NetDragon Websoft (777) H2 2023 earnings summary

Executive summary

• 2023 revenue was RMB 7,101 million, down 9.7% YoY, while gross profit rose 1.9%; operating profit and profit attributable to owners declined 28.6% and 34.1%, respectively.

• Gaming revenue increased 9.6% YoY, supported by content quality and player engagement; Mynd.ai’s education hardware revenue normalized to pre-pandemic levels.

• Completed the overseas education business spin-off and NYSE listing of Mynd.ai in Dec 2023; retained a 74.4% stake and continued consolidating its 2023 financials.

Financial highlights

• Revenue was RMB 7,101 million in 2023, down 9.7% YoY; gross profit was RMB 4,398 million, up 1.9%.

• EBITDA was RMB 1,325 million, down 8.7%; operating profit was RMB 821 million, down 28.6%; profit attributable to owners was RMB 550 million, down 34.1%.

• Non-GAAP operating profit was RMB 1,148 million, down 12.7%; non-GAAP profit attributable to owners was RMB 962 million, down 24.9%.

• Operating cash flow increased 4.2% to RMB 1,115 million; selling and marketing expenses fell 14.6% to RMB 807 million, while administrative and R&D expenses rose 23.0% and 12.9%.

Outlook and guidance

• 2024 gaming priorities: grow revenue through higher-quality content, launch several new games, broaden genres to social casual, idle and ACGN, and expand AIGC use.

• Mynd.ai plans continued software R&D, SaaS sales through its channel, and integration of Explain Everything with hardware; management sees potential to grow market share.

• Pipeline includes Eudemons Remake, Eudemons Mobile 2 overseas, Heroes Evolved Pocket Sci-Fi and multiple new IP titles, with several estimated launches in 2H24.