NetDragon Websoft Inc. Announces First Quarter 2010 Unaudited Financial Results

HONG KONG, June 11 /PRNewswire-Asia/ -- 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 financial results for the three months ended March 31, 2010.

Liu Dejian, Chairman and Executive Director of NetDragon, said, "We are pleased to announce our results for the first quarter 2010. Our revenue witnessed 4% sequential growth during the quarter, reinvigorated by the efforts of our experienced development and operational teams. Our net profit margin also rose to 15.2%, a significant improvement compared with the 0.9% recorded for the fourth quarter 2009, as our ongoing resource optimization program has resulted in reduced fixed costs and the streamlining of our enterprise."

On a strategic level Mr. Liu commented, "In our overseas efforts, following the lead of 'Eudemons Online', 'Conquer Online', and 'Zero Online', we launched the traditional Chinese version of 'Way of the Five' in Taiwan, which will further expand the market presence of NetDragon products in the region. In addition, our mobile software applications gained increasing popularity during the first quarter. The user base of our 91 series mobile phone applications grew steadily, laying a solid foundation for the meaningful development of this emerging business. Overall, we are very satisfied with our accomplishments in different IT and new media fields."

Mr. Liu concluded, "We believe that the online gaming industry will continue to have a promising development outlook in the coming years. NetDragon will be dedicated to strengthening core competencies that are based on research and development and operations, to adapt to a rapidly-changing industry environment and to attract more users with excellent gaming products. Meanwhile, we will continue to invest in new businesses like mobile phone applications, and to take advantage of the huge business opportunities in the mobile and internet sectors in the 3G era. We will firmly seize opportunities to achieve sustainable development and enhance shareholder value via these moves."

1Q 2010 Business Highlights

-- Traditional Chinese version of "Way of the Five" entered open beta in

January

-- NetDragon received multiple awards including recognition as a "Top 10

Games Developer in China for 2009" and "Overseas Expansion Award for

National Games for 2009" at the 2009 China Game Industry Annual

Conference in January

-- Released a new Chinese expansion pack "Star Fleets" for "Zero Online"

in February

-- Commenced closed beta test for "CJ7 Online" in March

-- NetDragon was elected as Fujian Animation Game Industry Association

Chief and recognized as "Fujian Animation & Game R&D Centre" at the

2010 Fujian Animation & Game Industry Annual Conference

-- Cooperate with Saigon Tel over Vietnamese version of "Conquer Online"

in March

-- Chairman and Executive Director of NetDragon Liu Dejian was honored

with "10th Fujian Science & Technology Award for Youth" in March

Recent Developments

-- From April to June, released English, French, Spanish and Arabic

versions of Conquer Online's EP "Legends Return Season I"

-- Released a new Chinese expansion pack "Legends Return" for "Conquer

Online" in May

-- Vietnamese version of "Eudemons Online" entered open beta in May

-- "Disney Fantasy Online" advanced into its final stage of open beta

testing and signed Chinese female singer Li Yuchun as the game's

spokesperson in May

-- "Dungeon Keeper Online" and "Cross Gate" started 2nd round of closed

beta testing in May

-- NetDragon was selected as the sole designated IT supporter for the

Fujian Pavilion at the Expo 2010 Shanghai China

-- Showcased at Cross-Straits Conference and attended the Cross-Straits

Copyright (Creative) Industry Summit Forum as the only corporate entity

-- Approved by extraordinary general meeting held in June, NetDragon has

successfully acquired the entire equity interests of Fujian TianDi,

which will also serve as NetDragon's future centralized campus.

Business Outlook

-- Open beta test of "CJ7 Online" is expected in July 2010

-- Open beta test of "Dungeon Keeper Online" is expected in 2H 2010

-- Games under development include: "Legend of the Dark", "Cross Gate" and

"Doomsday"

-- Our mobile business continues to make positive progress, as users of

our mobile software applications continue to rise

Management Conference Call

NetDragon will host a conference call and webcast to review its unaudited financial results for the first quarter 2010 ended March 31, 2010 at 8:00PM Hong Kong Time / 8:00AM Eastern Daylight Time, June 11, 2010.

Details of the investor conference call are as follows:

Time: 8:00PM Hong Kong Time / 8:00AM Eastern Daylight Time, June 11, 2010

Dial in numbers:

International Toll 1-617-213-8067

US Toll Free 1-866-770-7129

Hong Kong Toll Free 800-96-3844

South China Toll Free 10-800-130-0399

North China Toll Free 10-800-152-1490

Passcode 63389994

Replay service is available from 11:00PM June 11 to 12:00PM, June 18, 2010. Below are the replay numbers for different regions. International Toll: 1-617-801-6888; US Toll Free: 1-888-286-8010; Replay passcode: 13515369.

