(Hong Kong, 29 March 2022) NetDragon Websoft Holdings Limited (“NetDragon” or the “Company”;Hong Kong Stock Code: 777), a global leader in building internet communities, today announced itsfinancial results for fiscal year 2021. NetDragon’s management team will hold a conference call andwebcast at 11:00am Hong Kong time on 30th March 2022 to discuss the results and recent businessdevelopments.Mr. Dejian Liu, Chairman of NetDragon, commented, “We are proud of our achievements in 2021 aswe delivered yet another year of strong all-round performance. 2021 marked our fifth consecutiveyear of growth in revenue, operating profits and net profits, and this would not be made possiblewithout our deep investments made in our technologies, IP and sales partnership network. In 2021,our revenue increased by 14.6% YoY, reaching RMB7.0 billion as both our gaming and educationbusinesses continued to grow strongly.”
“Our education revenue in 2021 increased by 32.2% YoY, the highest growth rate in the past fouryears, as we saw accelerated market growth driven by increasing demand for blended learningsolutions around the world. As K-12 educators look for technology tools to educate and interact withstudents in the new normal of learning, our Promethean products have proven to be the best option inthe market as we continued to maintain our number one market share position in the internationalmarkets1. Our country rollout strategy also continued to make progress. During the second half of theyear, we successfully completed the first pilot phase for English Smart Classroom Lab project inThailand and expanded our strategic cooperation with Ghana Ministry of Education with a target toimplement a country-wide blended learning platform. In Egypt, we recently signed a definitive contractto supply 94,000 Promethean interactive flat panels to K-12 schools across the country, anothermilestone in our long-term partnership with the Ministry of Education.”“Our gaming business recorded 6.1% in revenue growth and 7.8% in core segmental profits growth aswe continued to pursue a balanced, sustainable growth strategy, which resulted in across-the-boardrevenue growth from PC and mobile platforms, as well as in both China and the overseas markets.Our flagship IP Eudemons continued its upward growth trajectory with a 7.8% YoY revenue increase.We also saw our annual revenue from the Eudemons IP grew by 3.5 times in the past 5 years on theback of a series of significant enhancements in content, gameplay and overall user experience. InDecember, we successfully launched our new ACGN2 mobile game under our new IP Under Oath,which not only attests to our ability in new genre development capability, but also significantly extendsour reach to young players and lays a solid foundation for our overseas expansion to capitalize on thehuge ACGN addressable market overseas.”“We would like to reiterate our commitment to enhance shareholder value as we continue to executecapital return measures including share buyback and dividends in view of our confidence in futuregrowth prospects and our ability to generate sustained free cash flow. In August 2021, we announced
1 Based on Futuresource Consulting Q4 2021 World Interactive Displays Report in Feb 2022. International market refers toglobal K-12 interactive panel market excluding China.
2 ACGN refers to Animation, Comic, Game and Novel
a 3-year share buyback program3 with a total repurchased amount of up to US$300 million, and todate, we have repurchased 16.2 million shares amounting to US$38.0 million. In total, we returnedUS$186.4 million to our shareholders in 2021 via a combination of share repurchase and dividendsdeclared, including a US$100 million special interim dividend announced in January 2022.”
Fiscal Year 2021 Financial Highlights
- Revenue was RMB7.0 billion, representing a 14.6% increase YoY.
- Revenue from the gaming business was RMB3.6 billion, representing 51.8% of theCompany’s total revenue and registering a 6.1% increase YoY.
- Revenue from the education business was RMB3.2 billion, representing 45.9% of theCompany’s total revenue and registering a 32.2% increase YoY.
- Gross profit was RMB4.5 billion, representing an 8.4% increase YoY.
- Core segmental profit4 from the gaming business was RMB2.1 billion, representing a 7.8%increase YoY.
- Core segmental loss4 from the education business was RMB411.7 million, representing a28.4% improvement YoY.
