 billion
- Gross margin for Mynd.ai improved by 4.3 percentage points to 29.7%
- New game pipeline with 4-5 titles expected to launch in next 6-9 months
Negative
- Overall revenue decreased 10.3% YoY to RMB3.30 billion
- Profit attributable to owners decreased 20.0% YoY to RMB400 million
- Overseas gaming revenue declined 12.9% YoY
- Mynd.ai revenue decreased 23.5% YoY to RMB1.18 billion
- Mynd.ai reported a net loss of RMB340 million, compared to RMB109 million loss in the prior year
News Market Reaction 1 Alert
On the day this news was published, NDWTY declined NaN%, reflecting a moderate negative market reaction.
Data tracked by StockTitan Argus on the day of publication.
EBITDA up
Dr. Dejian Liu, Chairman of NetDragon, commented: "In the first half of the year, we delivered results that demonstrate both our resilience in the face of short-term challenges and our focus in building products to strengthen our competitive position and drive long-term growth. Our domestic PC gaming business delivered revenue of
"Turning to our education business, our overseas education subsidiary, Mynd.ai, continued to go through a stage of industry transformation that presents both challenges and opportunities. On the one hand, we continued to see softening hardware shipment as education authorities are still reacting to a broad normalization of budgets post-Covid, and from a macro standpoint, inflation also played a role in affecting budget allocation decisions of schools. On the other hand, we believe the market is in a very early stage of transitioning from a hardware-centric model to an integrated software and service-based model, which presents a transformational opportunity, especially for Mynd.ai as the incumbent market leader in our addressable markets with an installed base of over 1 million classrooms."
"In recent months, NetDragon has also made remarkable progress in our country-level initiatives in
2024 First Half Financial Highlights
- Revenue was
RMB3.30 billion , representing a10.3% decrease YoY. - Revenue from the gaming and application services was
RMB2.12 billion , representing64.3% of the Company's total revenue and a0.8% decrease YoY. - Revenue from Mynd.ai was
RMB1.18 billion , representing35.7% of the Company's total revenue and a23.5% decrease YoY. - Gross profit was
RMB2.20 billion , representing a3.8% decrease YoY. - Core segmental profit[1] from the gaming and application services was
RMB688 million , representing an11.5% decrease YoY. - Core segmental loss1 from Mynd.ai was RMB111 million, compared to a loss of
RMB48 million in the first half of last year. - Operating profit was
RMB634 million , representing a9.3% decrease YoY. - Non-GAAP operating profit[2] was
RMB640 million , representing a7.5% decrease YoY. - EBITDA was
RMB1.04 billion , representing a12.9% increase YoY. - Non-GAAP EBITDA2 was
RMB1.15 billion , representing a33.1% increase YoY. - Profit attributable to owners of the Company was
RMB400 million , representing a20.0% decrease YoY. - Non-GAAP profit attributable to owners of the Company2 was RMB558 million, representing a
5.3% decrease YoY. - The Company declared an interim dividend of
HKD0.40 per ordinary share for the six months ended 30 June 2024.
1 Core segmental profit (loss) figures are derived from the Group's reported segmental profit (loss) figures (presented in accordance with Hong Kong Financial Reporting Standard ("HKFRS") 8), but exclude non-core/ operating, non-recurring or unallocated items including government grants, impairment loss (net of reversal), fair value change and exchange gain on financial assets at fair value through profit or loss ("FVTPL"), fair value change and exchange loss on derivative financial instruments, interest expense and exchange loss on convertible and exchangeable bonds and convertible note, redundancy payments, legal and professional fees for spin-off and reversal of impairment loss of intangible assets. |
2 To supplement the consolidated results of the Group prepared in accordance with HKFRSs, the use of non-GAAP measures is provided solely to enhance the overall understanding of the Group's current financial performance. The non-GAAP measures are not expressly permitted measures under HKFRSs and may not be comparable to similarly titled measures for other companies. The non-GAAP measures of the Group exclude share-based payments expense, amortisation of intangible assets arising on acquisitions of subsidiaries, write-down of inventories, fair value change on investment properties, fair value change on financial assets at FVTPL, fair value change on derivative financial instruments, finance costs, deferred tax, reversal of impairment loss of intangible assets, gain on disposal of intangible assets and exchange gain on pledged bank deposits, financial assets at FVTPL, convertible and exchangeable bonds and derivative financial instruments. |
