NetDragon Websoft (777) H2 2024 earnings summary

Executive summary

• Advanced dual AI+Gaming and AI+Education strategy, integrating AI to drive efficiency, cost reduction, and product innovation across both business lines.

• Fully embraced "AI + Gaming" strategy, reducing R&D personnel by 14% in 2024 and focusing on innovative gaming experiences and operational efficiency.

• Revenue declined 14.8% YoY to RMB6.0 billion, mainly due to Mynd.ai's industry headwinds and gaming business adjustments, but profit before tax rose 19.1% YoY to RMB756 million, driven by investment returns, cost savings, and improved efficiency.

• Strategic partnership with Wenge, bringing in RMB 75 million in cash and AI assets to accelerate global AI initiatives.

• Sale of early childhood development business and other non-strategic assets enhanced capital structure and cash reserves.

Financial highlights

• FY2024 revenue was RMB 6,047M, down 14.8% YoY; gross profit RMB 3,942M, down 10.3% YoY; gross margin improved by 3.3 ppts to 65.2%.

• EBITDA rose 7.1% YoY to RMB 1,418M; profit before tax up 19.1% YoY to RMB 756M.

• Net profit attributable to owners was RMB 311M, down 43.4% YoY, impacted by a one-time non-cash deferred tax expense of RMB 452M; adjusted net profit up 17.4% YoY.

• Operating cash flow exceeded RMB 1B for the sixth consecutive year; net cash at year end increased 13.3% YoY to RMB 2,098M.

• Final dividend of HKD0.50 per share, up 25% YoY; cumulative dividends since IPO surpassed HKD18 per share.

Outlook and guidance

• Continued headwinds expected in education for 2025, with recovery anticipated in 2026 as market cycles normalize.

• Focus on scaling SaaS revenue, new product launches, and strengthening Mynd.ai's global leadership in AI-driven classroom technology.

• Ongoing cost optimization and efficiency improvements to counter industry headwinds, especially in education.

• ADS buyback program and ongoing commitment to shareholder returns through dividends and potential share buybacks.