- EBITDA was RMB1.8 billion, representing a 12.8% increase YoY.
- Operating profit was RMB1.4 billion, representing a 27.4% increase YoY.
- Non-GAAP operating profit5 was RMB1.5 billion, representing a 14.6% increase YoY.
- Profit attributable to owners of the Company was RMB1.1 billion, representing a 11.4%increase YoY.
- Non-GAAP profit attributable to owners of the Company5 was RMB1.3 billion, representing a13.0% increase YoY.
- The Company declared a final dividend of HKD0.40 per ordinary share (2020: HKD0.25 perordinary share), subject to approval at the coming annual general meeting. Total dividendsfor the year (including special interim dividend declared in January 2022) amounted toHKD2.23perordinaryshare(2020:HKD0.50perordinaryshare),representingapproximately 93.8% of the total profit attributable to the owners for the year.
3 3-year share buy-back program is up to a total repurchased amount of US$300 million and subject to the buy-back mandateapproved by the Shareholders at the annual general meeting in each year, being 10% of the issued share capital, the RulesGoverning the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Hong Kong Codes on Takeovers andMergers and Share Buy-Backs.
4 Core segmental profit (loss) figures are derived from the Company’s reported segmental profit (loss) figures (presented inaccordance with Hong Kong Financial Reporting Standard (“HKFRS”) 8) but exclude non-core/operating, non-recurring orunallocated items including government grants, finance costs of financial instruments, intercompany finance costs, impairmentloss (net of reversal), impairment loss of goodwill and intangible assets, impairment of interest in an associate, fair valuechange and exchange loss on financial assets at fair value through profit or loss (“FVTPL”), fair value change and exchangegain on derivative financial instruments, interest expense and exchange gain on convertible and exchangeable bonds andredundancy payment.
5 To supplement the consolidated results of the Group prepared in accordance with HKFRSs, the use of non-GAAP measuresis provided solely to enhance the overall understanding of the Group’s current financial performance. The non-GAAP measuresare not expressly permitted measures under HKFRSs and may not be comparable to similarly titled measures for othercompanies. The non-GAAP measures of the Group exclude share-based payments expense, amortisation of intangible assetsarising on acquisitions of subsidiaries, impairment loss of goodwill and intangible assets, impairment of interest in an associate,fair value change on financial assets at FVTPL, fair value change on derivative financial instruments, finance costs, interestincome on pledged bank deposits and exchange gain on financial assets at FVTPL, bank borrowings, convertible andexchangeable bonds and derivative financial instruments.
Segmental Financial Highlight
| FY2021 | FY2020 | Variance | ||||
|---|---|---|---|---|---|---|
| (RMB ‘000) | Gaming | Education | Gaming (Restated) |
Education (Restated) |
Gaming | Education |
| Revenue | 3,641,562 | 3,231,003 | 3,432,666 | 2,443,941 | 6.1% | 32.2% |
| Gross Profit | 3,473,642 | 995,312 | 3,301,513 | 758,605 | 5.2% | 31.2% |
| Gross Margin | 95.4% | 30.8% | 96.2% | 31.0% | -0.8 ppts | -0.2 ppts |
| Core Segmental Profit (Loss)4 |
2,119,937 | (411,730) | 1,967,160 | (574,842) | 7.8% | -28.4% |
| Segmental Operating Expenses6 |
||||||
| – Research and development |
(657,547) | (500,903) | (634,272) | (536,678) | 3.7% | -6.7% |
| – Selling and marketing |
(418,952) | (530,140) | (401,142) | (483,215) | 4.4% | 9.7% |
| – Administrative | (318,294) | (350,635) | (306,586) | (291,157) | 3.8% | 20.4% |
Gaming Business
Our gaming business continued its growth momentum with both revenue and core segmental profithitting new highs. Revenue of gaming business increased by 6.1% YoY to RMB3.6 billion, and coresegmental profit increased by 7.8% YoY to RMB2.1 billion.Eudemons, our core flagship IP, achieved revenue growth of 7.8% YoY, and meanwhile has grown itsrevenue for 7 consecutive years. In 2021, our focus was on understanding the needs of our playerstogether with an optimal monetization strategy that leads to higher revenue generated as a result ofan enhanced playing experience, while ensuring a balanced ecosystem within the games. We alsoexecuted a multi-pronged content strategy that leads to expansion of monetizable contents which addutilities to our players and creates a pleasant user experience on top of the core MMORPG elements.Furthermore, we launched two expansion packs and multiple rejuvenation marketing campaignsduring the year for our flagship game Eudemons Online to drive revenue growth. Another futurerevenue driver will be our upcoming new game Eudemons Mobile 2, which underwent several roundsof testing during 2021 and is expected