HONG KONG, Dec. 1, 2016 /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 the third quarter. NetDragon's management team will hold a conference call and webcast at 6:30 p.m. Hong Kong time on December 1 to discuss the results and recent business developments.
Mr. Dejian Liu, Chairman and Executive Director of NetDragon, commented: "NetDragon recorded solid financial results of RMB694.5 million in revenue representing 167.7% increase year-over-year. Calibur of Spirit and Eudemons Online continued to be well received among our players and the main driver for revenue growth and segmental profit on a year-over-year basis. On a quarterly basis, our performance in the third quarter was in line with seasonality that is largely consistent with historical pattern in recent years." Mr. Liu also expressed: "I'm excited to see our pipeline for new games entering its strongest phase in recent years, with at least five new games to be launched in 2017, taking our games business to a new level."
"Our education business continued to register a strong third quarter with revenues of RMB392.2 million, representing over 40 times growth year-over-year. For the international education business, Promethean recorded a 20.3% year-over-year increase in revenue on a pro-forma basis resulting in an improved gross profit margin and a positive EBITDA for the quarter. ClassFlow™, our international flagship cloud-based education platform, has grown its user base to 2.4 million users at the end of third quarter (including over 1 million teachers), forming a strong foundation for user base growth in 2017. In China, encouraged by the very positive user engagement feedback on our 101 Education PPT software, we have started to accelerate product sales during the quarter. Finally, I am very excited about the commercialization of our Virtual Reality (VR) Editor in 2017. This will be the world's first DIY VR editor software used for education."
Financial Highlights
2016 Q3 Gaming Operational Metrics
| [1] |
Core segmental profit (loss) figures are derived from the Company's reported segmental profit (loss) figures (presented in accordance with HKFRS 8) but exclude non-core/operating, non-recurring or unallocated items including government grants, fair value change and finance cost of financial instruments and fair value change of derivative financial instrument |
| [2] |
To supplement the consolidated results of the Group prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs"), the use of non-GAAP operating loss measures is provided solely to enhance the overall understanding of the Group's current financial performance. The non-GAAP operating loss measure is not expressly permitted measure under HKFRSs and may not be comparable to similarly titled measure for other companies. The non-GAAP operating loss of the Group excludes share-based payments expense and amortisation of intangible assets arising on acquisition of subsidiaries |
Segmental Financial Highlights
| FY2016Q3 |
FY2016Q2 |
FY2015Q3 |
||||
| (RMB '000) |
Gaming |
Education |
Gaming |
Education |
Gaming |
Education |
| Revenue |
286,559 |
392,220 |
296,697 |
480,107 |
238,961 |
9,526 |
| Gross Profit |
266,002 |
115,436 |
279,736 |
155,803 |
216,593 |
1,162 |
| Gross Margin |
92.8% |
29.4% |
94.3% |
32.5% |
90.6% |
12.2% |
| Core Segmental Profit (Loss)[1] |
80,110 |
(106,301) |
99,356 |
(87,695) |
63,286 |
(73,689) |
| Segmental Operating Expenses[3] |
||||||
| - Research and development |
(91,283) |
(95,717) |
(82,060) |
(91,390) |
(70,634) |
(36,757) |
| - Selling and marketing |
(39,223) |
(81,561) |
(37,732) |
(95,323) |
(35,329) |
(6,756) |
| - Administrative |
(62,046) |
(32,569) |
(66,586) |
(39,090) |
(56,980) |
(23,099) |
| [1] Core segmental profit (loss) figures are derived from the Company's reported segmental profit (loss) figures (presented in accordance with HKFRS 8) [3] Segmental operating expenses exclude unallocated expenses/income such as depreciation, amortization and exchange gain (loss) that have been grouped into |
||||||
Games Business
The Company's games business continued its growth momentum in the third quarter, with revenue at RMB286.6 million, a 19.9% increase year-over-year, and core segmental profit at RMB80.1 million, a 26.6% increase year-over-year. The solid performance was mainly attributable to broad-based revenue growth of Calibur of Spirit and Eudemons Online PC and pocket version.
