On 29 March 2022, NetDragon Network Holdings Limited ("NetDragon" or "the Company"; HKEX stock code: 777) announced its full year 2021 financial results. NetDragon's management will hold a results briefing via teleconference and webcast on 30 March 2022 at 11:00 a.m. Hong Kong time to discuss financial results and recent business developments.
Mr. Liu Dejian, Chairman of NetDragon, said: "We are very pleased that NetDragon will achieve another good performance in 2021 and achieve strong performance across the board. Our revenue, operating profit and net profit have all grown for five consecutive years, thanks to our efforts in deepening our network of technology, IP and sales partners. Our games and education business maintained strong growth, with total revenue increasing by 14.6% year-on-year to over RMB7 billion. "
"In 2021, our education business revenue increased by 32.2% year-on-year, the highest increase in nearly four years. The growing demand for blended learning solutions worldwide is accelerating the market expansion. Prometheus continues to maintain its position as the number one international market share leader, which proves that its product is the preferred teaching and interaction tool for K-12 educators under the new normal. On the other hand, our national projects continue to make new progress. In the second half of the year, we successfully completed the first pilot of the English Smart Classroom Lab project in Thailand and expanded our strategic cooperation with the Ghanaian Ministry of Education, with the goal of deploying a national blended learning platform in Ghana. Recently, we signed a definitive contract to supply 94,000 Promethean interactive tablets to K-12 schools across Egypt, witnessing another milestone in our long-term cooperation with the Egyptian Ministry of Education. "
"Our gaming business revenue increased by 6.1% year-on-year, operating segmented profit increased by 7.8% year-on-year, and we implemented a balanced and sustainable growth strategy to promote balanced revenue growth in terminal and mobile games, China and overseas markets. Our flagship IP, Magic Domain, continued its growth trend, with revenue up 7.8% year-over-year. Through continuous improvements in content, gameplay, and user experience, the annual revenue of the Magic Domain IP has increased by nearly 3.5 times in the past five years. The successful launch of the new two-dimensional IP mobile game "Final Vow" in December 2021 is the embodiment of our ability to develop new categories of games, and also expands the coverage of young players, laying a solid foundation for us to expand overseas markets in 2022, so as to seize the huge market opportunities in the field of overseas two-dimensional games. "
"Given our confidence in the company's future growth prospects and ability to generate continued free cash flow, we reaffirm our commitment to enhancing shareholder value and continuing to actively implement capital return measures, including share repurchases and dividend distributions. In August 2021, we announced a three-year share repurchase program with a total repurchase amount of up to $300 million. To date, we have repurchased 16.2 million shares for a total amount of $38 million. In 2021, we returned a total of US$186 million to shareholders through a combination of share repurchases and dividend distributions, including a special interim dividend of US$100 million announced in January 2022. "
Financial summary of full year 2021 results
● Revenue was RMB7,035 million, an increase of 14.6% year-on-year.
● Revenue from the game business was RMB3,642 million, representing 51.8% of the Company's total revenue, an increase of 6.1% year-on-year.
● Revenue from the education business was RMB3,231 million, representing 45.9% of the Company's total revenue, representing an increase of 32.2% year-on-year.
● Gross profit was RMB4,523 million, an increase of 8.4% year-on-year.
● Operating classified profit from the game business was RMB2,120 million, representing a year-on-year increase of 7.8%.
● Operating classification loss3 from the education business was RMB412 million, a 28.4% narrower year-on-year.
● EBITDA was RMB1,829 million, representing a year-on-year increase of 12.8%.
● Operating profit was RMB1,385 million, up 27.4% year-on-year.
● Non-GAAP operating profit was RMB1,507 million, representing a year-on-year increase of 14.6%.
● Profit attributable to owners of the Company was RMB1,062 million, representing an increase of 11.4% year-on-year.
Profit attributable to owners of the non-GAAP Company was RMB1,290 million, an increase of 13.0% year-on-year.
● The Company's announcement of a final dividend of HK$0.40 per ordinary share (2020: HK$0.25 per ordinary share) is subject to the approval of the upcoming Annual General Meeting of Shareholders. The total dividend for the year, including the special interim dividend announced in January 2022, was HK$2.23 per ordinary share (2020: HK$0.50 per ordinary share), representing approximately 93.8% of the profit attributable to owners of the Company.
Categorical financial summaries
Game business
Our gaming business continues to grow, with record revenue and operating segment profits. Gaming revenue increased by 6.1% year-on-year to RMB3,642 million, while operating classified profit increased by 7.8% year-on-year to RMB2,120 million.
The revenue of the core flagship IP "Magic Domain" increased by 7.8% year-on-year, achieving seven consecutive years of growth. In 2021, our focus is on understanding the needs of our players and executing the best monetization strategies to increase revenue by enhancing the player experience while also ensuring a balanced in-game ecosystem. We've also implemented a multi-pronged content strategy to promote paid content that improves gameplay and create a pleasant user experience for players based on core MMORPG elements. In addition, during the year, we launched two expansion packs and multiple young marketing campaigns for our flagship game, Magic Domain, to drive revenue growth. The new game we'll be launching, Magic Mobile Game 2, will also be another revenue driver in the future, which has undergone multiple rounds of testing in 2021 and is expected to launch in 2022.
