Netdragon Websft Unsp/Adr

Good morning. Thank you for joining us for NetDragon Web Stop Holdings Limited 2022 Annual Results Presentation. 各位投资界的朋友早上好,欢迎各位出席网龙网络有限公司2022年年度业绩发布会。 Our presentation PPT will be broadcast on the live streaming platform, and the PPT is also available for download on our company website at www.nd.com.cn under Investor Relations Tag in IR Webcast section. 我们的业绩PPT会在直播平台同步播放,同时各位也可以在公司网站下载。 Before the start of our presentation, please allow me to introduce the management who are hosting today. We have Dr. Simon Leung, Group Vice Chairman and Executive Director. We have Mr. Ben Yam, Group CFO. We have Mr. Lin Chen, Group Senior VP. We have Mr. Vin Riera, CEO of Promethean. Let's pass our time to Dr. Simon Leung to host our presentation today. Well, thank you.

Well, first of all, welcome. Thank you for calling in. I have to apologize. I'm not dressed for the occasion, just like my other colleagues. And, you know, they're joining us from different parts of the world. Vin is from Seattle. Vincent is in Fudel. Ben is actually being isolated at his home because he got COVID. He doesn't look like it, but he's So Ben, thank you for joining, even though you are not well. But anyway, why don't we go straight to the chat. Today is actually kind of interesting. We'll go through 2002. We'll look at the outlook. It's the end of March. We're talking about 2022. So it's actually I think at times I will refer to 2023 as more like a, I don't know. If I kind of look back at 2022, if I may quote the tale of two cities, it was the best of times and sometimes it's not so much the worst of times, but it's not so good at the time because it's actually a lot happened in 2022. The good news, the upshot is that we're seeing the growth in our education segment. But frankly, that's not without some challenges. But the fact that we have a very good team and that we've been in the era that we were able to pull off very solid growth and respectable results, which is actually very good. If you think back on 2022, I mean, in Europe, so there's a war between Ukraine and Russia. Actually, that's caused some issues. Economy got hit in Europe and all that. And followed by, you know, we have some currency issues because of the devaluation of a lot of European currency compared to a very strong U.S. currency. And then we're dealing with some of the aftermath. But regardless of all those challenges, it's actually a very good result. If you look at our revenue growth, it's 12% year-over-year. That is with very, very good growth in education, offset by a small decline in our gaming sector. We are not the only one. It's actually we are declining, I think, slower than our competitors, which is actually good news from that end. But at the end of the day, we don't like declining results, so we're going to work very hard this year. LinkedIn is going to take you through what we plan to do in 2023. If you look at our problem, we chose to show the non-GAAP because it's actually We took some hits on some of our investment, which Ben will go through it. But from an operational standpoint, even with some of the decline on the gaming sector, we maintain the same kind of profit, you know, more or less year over year. And then we have a small growth in operating cash flow. That shows you we have a very solid business in terms of both education and gaming, and also operationally we perform very, very well. So with that, I'll go to highlight a little bit. I did talk about education, very solid growth. Good news also is that we maintain the number one global position in the panel outside of China. We also, one of the things we're very happy that we started to do, even before the big AI kind of wave, is actually embrace the AI technology, which Vin will talk about. at a high level what we are doing. We may set up some other time later in the year to take you through the detail on what we plan to do, both from a strategic standpoint and also from a product standpoint. On the gaming side, even though we declined, but we declined slower than the market, which is not bad. We also significantly invest in our people so we can position ourselves for our future growth. Again, Vinten is going to take you through some of the details. So with that, I'm going to turn it over to Ben, who is recovering from COVID, but he's going to do his best to take you through some of the highlights. Ben.

