NetDragon Websoft Inc. Announces Third Quarter 2009 Unaudited Financial Results

HONG KONG, Nov. 25 /PRNewswire-Asia-FirstCall/ -- NetDragon Websoft Inc. ("NetDragon", with its subsidiaries collectively the "Group"; Stock Code: 777), a leading online game developer and operator in China, today announced its unaudited consolidated financial results for the three months and nine months ended September 30, 2009.

Third Quarter 2009 Business Highlights

-- Launched "Gold Edition: Heroes of Might and Magic Online".

-- Licensed "Eudemons Online" and "Tou Ming Zhuang Online" in Vietnam.

-- Concluded the final round of closed beta testing for "Tian Yuan" and

initiated open beta testing of "Disney Fantasy Online".

-- Released the Expansion Pack (EP) of "Conquer Online" named "Raiding

Clans" in Chinese, English, French and Spanish.

-- "Panda Home", a self-developed mobile phone application, won the "Best

Home Replacement App" award at the first Android Network Awards.

-- Launched the 5th Chinese EP for "Eudemons Online", titled "Demon

Rising".

-- Launched open beta testing for the Arabic version of "Conquer Online"

in the MENA markets, marking the first-ever large-scale Chinese online

game successfully introduced in said area.

-- Licensed "Zero Online" in Japan and "Way of the Five" in Taiwan, Hong

Kong and Macau.

-- Recognized as the "Most Valuable Enterprise in China's Online Game

Industry over the Past Ten Years" at the Ten-Year China Online Game

Industry Award Ceremony.

-- The Group celebrated its 10th anniversary on 1 September 2009.

Recent Developments

-- Received the "Best Q-version Online Game" award for "Way of the Five"

won at the 2009 ChinaJoy Golden Plume Awards Grand Ceremony in October

2009.

-- Conducted the first close beta testing of "Dungeon Keeper Online" in

October 2009.

-- Licensed its flagship game "Eudemons Online" to Nival Group, for Russia

and the CIS region in October 2009.

-- Recognized by Fortune Magazine as one of the "2009 Outstanding

Employers - the Best Companies to Work for in China".

Chairman's Statement

Mr. Liu Dejian, Chairman and Executive Director of NetDragon, commented: "As one of the leading innovators in the rapidly evolving interactive media industry, we continue to execute upon our strategy of strengthening core game development and operating capabilities in order to tap market opportunities both in the PRC and abroad. With an R&D force of nearly 2,000, we have built our "engine" for future growth in online gaming, mobile applications, digital platforms and multimedia initiatives."

Mr. Liu continued: "With increasing output of proprietary products from our R&D engine, we have been able to bolster our pioneering approach of direct game operations in multiple geographies while also expanding our network of publishing partners around the world through outbound licensing. We are quite happy with our progress in attracting gamers in both emerging and developed markets, and we shall redouble our efforts to provide players worldwide with excellent interactive entertainment experiences for years to come."

Mr. Liu concluded: "While our capacity expansion in the past 2 years has elevated our fixed cost structure, we remain a firm believer in the innovative practices and the productivity of our human resources. We expect to reap the rewards from our prudent investment in the future, and as our Group headcount remains flat sequentially, we believe that margins will recover in due course."

Business Outlook

-- Launch of "Tian Yuan" and "Disney Fantasy Online" expected by year-end

2009.

-- Launch of English version of "Eudemons Online" EP "Demon Rising"

expected in December, 2009.

-- Games in the pipeline include "CJ7 Online" and "Dungeon Keeper Online"

in 2010, and a new version of "Ultima Online" in 2011.

-- Enhance our proprietary technological platform and produce a greater

proportion of high-quality 3D games to further enrich our game

portfolio.

-- Upgrade our game and product development capability in a prudent and

selective manner.

-- Maintain our focus on the in-game user experience and the timely launch

of EPs, to extend the lifecycle of our existing games.

-- Continue to explore opportunities in mobile software applications, as

many of the Group's mobile apps rank among the most popular mobile

products in China. This business endeavor is an integral part of the

Groups' multimedia strategy.

Management Conference Call

NetDragon will host a management conference call and webcast to review its results and recent developments, at 8:00 pm Hong Kong Time 25 November 2009, which corresponds to 7:00 am on 25 November Eastern Standard Time.

Dial-in details for the live conference call are as follows:

Dial in numbers:

International Toll +1 617 786 2963

US Toll Free +1 800 901 5241

Hong Kong Toll Free +800 96 3844

South China Toll Free 10 800 130 0399

North China Toll Free 10 800 152 1490

Passcode: 63545413

Replay service is available from November 25 to December 2, 2009. Below are the replay numbers for different regions. International Toll: +1 617 801 6888; US Toll Free: +1 888 286 8010; Replay passcode: 54422741. A live and archived webcast of the conference call will be available on the Investor Relations section of NetDragon's website at http://ir.netdragon.us/investor/ir_events.shtml . Participants in the live webcast should visit the aforementioned website 10 minutes prior to the call, then click on the icon for "3Q 2009 Results Investor Conference Call" and follow the registration instructions.

