NetDragon Announces Fiscal Year 2019 Financial Results, Record High Revenue and Profit
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NetDragon Announces Fiscal Year 2019 Financial Results, Record High Revenue and Profit

HONG KONG, March 31, 2020 — (PRNewswire) — NetDragon Websoft Holdings Limited ('NetDragon' or the 'Company'; Hong Kong Stock Code: 777), a global leader in building internet communities, today announced its financial results for fiscal year 2019. NetDragon's management team will hold a conference call and webcast at 10:00am Hong Kong time on 1 April 2020 to discuss the results and recent business developments.

Mr. Dejian Liu, Chairman of NetDragon, commented: "2019 was a special year to NetDragon as we achieved record high revenue and profit while celebrating our 20th anniversary. We recorded revenue of RMB5,793.1 million, up 15.0% year-over-year, and net profit attributable to shareholders of RMB807.2 million, up 48.0% year-over-year.

"Our gaming business maintained its strong growth momentum with 39.4% year-over-year revenue growth, as mobile games and PC games sustained remarkable growth with 46.8% and 38.3% increase in revenue year-over-year respectively. The business has proven to deliver consistent and sustainable growth, as our revenue has grown at a CAGR of 35.3% in the past five years, while segmental profits have increased more than sevenfold during this period. Our performance in 2019 was driven by across-the-board revenue growth coming from all of our major IPs, including Eudemons Online, Heroes Evolved and Conquer Online. Over the past many years, NetDragon has built a unique set of technologies, knowhow and operational capabilities across multiple genres and markets, which will provide the foundation for us to drive our gaming business forward with sustainable growth."

"Our education business also delivered solid performance as our subsidiary Promethean continued its global market leadership position[1] in K-12 interactive classroom technologies with the largest market share in international markets. We had a strong second half as we continued to see robust growth in our core regions, particularly in the US and European markets, as well as new markets including Egypt. On the product side, we are delighted that our Red Dot Design Award-winning ActivPanel Elements Series has been well received since its shipment commenced in the second quarter."

"While our Promethean offerings continue to enable us to expand our ecosystem within the classroom environment, we are making strong progress with our online learning community platform Edmodo, which has seen unprecedented increase in active users and new registered users since the outbreak of the coronavirus, as teachers and students around the world embrace Edmodo as an easy-to-use, effective and reputable platform that will ensure the continuity of learning in a fun and engaging manner. In particular, Edmodo has recently been chosen by the Ministry of Education in the Arab Republic of Egypt to be the designated online learning platform for the K12 education system in Egypt for immediate rollout to over 22 million students and over 1 million teachers in the country to provide distance learning support in the period of school suspension."

"In China, we continued to deliver strong progress with our strategy to drive user adoption. The number of monthly actively installed base of our flagship platform 101 Education PPT has surpassed 1 million, representing a sizable user base of teachers to drive learning activities in the classroom environment. Our One-Stop Learning platform, which enables teachers and students to communicate, teach and learn after school, has seen MAU increase by more than 20 times since the coronavirus outbreak. With our fast-scaling coverage of active users in both classrooms and at home, we are well on track to build our ecosystem towards monetization."

[1] Based on report issued by Futuresource Consulting dated 17 February 2020, incorporating actual shipment volumes (excluding China) of the Company.

Fiscal Year 2019 Financial Highlights

[2] Core segmental profit (loss) figures are derived from the Company'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, fair value change and finance cost of financial instruments, intercompany finance cost, impairment loss (net of reversal), impairment of goodwill and intangible assets and fair value change of convertible preferred shares.

[3] To supplement the consolidated results of the Company prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs"), the use of non-GAAP operating profit measure is provided solely to enhance the overall understanding of the Company's current financial performance. The non-GAAP operating profit measure is not expressly permitted measure under HKFRSs and may not be comparable to similarly titled measure for other companies. The non-GAAP operating profit of the Company excludes share-based payments expense, amortisation of intangible assets arising on acquisition of subsidiaries and impairment of goodwill and intangible assets.

