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, and new titles are in the pipeline.

• Mynd.ai faced a 23.5% year-over-year revenue drop but improved gross margin and narrowed adjusted EBITDA loss, excluding a one-time deferred tax item; net profit attributable to owners fell 20% to CNY 400 million due to this provision, but rose 24% excluding it.

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

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

• Management remains optimistic, focusing on AI, SaaS, and global expansion, with a transition to a combined hardware and services model in education.

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% year-over-year; Mynd.ai revenue was RMB1.18 billion, down 23.5% year-over-year.

• Gross margin improved to 66.6% from 62% year-over-year, 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% year-over-year.

• Profit attributable to owners was RMB400 million, down 20% year-over-year; non-GAAP profit was RMB558 million, down 5.3% year-over-year.

• Cash and liquid investments increased by 11% to RMB2.38 billion at period end.

Outlook and guidance

• New game launches (Code-Alpha, Nebula Rangers, Under Oath, Eudemons Remake) 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, with ongoing cost optimization and margin improvement.

• Management is confident in meeting full-year net profit targets and maintaining market leadership, despite macroeconomic 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.