Well, thank you, Simon. Okay. First, I'm going to quickly go through the overall P&M, and then I'm going to talk about our potential. Okay. So our overall revenue growth for the year was 11.8%. I'm going to decide a year with macro challenges, especially in the gaming business. Gaming is down 5.8% while education was up 34%, and I'll let Lin-Chen again tell you the details. On the expense side, we continue to benefit from the opportunity leverage as all three of the SG&A line items went down as a percentage of revenue. And then in terms of bottom line, on a non-GAAP basis, our EBITDA went down by 10.8% and operating profits went down by 12.7%. Non-GAAP profits, I should go to owners of the company, was down by a slight 2.2%. But I wanted to point out that our operating cash flow actually saw a moderate growth of 4.2% through the year as we continue to manage our cash flow with a consistent approach. And also, we had 3.7 billion RMB of cash and cash growth on our balance sheet as of the end of 2018. On to the next slide. Okay. On this slide, I'm going to talk about the financials for education and gaming. First, on the education system, while we saw strong top-line growth, our growth margin actually dropped by 7.6%. And that is mainly due to a couple of factors that is actually outside of our control. One is , and then the other one is currency impact given a strong U.S. dollar against the GDP and the Euro. And if we look at the adjusted gross margin, which takes our tariffs and assumes foreign exchange on a neutral basis, adjusted gross margin is 29.2% for the year compared to 30.7%, which is a very slight decrease. And that is actually because of a slight increase in the material cost per unit that launched our new active petal line in June 2022. And this is a product that is actually faster, more powerful, right, and comes with industry-leading new features, which we're going to talk about. And the other reason for the drop is that while we launched F701 in June, we had to sell down F707, which is our existing model. And so we had to sell down that inventory with a lower AFP than in 2021. And in addition, there's also a one-off accounting write-off of a warranty inventory in 2022, which also impacted those projects. Overall, in terms of the segmental bottom line, our core segmental loss for education narrowed by 27% to $299 million as a result of our continued efforts in cost management. On the gaming side, what I want to highlight is that we continue to invest in R&D in 2022 as we saw our R&D expense increase by 16.7% during the year. We believe that our increased investment in R&D will enable us to continue to grow our pipeline, both in terms of quality and also in terms of quantity. And then on the SG&A side, we also continue to look for cost-creating opportunities in terms of sales and marketing, and also administrative expenses. And as a result, you can see that both of these expenses also decreased during the year. Okay, with that, I'm going to pass the time to Lintong, who is going to take us through the payment business.

Thank you, Ben. Hello, everyone. I'm Lin Chen. Next, I will introduce the performance of the online game in 2022. First of all, as mentioned above, in the past two years, we have been under pressure from the economy and the epidemic. At the same time, our game business is relatively stable. The game revenue of the entire market has dropped by 10%, and we have dropped by 5.8%. But in the past few years, our strategy and products have been gradually verified in this process. First, for example, in our overseas business, we have achieved a growth of 6.5%. At the same time, our overseas revenue ratio is also continuing to increase. Last year, we increased to 15.7%. This is a growth of revenue of five consecutive years and an increase in the ratio, making our entire game business healthier. At the same time, we also did a lot of optimization work last year, especially in terms of our entire user structure and payment structure, we also obtained some relatively good results. Especially at the PC end, our entire APA gained a growth of 16.4%. At the same time, we are relatively optimistic about the growth after the epidemic and economic recovery. So last year, we also obtained some relatively good talents to rebuild our R&D team. we will still set up a product line in the future. We hope that in the next 2023 and 2024, our games can recover and grow again. Next slide, please. First, in terms of PC run, due to the player structure of our PC run and the structure of large users, we will be more affected by the epidemic. But in this part, as the economy and the epidemic recover, it will also recover quickly. In terms of mobile phones, we have only dropped by 0.2%. In terms of mobile phones, we will use