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NetDragon Websoft Inc. Announces 2012 Third Quarter Results

November 23, 2012

HONG KONG, Nov. 23, 2012 /PRNewswire/ — NetDragon Websoft Inc. (“NetDragon”; Stock Code: 777), a leading developer and operator of online games and mobile internet platforms in China, today announced its unaudited financial results for the third quarter ended September 30, 2012. A conference call and webcast is scheduled for November 23, 2012 at 7:00 pm Hong Kong time (6:00 am ET, November 23) to review the company’s financial results and recent business developments.

Third Quarter 2012 Financial and Operational Highlights

  • Total Revenues* were RMB290.1 million, an increase of 11.7% over the second quarter of 2012 (“QoQ”) and an increase of 43.8% over the third quarter of 2011 (“YoY”);
  • Revenue from Online Games was RMB204.0 million, an increase of 1.5% QoQ and an increase of 11.2% YoY;
  • Revenue from Mobile Internet* was RMB86.1 million, an increase of 46.2% QoQ and an increase of 370.9% YoY;
  • Gross profit was RMB252.8 million, an increase of 8.2% QoQ and an increase of 36.9% YoY;
  • Operating profit was RMB127.0 million, an increase of 43.8% QoQ and an increase of 114.9% YoY;
  • Profit attributable to Owners of the Company was RMB95.4 million, an increase of 111.8% QoQ and an increase of 91.7% YoY;
  • Pro Forma Net Profit was RMB117.6 million, an increase of 71.2% QoQ and an increase of 133.4% YoY;
  • Basic earnings per share (“EPS”) were RMB18.95 cents, while diluted earnings per share were RMB18.87 cents;
  • Peak concurrent users (“PCU”) for online games were 525,000, a decrease of 9.8% QoQ and a decrease of 7.7% YoY;
  • Average concurrent users (“ACU”) for online games were 281,000, a decrease of 8.5% QoQ and a decrease of 6.3% YoY;
  • Total users of 91 Assistant were 127 million, an increase of 27.2% QoQ and an increase of 253.4% YoY;
  • Total users of HiMarket exceeded 48 million, an increase of 57.5% QoQ and an increase of 599.7% YoY.
    * The company has revisited the
     accounting policies of its
     mobile Internet business, and
     determined to present 91 mobile
     platform revenues derived from
     third party apps and content
     with cooperation partners on a
     net basis instead of gross
     basis. Management believes this
     will result in more relevant
     information about the core
     financial and operational
     performance of the mobile
     internet segment. Restated
     revenue figures net of
     cooperation fee for prior
     reporting periods are provided
     below

Mr. Liu Dejian, Chairman and Executive Director of NetDragon, commented “In the third quarter of 2012, NetDragon maintained stability in online games and robust growth in mobile internet business. Total revenues hit a new high, growing 11.7% quarter-over-quarter to RMB290.1 million; net profit grew 111.8% quarter-over-quarter.

“Our revenue from online games increased approximately 1.5% quarter-over-quarter,aided by release of an expansion pack for Eudemons Online in September. As the traditional online games market matures, we will continue to support our flagship titles but shift our emphasis towards mobile and web games production. We believe that the increasingly enriched product portfolio will help our company maintain solid growth in online games going forward.

“Our mobile internet business maintained its industry-leading position, increasing its revenue by 46.2% quarter-over-quarter. After focusing primarily on user acquisition since our mobile platform’s inception in 2008, we now see our business entering a period of fast-growing monetization. Moreover, we are excited about our leadership role in the mobile internet world, and wholeheartedly accept the challenges and opportunities that lie ahead in fashioning a healthy and dynamic win-win mobile internet ecosystem in China and beyond.”

Third Quarter 2012 Business Highlights

Mobile Internet

  • “91 Assistant”, NetDragon’s applications distribution platform for all mainstream operating systems, reached 127 million total users. Total users for “HiMarket”, NetDragon’s Android applications distribution platform, exceeded 48 million.
  • Total apps and content exceeded 700,000 and aggregate downloads surpassed 9.5 billion, which ranks NetDragon as China’s largest mobile applications distribution platform.
  • 91 Open Mobile Platform launched more than 300 mobile games, with total registered users exceeding 9 million.
  • 91 DeNA, the joint venture between 91 Mobile and Japan’s largest mobile social gaming platform operator DeNA Co., Ltd., launched its first self-developed game “Legend of Cavalry” and localized titles including “Fantasica”, “Emblem of the Gods” and “Rites of Delta”.

