NetDragon Websoft Inc. Announces First Quarter 2010 Unaudited Financial Results

Jun 11, 2010, 06:02 ET from NetDragon Websoft Inc.

HONG KONG, June 11 /PRNewswire-Asia-FirstCall/ -- NetDragon Websoft Inc. ("NetDragon", with its subsidiaries collectively the "Group"; Stock Code: 777), a leading online game developer and operator in China, today announced its unaudited financial results for the three months ended March 31, 2010.

Liu Dejian, Chairman and Executive Director of NetDragon, said, "We are pleased to announce our results for the first quarter 2010. Our revenue witnessed 4% sequential growth during the quarter, reinvigorated by the efforts of our experienced development and operational teams. Our net profit margin also rose to 15.2%, a significant improvement compared with the 0.9% recorded for the fourth quarter 2009, as our ongoing resource optimization program has resulted in reduced fixed costs and the streamlining of our enterprise."

On a strategic level Mr. Liu commented, "In our overseas efforts, following the lead of 'Eudemons Online', 'Conquer Online', and 'Zero Online', we launched the traditional Chinese version of 'Way of the Five' in Taiwan, which will further expand the market presence of NetDragon products in the region. In addition, our mobile software applications gained increasing popularity during the first quarter. The user base of our 91 series mobile phone applications grew steadily, laying a solid foundation for the meaningful development of this emerging business. Overall, we are very satisfied with our accomplishments in different IT and new media fields."

Mr. Liu concluded, "We believe that the online gaming industry will continue to have a promising development outlook in the coming years. NetDragon will be dedicated to strengthening core competencies that are based on research and development and operations, to adapt to a rapidly-changing industry environment and to attract more users with excellent gaming products. Meanwhile, we will continue to invest in new businesses like mobile phone applications, and to take advantage of the huge business opportunities in the mobile and internet sectors in the 3G era. We will firmly seize opportunities to achieve sustainable development and enhance shareholder value via these moves."

    1Q 2010 Business Highlights
    -- Traditional Chinese version of "Way of the Five" entered open beta in
       January
    -- NetDragon received multiple awards including recognition as a "Top 10
       Games Developer in China for 2009" and "Overseas Expansion Award for
       National Games for 2009" at the 2009 China Game Industry Annual
       Conference in January
    -- Released a new Chinese expansion pack "Star Fleets" for "Zero Online"
       in February
    -- Commenced closed beta test for "CJ7 Online" in March
    -- NetDragon was elected as Fujian Animation Game Industry Association
       Chief and recognized as "Fujian Animation & Game R&D Centre" at the
       2010 Fujian Animation & Game Industry Annual Conference
    -- Cooperate with Saigon Tel over Vietnamese version of "Conquer Online"
       in March
    -- Chairman and Executive Director of NetDragon Liu Dejian was honored
       with "10th Fujian Science & Technology Award for Youth" in March

    Recent Developments
    -- From April to June, released English, French, Spanish and Arabic
       versions of Conquer Online's EP "Legends Return Season I"
    -- Released a new Chinese expansion pack "Legends Return" for "Conquer
       Online" in May
    -- Vietnamese version of "Eudemons Online" entered open beta in May
    -- "Disney Fantasy Online" advanced into its final stage of open beta
       testing and signed Chinese female singer Li Yuchun as the game's
       spokesperson in May
    -- "Dungeon Keeper Online" and "Cross Gate" started 2nd round of closed
       beta testing in May
    -- NetDragon was selected as the sole designated IT supporter for the
       Fujian Pavilion at the Expo 2010 Shanghai China
    -- Showcased at Cross-Straits Conference and attended the Cross-Straits
       Copyright (Creative) Industry Summit Forum as the only corporate entity
    -- Approved by extraordinary general meeting held in June, NetDragon has
       successfully acquired the entire equity interests of Fujian TianDi,
       which will also serve as NetDragon's future centralized campus.

    Business Outlook
    -- Open beta test of "CJ7 Online" is expected in July 2010
    -- Open beta test of "Dungeon Keeper Online" is expected in 2H 2010
    -- Games under development include: "Legend of the Dark", "Cross Gate" and
       "Doomsday"
    -- Our mobile business continues to make positive progress, as users of
       our mobile software applications continue to rise

Management Conference Call

NetDragon will host a conference call and webcast to review its unaudited financial results for the first quarter 2010 ended March 31, 2010 at 8:00PM Hong Kong Time / 8:00AM Eastern Daylight Time, June 11, 2010.

    Details of the investor conference call are as follows:

    Time: 8:00PM Hong Kong Time / 8:00AM Eastern Daylight Time, June 11, 2010

    Dial in numbers:
    International Toll       1-617-213-8067
    US Toll Free             1-866-770-7129
    Hong Kong Toll Free      800-96-3844
    South China Toll Free    10-800-130-0399
    North China Toll Free    10-800-152-1490
    Passcode                 63389994

Replay service is available from 11:00PM June 11 to 12:00PM, June 18, 2010. Below are the replay numbers for different regions. International Toll: 1-617- 801-6888; US Toll Free: 1-888-286-8010; Replay passcode: 13515369.

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 "1Q 2010 Results Conference Call" and follow the registration instructions.

About NetDragon

NetDragon Websoft Inc. is a leading innovator and creative force in China's online gaming industry. Established in 1999, NetDragon has been operating and developing a broad range of MMORPGs since launching its first self-made title Monster & Me in 2002. In addition, NetDragon is China's pioneer in overseas expansion, having directly operated its titles in overseas markets since 2004 in English, French, Spanish and other foreign languages.