About NetDragon

NetDragon Websoft Inc. is a leading innovator and creative force in China's online gaming industry. Established in 1999, NetDragon has been operating and developing a broad range of MMORPGs since launching its first self-made title Monster & Me in 2002. In addition, NetDragon is China's pioneer in overseas expansion, having directly operated its titles in overseas markets since 2004 in English, French, Spanish and other foreign languages.

The Group's game portfolio comprises a range of massively multiplayer online games that cater to various types of players and gaming preferences. Current offerings include the games Way of the Five, Eudemons Online, Conquer Online, Zero Online, and Heroes of Might & Magic Online. The Group also has several games currently in development, including Tian Yuan, Disney Fantasy Online, CJ7 Online, Dungeon Keeper Online and a new version of Ultima Online.

Financial Highlights (unaudited)

(RMB Millions) 3Q 2009 2Q 2009 QoQ 3Q 2009 3Q 2008 YoY

Revenue 150.9 162.9 (7.4%) 150.9 136.6 10.4%

Gross Profit 129.0 140.9 (8.4%) 129.0 119.3 8.2%

GPM 85.5% 86.5% -- 85.5% 87.3% --

Profit for the

period 19.0 17.6 7.9% 19.0 50.9 (62.7%)

NPM 12.6% 10.8% -- 12.6% 37.2% --

Basic EPS

(RMB cents) 3.67 3.32 10.5% 3.67 9.45 (61.2%)

Dividend per

share (HKD) -- 0.082 -- -- -- --

Metrics

3Q2009 2Q2009 1Q2009 4Q2008 3Q2008 2Q2008 1Q2008

PCU 519,000 632,000 695,000 591,000 544,000 697,000 669,000

ACU 273,000 310,000 333,000 317,000 311,000 355,000 313,000

Note: Online games include Conquer Online, Eudemons Online, Zero Online,

Tou Ming Zhuang Online, Heroes of Might and Magic Online, Way of

the Five and other games.

Condensed Consolidated Statement of Comprehensive Income

For the nine months ended 30 September 2009

Three months ended Nine months ended

30 September 30 September

2009 2008 2009 2008

(Unaudited) (Unaudited)(Unaudited) (Unaudited)

RMB'000 RMB'000 RMB'000 RMB'000

Revenue 150,877 136,618 487,646 459,515

Cost of revenue (21,833) (17,341) (62,639) (49,742)

Gross profit 129,044 119,277 425,007 409,773

Other revenue and gains 28,539 13,973 39,926 28,707

Selling and marketing

expenses (31,551) (26,446) (98,746) (70,686)

Administrative expenses (48,151) (27,824) (129,468) (90,137)

Development costs (55,484) (22,713) (143,253) (58,343)

Other expenses (161) (3,870) (538) (23,165)

Changes in fair value of

derivative financial

instruments -- 20,355 (15,214) 20,793

Changes in fair value of

financial assets at

fair value through profit

or loss -- (22,318) 18,431 (21,709)

Share of losses of

associates -- -- (724) --

Profit before taxation 22,236 50,434 95,421 195,233

Taxation (3,250) 450 (10,043) (29,156)

Profit for the period 18,986 50,884 85,378 166,077

Other comprehensive loss:

Exchange differences

arising on translation (522) (1,627) (720) (47,428)

of foreign operations

Total comprehensive income

for the period 18,464 49,257 84,658 118,649

Profit for the period

attributable to

-Owners of the Company 19,290 50,884 85,682 166,189

-Minority interests (304) -- (304) (112)

18,986 50,884 85,378 166,077

Total comprehensive income

attributable to:

-Owners of the Company 18,768 49,257 84,962 118,761

-Minority interests (304) -- (304) (112)

18,464 49,257 84,658 118,649

Earnings per share

- Basic 3.67cents 9.45 cents 16.30cents 30.67cents

- Diluted 3.67cents N/A N/A N/A

Condensed Consolidated Statement of Financial Position

As at 30 September 2009

At 30 At 31

September December

2009 2008

(Unaudited) (Audited)

RMB'000 RMB'000

Non-current assets

Property, plant and equipment 106,829 96,160

Prepaid lease payments 12,916 7,224

Deposit paid for acquisition of property,

plant and equipment -- 7,357

Intangible assets 10,017 10,754

Interests in associates -- 224

Available-for-sale investments 4,000 4,000

Loan receivables 6,180 6,835

Deferred tax assets 54 54

139,996 132,608

Current assets

Prepaid lease payments 228 138

Trade and other receivables, prepayments

and deposits 79,648 81,990

Loan receivables 416 440

Held for trading investments 282 --

Financial assets at fair value through

profit or loss -- 311,806

Derivative financial instruments -- 31,857

Amounts due from associates 26,000 --

Tax recoverable 74 108

Bank deposits 397,309 629,454

Bank balances and cash 904,140 332,009

1,408,097 1,387,802

Current liabilities

Trade and other payables, accruals and

deferred income 84,514 53,677

Income tax payable 12,721 12,922

97,235 66,599

Net current assets 1,310,862 1,321,203

1,450,858 1,453,811

Capital and reserves

Share capital 39,264 39,264

Share premium and reserves 1,411,898 1,414,547

Equity attributable to owners of the

Company 1,451,162 1,453,811

Minority interests (304) --

1,450,858 1,453,811