While the third quarter being a traditionally low season for Eudemons Online, its revenue recorded a strong 17.4% increase year-over-year. In addition, Eudemons Online Pocket version continued to receive strong traction and recorded a record high monthly gross revenue in August on the back of the launch of new game-play features. Another flagship game, Calibur of Spirit, also experienced 17.9% growth in revenue year-on-year demonstrating the continuous popularity of this game.
Various operational indicators including ACU and PCU have experienced fluctuations in the third quarter, due to seasonality and the stepped-up efforts in clearing bots during the period. Such clearing efforts are necessary for maintaining the healthy balance of the gaming ecosystem, which will strengthen our monetization scheme over time.
Looking into the rest of the year, the Company is confident to see strong revenue contribution from Eudemons Online driven by the expansion pack launched in October. Furthermore, the English version and Traditional Chinese version of Tiger Knight, our new large-scale 3D online war game, were released on Steam platform in October and will start generating revenue for the fourth quarter.
Our management is excited about the pipeline we have built and a number of new games to be released in the next 12 months, including the new Eudemons Online mobile game to be co-developed with Kingsoft, several new games leveraging the technologies of Calibur of Spirit, and the simplified Chinese version of Tiger Knight. Such strong pipeline is expected to drive robust growth for the Company's games business in 2017 and beyond.
Finally, the Company has made significant progress in the integration VR and Augmented Reality (AR) technologies in our games. We have started adding VR capability to Tiger Knight, which delivers an immersive real battle fighting experience to our players. The Company is confident that its proprietary technologies and know-how in gaming products will open up new revenue streams in the future.
Education Business
Revenue from the education business was RMB392.2 million for the third quarter of 2016, over 40 times increase year-over-year, which reflected the consolidation of Promethean's revenue and the beginning of revenue ramp-up of our education business in China.
On a pro-forma basis, our Promethean subsidiary registered a 20.3% increase year-over-year in revenue, demonstrating the success of the Company's acquisition and integration strategy. In addition, Promethean continued to make progress on streamlining operations as well as cost rationalization, resulted in a positive EBITDA for the third quarter.
The Company continued to invest in the development and marketing of ClassFlow™, its flagship cloud-based interactive K-12 (Kindergarten-to-Grade 12) software for the international market, with a user base that has grown to 2.4 million users (including over 1 million teachers) at the end of the third quarter.
The management is confident that 2017 will be a big year of user scaling and user engagement for ClassFlow™ because (1) we are on track to convert users of ActivInspire, our popular legacy lesson preparation software that works with our K-12 interactive display products, into users of ClassFlow™ through a number of initiatives that will enable a seamless transition; (2) users of our Promethean Planet community portal have recently been converted into ClassFlow™, thus directing traffic and activity into ClassFlow™; and (3) we are ramping up its engagement efforts through various online and high touch initiatives. Going forward, we will continue to execute our strategy of solving teachers' pain points and driving teachers' engagement and adoption of ClassFlow™, which in turn will drive adoption by students and parents.
Revenue from the education business in China was RMB55.5 million in the third quarter, a 482.5% increase year-over-year. Our contracted revenue is at around RMB90.5 million from January to October this year. The third quarter marks the beginning of the large scale commercialization in China, backed by the very positive user engagement feedback on our flagship 101 Education PPT software, including time-saving in lesson preparation, enhancement of classroom interactivity and the high frequency of user log-in and usage of the software. Such positive feedback is a validation to the value that our software creates for our users, which lays the foundation for a strong user ramp up in 2017 as we commence our broad-based user acquisition and engagement efforts.
During the quarter, the Company also completed the development of the beta version of our VR Editor, which we believe will be the world's first DIY VR Editor for education purpose with a comprehensive 3D content library. We will begin the commercialization of VR Editor in the first half of 2017 in both K-12 and the higher-education space, and we expect such product to form a core component of our revenue going forward.
Looking forward, the Company also plans to expand its education business to emerging markets including India and the Middle East, while continues to focus on growing the user base of our products in the existing markets, which in turn will help drive revenue growth.
Management Conference Call
NetDragon will host a management conference call with PowerPoint presentation and webcast to review its third quarter on December 1, 2016, at 6:30 p.m. Hong Kong time. Management attending the conference call includes Simon Leung, Vice Chairman and Executive Director; Ben Yam, Chief Financial Officer.