Online Games

  • Eudemons Online’s new Chinese EP was officially launched.
  • Disney Fantasy Online’s new EPs were launched in August and September 2012, respectively.
  • The Arabic version of “DDTank” for which NetDragon serves as an agent, officially launched its open beta testing on September 20.

Recent Developments and Business Outlook

Mobile Internet

  • 91 Limited and China’s leading TMT social media DoNews jointly held “Symposium on Trend of Mobile applications on Android Platform & 2012 First China Android Business Summit”, aiming to build an Android ecosystem in China.
  • NetDragon launched its quarterly report titled “Trend of Mobile Applications on 91 Mobile Internet” in a move to provide macro data that assists mobile developers and advertisers.

Online Games

  • New expansion packs for “Heroes of Might and Magic Online” and “Tou Ming Zhuang Online” are scheduled for the fourth quarter of 2012.
  • NetDragon’s 2.5D MMORPG “Crazy Tribes” set in an ancient era underwent its closed beta testing in September 2012 and is scheduled for its first open beta testing in November 2012.

Others

  • As of September 30, 2012, “91 Application Center for Children” exceeded 35 million totaled aggregate downloads, on which over 4000 applications are available for kids created by developers both in and outside of China. Android version of the Center will be introduced this year.

Financial Highlights:

    RMB('000)                   3Q 2012 2Q 2012 3Q 2011 QoQ(%) YoY(%)
    --------                    ------- ------- -------   -----  -----
    Revenue (Restated)                 290,144 259,849 201,812   11.7%  43.8%
    -----------------                  ------- ------- -------   ----   ----
    -Online Games                      204,067 200,992 183,533    1.5%  11.2%
    -------------                      ------- ------- -------    ---   ----
    -Mobile Internet (Restated)         86,077  58,857  18,279   46.2% 370.9%
    --------------------------          ------  ------  ------   ----  -----
    Gross Profit                       252,786 233,675 184,696    8.2%  36.9%
    ------------                       ------- ------- -------    ---   ----
    GPM                                   87.1%   89.9%   91.5%  -2.8%  -4.4%
    ---                                   ----    ----    ----   ----   ----
    Operating Profit                   126,958  88,289  59,077   43.8% 114.9%
    ----------------                   -------  ------  ------   ----  -----
    Net Profit                          95,285  44,986  49,854  111.8%  91.1%
    ----------                          ------  ------  ------  -----   ----
    Pro Forma Net Profit               117,580  68,683  50,380   71.2% 133.4%
    --------------------               -------  ------  ------   ----  -----
    NPM                                   32.8%   17.3%   24.7%  15.5%   8.1%
    ---                                    ----    ----    ----  ----    ---
    EPS-Basic (RMB cents)                 18.95    8.75    9.48 116.6%  99.9%
    --------------------                  -----    ----    ---- -----   ----
    EPS-Diluted (RMB cents)               18.87    8.73    9.48 116.2%  99.1%
    ----------------------                -----    ----    ---- -----   ----

* Restated Revenue Figures

    RMB ('000)      2Q 2012        1Q 2012        4Q 2011        3Q 2011        2Q 2011        1Q 2011
    ---------       -------        -------        -------        -------        -------        -------
    Total Revenues
     (Unrestated)          276,133        236,975        217,176        202,739        184,304         156,755
    --------------         -------        -------        -------        -------        -------         -------
    Total Revenues
     (Restated)            259,849        227,310        212,171        201,812        184,642         156,904
    --------------         -------        -------        -------        -------        -------         -------
    Mobile Internet
     Revenue
     (Unrestated)           75,141         45,394         24,663         19,206          9,441           6,099
    ---------------         ------         ------         ------         ------          -----           -----
    Mobile Internet
     Revenue
     (Restated)             58,857         35,729         19,658         18,279          9,779           6,248
    ---------------         ------         ------         ------         ------          -----           -----

Metrics

Online Games

        3Q 2012 2Q 2012 1Q 2012 4Q 2011 3Q 2011 2Q 2011
        ------- ------- ------- ------- ------- -------
    PCU        525,000 582,000 600,000 612,000 569,000  643,000
    ---        ------- ------- ------- ------- -------  -------
    ACU        281,000 307,000 297,000 310,000 300,000  311,000
    ---        ------- ------- ------- ------- -------  -------

Pro Forma Financial Measures

To supplement the consolidated results prepared in accordance with Hong Kong Financial Reporting Standards, certain pro forma financial measures, namely Pro Forma Net Profit, have been presented in this press release. These unaudited pro forma financial measures should be considered in addition to, not as a substitute for, measures of the Group’s financial performance prepared in accordance with HKFRS. In addition, these pro forma financial measures may be defined differently from similar terms used by other companies.

