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NetDragon Websoft Inc. Announces 2012 Third Quarter Results

Friday, November 23, 2012 4:13 AM


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( mailto: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 )
(Source: Quotemedia)

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