Segmental Financial Highlights


FY2019

FY2018

Variance

(RMB '000)

Gaming

Education

Gaming

(Restated)

Education
(Restated)

Gaming

Education

Revenue

3,299,626

2,395,398

2,367,405

2,565,556

39.4%

-6.6%

Gross Profit

3,165,500

713,009

2,262,355

766,057

39.9%

-6.9%

Gross Margin

95.9%

29.8%

95.6%

29.9%

+0.3 ppt

+0.1 ppt

Core Segmental
Profit (Loss)[2]

1,923,262

(524,458)

1,271,564

(384,929)

51.3%

36.2%

Segmental Operating
Expenses







 - Research and
   development

(557,561)

(491,261)

(458,932)

(449,332)

21.5%

9.3%

 - Selling and
   marketing

(385,921)

(508,088)

(232,099)

(440,704)

66.3%

15.3%

- Administrative

(306,434)

(254,866)

(295,989)

(239,497)

3.5%

6.4%

Gaming Business

Our gaming business revenue increased by 39.4% year-over-year to RMB3,299.6 million. Mobile games revenue surged by 46.8% year-over-year, while PC games revenue growth remained strong at 38.3% year-over-year. We also performed well in the overseas markets and recorded 66.4% increase in revenue year-over-year. As a result of strong top line growth and positive operating leverage, gaming business's core segmental profit jumped by 51.3% year-over-year.

In particular, our flagship IP Eudemons recorded 39.2% year-over-year increase in revenue of the PC and mobile versions combined. During the year, we successfully carried out a series of major marketing initiatives including cross-industry collaboration with Nezha IP and renowned celebrities to enhance the market influence of Eudemons. On the back of our marketing activities and new expansion packs, we managed to increase gamers' loyalty and activities, while at the same time optimizing spending, resulting in significant revenue growth as well as a 38.8% year-over-year increase in monthly active players.

Our other two major IPs, namely Heroes Evolved and Conquer Online, also recorded solid revenue growth of 32.5% and 66.3% year-over-year respectively. In particular, Conquer Online achieved record high revenue after its sixteenth year of history, as we stepped up our effort in enhancing the contents and user experience with multiple expansion packs launched during the year. Heroes Evolved also performed exceptionally well, with its growth attributable to a combination of introduction of new playing methods and effective marketing and promotion campaigns including IP crossovers with two popular anime, OVERLORD and Rakshasa Street, which led to a substantial increase in gross billings.

Looking forward, we are well-positioned to drive consistent, long-term revenue and profit growth for our gaming business by building on the success of our technology knowhow and our IP portfolio to launch new premier quality games of different genre, grow the user base and engagement of our existing games, launch new IP and seek to work with our partners on IP collaboration. Currently, we have a robust pipeline with games of different categories and genres under development or in testing stage, including Vow of Heroes, Eudemons II, Eudemons Legends, Heroes of Ages, Heroes Evolved Thrones and Battle of Giants.

Education Business

Our revenue from the education business was RMB2,395.4 million, down 6.6% year-over-year. Excluding revenue from the large Moscow tender in 2018 (which we exclude for more comparable presentation due to cyclical nature of the tender), revenue from the education business increased by 12.0% year-over-year. Our subsidiary Promethean continued its market leadership by maintaining its number 1 market share position in our key geographical regions including the US and a large number of European countries, resulting in strong growth momentum during the year, particularly in the second half of 2019 on the back of our new ActivPanel Elements Series product launch as shipment of this product started in the second quarter. ActivPanel Elements Series is Promethean's next-generation interactive panel, featuring unmatched ease-of-use, security and manageability. This ground-breaking innovation has earned our team a winner of the prestigious Red Dot Design Award during the year, as well as excellent feedback from customers. Overall, Promethean's unit volume of panel shipment increased by 11.1% year-over-year, while revenue increased 20.0% sequentially from first half to second half of 2019, as a result of the positive reception of our new product launch. We also see strong traction among emerging markets. In January 2019, we signed an MOU with The Ministry of Education of Egypt with the goal to deliver to Egypt a total of 265,000 sets of intelligent classrooms equipped with our education products including Promethean panels as well as software platforms. Building on our success in Egypt with a unique country coverage model, we are expanding our "country strategy" into other countries as we have initiated discussions on multiple country-level opportunities.