NetDragon's game portfolio comprises a range of massively multiplayer online games that cater to various types of players and gaming preferences. Current offerings include the games Way of the Five, Eudemons Online, Conquer Online, Zero Online, Heroes of Might & Magic Online, Disney Fantasy Online and Tian Yuan. NetDragon also has several games currently in development, including Dungeon Keeper Online, Doomsday, Cross Gate, Legend of the Dark and a new version of Ultima Online.



    Financial Highlights:

        RMB('000)        2010 1Q    2009 4Q    2009 1Q     QoQ(%)     YoY(%)
    Revenue              139,476    134,190    173,898       3.9%    (19.8%)
    Gross Profit         120,759    115,459    155,016       4.6%    (22.1%)
    GPM                    86.6%      86.0%      89.1%       0.5%     (2.6%)
    Profit for the
     period               21,169      1,246     48,799    1599.0%    (56.6%)
    NPM                    15.2%       0.9%      28.1%      14.2%    (12.9%)
    EPS-Basic (RMB
     cents)                 4.03       0.27       9.31    1392.6%    (56.7%)
    EPS-Diluted (RMB
     cents)                 4.03       0.27       9.31    1392.6%    (56.7%)



    Metrics

               1Q 2010  4Q 2009  3Q 2009  2Q 2009  1Q 2009  4Q 2008  3Q 2008
        PCU    451,000  492,000  519,000  632,000  695,000  591,000  544,000
        ACU    230,000  253,000  273,000  310,000  333,000  317,000  311,000


    Note: Online games include Conquer Online, Eudemons Online, Zero Online,
          Tou Ming Zhuang Online, Heroes of Might and Magic Online, Way of the
          Five, Disney Fantasy Online, Tian Yuan and other games.



    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
    FOR THE THREE MONTHS ENDED 31 MARCH 2010

                                               Three months ended
                                       31/3/2010    31/12/2009     31/3/2009
                                        RMB '000      RMB '000      RMB '000
                                      (Unaudited)   (Unaudited)   (Unaudited)
    Revenue                              139,476       134,190       173,898
    Cost of revenue                      (18,717)      (18,731)      (18,882)

    Gross profit                         120,759       115,459       155,016
    Other income and gains                 5,660        17,881         5,750
    Selling and marketing expenses       (22,197)      (34,714)      (27,716)
    Administrative expenses              (42,176)      (37,466)      (35,563)
    Development costs                    (39,739)      (58,208)      (42,574)
    Other expenses                          (928)       (1,368)         (243)
    Net (loss) gain on derivative
     financial instruments                    --            --           184
    Net gain (loss) on financial
     assets designated as fair
     value through profit or loss             --            --        (1,138)
    Share of loss of a jointly
     controlled entity                        --            --          (214)

    Profit before taxation                21,379         1,584        53,502
    Taxation                                (210)         (338)       (4,703)

    Profit for the period                 21,169         1,246        48,799

    Other comprehensive income
     (loss):
    Exchange differences arising on
     translation of
     foreign operations                       20           (64)       (1,041)

    Total comprehensive income for
     the period                           21,189         1,182        47,758

    Profit for the period
     attributable to:
      -Owners of the Company              21,215         1,426        48,943
      -Non-controlling interests             (46)         (180)         (144)

                                          21,169         1,246        48,799
    Total comprehensive income
     attributable to:
      - Owners of the Company             21,235         1,362        47,902
      - Non-controlling interests            (46)         (180)         (144)
                                          21,189         1,182        47,758

                                       RMB cents     RMB cents     RMB cents
    Earnings per share
      - Basic                               4.03          0.27          9.31
      - Diluted                             4.03          0.27          9.31



    CONSOLIDATED STATEMENT OF FINANCIAL POSITION
    AS AT 31 MARCH 2010

                                                     31 March     31 December
                                                       2010           2009
                                                   (Unaudited)      (Audited)
                                                     RMB '000       RMB '000
    Non-current assets
    Property, plant and equipment                     106,825        109,226
    Prepaid lease payments                             41,072         41,075
    Deposit paid for acquisition of property,           8,895          8,895
     plant and equipment
    Intangible asset                                   13,715         12,980
    Interests in jointly controlled entities               --             --
    Available-for-sale investments                      4,000          4,000
    Loan receivables (Staff loans)                      6,712          7,313
    Deferred tax assets                                    54             54
                                                      181,273        183,543

    Current assets
    Prepaid lease payments                                626            855
    Loan receivables (Staff loans)                        674            893
    Trade receivables                                  22,696         14,128
    Other receivables, prepayments and deposits        58,500         66,272
    Held for trading investments                          256            377
    Amount due from related parties                       241             --
    Advances to a jointly controlled entity            33,000         29,000
    Tax recoverable                                        --             20
    Bank deposits                                     448,470        551,970
    Bank balances and cash                            805,114        705,053
                                                    1,369,577      1,368,568

    Current liabilities
    Trade payables                                        332            285
    Other payables and accruals                        44,658         67,881
    Deferred income                                    17,367         18,189
    Income tax payable                                  9,916          9,935
                                                       72,273         96,290

    Net current assets                              1,297,304      1,272,278
                                                    1,478,577      1,455,821

    Capital and reserve
    Share capital                                      39,264         39,264
    Share premium and reserves                      1,439,843      1,417,041
    Equity attributable to owners of the            1,479,107      1,456,305
     Company
    Non-controlling interests                            (530)          (484)
                                                    1,478,577      1,455,821

SOURCE NetDragon Websoft Inc.



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