NetDragon Announces 2023 Annual Financial Results
Strong gaming growth fuels momentum
as
Dr.
"Turning to our education business, 2023 was a landmark year as we successfully completed the spin-off listing of our overseas education business in the
"We continued to make positive progress on the ESG front in 2023. In December, our ESG rating was upgraded to "BBB" by MSCI, the globally renowned index provider. This marked a significant upgrade from the previous rating and underscores the market's recognition of our achievements in ESG."
"We are also pleased to announce that the Board has approved our final dividend proposal of
Fiscal Year 202 3 Financial Highlights
- Revenue was
RMB7.1 billion , representing a 9.7% decrease YoY. - Revenue from gaming and application services was
RMB4.2 billion , representing 59.0% of the Company's total revenue and a 6.6% increase YoY. - Revenue from Mynd.ai was
RMB2.9 billion , representing 41.0% of the Company's total revenue and a 25.7% decrease YoY. - Gross profit was
RMB4.4 billion , representing an 1.9% increase YoY. - Core segmental profit[1] from the gaming and application services was
RMB1.4 billion , representing a 12.9% increase YoY. - Core segmental loss[1] from Mynd.ai was RMB93 million for FY2023 compared to profit of
RMB30 million for FY2022. - EBITDA was
RMB1.3 billion , representing an 8.7% decrease YoY. - Operating profit was
RMB821 million , representing a 28.6% decrease YoY. - Non-GAAP operating profit[2] was
RMB1 .1 billion, representing a 12.7% decrease YoY. - Profit attributable to owners of the Company was
RMB550 million , representing a 34.1% decrease YoY. - Non-GAAP profit attributable to owners of the Company[2] was
RMB962 million , representing a 24.9% decrease YoY. - Operating cashflow was
RMB1.1 billion , representing a 4.2% increase YoY. - The Company declared a final dividend of
HK$0.4 per ordinary share (2022:HK$0.4 per ordinary share), subject to approval at the coming annual general meeting.
Segmental Financial Highlights
Our two main reportable segments were previously "Gaming business" and "Education business". As our overseas education business has been separately listed as Mynd.ai in the
|
FY2023 |
FY2022 |
Variance |
|||
(RMB million) |
Gaming and |
Mynd.ai |
Gaming and |
Mynd.ai |
Gaming and |
Mynd.ai |
|
|
|
(Restated) |
(Restated) |
(Restated) |
(Restated) |
Revenue |
4,189 |
2,910 |
3,931 |
3,919 |
+6.6 % |
-25.7 % |
Gross Profit |
3,708 |
728 |
3,375 |
927 |
+9.9 % |
-21.5 % |
Gross Margin |
88.5 % |
25.0 % |
85.9 % |
23.7 % |
+ 2.6 ppts |
+ 1.3 ppts |
Core Segmental |
1,399 |
(93) |
1,239 |
30 |
+12.9 % |
N/A |
Segmental Operating |
|
|
|
|
|
|
-
Research and |
(1,186) |
(196) |
(1,019) |
(204) |
+16.4 % |
-3.9 % |
-
Selling and |
(463) |
(327) |
(514) |
(419) |
-9.9 % |
-22.0 % |
- Administrative |
(649) |
(267) |
(618) |
(263) |
+5.0 % |
+1.5 % |
Gaming Business
Our gaming revenue, which represents 89.7% of gaming and application services revenue, achieved a record high
In 2023, our domestic and overseas gaming revenue increased by 10.5% and 4.5% YoY, respectively. Our overseas revenue, which represented 15.0% of our gaming revenue, continued to be resilient despite a negative 5.7%[4] growth of the overall overseas revenue of Chinese gaming developers in 2023 as the overseas gaming sector saw reduced activities post-Covid as well as headwinds caused by the broad-based changes around user privacy policies. We also achieved revenue growth in both PC and mobile segments. Revenue from PC games amounted to RMB3.2 billion, accounting for 84.3% of total gaming revenue with an 11.1% YoY growth. Mobile game revenue reached RMB589 million, accounting for 15.7% of total gaming revenue and registering a 2.0% YoY growth.