Details of the live conference call are as follows:
| International Toll |
+65-6713-5090 |
| US Toll Free |
+1-866-519-4004 |
| Hong Kong Toll Free |
800-906-601 |
| China Toll Free (for fixed line users) |
800-819-0121 |
| China Toll Free (for mobile users) |
400-620-8038 |
| Passcode |
NetDragon |
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 "3Q 2016 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. Established in 1999, NetDragon is a vertically integrated, cutting-edge R&D powerhouse with a highly successful track record which includes the development of flagship MMORPGs such as Eudemons Online and Conquer Online, 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 in 2013 in what was at the time the largest Internet M&A transaction in China. Being China's pioneer in overseas expansion, NetDragon also directly operates a number of game titles in over 10 languages internationally since 2003. In recent years, NetDragon has emerged as a major player in the global online and mobile education space as it works to leverage its mobile Internet technologies and operational know-how to develop a game-changing education ecosystem. For more information, please visit www.netdragon.com.
For investor enquiries, please contact:
NetDragon Websoft Holdings Limited
Ms. Maggie Zhou
Senior Director of Investor Relations
Tel.: +852-2850-7266/ +86-591-8754-3120
Email: maggie@nd.com.cn; ndir@nd.com.cn
Website: www.nd.com.cn/ir
| CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2016 |
|||||||
| Three Months Ended |
|||||||
| 30/09/2016 |
30/06/2016 |
30/09/2015 |
|||||
| (Unaudited) |
(Unaudited) |
(Unaudited) |
|||||
| RMB'000 |
RMB'000 |
RMB'000 |
|||||
| Revenue |
694,544 |
786,907 |
259,412 |
||||
| Cost of revenue |
(309,579) |
(349,481) |
(44,031) |
||||
| Gross profit |
384,965 |
437,426 |
215,381 |
||||
| Other income and gains |
12,406 |
63,151 |
43,951 |
||||
| Selling and marketing expenses |
(122,819) |
(134,777) |
(42,663) |
||||
| Administrative expenses |
(172,074) |
(162,141) |
(133,516) |
||||
| Development costs |
(191,788) |
(178,050) |
(107,472) |
||||
| Other expenses and losses |
(16,041) |
(16,646) |
(3,270) |
||||
| Share of (losses) profit of associates |
(184) |
213 |
(3,177) |
||||
| Operating (loss) profit |
(105,535) |
9,176 |
(30,766) |
||||
| Interest income on pledged bank deposit |
- |
- |
1,657 |
||||
| Exchange loss on pledged bank |
(5,733) |
(6,341) |
(10,527) |
||||
| Gain on derivative financial instrument |
37,276 |
92,180 |
13,408 |
||||
| Net loss on disposal of held-for-trading investments |
- |
- |
(525) |
||||
| Net gain (loss) on held-for-trading investments |
5,656 |
4,255 |
(2,334) |
||||
| Finance costs |
(1,927) |
(2,031) |
(851) |
||||
| (Loss) profit before taxation |
(70,263) |
97,239 |
(29,938) |
||||
| Taxation |
(4,082) |
(6,679) |
(8,072) |
||||
| (Loss) profit for the period |
(74,345) |
90,560 |
(38,010) |
||||
| Other comprehensive (expense) income for |
|||||||
| Items that may be subsequently |
|||||||
| Exchange differences arising on translation |
(5,359) |
(35,166) |
3,796 |
||||
| Fair value loss on available-for-sale investment |
(3,131) |
(3,448) |
- |
||||
| Other comprehensive (expense) |
(8,490) |
(38,614) |
3,796 |
||||
| Total comprehensive (expense) |
(82,835) |
51,946 |
(34,214) |
||||
| (Loss) profit for the period attributable to: |
|||||||
| - Owners of the Company |