faster content reception efficiency and integrated marketing to quickly interact with our users. In this regard, I believe that the overall IP user group, user level, and user year are of great help to us. In terms of mobile phones, the performance is significantly higher than that of the market. Next slide, please. First of all, I would like to introduce you to the overall performance of MoYu IP. MoYu IP is the longest IP in the MMO channel. In terms of IP, our revenue dropped by 6.9% at the PC end. At the same time, we value the maintenance of users and their annuality. In terms of the fee structure and the fee users, it has been greatly improved and has grown. At the same time, its mobile version, which is our MOU version, its DAU also has a significant growth. This means that although the economy and the fee were affected last year, the overall player activity has maintained a growth. This is a very good basis for our long-term operation. And on the mobile side, overall, . . . . . . . . . . . . . . On the whole MMO track, we pay great attention to the fine-tuning of the long-term. At the same time, we open up the entire system of the operating unit. For our users, the most important thing is the quality of the content we launched. In terms of content, we not only have the production of files, we also have some IP link technology. At the same time, our overall integration and marketing is maximized from different dimensions. For example, In the content version, our files will update our content play style to bring players continuous content experience. At the same time, we also have industrial connections. These are mouth-to-mouth. At the same time, we also have some movie connections. It will further promote the growth of our revenue. At this time, based on all of our content, we will better do user acquisition and user protection. At the same time, through our better market and marketing, to break through and acquire more users. You can also see that the overall sales cost ratio has actually decreased. This also shows that the efficiency of our entire operation and sales is improved. Next slide. Here, the focus is on two aspects. The first aspect is our continuous update of the materials. From these data, you can see that our focus is on the update of the materials. Every time we launch We will keep a three to four-month content update frequency. Combined with the entire content upgrade, I believe it will give our users a better high-quality experience. The other dimension is actually some of the continuous updates we have made in the IP link. uh uh uh our joint purpose. In this regard, we believe that we will do better in this area as we continue to accumulate some experience this year. Next slide, please. As for the whole product line of Moyu, on March 23, our Moyu mobile game 2 has successfully launched. This is a new Moyu mobile game that has been important since Moyu mobile game in 2017. The online product has also achieved a better result. For example, we have reached tens of millions of users in the first day. The total number of users has also exceeded 6 million. This is a very good result for an MMO product. This also proves that the deep roots of the MMO track and the accumulation of overall IP users in MMO. Next page. At this time, for us, Moyu is not only an IP, but we also want to run it as a long-term line brand. In addition to the existing product line, in fact, this year we will re-plan the IP product line strategy of Moyu in a more detailed way. In these three directions, the market is also verified to prove the success of the product strategy. For example, in the classic modding part, we have the PC side, we have our pocket version, and our modding mobile. From the market point of view, classic old-fashioned and classic modding, this is definitely the product line that our most loyal modding users are happy to see. At the same time, this year we have added all our R&D, which will gradually arrange our resources in two directions, quality upgrade and product evolution. In the quality upgrade, we will have a PC remodeling version, We have new PC modules, including our pocket version 2.0, which are all made in the direction of our quality upgrade. This product line will gradually push into the market in 2024 to expand our entire user group and content product line. The last one is the part of our product upgrade. Surrounding the entire module IP, we will continue to improve our IP worldview, At the same time, in addition to the 2.5D view, we will also launch new MoYu products with an open view, including MoYu for the open world. Here, we will also set up the entire MoYu ecosystem in the direction of MoYu for the original universe. At the same time, we think that the MMO category is actually the closest to