to be launched within 2022.Our overseas revenue increased 7.9% YoY as we continued to replicate our successful model forConquer Online in Egypt and expanded into the Philippines, U.S., Canada and Saudi Arabia. Further,as MOBA remains one of the most popular game genres globally, we see significant opportunities inthe overseas markets for our other flagship game Heroes Evolved given its success in China withover 200 million registered users, and as such we have increased our efforts in developing newmarkets for this game including Pakistan and Vietnam.We reached another key milestone by launching a new IP in 2021 as we commenced open-betatesting of our first ACGN mobile game Under Oath in December with over 1 million active users and
6 Segmental operating expenses exclude unallocated expenses/income such as depreciation, amortisation and exchangedifference that have been grouped into SG&A categories on the Company’s reported consolidated financial statements, butcannot be allocated to specific business segments for purpose of calculating the segmental profit (loss) figures in accordancewith HKFRS 8.
152,000 APA7 in the first month. The successful launch of this game represents an extension of ourgame development capability to the ACGN genre, which is another major game genre with hundredsof millions of players globally. We currently aim to launch the first overseas version of Under Oath inSoutheast Asia in the second half of this year.We are also excited by the metaverse gaming space that gained tremendous traction in 2021. During2021, we initiated planning of our first blockchain-based metaverse game under our well-knownoverseas IP Neopets with an alpha launch of the game scheduled in the second half of 2022. Ourvision for this game is to become the leading player in the “pet” asset class on the blockchain, and weexpect to differentiate with a “Play-and-Earn” ecosystem with fun gameplay as the primary incentive toplay, hence targeting both blockchain and mainstream players, as well as an existing base of 150million Neopets’ players.Looking forward, we will continue to pursue a balanced growth strategy which will enable us tocontinue our growth trajectory in the long run. We expect our revenue growth to come from bothexisting games and new games. We will also ramp up our effort in exploring the opportunity todevelop blockchain-based games, both based on our own IPs as well as new IPs.
Education Business
Revenue from our education business increased by 32.2% YoY to RMB3.2 billion, while coresegmental loss decreased by 28.4% YoY. The global pandemic in the past two years has led tofundamental changes in education as blended learning model has become a major global trend. Weare in a strong position to capitalize on this unprecedented opportunity as Interactive Flat PanelDisplay (“IFPD”) is widely seen as the “futureproof” technology to support hybrid learning8, and we arethe clear market leader in this category.2021 is a year of accelerated market growth as we saw significant momentum in demand from K-12schools around the world. Shipment volume of interactive flat panel displays in the global K-12 marketincreased by 24.3% YoY in 2021, representing the highest growth in the past 5 years8. During theyear, we continued to build on our market leadership position, leading to 32.2% YoY revenue growthfor our education business. Specifically, we delivered strong performance in all of our major marketsas we maintained our No. 1 market share position in 4 of our top 5 countries in terms of revenuecontribution, including the U.S., the U.K., Germany and France. We also continued to execute withoperational excellence to overcome supply chain challenges, as we mitigated increase in materialscost and freight cost by strategically enhancing our product mix and adoption of best-in-class logisticsplanning. The gross margin for our education business was 30.8% in 2021, compared to 31.0% in2020.We continued to make progress during the year with our country rollout. In Thailand, our pilot forEnglish Smart Classroom Lab Project was completed with significant quantifiable increase in students’learning outcomes, and on the back of that, we expect to move towards a nationwide paid pilot thisyear. In September, we signed a MOU with Ghana Ministry of Education to secure a long-termpartnership to develop a country-wide blended learning platform. We also reached another majormilestone in Egypt recently by signing a definitive contract to supply 94,000 Promethean interactiveflat panels to K-12 schools, and meanwhile large-scale adoption of Edmodo is expected in 2022. Webelieve the adoption of Edmodo in Egypt will lead to further revenue opportunities down the road aswe expect Edmodo to be the go-to platform for contents and services for K-12 students, parents andteachers in the country.