(65,435) |
70,669 |
(26,530) |
||||
| - Non-controlling interests |
(8,910) |
19,891 |
(11,480) |
||||
| (74,345) |
90,560 |
(38,010) |
|||||
| Total comprehensive (expense) income |
|||||||
| - Owners of the Company |
(73,095) |
37,336 |
(22,734) |
||||
| - Non-controlling interests |
(9,740) |
14,610 |
(11,480) |
||||
| (82,835) |
51,946 |
(34,214) |
|||||
| RMB cents |
RMB cents |
RMB cents |
|||||
| (Loss) earnings per share |
|||||||
| - Basic |
(13.18) |
14.30 |
(5.34) |
||||
| - Diluted |
(13.18) |
14.30 |
(5.34) |
||||
| CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2016 |
|||||||
| 30 September 2016 |
31 December 2015 |
||||||
| (Unaudited) |
(Audited) |
||||||
| RMB'000 |
RMB'000 |
||||||
| Non-current assets |
|||||||
| Property, plant and equipment |
1,330,881 |
1,246,117 |
|||||
| Prepaid lease payments |
548,521 |
438,677 |
|||||
| Investment properties |
55,791 |
55,377 |
|||||
| Intangible assets |
815,110 |
953,950 |
|||||
| Interests in associates |
16,931 |
18,883 |
|||||
| Available-for-sale investments |
22,606 |
5,000 |
|||||
| Loan receivables |
21,073 |
23,081 |
|||||
| Trade receivables |
15,157 |
18,112 |
|||||
| Deposits made for acquisition of property, |
14,824 |
18,302 |
|||||
| Goodwill |
370,966 |
334,839 |
|||||
| Deferred tax assets |
3,230 |
3,611 |
|||||
| 3,215,090 |
3,115,949 |
||||||
| Current assets |
|||||||
| Inventories |
170,370 |
117,584 |
|||||
| Prepaid lease payments |
6,789 |
2,733 |
|||||
| Loan receivables |
12,370 |
3,397 |
|||||
| Trade receivables |
313,469 |
234,733 |
|||||
| Amounts due from customers for contract work |
8,085 |
4,339 |
|||||
| Other receivables, prepayments and deposits |
117,861 |
115,918 |
|||||
| Amount due from a related company |
1,704 |
1,704 |
|||||
| Amounts due from associates |
9,222 |
11,204 |
|||||
| Tax recoverable |
2,941 |
11,159 |
|||||
| Held-for-trading investment |
177,306 |
170,640 |
|||||
| Pledged bank deposit |
396 |
- |
|||||
| Bank deposits |
131,553 |
583,091 |
|||||
| Bank balances and cash |
789,478 |
1,126,957 |
|||||
| 1,741,544 |
2,383,459 |
||||||
| Assets classified as held for sale |
- |
2,690 |
|||||
| 1,741,544 |
2,386,149 |
||||||
| Current liabilities |
|||||||
| Trade and other payables |
471,132 |
507,592 |
|||||
| Amounts due to customers for contract work |
1,312 |
993 |
|||||
| Provisions |
33,109 |
29,373 |
|||||
| Deferred income |
85,807 |
85,039 |
|||||
| Amount due to a related company |
444 |
2,254 |
|||||
| Amounts due to associates |
1,244 |
9,632 |
|||||
| Convertible preferred shares |
153,227 |
278,499 |
|||||
| Secured bank borrowings |
37,859 |
25,142 |
|||||
| Income tax payable |
30,986 |
95,194 |
|||||
| 815,120 |
1,033,718 |
||||||
| Net current assets |
926,424 |
1,352,431 |
|||||
| Total assets less current liabilities |
4,141,514 |
4,468,380 |
|||||
| Non-current liabilities |
|||||||
| Other payables |
6,465 |
12,723 |
|||||
| Provisions |
1,731 |
2,027 |
|||||
| Deferred tax liabilities |
127,652 |
149,993 |
|||||
| 135,848 |
164,743 |
||||||
| Net assets |
4,005,666 |
4,303,637 |
|||||
| Capital and reserves |
|||||||
| Share capital |
36,654 |
36,726 |
|||||
| Share premium and reserves |
3,966,018 |
4,257,120 |
|||||
| Equity attributable to owners of the Company |
4,002,672 |
4,293,846 |
|||||
| Non-controlling interests |
2,994 |
9,791 |
|||||
| 4,005,666 |
4,303,637 |
||||||