During the year, our overseas revenue increased by 7.9% year-on-year. We continue to replicate and expand Conquest's successful operating model in Egypt to the Philippines, the United States, Canada and Saudi Arabia. In addition, given that MOBA is one of the most popular game categories in the world, we believe that its other flagship game with more than 200 million domestic registered users, "Soul Blade", also contains huge overseas market potential. As a result, we stepped up our efforts to expand the game into new overseas markets such as Pakistan and Vietnam.
Another milestone is the launch of our new IP in 2021. Our first two-dimensional mobile game "The Oath of the End" opened in public beta in December, with more than 1 million active users and 152,000 active paid users in the first month of launch. The successful launch of this game marks the expansion of our game development capabilities into the quadratic category, another major game category with hundreds of millions of players worldwide. We currently plan to launch the first overseas version of the Final Vow in the Southeast Asian market in the second half of 2022.
We are also excited about the great opportunities that the metaverse game field has in 2021. Based on our well-known overseas IP Neo Pet, we began planning the first blockchain meta-universe game and plan to release a closed internal beta version in the second half of 2022. We aim to become the leader in the "pet" asset class on the blockchain through this game. At the same time, we plan to create a distinctive "Play-and-Earn" ecosystem, with interesting gameplay as the main selling point, attracting blockchain users and mainstream players, as well as the 150 million players of Neo Pet IP.
Looking ahead, we will continue to implement a balanced growth strategy to maintain our growth trend over the long term. We expect existing and new games to continue to generate revenue growth for the company. At the same time, we will also increase investment to explore opportunities to develop blockchain games based on our own IP and new IP.
Educational business
Our education revenue increased by 32.2% year-on-year to RMB3,231 million and operating classification loss narrowed by 28.4% year-on-year. Over the past two years, the global COVID-19 pandemic has led to fundamental changes in the education industry, and blended learning models are becoming a mainstream trend around the world. Interactive flat panel display devices are widely recognized as "future-proof" technologies that support blended learning6, and as the market leader in this space, we are able to seize this unprecedented opportunity to further expand our market share."
2021 is a year of accelerated growth in the education market, and the demand for interactive tablets in K-12 schools around the world is very strong. In 2021, the shipment of interactive flat panel display devices in the global K-12 market increased by 24.3% year-on-year, the highest growth rate in the past five years. During the year, we continued to strengthen our market leadership, with revenue from our education business increasing by 32.2% year-on-year. We achieved strong performance in all major markets and maintained the number one market share position in four of the top five countries in terms of sales revenue contribution, including the UNITED States, the United Kingdom, Germany and France. We also continue to overcome supply chain challenges through operational excellence, strategically optimizing our product portfolio and adopting optimal logistics planning to alleviate the pressures of rising material and freight costs. The gross margin of our education business was 30.8% in 2021, compared to 31.0% in 2020.
During the year, our national-level projects continued to make progress. On the basis of the completion of our pilot English Smart Classroom Lab project in Thailand and the quantifiable and significant improvement in student performance, we expect to conduct a nationwide paid pilot in 2022. In September 2021, we signed a Memorandum of Understanding with the Ministry of Education of Ghana to establish a long-term partnership to create a national blended learning platform. Recently, our Project in Egypt reached another important milestone, and by signing a defined contract, we will provide 94,000 Prometheus Interactive Tablets to K-12 schools in Egypt and achieve large-scale adoption of Edmodo in Egypt by 2022. We believe Edmodo is poised to become the platform of choice for K-12 students, parents and teachers in Egypt to access content and services, which will bring us more revenue opportunities."
In the Chinese market, we continue to implement our B2G strategy, working closely with education authorities and schools to proactively explore and seize opportunities. During the year, we made good progress in our virtual experimental teaching service system in cooperation with the Central E-Education Center (a public institution directly under the Ministry of Education of the People's Republic of China) and successfully completed a nationwide pilot covering more than 7,000 schools in 31 provinces, laying the foundation for commercial promotion in 2022. In November 2021, we made another significant progress – winning the bid for the Ministry of Education's National Primary and Secondary School Smart Education Platform Construction Project and becoming a technical partner of the platform. In the context of B2G becoming the mainstream business model of the Future Chinese education market, we have the ability to fully grasp the future B2G revenue opportunities with this project.
Looking ahead, we expect the education business to achieve further performance in 2022. The classroom penetration rate of interactive tablets in the global K-12 market is currently 18%, and it is expected to reach 30% in 2025, which provides huge growth space for the sales of Prometheus interactive tablets. At the same time, the increasing penetration of interactive tablets in the classroom will inevitably lead to more software and content monetization opportunities, which we will benefit from as the market's leading provider of blended learning services.