While Promethean expands our ecosystem within the classroom environment, we have made strong progress in extending our presence into the "home" with our online learning community platform Edmodo, which has seen unprecedented increase in active users and new registered users since the outbreak of the coronavirus. The remarkable increase in adoption, with DAU currently over 4 million, is due to Edmodo's clear differentiation with its freemium model, emphasis on sharing and community building, as well as its globally reputable brand as a reliable and secured platform for online and mobile learning. Recently, Edmodo was also selected as a UNESCO-recommended distance learning platform, due to its wide reach, strong user base and evidence of positive impact on learning. And in March 2020, Edmodo became Egypt's designated national K-12 online learning platform, as we work towards deployment of Edmodo across the whole of Egypt to create for a positive transformation of education at a country level. Meanwhile, we are also starting to lay the foundation to monetize our user base with a SaaS model as we soft launched AskMo, an online homework help service, in the fourth quarter.

In China, our strategy focus is to both expand user coverage and work towards monetization via a SaaS model. We have started large-scale penetration of our Promethean offerings with multiple tender wins in Fuzhou during the year. Our platform user adoption in the classroom environment has also continued to pick up traction, as the number of monthly active installed base of our flagship software platform 101 Education PPT has exceeded 1 million. Separately, our One-Stop Learning platform, which enables teachers and students to communicate, teach and learn after school, has seen MAU increase by more than 20 times in China since the coronavirus outbreak. With our fast-scaling coverage of active users in both classrooms and at home, we are well on track to build our ecosystem towards monetization. In December 2019, we signed a partnership agreement to partner with National Center for Educational Technology (NCET) to rollout the NCET VLAB Teaching Service System, a virtual laboratory platform, nationwide to high schools across China, which is expected to generate revenue based on a SaaS model at the school level. 

Last but not least, as schools continue to shut down around the world due to the outspread of coronavirus, NetDragon is upholding its corporate social responsibility by offering online learning tools, resources and platforms to teachers, students and parents worldwide to support "continuous learning amid school suspension". As noted above, our education platforms have seen significant surge in user traffic and activities, and we are committed to serving teachers, students and parents during this challenging period, and to enhance their teaching and learning experience not just during the outbreak, but also when school learning comes back to normal. 

Looking forward, we are excited with the outlook of our education business in 2020, thanks to rising traction in tender business, surge in user traffic, as well as growing online monetization opportunities. We believe the unique differentiation of the ecosystem that we have built, as well as our technologies,  will enable us to fulfil our mission to transform education at a global scale.

Management Conference Call

NetDragon's management team will hold a conference call and webcast at 10:00am Hong Kong time on 1 April 2020 (Wednesday) to discuss the results and recent business developments.

Details of the live conference call are as follows:

International 

+852 2112 1700

Mainland China

4008 428 383

HK (China)

+852 2112 1700

US

1 877 301 4670

UK 

0800 068 8163

Passcode 

6237526# 

A live and archived webcast of the conference call will be available on the Investor Relations section of NetDragon's website at http://www.netdragon.com/investor/ir-webcasts.shtml. Participants in the live webcast should visit the aforementioned website 10 minutes prior to the call, then click on the icon for "2019 Results Conference Call" 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. These include China's number one online gaming portal, 17173.com, and China's most influential smartphone app store platform, 91 Wireless, which was sold to Baidu for US$1.9 billion in 2013 as the largest Internet M&A transaction in China.

Established in 1999, NetDragon is one of the most reputable and well-known online game developers in China with a history of successful game titles including Eudemons Online, Heroes Evolved and Conquer Online. In recent years, NetDragon has also started to scale its online education business on the back of management's vision to create the largest global online learning community, and to bring the "classroom of the future" to every school around the world.

For investor enquiries, please contact:

NetDragon Websoft Holdings Limited

Ms. Maggie Zhou
Senior Director of Investor Relations
Tel.: +852 2850 7266 / +86 591 8390 2825
Email: maggie@nd.com.cn
Website: ir.netdragon.com

 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019



2019


2018


RMB'000


RMB'000





Revenue

5,793,075


5,037,539

Cost of revenue

(1,937,823)


(1,990,298)





Gross profit

3,855,252


3,047,241

Other income and gains

137,323


118,189

Impairment loss under expected credit loss model,
     net of reversal

(26,491)


(11,717)

Selling and marketing expenses

(915,754)


(697,871)

Administrative expenses

(883,083)


(853,180)

Development costs

(1,075,400)


(922,867)

Other expenses and losses

(305,356)


