NetDragon Websoft (777) H1 2024 earnings summary

Executive summary

• Revenue declined 10.3% year-over-year to RMB3.30 billion, with gaming revenue stable and education revenue down due to industry headwinds.

• Domestic PC gaming revenue grew 2.1% year-over-year, while overseas gaming revenue declined 12.9% due to temporary issues.

• Mynd.ai revenue dropped 23.5% year-over-year, but gross margin improved and adjusted EBITDA loss narrowed, excluding a one-time tax item.

• EBITDA rose 12.9% year-over-year to RMB1.04 billion, and non-GAAP EBITDA increased 33.1% to RMB1.15 billion.

• An interim dividend of HKD0.40 per share was declared for the period.

Financial highlights

• Group revenue was RMB3.30 billion, down 10.3% year-over-year; gaming and application services revenue was RMB2.12 billion, down 0.8%, and Mynd.ai revenue was RMB1.18 billion, down 23.5%.

• Gross margin improved to 66.6% from 62.1% in 1H2023, driven by cost savings and operational efficiencies.

• EBITDA was RMB1.04 billion, up 12.9% year-over-year; non-GAAP EBITDA was RMB1.15 billion, up 33.1%.

• Profit attributable to owners dropped 20% to RMB400 million due to a one-time deferred tax provision; excluding this, net profit rose 24%.

• Non-GAAP profit attributable to owners was RMB558 million, down 5.3% year-over-year.

Outlook and guidance

• New game launches (Code-Alpha, Nebula Rangers, Under Oath, Eudemons releases) are expected to drive growth in the next 6–12 months.

• Mynd.ai is focusing on transitioning to a software and service-based model, leveraging its installed base and new SaaS offerings.

• Management remains confident in long-term growth and market leadership despite near-term challenges.

• Strategic education technology initiatives are underway in Thailand and Saudi Arabia, with new platforms and partnerships expected to launch later in the year.

• Mynd.ai to host a Capital Markets Day to detail growth strategy.