the original universe concept. Because it has a rich social network, rich online and offline interaction, around our entire IP brand and continuous investment. We also hope that MoYu will become a long-term global ecosystem. Next slide. Next, I will introduce our ZhenFu IP. ZhenFu IP has maintained long-term income growth, especially in the overseas part. It has done a very good job. Its overall income has increased by 9.5%, and its activity has also increased by 7%. In fact, this is the foundation of our whole MMO strategy and the success strategy of market promotion. First of all, in the MMO part, in fact, as our government products are pushed to different countries, we will do a lot of MMO plus parts. For example, MMO plus some light combinations, MMO plus leisure. In fact, through this addition method, we can adapt to different cultures and different user habits very well. uh, uh, uh, uh, In terms of overseas strategy, I can roughly divide it into the part of pure quantity and true quantity. In terms of pure quantity, with the development of two IPs in overseas, such as Moyu and Soul of the Soul, we have found that after some opportunities in the South China Sea have passed overseas, there are actually a lot of opportunities for some long-term and refined operations. We will talk about competition barriers. We pay more attention to the construction of long-term competition barriers. For example, some long-term offline promotion. These tie us up with the game and the user for a long time. Some offline operators are our overall distributors. These are part of our overall ecosystem. These will also ensure the long-term stability of our revenue. At the same time, It is also very stable. When it is affected by the epidemic, I believe its resistance is also stronger. At the same time, as we continue to expand overseas, we are also starting to do more delicate and vertical content. These contents are produced in the soul of the soul, and they have also been verified in the conquest. Then we will have more opportunities to make a larger investment in the future. This is the part of quantity. In terms of quantity, our existing products, such as our Central City Agreement, have signed a contract with a well-known 3A operator, which will start to push overseas markets this year. This is a quantity for us, including the part of Neopad's original universe, which is also a quantity for us. And under the premise of some verification strategies, we will also add our part of investment acquisition. This is also an extension of our existing verification part. This can also help us expand our revenue scale. This is also part of the layout we will do this year. I believe that under these strategies, in 2023 and 2024, our overseas revenue will also have a healthier growth. This is the IP product line in the next 23 and 24 years. As you can see, with every quarter of the year, the number of products we release is increasing. This is also a return on the growth of R&D in the past year. There are actually two parts here. One is relatively very stable, as mentioned earlier, whether it is the part of the English soul, Zhenhu, or the IP product line of MoYu. Another part is that we are in the innovation track. In terms of the innovation track, we are still relatively deep into the MMO plus part. For example,放置卡,一些放置的品类。这些品类是跟我们的DNA是相对更加契合的。它相对来讲都比较的长线,能够把我们的MMO优势发挥到最大。这里的话,这些IP产品线的上限跟布局会对我们的收入有一个更加利好的作用。 As of this year, in January and February of 2023, our overall income has actually had a very good trend. I believe that in this year's financial report, we will also show you more. In addition, I would like to mention the big environment. In terms of the big environment, from a policy point of view, it has been relatively fully recognized that the game has a positive effect as a technology innovation. At the same time, with the normalization of the board number, I think the overall gaming industry of the company will also be greatly improved. At the same time, some of the latest AIGC technologies, in our opinion, are also a very good example. We have already used it in the part of the production of the entire game, which has received a lot of verification, especially in the art and even in the planning part. It has obviously played a major role in our production. At the same time, we also value it very much to create a new gaming experience. Because our main platform is also an MMO. MMO requires a lot of content, a lot of positive social media to drive a gaming platform. We are very optimistic about the use of AI NPCs and some virtual streamers and virtual idols. These are also a great opportunity for us. I believe that with the drive of these big environments, with the push of technology, with the push of our new product line, Great. Thank you.

