NetDragon Announces 2011 Second Quarter and Interim Results

NetDragon Websoft Inc. (“NetDragon”; Stock Code: 777), a leading developer and operator of online games and mobile Internet applications in China, today announced its unaudited interim financial results for the period ended June 30, 2011. Additionally, a management conference call and live webcast is scheduled at 7:00 PM Hong Kong time, August 25, 2011 to review financial results and recent business developments.

Second Quarter 2011 Financial and Operational Highlights

  • Net Revenue was RMB184.3 million, an increase of 17.6 % over the first quarter of 2011 (“QoQ”), and an increase of 53.4% over the second quarter of 2010 (“YoY”)
  • Revenue from Online Games was RMB174.9 million, an increase of 16.1% QoQ and an increase of 45.6% YoY
  • Revenue from Mobile Internet was RMB9.4 million, an increase of 54.8% QoQ and an increase of 2,250% YoY
  • Operating Profit was RMB56.7 million, an increase of 50.1% QoQ and an increase of 848.8% YoY
  • Profit attributable to owners of the company was RMB42.9 million, an increase of 24.0% QoQ and an increase of 2,672.4% YoY; net profit margin was 23.3%, up from 22.1% in the first quarter of 2011 and 1.3% in the second quarter of 2010
  • Basic earnings per share (EPS) were RMB8.15 cents, diluted EPS were RMB8.15 cents
  • Peak concurrent users (“PCU”) for online games were 643,000, an increase of 17.8% QoQ
  • Average concurrent users (“ACU”) for online games were 311,000, an increase of 26.4% QoQ
  • The Board has resolved to declare an interim dividend of HKD 0.1 per share on September 15, 2011 for the six months ended June 30, 2011, which will be paid to the shareholders whose names appeared on the register of members of the Company on September 8, 2011

Mr. Liu Dejian, Chairman and Executive Director of NetDragon, commented, “Following a significant rise in first-quarter 2011 net profit, NetDragon maintained steady growth momentum this quarter, thanks to continued growth in online games and mobile business revenues, coupled with effective control over R&D and other costs. This has resulted in dramatically improved first-half results when compared with the same period of 2010. We believe that our game business will perform even better in future on the back of upcoming product launches. NetDragon expects to launch our self-developed and highly-anticipated 3D titles, World of Dungeon Keeper Online and TRANSFORMERS Online, in the fourth quarter of 2011 and Spring 2012, respectively. In addition to MMORPGs, we expect to unveil a FPS, TCG and ‘beat-em-up’ side scroller as well as ports of our popular PC games to tablet PC and smartphone platforms in the future, which will better enable NetDragon to expand its customer base at home and abroad.”

Mr. Liu continued, “We are delighted that NetDragon’s Mobile Internet business achieved significant growth during the first half, boosted by the increasing brand awareness of our mobile platforms. During the second quarter, revenues from the mobile Internet business exceeded our expectations, reaching RMB9.4 million, up 55% sequentially. As of June 30, users of our 91 Series smartphone products surpassed 40 million, including over 25 million total installations of our marketplace client 91 PC Suite. Aggregate downloads of applications and content through our platforms is greater than 3 billion; and user loyalty has improved as well. Looking into the future, the company will continue to focus on platform creation with an open and cooperative attitude in a changing and competitive mobile Internet market, to constantly improve customer satisfaction and mobile Internet product experience, and to maintain NetDragon’s leadership in the industry.”

Second Quarter 2011 Business Highlights

Online Games



  • The fifth Chinese EP “Edge of Night” for Eudemons Online was released, introducing a new “Vampire” class and driving the maximum number of the game’s concurrent users to hit a four-year high.
  • The Turkish version of Conquer Online was available in countries including Turkey, Germany, Azerbaijan and Cyprus, further expanding the overseas footprint of NetDragon and cementing its leadership in emerging online game markets.
  • The EP “Demon Rising” for the traditional Chinese version of Eudemons Online was launched in Malaysia. “Edge of Night” for the English version of Eudemons Online and “The Andromeda Crisis” for the English version of Zero Online were also released.

Mobile Internet

  • NetDragon entered into a strategic cooperation agreement with Japan’s largest social game developer DeNA Co Ltd. to share their mobile phone game resources and distribution platform.
  • The users of “HiMarket” grew rapidly, with NetDragon maintaining its leading position among China’s Android marketplaces.
  • 91 Panda Reader won the China Software and Information Services Industry Award for Innovative Product at the 9th China International Software & Information Service Fair (CISIS).

Other

  • NetDragon granted a total of 16,090,900 share options to its core members, outstanding employees and other eligible participants, to ensure the continuing growth and success of NetDragon by implementing a medium-and long-term equity incentive plan.
  • NetDragon paid a final dividend of HK$0.02 per share for the year ended December 31, 2010, with dividend payments in cash totaling approx. RMB 8,994,000.
  • NetDragon’s indirectly wholly-owned subsidiary 91 Limited entered into an agreement with members of the IDG Group on the sale of convertible preferred shares for US$3,999,840. The preferred shares sold will represent 17.9% of all the outstanding shares of 91 Limited upon full conversion.

Recent Developments & Business Outlook

Online Games

  • “Legend of the Oriental”, the new EP for Heroes of Might and Magic Online was launched in August.
  • NetDragon’s first 3D MMORPG, World of Dungeon Keeper Online, started 3rd round of closed testing in August, and is expected to enter public open beta testing in October 2011.
  • TRANSFORMERS Online is expected to be launched in China in Spring 2012.
  • New EPs for Conquer Online, Eudemons Online, and Zero Online are expected in 2011.
  • “The Returning Light” EP for Conquer Online will be launched in Brazil; tablet PC and web browser versions of the English version of Conquer Online are slated for release by year end.

Mobile Internet

  • Plan to launch 91 mobile games open arena for the establishment of mobile terminal games open arena.
  • A series of products including 91 PC Suite, Android market and 91 Panda Reader will continue to strengthen their leading advantages, further improve the application and content distribution abilities, and put much more effort into the Android business.
  • Continue to advance mobile game business, further open platforms and optimize community functions and user experiences to absorb more excellent game contents into 91 platform.
  • Continue to advance 91 mobile open platform plan and entrepreneurial team supporting plan, to assist more excellent applications and teams to grow fast with the help of 91 platform.
Financial Highlights
RMB(’000) 2Q 2011 1Q 2011 QoQ(%) 1H 2011 1H 2010 YoY(%)
Revenue 184,304 156,755 17.6% 341,059 259,596 31.4%
Gross Profit 170,195 142,212 19.7% 312,407 224,249 39.3%
GPM 92.3% 90.7% 1.6% 91.6% 86.4% 5.2%
Profit for the period 42,970 34,672 23.9% 77,642 22,673 242.4%
NPM 23.3% 22.1% 1.2% 22.8% 8.7% 14.1%
EPS-Basic (RMB cents) 8.15 6.57 24.0% 14.72 4.33 239.9%
EPS-Diluted (RMB cents) 8.15 6.57 24.0% 14.72 4.33 239.9%
Metrics
2Q 2011 1Q 2011 4Q 2010 3Q 2010 2Q 2010
PCU 643,000 546,000 542,000 589,000 449,000
ACU 311,000 246,000 232,000 226,000 217,000
Note: Online games include Conquer Online, Eudemons Online, Zero Online, Tou Ming Zhuang Online, Heroes of Might and Magic Online, Way of the Five, Tian Yuan, Disney Fantasy Online and other games.

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