(150,308)

Share of losses of associates

(4,936)


(1,370)

Share of loss of a joint venture

(3,370)


(1,717)





Operating profit

778,185


526,400

Interest income on pledged bank deposits

3,181


3,607

Exchange loss on secured bank borrowings and 
     convertible preferred shares

(1,052)


(10,030)

Fair value change on convertible preferred shares

110,697


60,659

Net loss on disposal of property held for sale

-


(68)

Finance costs

(24,742)


(12,415)





Profit before taxation

866,269


568,153

Taxation

(163,214)


(91,349)





Profit for the year

703,055


476,804





Other comprehensive income (expense) for the year,
     net of income tax:




Item that may be reclassified subsequently
    
to profit or loss:




Exchange differences arising on translation
    
of foreign operations

5,517


4,332

Item that will not be reclassified to profit or loss:




Fair value gain (loss) on equity instrument at fair value
    
 through other comprehensive income

878


(9,366)

Other comprehensive income (expense) for the year

6,395


(5,034)

Total comprehensive income for the year

709,450


471,770





Profit (loss) for the year attributable to:




- Owners of the Company

807,212


545,573

- Non-controlling interests

(104,157)


(68,769)


703,055


476,804





Total comprehensive income (expense) 
    
 for the year attributable to:




- Owners of the Company

813,456


541,430

- Non-controlling interests

(104,006)


(69,660)


709,450


471,770






RMB cents


RMB cents

Earnings per share




- Basic

152.68


102.42

- Diluted

152.17


102.27

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 December 2019



2019


2018


RMB'000


RMB'000

Non-current assets




Property, plant and equipment

1,918,697


1,657,417

Right-of-use assets

467,250


-

Prepaid lease payments

-


293,228

Investment properties

95,090


77,281

Intangible assets

675,737


824,991

Interests in associates

54,655


23,591

Interests in a joint venture

12,346


15,716

Equity instruments at fair value through
    
other comprehensive income

 

4,514


 

1,493

Loan receivables

9,573


12,850

Prepayments and deposits

57,829


45,564

Contract assets

-


2,389

Deposits made for acquisition of
    
property, plant and equipment

 

11,486


 

7,698

Goodwill

313,328


390,640

Deferred tax assets

47,317


38,169


3,667,822


3,391,027





Current assets




Properties under development

469,070


536,848

Properties for sales

20,640


-

Inventories

237,478


267,420

Prepaid lease payments

-


6,636

Loan receivables

27,354


16,078

Trade receivables

689,360


450,435

Other receivables, prepayments and deposits

328,369


320,360

Contract assets

18,333


29,775

Amounts due from a related company

849


140

Amounts due from associates

2,262


2,105

Amount due from a joint venture

279


751

Amount due from a director

400


-

Tax recoverable

6,689


1,126

Financial assets at fair value through profit or loss

1,492


-

Restricted bank balances

15,089


15,089

Pledged bank deposits

145,787


156,168

Bank deposit over three months

-


68,632

Bank balances and cash

2,125,637


1,483,352


4,089,088


3,354,915




Current liabilities



Trade and other payables

980,522


783,040

Contract liabilities

529,497


412,462

Lease liabilities

54,603


-

Provisions

69,867


59,936

Amounts due to a related company

105


982

Amounts due to associates

257


720

Secured bank borrowings

161,135


155,157

Tax payable

107,120


70,095


1,903,106


1,482,392

Net current assets

2,185,982


1,872,523

Total assets less current liabilities

5,853,804


5,263,550





Non-current liabilities




Other payables

16,275


22,219

Convertible preferred shares

-


108,904

Secured bank borrowings

246,068


169,604

Lease liabilities

108,803


-

Deferred tax liabilities

121,610


163,843


492,756


464,570





Net assets

5,361,048


4,798,980





Capital and reserves




Share capital

38,822


38,863

Share premium and reserves

5,557,499


4,893,941





Equity attributable to owners of the Company

5,596,321


4,932,804

Non-controlling interests

(235,273)


(133,824)


5,361,048


4,798,980

 

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SOURCE NetDragon Websoft Holdings Limited

Contact:
Company Name: NetDragon Websoft Holdings Limited
Web: http://ir.netdragon.com
Financial data for NetDragon Websoft Holdings Limited