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.com/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 "1Q 2010 Results 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.

NetDragon'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, Heroes of Might & Magic Online, Disney Fantasy Online and Tian Yuan. NetDragon also has several games currently in development, including Dungeon Keeper Online, Doomsday, Cross Gate, Legend of the Dark and a new version of Ultima Online.

Financial Highlights:

RMB('000) 2010 1Q 2009 4Q 2009 1Q QoQ(%) YoY(%)

Revenue 139,476 134,190 173,898 3.9% (19.8%)

Gross Profit 120,759 115,459 155,016 4.6% (22.1%)

GPM 86.6% 86.0% 89.1% 0.5% (2.6%)

Profit for the

period 21,169 1,246 48,799 1599.0% (56.6%)

NPM 15.2% 0.9% 28.1% 14.2% (12.9%)

EPS-Basic (RMB

cents) 4.03 0.27 9.31 1392.6% (56.7%)

EPS-Diluted (RMB

cents) 4.03 0.27 9.31 1392.6% (56.7%)

Metrics

1Q 2010 4Q 2009 3Q 2009 2Q 2009 1Q 2009 4Q 2008 3Q 2008

PCU 451,000 492,000 519,000 632,000 695,000 591,000 544,000

ACU 230,000 253,000 273,000 310,000 333,000 317,000 311,000

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

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

Five, Disney Fantasy Online, Tian Yuan and other games.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED 31 MARCH 2010

Three months ended

31/3/2010 31/12/2009 31/3/2009

RMB '000 RMB '000 RMB '000

(Unaudited) (Unaudited) (Unaudited)

Revenue 139,476 134,190 173,898

Cost of revenue (18,717) (18,731) (18,882)

Gross profit 120,759 115,459 155,016

Other income and gains 5,660 17,881 5,750

Selling and marketing expenses (22,197) (34,714) (27,716)

Administrative expenses (42,176) (37,466) (35,563)

Development costs (39,739) (58,208) (42,574)

Other expenses (928) (1,368) (243)

Net (loss) gain on derivative

financial instruments -- -- 184

Net gain (loss) on financial

assets designated as fair

value through profit or loss -- -- (1,138)

Share of loss of a jointly

controlled entity -- -- (214)

Profit before taxation 21,379 1,584 53,502

Taxation (210) (338) (4,703)

Profit for the period 21,169 1,246 48,799

Other comprehensive income

(loss):

Exchange differences arising on

translation of

foreign operations 20 (64) (1,041)

Total comprehensive income for

the period 21,189 1,182 47,758

Profit for the period

attributable to:

-Owners of the Company 21,215 1,426 48,943

-Non-controlling interests (46) (180) (144)

21,169 1,246 48,799

Total comprehensive income

attributable to:

- Owners of the Company 21,235 1,362 47,902

- Non-controlling interests (46) (180) (144)

21,189 1,182 47,758

RMB cents RMB cents RMB cents

Earnings per share

- Basic 4.03 0.27 9.31

- Diluted 4.03 0.27 9.31

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2010

31 March 31 December

2010 2009

(Unaudited) (Audited)

RMB '000 RMB '000

Non-current assets

Property, plant and equipment 106,825 109,226

Prepaid lease payments 41,072 41,075

Deposit paid for acquisition of property, 8,895 8,895

plant and equipment

Intangible asset 13,715 12,980

Interests in jointly controlled entities -- --

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

Loan receivables (Staff loans) 6,712 7,313

Deferred tax assets 54 54

181,273 183,543

Current assets

Prepaid lease payments 626 855

Loan receivables (Staff loans) 674 893

Trade receivables 22,696 14,128

Other receivables, prepayments and deposits 58,500 66,272

Held for trading investments 256 377

Amount due from related parties 241 --

Advances to a jointly controlled entity 33,000 29,000

Tax recoverable -- 20

Bank deposits 448,470 551,970

Bank balances and cash 805,114 705,053

1,369,577 1,368,568

Current liabilities

Trade payables 332 285

Other payables and accruals 44,658 67,881

Deferred income 17,367 18,189

Income tax payable 9,916 9,935

72,273 96,290

Net current assets 1,297,304 1,272,278

1,478,577 1,455,821

Capital and reserve

Share capital 39,264 39,264

Share premium and reserves 1,439,843 1,417,041

Equity attributable to owners of the 1,479,107 1,456,305

Company

Non-controlling interests (530) (484)

1,478,577 1,455,821