Our Eudemons IP performed exceptionally well in 2023 with revenue of
Our content strategy also paid off on the mobile end as the MAU of the "cross platform" version (ie. mobile platform) of Eudemons Online increased by 50.4% YoY, representing 36.2% of MAU on the PC platform, while at the same time nearly 20% of its average paying users are active players on the "cross platform" version. The strong engagement level of our players on both PC and mobile platforms, as well as the increasing dual-platform attribute (ie. PC and mobile) of Eudemons Online, opens the door to significantly more engagement and monetization opportunities. In 2023, revenue of our mobile games under the Eudemons IP increased by 4.6% YoY. In particular, our top flagship mobile game, Eudemons pocket version achieved a 6.0% YoY increase in gross billings, driven by optimization of our publishing strategy resulting in more effective and efficient user acquisition, in addition to continuous enhancement in gameplay experience.
Our Heroes Evolved IP continued to turn around its performance with games under the IP achieving a 5.8% revenue growth YoY. The popularity of the Heroes Evolved IP saw a significant increase during the year as we achieved a record-breaking level of live-streaming audience attending the Heroes Evolved e-sports competition events during the second half of the year. As live e-sports events resumed post-Covid in 2023, we expect to build on our success in e-sports to step up the promotion of the Heroes Evolved IP and drive player acquisition, leveraging an existing base of over 300 million of players having played the games under this IP since its launch.
We also achieved a significant expansion for our Conquer IP in 2023. The success of the "MMO+ casual" gameplay within the Conquer Online game resulted in the initiation of development of a new game (Code-Alpha) using this proven game play which is expected to be launched in 2024. We also started to create an ecosystem of online-to-offline competition to bring players' engagement to a new level.
During the year, we made remarkable progress in the application of generative AI (aka. AIGC) to create value for different parts of our gaming business. We saw the utilization of AI for our art production tasks increased from 14% in Q1 to 58% in Q4 2023, while man-hour savings driven by AI increased by 300% as we increasingly benefited from training of AI large language model that resulted in efficient production of high-quality contents. With AIGC, we are able to deliver much more frequent content updates that serve to increase retention of players and drive monetization. In addition, we also strategically position our investment in AIGC in areas that complement our competitive strength. During the year, we achieved strong progress in developing the "AI Companion" technology in MOBA games, including significantly increasing the retention rate of players who played with AI companions based on our testing data. We are also progressing with R&D work in NPC (non-playing characters) that could be integrated in our new open-world MMORPG in the future.
Going forward, we expect to continue to drive revenue and profits growth for our gaming business with a two-pronged approach – growing revenue for our existing games and investing in a robust pipeline of new games with a diversified array of genres, including social casual, idle card, top-down shooter, MOBA, MMORPG and ACGN games. We will also expand our geographical markets in 2024, and expect to enter or expand our presence in markets such as
Mynd.ai
In
Revenue of Mynd in 2023 was
Other 2023 financial highlights of Mynd include:
- Gross Margin improved 1.3 percentage points versus 2022 to 25.0%, due to lower materials and freight costs, as well as exchange rate impact
- Cash flow from operations improvement of
RMB23 million compared to 2022[5] - Cash balance at year end was
RMB650 million compared toRMB203 million at year end 2022 - Core segmental loss[1] of
RMB93 million compared to profit ofRMB30 million in 2022, primarily driven by lower sales volumes due to the market normalization as explained above
The Promethean brand under Mynd continued to maintain its market leadership position. During 2023, Promethean captured 17.4% of the K-12 Interactive Flat Panel Displays volume market share globally ex-China. [6] In Q4 2023 alone, Promethean was able to capture 21.1% of the global ex-
Promethean's market leadership in the global K-12 market puts the company in position to continue to grow both its hardware and software business. In addition to driving the growth of its hardware business, Promethean recently launched its integrated SaaS offering, Explain Everything Advanced, to tap into the subscription-based software revenue opportunity, leveraging our global go-to-market channel. Over the course of 2024, Mynd plans to continue to drive the evolution and growth of the software business, with enhancements to the core offerings and empowering its sales team to drive engagement with customers. Mynd will also continue to invest in R&D to maintain its leadership both at the high-end of the market and foster deeper penetration of the broader, lower-cost market.