Management believes that the pro forma financial measures provide investors with useful supplementary information to assess the performance of the Group’s core operations by excluding certain non-cash items, namely valuation loss on derivative financial instruments and finance costs, on a non-tax adjusted basis, both items associated with convertible preferred shares and promissory notes issued by a subsidiary.

Management Conference Call

NetDragon will host a management conference call and webcast to review its financial results for the third quarter ended September 30, 2012 on Friday, November 23, 2012 Hong Kong time.

Details of the live conference call are as follows:

Time: 7:00 PM Beijing / Hong Kong Time / 6:00 AM Eastern Standard Time, November 23, 2012

    International Toll              65-6723-9381
    US Toll Free                    1-866-519-4004
    Hong Kong Toll Free             800-930-346
    China Toll Free (for fixed
     line users)                    800-8190-121
    China Toll Free (for mobile
     users)                         400-6208-038
    Passcode                        NetDragon

Replay service is available from 10:00 PM November 23 to 08:59 PM December 1, 2012 HKT. Below are the replay numbers for different regions. International Toll: 61-2-8199-0299; US Toll Free: 1-855-4525-696; Replay passcode: 68454378. 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 “3Q 2012 Results Conference Call” and follow the registration instructions.

About NetDragon

NetDragon Websoft Inc. (HKSE: 0777) is a leading innovator and creative force in China’s online gaming and mobile internet industries. Established in 1999, we are a vertically integrated developer & operator of MMORPGs and a cutting-edge R&D powerhouse. We launched our first self-made online game Monster & Me in 2002, followed by multiple titles including Eudemons Online, Conquer Online and Heroes of Might & Magic Online. We are also China’s pioneer in overseas expansion, directly operating titles in overseas markets since 2003 in English, Spanish, Arabic and other languages. In the mobile Internet industry, we provide China’s leading marketplace for smartphone users, offering applications and content for the most popular mobile operating systems. NetDragon offers many well-known mobile Internet products and services, including sj.91.com, www.hiapk.com, 91 Assistant, HiMarket, 91 Panda Reader and 91 Panda Home.

For investor inquiries, please contact:

NetDragon Websoft Inc.

Ms. Maggie Zhou
Investor Relations Director
Tel.:| +86 591 8754 3120
+86 591 8390 2825
Email:| ndir@nd.com.cn
Website:| www.nd.com.cn/ir

                    CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                          FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2012

                                                           Three Months Ended
                                                30/9/2012  30/6/2012               30/9/2011
                 (Unaudited)                 (Unaudited                (Unaudited
                                             /Restated)               /Unrestated)
                   RMB '000                   RMB '000                  RMB '000
    Revenue                                       290,144                 259,849                  202,739
    Cost of revenue                               (37,358)                (26,174)                 (18,043)
                                                  -------                 -------                  -------

    Gross profit                                  252,786                 233,675                  184,696
    Other income and gains                         17,322                  11,397                    5,303
    Selling and marketing expenses                (37,388)                (37,078)                 (34,310)
    Administrative expenses                       (51,564)                (54,270)                 (56,373)
    Development costs                             (46,231)                (50,164)                 (36,280)
    Other expenses                                 (7,604)                (14,986)                  (3,894)
    Share of losses of associates                    (363)                   (285)                     (65)
                                                     ----                    ----                      ---

    Operating Profit                              126,958                  88,289                   59,077
    Interest income on pledged bank
     deposit                                        2,600                       -                        -
    Exchange gain (loss) on pledged bank
     deposit, secured bank loan and
     redeemable convertible preference
     shares                                         6,234                  (1,642)                     427
    Net loss on derivative financial
     instruments                                  (15,474)                (19,378)                    (210)
    Finance costs                                  (6,821)                 (4,319)                    (316)
                                                   ------                  ------                     ----