7 APA refers to Active Paying Account
8 Based on Futuresource Consulting Q4 2021 World Interactive Displays Report in Feb 2022
In China, we continued to execute our B2G strategy by working closely with education departmentsand schools to identify and capture opportunities. During the year, we made solid progress with ourVirtual Lab platform in partnership with National Center for Educational Technology (a unit directlyaffiliated with the Chinese Ministry of Education) by successfully completing the nationwide pilot andcovering more than 7,000 schools in 31 provinces that provided the foundation for commercial roll-outin 2022. In November 2021, we achieved another major win as we were awarded the tender to be thetechnical partner for the Ministry of Education’s National K-12 Smart Education Platform Project. Weexpect this tender win will enable us to capitalize on future B2G revenue opportunities, which willbecome mainstream going forward in China.Looking forward, we expect our overall education business to deliver another strong year in 2022.Global K-12 classroom penetration of interactive display is expected to rise from 18% to 30% by20259, providing ample room for growth of our Promethean panels, while increasing penetration ofclassroom panels will inevitably open up software and content monetization opportunities, which willput us in a great position as the leading blended learning service provider.
– End –
9 Based on Futuresource Consulting Q4 2021 World Interactive Displays Report in Feb 2022
Management Conference Call and Webcast
NetDragon’s management team will hold a conference call and webcast at 11:00 am Hong Kong timeon 30 March 2022 to discuss the results and recent business developments.
Details of the live conference call are as follows:
| International | +852 2112 1888 |
|---|---|
| Mainland China | 4008 428 338 |
| HK (China) | +852 2112 1888 |
| US | 1 866 226 1406 |
| UK | 0800 032 2849 |
| Passcode | 8592530# |
A live and archived webcast of the conference call will be available on the Investor Relations sectionof NetDragon’s website at http://ir.nd.com.cn/en/category/webcast. Participants in the live webcastshould visit the aforementioned website 10 minutes prior to the call, then click on the icon for “2021Annual Results Conference Call and Webcast” and follow the registration instructions.
About NetDragon Websoft Holdings Limited
NetDragon Websoft Holdings Limited (HKSE: 0777) is a global leader in building internet communitieswith a long track record of developing and scaling multiple internet and mobile platforms that impacthundreds of millions of users, including previous establishments of China’s first online gaming portal,17173.com, and China’s most influential smartphone app store platform, 91 Wireless.Established in 1999, NetDragon is one of the most reputable and well-known online game developersin China with a history of successful game titles including Eudemons Online, Heroes Evolved,Conquer Online and Under Oath. In recent years, NetDragon has also started to scale its onlineeducation business on the back of management’s vision to create the largest global online learningcommunity, and to bring true integrated blended learning solutions to every school around the world.