We believe Mynd is exceptionally well positioned to win market share with the following differentiation:
- Huge installed base of existing Promethean users as the market leader, which is conducive for replacement sales and SaaS software sales
- Unparalleled focus in education with a deep understanding of the needs of schools
- Unique ability to understand and meet the needs of schools/teachers in different use cases with professional training by our inhouse team of education consultants
- Comprehensive support structure post-sales to ensure seamless integration into teachers' workflow
- Well-established global network of over 4,000 distributors/resellers built over 20 years with deep understanding of the value of Promethean panels
- Promethean's market reputation and its long history as the market leading brand lead to confidence that we can be a long-term technology partner
The spinoff listing of Mynd has set the stage for the company to expand beyond hardware and integrate software applications into the offering to bring teaching and learning experience to a new level. Looking forward, the catalysts for success for Mynd will include continued growth of our hardware revenue, investing in the development of our software applications to scale SaaS revenue and expanding market leadership in both hardware and software space.
Management Presentation and Webcast
NetDragon's management team will hold a results presentation and webcast at
Details of the presentation are as follows:
Time: |
1 0 :00 AM, Hong Kong Time on March 28 , 2024 , Thursday / 1 0 :00 PM, Eastern Time on March 27 , 2024 , Wednesday |
Format : |
Physical Presentation at |
|
OR Online Webcast |
Venue: |
Level 2, No. |
Webcast: |
https://webcast.roadshowchina.cn/SU9UQ3pzTDZaaGF6T3FSM3pmeXpCdz09 |
The live and archived webcast of the conference call will be available on the Investor Relations section of NetDragon's website at http://ir.nd.com.cn/en/category/webcast. Participants of the live webcast should visit the aforementioned website 10 minutes prior to the call, then click on the icon for "2023 Annual Results Presentation and Webcast" and follow the registration instructions.
About
Established in 1999, NetDragon is one of the most reputable and well-known online game developers in
For investor enquiries, please contact:
Ms.
Senior Director of Investor Relations
Tel: +852 2850 7266 / +86 591 8390 2825
Email: maggiezhou@nd.com.hk/ir@netdragon.com
Website: ir.netdragon.com
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME |
||||
FOR THE
YEAR
ENDED
31 |
||||
|
|
|
||
|
|
2023 |
|
2022 |
|
|
RMB million |
|
RMB million |
Revenue |
|
7,101 |
|
7,866 |
Cost of revenue |
|
(2,703) |
|
(3,551) |
|
|
|
|
|
Gross profit |
|
4,398 |
|
4,315 |
Other income and gains |
|
264 |
|
223 |
Impairment loss under expected credit loss model, net of reversal |
|
(3) |
|
(14) |
Selling and marketing expenses |
|
(807) |
|
(945) |
Administrative expenses |
|
(1,199) |
|
(975) |
Research and development costs |
|
(1,382) |
|
(1,224) |
Other expenses and losses |
|
(446) |
|
(213) |
Share of results of associates and joint ventures |
|
(4) |
|
(17) |
|
|
|
|
|
Operating profit |
|
821 |
|
1,150 |
Exchange loss on financial assets at fair value through profit or |
|
(21) |
|
(73) |
Fair value change on financial assets at fair value |
|
75 |
|
(33) |
Fair value change on derivative financial instruments |
|
28 |
|
15 |
Finance costs |
|
(268) |
|
(219) |
|
|
|
|
|
Profit before taxation |
|
635 |
|
840 |
Taxation |
|
(188) |
|
(76) |