Segmental Financial Highlights
2024 First Half | 2023 First Half | Variance | ||||
(RMB million) | Gaming | Mynd.ai | Gaming | Mynd.ai | Gaming | Mynd.ai |
(Restated) | (Restated) | |||||
Revenue | 2,121 | 1,180 | 2,139 | 1,542 | -0.8 % | -23.5 % |
Gross profit | 1,849 | 351 | 1,896 | 392 | -2.5 % | -10.5 % |
Gross margin | 87.2 % | 29.7 % | 88.6 % | 25.4 % | -1.4 ppts | +4.3 ppts |
Core segmental profit | 688 | (111) | 777 | (48) | -11.5 % | +131.3 % |
Segmental operating | ||||||
- Research and | (595) | (101) | (542) | (99) | +9.8 % | +2.0 % |
- Selling and marketing | (210) | (139) | (240) | (187) | -12.5 % | -25.7 % |
- Administrative | (324) | (200) | (361) | (145) | -10.2 % | +37.9 % |
|
Gaming Business
Our gaming revenue, which represents
During the first half, domestic PC game revenue was
Our top flagship IP Eudemons generated a total revenue of
We continued to focus on enhancing quality of experience for our players leading to YoY growth of both gameplay-driven and content-driven revenue of our flagship game Eudemons Online in the domestic market during the first half. In particular, our measures include enhancing the depth and richness of different character roles, optimizing our graphics and in-game music, and integrating "Guofeng" and cultural elements to resonate with the interests and passion of many of our players.
Going forward, we expect to implement a multi-pronged growth strategy for the Eudemons IP, including achieving stable growth for our existing games, launching the Eudemons Remake Version and Eudemons Pocket Version 2.0 (in early 2025 and 2026 respectively) to target the huge existing pool of Eudemons IP players with a market-proven revenue model, as well as developing a new Eudemons PC game to be launched in the second half of 2025 to target both brand new players and existing player pool. We believe this strategy will bring the revenue scale of the Eudemons IP to a new level, and will drive revenue growth for many years to come.
Our Heroes Evolved IP continued to make positive progress in the first half, both from a revenue growth standpoint and a long-term strategic development standpoint. In particular, our Heroes Evolved PC game continued its momentum and delivered three consecutive reporting periods of revenue growth with a
Our Conquer IP delivered strong result in the domestic market with a
We also made great strides in executing our long-term strategy of expanding our IP and genre. Our new roguelike top-down shooter game under development Nebula Rangers started testing on TapTap in July and received a user score of 8.0. The game is expected to launch globally in 2025 and has the potential to become a new high DAU title. Furthermore, our new casual game Code-Alpha started testing in the overseas markets in June with positive results, and we expect meaningful revenue contribution from this game for the rest of the year with the potential to open up a new track for a casual entertainment genre. We are also making inroad in the ACGN genre as we received positive testing metrics in the overseas market for Under Oath after several rounds of game refinement in the past 12 months, and we currently believe there is strong visibility to launch the game in the first half of 2025. Last but not least, we are in the testing stage for our other new games including Miracland Saga, a new MMORPG to focus on the overseas market, and Huan Kong Cheng Zhan Ge to target the idle card game segment.
Looking forward in terms of our new game pipeline as a whole, we expect to drive growth of our overall revenue and profitability by delivering on our new game launches in the number of 4-5 new titles in the coming 6-9 months spanning across both our existing flagship IPs and new IPs.
4 According to news article: |
Mynd.ai
Our overseas education subsidiary, Mynd.ai, has experienced a continued industry-wide softening demand trend throughout most of its key geographic markets. After several years of high funding as a result of COVID-related government relief programs, local education authorities are still reacting to a broad normalization of budgets which affected hardware revenue for all players in the interactive flat panel market during the period. In addition, inflation has also led to higher recurring overhead costs for schools that affected budget allocation decisions for many of our customers.