    Profit before taxation                        113,497                  62,950                   58,978
    Taxation                                      (18,212)                (17,964)                  (9,124)
                                                  -------                 -------                   ------

    Profit for the period                          95,285                  44,986                   49,854
    Other comprehensive income (expense):
    Exchange differences arising on
    translation of foreign operations                  59                      89                     (734)
                                                      ---                     ---                     ----

    Total comprehensive income for the
     period                                        95,344                  45,075                   49,120
                                                   ======                  ======                   ======

    Profit for the period attributable
     to:
    -Owners of the Company                         95,399                  45,032                   49,771
    -Non-controlling interests                       (114)                    (46)                      83
                                                     ----                     ---                      ---
                                                   95,285                  44,986                   49,854
                                                   ======                  ======                   ======
    Total comprehensive income
     attributable to:
    - Owners of the Company                        95,458                  45,121                   49,037
    - Non-controlling interests                      (114)                    (46)                      83
                                                     ----                     ---                      ---
                                                   95,344                  45,075                   49,120
                                                   ======                  ======                   ======
                                            RMB cents                 RMB cents               RMB cents
    Earnings per share
    - Basic                                         18.95                    8.75                     9.48
    - Diluted                                       18.87                    8.73                     9.48
                                                    =====                    ====                     ====

                           CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                          (AS AT 30 SEPTEMBER 2012)

                                             30 September 2012                    31 December 2011
                                                (Unaudited)                          (Audited)
                                                 RMB '000                             RMB '000
    Non-current assets
    Property, plant and
     equipment                                                           261,116                192,119
    Prepaid lease payments                                               140,042                 86,298
    Investment property                                                   16,111                 15,809
    Deposit paid for
     acquisition of
     property, plant and
     equipment                                                                 -                 19,050
    Intangible assets                                                      4,000                  4,520
    Interests in
     associates                                                           12,148                 12,669
    Long-term deposit                                                      3,600                      -
    Available-for-sale
     investments                                                           5,000                  4,000
    Loan receivables                                                       8,893                  6,314
    Deferred tax assets                                                       54                     54
                                                                             ---                    ---
                                                                         450,964                340,833
                                                                         -------                -------

    Current assets
    Prepaid lease payments                                                 2,902                  1,784
    Loan receivables                                                       3,894                  1,091
    Trade receivables                                                     81,469                 41,555
    Other receivables,
     prepayments and
     deposits                                                             46,484                 41,429
    Held for trading
     investment                                                            5,000                      -
    Amount due from
     related companies                                                     2,499                  1,200
    Pledged bank deposit                                                 191,387                      -
    Bank deposits                                                        173,358                 40,000
    Bank balances and cash                                             1,271,289              1,428,928
                                                                       ---------              ---------
                                                                       1,778,282              1,555,987
                                                                       ---------              ---------

    Current liabilities
    Trade payables                                                        31,154                  5,001
    Other payables and
     accruals                                                            108,955                121,353
    Deferred income                                                       32,881                 25,528
    Amount due to a
     related company                                                           -                    965
    Secured bank loan                                                    185,174                      -
    Other financial
     liability                                                             6,183                      -
    Promissory notes                                                           -                 30,623
    Income tax payable                                                    42,724                 42,849
                                                                          ------                 ------
                                                                         407,071                226,319
                                                                         -------                -------
    Net current assets                                                 1,371,211              1,329,668
                                                                       ---------              ---------
    Total assets less
     current liabilities                                               1,822,175              1,670,501
                                                                       ---------              ---------

    Non-current
     liabilities
    Redeemable convertible
     preferred shares                                                    174,979                131,675
    Conversion option
     derivative liability                                                 75,135                 39,932
                                                                          ------                 ------
                                                                         250,114                171,607
                                                                         -------                -------
    Net assets                                                         1,572,061              1,498,894
                                                                       =========              =========

    Capital and reserves
    Share capital                                                         37,511                 38,226
    Share premium and
     reserves                                                          1,508,763              1,461,126
                                                                       ---------              ---------
    Equity attributable to
     owners of the Company                                             1,546,274              1,499,352
    Non-controlling
     interests                                                            25,787                   (458)
                                                                          ------                   ----
                                                                       1,572,061              1,498,894
                                                                       =========              =========

SOURCE NetDragon Websoft Inc.


Source: PR Newswire