|
|
|
|
|
Profit for the year |
|
447 |
|
764 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (expense) for the year, net of income tax: |
|
|
|
|
Item that may be reclassified subsequently to profit or loss: |
|
|
|
|
Exchange differences arising on translation of foreign |
|
43 |
|
47 |
Item that will not be reclassified to profit or loss: |
|
|
|
|
Fair value change on equity instruments at
fair value through |
|
(22) |
|
(2) |
Other comprehensive income for the year |
|
21 |
|
45 |
Total comprehensive income for the year |
|
468 |
|
809 |
|
|
|
|
|
Profit (loss) for the year attributable to: |
|
|
|
|
- Owners of the Company |
|
550 |
|
834 |
- Non-controlling interests |
|
(103) |
|
(70) |
|
|
447 |
|
764 |
|
|
|
|
|
Total comprehensive income (expense) for the year |
|
|
|
|
- Owners of the Company |
|
570 |
|
879 |
- Non-controlling interests |
|
(102) |
|
(70) |
|
|
468 |
|
809 |
|
|
|
|
|
|
|
RMB cents |
|
RMB cents |
Earnings per share |
|
|
|
|
- Basic |
|
103.00 |
|
154.15 |
- Diluted |
|
103.00 |
|
154.14 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
||||
AT 31 DECEMBER 202 3 |
||||
|
|
|
|
|
|
|
2023 |
|
2022 |
|
|
RMB million |
|
RMB million |
Non-current assets |
|
|
|
|
Property, plant and equipment |
|
2,422 |
|
1,936 |
Right-of-use assets |
|
380 |
|
380 |
Investment properties |
|
60 |
|
59 |
|
|
325 |
|
287 |
Intangible assets |
|
868 |
|
739 |
Interests in associates and joint ventures |
|
43 |
|
34 |
Equity instruments at fair value through other comprehensive |
|
45 |
|
56 |
Financial assets at fair value through profit or loss |
|
453 |
|
404 |
Loan receivables |
|
12 |
|
8 |
Other receivables, prepayments and deposits |
|
351 |
|
94 |
Deferred tax assets |
|
433 |
|
347 |
|
|
5,392 |
|
4,344 |
Current assets |
|
|
|
|
Properties under development |
|
70 |
|
343 |
Properties for sale |
|
280 |
|
303 |
Inventories |
|
405 |
|
807 |
Financial assets at fair value through profit or loss |
|
38 |
|
84 |
Loan receivables |
|
79 |
|
4 |
Trade receivables |
|
702 |
|
654 |
Other receivables, prepayments and deposits |
|
485 |
|
549 |
Amounts due from joint ventures |
|
7 |
|
5 |
Tax recoverable |
|
39 |
|
29 |
P ledged bank deposits |
|
315 |
|
1 |
Bank deposits with original maturity over three months |
|
329 |
|
207 |
Cash and cash equivalents |
|
2,241 |
|
3,701 |
|
|
4,990 |
|
6,687 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
1,518 |
|
1,513 |
Contract liabilities |
|
491 |
|
406 |
Lease liabilities |
|
76 |
|
67 |
Provisions |
|
127 |
|
94 |
Derivative financial instruments |
|
107 |
|
31 |
Bank borrowings |
|
1,033 |
|
737 |
Convertible and exchangeable bonds |
|
3 |
|
16 |
Convertible note |
|
1 |
|
- |
Tax payable |
|
80 |
|
100 |
|
|
3,436 |
|
2,964 |
Net current assets |
|
1,554 |
|
3,723 |
Total assets less current liabilities |
|
6,946 |
|
8,067 |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Other payables |
|
37 |
|
19 |
Lease liabilities |
|
45 |
|
50 |
Bank borrowings |
|
1 |
|
2 |
Convertible and exchangeable bonds |
|
253 |
|
1,317 |
Convertible note |
|
356 |
|
- |
Convertible preferred shares |
|
- |
|
- |
Deferred tax liabilities |
|
80 |
|
80 |
|
|
772 |
|
1,468 |
Net assets |
|
6,174 |
|
6,599 |
|
|
|
|
|
Capital and reserves |
|
|
|
|
Share capital |
|
39 |
|
40 |
Share premium and reserves |
|
5,856 |
|
6,859 |
Equity attributable to owners of the Company |
|
5,895 |
|
6,899 |
Non-controlling interests |
|
279 |
|
(300) |
|
|
6,174 |
|
6,599 |
UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS |
||||
|
|
|
|
|
|
|
2023 |
|
2022 |
|
|
(Unaudited) |
|
(Unaudited) |
|
|
RMB million |
|
RMB million |
Operating profit |
|
821 |
|
1,150 |
Add: |
|
|
|
|
Share-based payments expense |
|
104 |
|
6 |
Amortization of intangible assets arising on acquisitions |
|
65 |
|
56 |
Impairment loss and write off of intangible assets and |
|
46 |
|
103 |
Redemption loss of convertible and exchangeable bonds |
|
156 |
|
- |
Less: |
|
|
|
|
Reversal of impairment loss of intangible assets |
|
(44) |
|
- |
Non-GAAP operating profit |
|
1,148 |
|
1,315 |
|
|
|
|
|
Profit attributable to owners of the Company |
|
550 |
|
834 |
Add: |
|
|
|
|
Share-based payments expense |
|
8 |
|
7 |
Amortization of intangible assets arising on acquisitions |
|
51 |
|
43 |
Impairment loss and write off of intangible assets and |
|
41 |
|
100 |
Finance costs |
|
244 |
|
199 |
Fair value (gain) loss on financial assets at fair value |
|
(74) |
|
32 |
Fair value (gain) loss on derivative financial instruments |
|
(27) |
|
3 |
Exchange
loss
on financial assets at fair value through |
|
13 |
|
63 |
Redemption loss of convertible and exchangeable bonds |
|
156 |
|
- |
Non-GAAP profit attributable to owners of the |
|
962 |
|
1,281 |
[1] Core segmental profit (loss) figures are derived from the Company's reported segmental profit (loss) figures (presented in accordance with Hong Kong Financial Reporting Standard ("HKFRS") 8) but exclude non-core/operating, non-recurring or unallocated items including government grants, intercompany finance costs, impairment loss (net of reversal), impairment loss and write off of intangible assets and inventories, fair value change and exchange difference on financial assets at fair value through profit or loss ("FVTPL"), fair value change and exchange difference on derivative financial instruments, interest expense, exchange loss and redemption loss on convertible and exchangeable bonds and redundancy payment |
[2] To supplement the consolidated results of the Company prepared in accordance with HKFRSs, the use of non-GAAP measures is provided solely to enhance the overall understanding of the Company's current financial performance. The non-GAAP measures are not expressly permitted measures under HKFRSs and may not be comparable to similarly titled measures for other companies. The non-GAAP measures of the Company exclude share-based payments expense, amortisation of intangible assets arising on acquisitions of subsidiaries, impairment loss and write off of intangible assets and inventories, fair value change on financial assets at FVTPL, fair value change on derivative financial instruments, finance costs, interest income on pledged bank deposits, redemption loss of convertible and exchangeable bonds, reversal of impairment loss of intangible assets and exchange difference on financial assets at FVTPL, convertible and exchangeable bonds and derivative financial instruments. |
[3] Segmental operating expenses exclude unallocated expenses/income such as amortization and exchange difference that have been grouped into SG&A categories on the Company's reported consolidated financial statements, but cannot be allocated to specific business segments for purpose of calculating the segmental profit (loss) figures in accordance with HKFRS 8. |
[4]
According to the China Game Industry Group Committee ("CGIGC") & Gamma Data <2023 China Gaming Industry Report>, |
[5]
From Form 20-F filing of Mynd, in accordance with |
[6]
According to |
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