For investor enquiries, please contact:
NetDragon Websoft Holdings Limited
Maggie Zhou
Senior Director of Investor Relations
Tel：+852 2850 7266 / +86 591 8390 2825
Email：maggiezhou@nd.com.cn
Website：ir.netdragon.com
| CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME | ||
| FOR THE YEAR ENDED 31 DECEMBER 2021 | ||
| 2021 | 2020 | |
| RMB’000 | RMB’000 | |
| Revenue | 7,035,496 | 6,137,640 |
| Cost of revenue | (2,512,930) | (1,966,376) |
| Gross profit | 4,522,566 | 4,171,264 |
| Other income and gains | 223,893 | 230,884 |
| Impairment loss under expected credit loss model,
net of reversal |
(8,077) | 1,607 |
| Selling and marketing expenses | (955,413) | (893,513) |
| Administrative expenses | (955,673) | (903,111) |
| Development costs | (1,159,308) | (1,175,928) |
| Other expenses and losses | (266,118) | (326,817) |
| Share of results of associates | (14,807) | (15,080) |
| Share of results of joint ventures | (1,586) | (1,783) |
| Operating profit | 1,385,477 | 1,087,523 |
| Interest income on pledged bank deposits | 819 | 3,263 |
| Exchange gain on financial assets at fair value through profit or loss, bank borrowings, convertible and exchangeable bonds and derivative financial instruments |
18,605 | 45,302 |
| Fair value change on financial assets at fair value through profit or loss |
20,299 | 51,733 |
| Fair value change on derivative financial instruments | (2,879) | 43,323 |
| Finance costs | (185,896) | (157,680) |
| Profit before taxation | 1,236,425 | 1,073,464 |
| Taxation | (253,067) | (217,644) |
| Profit for the year | 983,358 | 855,820 |
| Other comprehensive (expense) income 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 |
(24,716) | (11,568) |
| Item that will not be reclassified to profit or loss: | ||
| Fair value (loss) gain on equity instruments at fair value through other comprehensive income |
(2,645) | 6,042 |
| Other comprehensive expense for the year | (27,361) | (5,526) |
| Total comprehensive income for the year | 955,997 | 850,294 |
| Profit (loss) for the year attributable to: | ||
| – Owners of the Company | 1,062,060 | 953,501 |
| – Non-controlling interests | (78,702) | (97,681) |
| 983,358 | 855,820 | |
| Total comprehensive income (expense) for the year attributable to: |
||
| – Owners of the Company | 1,036,088 | 944,235 |
| – Non-controlling interests | (80,091) | (93,941) |
| 955,997 | 850,294 | |
| RMB cents | RMB cents | |
| Earnings per share | ||
| – Basic | 191.67 | 171.19 |
| – Diluted | 191.58 | 170.96 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||
| AT 31 DECEMBER 2021 | ||
| 2021 | 2020 | |
| RMB’000 | RMB’000 | |
| Non-current assets | ||
| Property, plant and equipment | 1,939,499 | 1,992,708 |
| Right-of-use assets | 428,278 | 455,011 |
| Investment properties | 77,062 | 76,529 |
| Intangible assets | 772,309 | 625,771 |
| Interests in associates | 35,119 | 49,659 |
| Interests in joint ventures | 14,977 | 16,563 |
| Equity instruments at fair value through
other comprehensive income |
8,105 | 10,808 |
| Financial assets at fair value through profit or loss | 266,078 | 281,194 |
| Loan receivables | 8,220 | 10,421 |
| Other receivables, prepayments and deposits | 37,543 | 62,841 |
| Deposits made for acquisition of property,
plant and equipment |
4,690 | 3,630 |
| Goodwill | 217,087 | 241,332 |
| Deferred tax assets | 135,076 | 43,437 |
| 3,944,043 | 3,869,904 | |
| Current assets | ||
| Properties under development | 316,872 | 263,915 |
| Properties for sale | 205,273 | 253,367 |