The key financial milestones for Mynd.ai in the first half of the year are as follows:
- Revenue of
RMB1.18 billion compared toRMB1.54 billion in the first half of the prior year, with the decrease primarily driven by reduced spending by key customers due to the softer industry demand - Gross margins increased 430 basis points to
29.7% primarily due to increased operational efficiencies leading to cost savings in a number of areas, including lower component material pricing, freight and other savings as a result of moving part of the manufacturing process toMexico , as well as lower warranty costs due to observed lower failure rates on our ActivPanel 9 and our ActivPanel LX models - Cash flow from operations improvement of
RMB34 million compared to the same period in the prior year[5] - Cash position of
RMB494 million with available existing credit line - Adjusted EBITDA loss of
RMB40 million , a slight7.5% YoY improvement (despite the decline in revenue) primarily driven by optimization of overhead costs5 - Net loss of
RMB340 million compared to a loss ofRMB109 million in the same period in the prior year, primarily due to the recording of a one-time non-cash valuation allowance against deferred tax assets in the amount ofRMB294 million 5 (excluding this one-time effect, net loss narrowed by58.0% YoY) - Management continuing to implement cost saving measures to mitigate effects of headwinds in the hardware market
5 From Form 6-K filing of Mynd.ai, in accordance with |
Despite the near-term challenges, we are confident in our business model and are well positioned to prioritize and streamline our operations and navigate the market challenges, as evidenced by our margin improvement. As we continue to pursue cost optimization initiatives and evaluate our capital allocation strategy, we believe we are competitively well positioned to continue as the market leader in this space.
On a broader scale, we are facing an unprecedented opportunity as we believe the global classroom education technology market is still in a very early stage of evolving from a hardware-centric model to an integrated software and service based model. We believe Mynd.ai's position as the incumbent market leader in our addressable markets, our installed base of over 1 million classrooms, a well-established network of distribution channels and a head-start advantage in launching its first SAAS offering in Explain Everything Advanced earlier this year are competitive moats that put us in a unique position at this market juncture. In view of the opportunity ahead of us, we are dedicated to delivering hardware and software solutions with groundbreaking tools and new technologies for the education, business, and public sectors in line with our long-term strategic vision.
We expect our subsidiary Mynd.ai to host a capital markets day in the near future to detail our strategic plan to our shareholders and the investor community.
Management Presentation and Webcast
NetDragon's management team will hold a results presentation and webcast at 10:00am
Details of the presentation are as follows:
Time: | 10:00 AM, Hong Kong Time on 30 August 2024, Friday / 10:00 PM, Eastern Time on 29 August 2024, Thursday |
Format: | Physical Presentation at The Executive Centre, |
OR Online Webcast | |
Venue: | Level 2, No. 28 Stanley Street, Central, |
Webcast： | https://webcast.roadshowchina.cn/Ym82eDBGWlozOGdtNjY5TUF6L3RDQT09 |
The live and archived webcast of the conference call will be available on the Investor Relations section of NetDragon's website at http://ir.nd.com.cn/en/category/webcast. Participants in the live webcast should visit the aforementioned website 10 minutes prior to the call, then click on the icon for "2024 Interim Results Presentation and Webcast" and follow the registration instructions.
About NetDragon Websoft Holdings Limited
NetDragon Websoft Holdings Limited (HKSE: 0777) is a global leader in building internet communities with a long track record of developing and scaling multiple internet and mobile platforms that impact hundreds of millions of users, including previous establishments of
Established in 1999, NetDragon is one of the most reputable and well-known online game developers in
For investor enquiries, please contact:
NetDragon Websoft Holdings Limited
Ms. Maggie Zhou
Senior Director of Investor Relations
Email: maggiezhou@nd.com.hk / ir@netdragon.com
Website: ir.netdragon.com
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND | |||
OTHER COMPREHENSIVE INCOME | |||
FOR THE SIX MONTHS ENDED 30 JUNE 2024 | |||
Six months ended 30 June | |||
2024 | 2023 | ||
(Unaudited) | (Unaudited) | ||
RMB million | RMB million | ||
Revenue | 3,301 | 3,681 | |
Cost of revenue | (1,102) | (1,394) | |
Gross profit | 2,199 | 2,287 | |
Other income and gains | 139 | 120 | |
Selling and marketing expenses | (352) | (443) | |
Administrative expenses | (551) | (570) | |
