Operating Profit Increased 59% YoY
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 the first half of 2021. NetDragon’s management team will hold a conference call and webcast at 10:00am Hong Kong time on 27th August 2021 to discuss the results and recent business developments.
Mr. Dejian Liu, Chairman of NetDragon, commented, “We are excited about our overall achievements in the first half of 2021 and the strong momentum of both our gaming and education business. Our revenue increased by 18.9% year-on-year (“YoY”), reaching RMB3.4 billion, and at the same time we achieved a 59.2% YoY increase in operating profit. The outstanding operating performance is a testimony to our unique core competencies built over years of investment in our people, technologies and infrastructure.”
“Our education business recorded one of our strongest growth performances in recent years. Riding on its global market leadership position, our flagship classroom technology subsidiary Promethean continued to gain further market share, resulting in a 25.2% YoY revenue growth on the back of fast-growing market demand for classroom technology. We also continued to make progress with the execution of our country strategy with the recent signing of a MOU with the Ministry of Education in Thailand to launch the English Smart Classroom Lab project, where we will deliver a unique blended learning solution targeting the English-learning use case. In addition to Egypt and Thailand, where we see our largest near-term revenue opportunities, we are in discussion to pursue multiple opportunities in several other countries. Given our strong business performance and our confidence in the outlook, we have also recently started to commence the planning work for the public listing of our education business[2].”
“Our gaming business returned to double digit growth in both revenue and core segmental profit. We continued to see rising players’ activities and engagement in our flagship IP Eudemons, with the MAU for the IP increasing by 5.5% YoY, which led to strong revenue growth for the IP. Our flagship game Eudemons Online achieved yet another record high in monthly revenue of over RMB290 million. Our two flagship mobile games, Eudemons Online Pocket Version and Eudemons Online Mobile, also saw significant increase in their MAU and DAU. Meanwhile, we continued to execute various growth initiatives for our two other flagship IPs, Conquer and Heroes Evolved, with the objective of building a solid foundation to drive long-term growth. Looking forward, we have a robust pipeline of new gaming titles which will further expand and diversify our portfolio.”
“We are also committed to maximizing the capital return for our shareholders and at the same time be able to invest in our future. To follow through on this long-term commitment, we would like to take the opportunity to announce that our board has authorized (1) a committed 3-year share buy-back program[1] with a total repurchased amount of up to US$300 million, and (2) the increase of our interim dividend by 60% to HK$0.40 per ordinary share. Our decision to commit to this share buy-back program and increasing our cash dividend underscores our confidence in the long-term business outlook and our future cash generation abilities. We will implement these measures while maintaining a strong balance sheet and liquidity profile, as we expect our free cash flow generated each year will be more than sufficient to fund the share buy-back and dividends combined. Meanwhile, our net cash as of end of the first half sits at RMB4.1 billion, which will enable us to capitalize on strategic and acquisition opportunities going forward.”
2021 First Half Financial Highlights
- Revenue was RMB3,356.2 million, representing an 18.9% increase YoY.
- Revenue from the gaming business was RMB1,847.5 million, representing 55.0% of the Group’s total revenue and registering a 12.2% increase YoY.
- Revenue from the education business was RMB1,407.6 million, representing 41.9% of the Group’s total revenue and registering a 23.7% increase YoY.
- Gross profit was RMB2,233.9 million, representing a 19.5% increase YoY.
- Core segmental profit[3] from the gaming business was RMB1,069.2 million, representing a 13.3% increase YoY.
- Core segmental loss[3] from the education business was RMB265.8 million, representing a 29.6% improvement YoY.
- EBITDA was RMB892.1 million, representing a 42.4% increase YoY.
- Non-GAAP operating profit[4] was RMB753.9 million, representing a 48.1% increase YoY.
- Profit attributable to owners of the Company was RMB430.7 million, representing a 28.0% increase YoY.
- Non-GAAP profit attributable to owners of the Company[4] was RMB566.7 million, representing a 26.1% increase YoY.
- Net cash balance was RMB 4.1 billion as at 30 June 2021.
- The Company declared an interim dividend of HK$0.40 per ordinary share for the six months ended 30 June 2021, representing a 60% increase YoY.
Segmental Financial Highlights
| 2021 First Half | 2020 First Half | Variance | ||||
| (RMB ‘000) | Gaming | Education | Gaming | Education | Gaming | Education |
| Revenue | 1,847,548 | 1,407,641 | 1,647,334 | 1,137,941 | 12.2% | 23.7% |
| Gross Profit | 1,765,923 | 431,055 | 1,583,529 | 285,208 | 11.5% | 51.1% |
| Gross Margin | 95.6% | 30.6% | 96.1% | 25.1% | -0.5 ppts | +5.5 ppts |
| Core Segmental Profit (Loss)[3] | 1,069,173 | (265,772) | 943,605 | (377,294) | 13.3% | -29.6% |
| Segmental Operating Expenses[5] | ||||||
| – Research and development | (322,611) | (272,141) | (305,790) | (258,219) | 5.5% | 5.4% |
| – Selling and marketing | (200,100) | (235,190) | (178,765) | (242,625) | 11.9% | -3.1% |
| – Administrative | (170,948) | (172,155) | (157,773) | (141,526) | 8.4% | 21.6% |
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