| Inventories | 685,117 | 316,909 |
| Loan receivables | 22,207 | 22,042 |
| Trade receivables | 831,986 | 525,353 |
| Other receivables, prepayments and deposits | 481,455 | 399,537 |
| Contract assets | 11,692 | 12,236 |
| Amount due from a related company | – | 47 |
| Amounts due from joint ventures | 2,945 | 974 |
| Tax recoverable | 25,273 | 14,035 |
| Financial assets at fair value through profit or loss | 1,852 | 5,781 |
| Restricted bank balances | 7,828 | 15,611 |
| Pledged bank deposits | 1,047 | 146,073 |
| Bank deposits with original maturity over three months | 630,000 | 33,021 |
| Bank balances and cash | 3,717,246 | 4,114,410 |
| 6,940,793 | 6,123,311 | |
| Current liabilities | ||
| Trade and other payables | 1,455,221 | 1,091,369 |
| Contract liabilities | 357,240 | 405,483 |
| Lease liabilities | 63,571 | 56,224 |
| Provisions | 88,784 | 71,501 |
| Derivative financial instruments | 42,565 | 40,894 |
| Amount due to an associate | 936 | 3,484 |
| Amount due to a joint venture | – | 593 |
| Convertible and exchangeable bonds | 15,000 | 15,351 |
| Bank borrowings | 402,910 | 154,597 |
| Dividend payable to non-controlling interests | – | 99 |
| Tax payable | 127,882 | 121,083 |
| 2,554,109 | 1,960,678 | |
| Net current assets | 4,386,684 | 4,162,633 |
| Total assets less current liabilities | 8,330,727 | 8,032,537 |
| Non-current liabilities | ||
| Other payables | 10,763 | 5,409 |
| Convertible preferred shares | – | – |
| Convertible and exchangeable bonds | 1,069,874 | 976,765 |
| Bank borrowings | – | 191,073 |
| Lease liabilities | 95,370 | 116,453 |
| Deferred tax liabilities | 80,111 | 90,907 |
| 1,256,118 | 1,380,607 | |
| Net assets | 7,074,609 | 6,651,930 |
| Capital and reserves | ||
| Share capital | 39,795 | 40,951 |
| Share premium and reserves | 7,274,605 | 6,766,393 |
| Equity attributable to owners of the Company | 7,314,400 | 6,807,344 |
| Non-controlling interests | (239,791) | (155,414) |
| 7,074,609 | 6,651,930 | |
| UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS | ||
| 2021 | 2020 | |
| (Unaudited) | (Unaudited) | |
| RMB’000 | RMB’000 | |
| Operating profit | 1,385,477 | 1,087,523 |
| Add: | ||
| Share-based payments expense | 13,885 | 32,125 |
| Amortisation of intangible assets arising on acquisitions of subsidiaries |
64,137 | 67,206 |
| Impairment loss of goodwill and intangible assets | 20,929 | 127,913 |
| Impairment of interest in an associate | 22,570 | – |
| Non-GAAP operating profit | 1,506,998 | 1,314,767 |
| Profit attributable to owners of the Company | 1,062,060 | 953,501 |
| Add: | ||
| Share-based payments expense | 13,881 | 32,117 |
| Amortisation of intangible assets arising on acquisitions of subsidiaries |
49,433 | 51,269 |
| Impairment loss of goodwill and intangible assets | 11,779 | 98,785 |
| Impairment of interest in an associate | 20,339 | – |
| Finance costs10 | 168,198 | 143,414 |
| Fair value loss on derivative financial instruments | 2,879 | – |
| Less: | ||
| Fair value gain on financial assets at fair value through profit or loss |
(21,218) | (50,496) |
| Fair value gain on derivative financial instruments | – | (43,323) |
| Exchange gain on financial assets at fair value through profit or loss, bank borrowings, convertible and exchangeable bonds and derivative financial instruments |
(16,234) | (39,671) |
| Interest income on pledged bank deposits | (819) | (3,263) |
| Non-GAAP profit attributable to owners of the Company |
1,290,298 | 1,142,333 |
10 Substantially non-cash