Research and development costs | (696) | (641) | |
Other expenses and losses | (105) | (54) | |
Operating profit | 634 | 699 | |
Exchange gain (loss) on pledged bank deposits, | 2 | (35) | |
Fair value change on financial assets at fair value | 77 | 35 | |
Fair value change on derivative financial instruments | 70 | 15 | |
Finance costs | (81) | (135) | |
Profit before taxation | 702 | 579 | |
Taxation | (397) | (126) | |
Profit for the period | 305 | 453 | |
Other comprehensive income (expense) for the period, | |||
Item that may be reclassified subsequently to profit | |||
Exchange differences arising on translation of foreign | 1 | 61 | |
Item that will not be reclassified to profit or loss: | |||
Fair value change on equity instruments at fair value | (12) | (1) | |
Other comprehensive (expense) income for the period | (11) | 60 | |
Total comprehensive income for the period | 294 | 513 | |
Profit (loss) for the period attributable to: | |||
- Owners of the Company | 400 | 500 | |
- Non-controlling interests | (95) | (47) | |
305 | 453 | ||
Total comprehensive income (expense) for the period | |||
- Owners of the Company | 388 | 557 | |
- Non-controlling interests | (94) | (44) | |
294 | 513 | ||
RMB cents | RMB cents | ||
Earnings per share | |||
- Basic | 75.46 | 92.61 | |
- Diluted | 75.46 | 92.61 | |
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||
AS AT 30 JUNE 2024 | |||
30 June 2024 | 31 December 2023 | ||
(Unaudited) | (Audited and | ||
RMB million | RMB million | ||
Non-current assets | |||
Property, plant and equipment | 2,357 | 2,422 | |
Right-of-use assets | 458 | 380 | |
Investment properties | 47 | 60 | |
Goodwill | 320 | 325 | |
Intangible assets | 783 | 868 | |
Interests in associates and joint ventures | 43 | 43 | |
Equity instruments at fair value through other | 32 | 45 | |
Financial assets at fair value through profit or loss | 509 | 453 | |
Loan receivables | 12 | 12 | |
Other receivables, prepayments and deposits | 352 | 351 | |
Deferred tax assets | 151 | 433 | |
5,064 | 5,392 | ||
Current assets | |||
Properties under development | 70 | 70 | |
Properties for sale | 281 | 280 | |
Inventories | 269 | 405 | |
Financial assets at fair value through profit or loss | 124 | 38 | |
Loan receivables | 90 | 79 | |
Trade receivables | 745 | 702 | |
Other receivables, prepayments and deposits | 667 | 492 | |
Tax recoverable | 30 | 39 | |
Pledged bank deposits | 624 | 315 | |
Bank deposits with original maturity over three months | 215 | 329 | |
Cash and cash equivalents | 2,382 | 2,241 | |
5,497 | 4,990 | ||
Current liabilities | |||
Trade and other payables | 1,390 | 1,518 | |
Contract liabilities | 379 | 491 | |
Lease liabilities | 97 | 76 | |
Provisions | 110 | 127 | |
Derivative financial instruments | 37 | 107 | |
Bank borrowings | 1,318 | 1,033 | |
Convertible and exchangeable bonds | 274 | 256 | |
Convertible note | 375 | 357 | |
Tax payable | 72 | 80 | |
4,052 | 4,045 | ||
Net current assets | 1,445 | 945 | |
Total assets less current liabilities | 6,509 | 6,337 | |
Non-current liabilities | |||
Other payables | 35 | 37 | |
Lease liabilities | 110 | 45 | |
Bank borrowings | - | 1 | |
Deferred tax liabilities | 84 | 80 | |
229 | 163 | ||
Net assets | 6,280 | 6,174 | |
Capital and reserves | |||
Share capital | 39 | 39 | |
Share premium and reserves | 6,075 | 5,856 | |
Equity attributable to owners of the Company | 6,114 | 5,895 | |
Non-controlling interests | 166 | 279 | |
6,280 | 6,174 | ||
UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS | |||
Six months ended 30 June | |||
2024 | 2023 | ||
(Unaudited) | (Unaudited) | ||
RMB million | RMB million | ||
Operating profit | 634 | 699 | |
Gain on disposal of intangible assets | (51) | - | |
Amortisation of intangible assets arising on | 36 | 30 | |
Fair value change in investment properties | 13 | - | |
Share-based payments expense | 8 | 2 | |
Reversal of impairment loss of intangible assets | - | (43) | |
Write-down of inventories | - | 4 | |
Non-GAAP operating profit | 640 | 692 | |
Profit attributable to owners of the Company | 400 | 500 | |
Fair value change on financial assets at fair value | (77) | (35) | |
Fair value change on derivative financial instruments | (53) | (15) | |
Gain on disposal of intangible assets | (51) | - | |
Exchange (gain) loss on pledged bank deposits, | (2) | 30 | |
Deferred tax | 219 | - | |
Finance costs | 71 | 122 | |
Amortisation of intangible assets arising on | 32 | 24 | |
Fair value change in investment properties | 13 | - | |
Share-based payments expense | 6 | 2 | |
Reversal of impairment loss of intangible assets | - | (43) | |
Write-down of inventories | - | 4 | |
Non-GAAP profit attributable to owners of the | 558 | 589 | |
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SOURCE NetDragon Websoft Holdings Limited
FAQ
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