Good morning. Good afternoon. Good evening, everybody. My name is Ben Riera. I'm the CEO for Media. I'm going to be talking about two things today. I'm going to talk about 2022 performance and review the highlights of last year. And I'm also going to be talking about what we're focused on on a go-forward basis in 2023 and beyond. Next slide, please. We saw nice growth across our three main categories that we track. Revenue was up 31% year-over-year. We finished the year at $585 million in revenue. We shipped over 253 interactive flat panels last year. That was a 38% increase year over year. And we're also able to increase our market share from 23 to 23.7%. So across all three categories, we saw nice levels of growth. Next slide. I talk a lot about our global footprint in these falls and looking at where we're number one. Simon already mentioned that we're the number one a provider of interactive displays globally, excluding China. And I'm pleased to share that we're number one in nine of our top 10 markets by revenue contribution. This is a really important metric for us for a couple of reasons. The first is we want to be number one in a market. We want to be the thought leader. We want to be the market leader. But also equally as important, as we build out a new pipeline of products, we want a strong install base to go sell these products, to sell our new products to. And what this shows is we have deep relationships globally with customers in our largest markets. Next slide, please. We also launched our ActivePanel 9 in June, and we were able to launch it with a higher ASP. We're super proud of the new ActivePanel 9 product. It comes with upgraded hardware. It comes with ActiveSync security features and recording features. This is a very strong product line in the market today. And the fact that we're able to sell this product at a higher ASP really shows that. When we launched this product, we got multiple areas of feedback from existing customers as well as net new customers. What our existing customers really liked about the product is it was a seamless transition from a previous version of a Promethean product into a new version of a Promethean product. except it has much better features and functionality than prior versions, but it was a seamless transition. What new customers liked about this product is that it was super easy to set up, it was super easy to install, and very intuitive to use. So when we take a look at how this product resonated in the market as we look back over the last six months, we're super pleased with the progress that we made. Next slide. We also acquired a company in 2022. We acquired Explain Everything. It's an existing SaaS product and it's a whiteboard product. Whiteboards are incredibly important to our customers. Over 90%, 95% of our customers utilize the whiteboard application at least monthly. And the whiteboard function that exists with Promethean is a great user experience, but it's very basic user experience. As technology has increased, and use and ease of use of that technology, we saw a lot of requests from our customer base to expand our offering and specifically our whiteboard offering. We're thrilled that we were able to acquire a market leader in the whiteboard space. Product is very differentiated. It's got collaboration features. It allows you to present, record, and collaborate. And it's a product that sells today in the Apple store. We sell it directly today to and customers, and we're super excited about our ability to integrate this product into other software offerings to increase the size of the software stack that we have going to our customers that takes a great Promethean experience, allows our customers to be able to enhance that to whatever level they see fit. We're going to build on the monetization that started with this product in 2015, and we're excited to incorporate it into our existing offerings and our future offerings. Next slide. One of the things that we also look at is we like to look at customer feedback, but we also want to see where our awards are coming from. I'm thrilled to say that we've got awards across the three most important categories, teaching and learning awards for use in the classroom, EdTech awards for innovation within the EdTech environment, and then also IT awards for ease of use and security by the IT administrators that will set up and connect these devices. So as we take a look back at 2022, and as Simon said, it seems like it was so long ago, we accomplished a tremendous amount of things aside from a number of awards. We were our market share, which is incredibly important. We had strong revenue growth. We launched our new AP9 product, which is just setting the stage for future growth. And we acquired Explain Everything, which is a SAS revenue stream and a product that we feel really good about. So if we go to the next slide, I want to talk to you about what we're looking at and what's to come and what we're actually working on. So I'm going to talk about our path to integrate AI. So if we go to the next slide. We mentioned last year that we had a strategic partnership to take the two market leaders, Promethean as an interactive flat panel, market leader in front of class with Merlin Mine, which is the leader in AI assistance for education. And we signed an exclusive distribution agreement between the two of us This agreement arrangement has been great. We've had the opportunity to get more Merlin Mind devices in the market. We've also had the opportunity to hear the phenomenal feedback that we're getting from teachers that are using the product and the ease of use that it has. And what it's really enabling us to do is to see how AI is being used in the market today and where we can bring AI in the future across our offering. We're also seeing an opportunity in working with Merlin to roll out an additional AI integrated panel, which I'll talk about briefly shortly. Next slide, please. So, just as a quick reminder of what Merlin Mind is, Merlin Mind is the leader in AI-powered teaching voice assistant. And really what it allows is it allows a teacher to be able to operate anywhere in the classroom using voice AI. We can tell if a product is successful or if people like using it by the amount of times that they use it. And the way that Merlin is able to engage or teachers are able to engage with the Merlin product is nothing short of stellar. The average user uses this over 30 times a day in the classroom. The top 17% are using it greater than 50 times a day. And the top 6% of users are using it 100 times a day. When you compare that to, you know, a large offering like Amazon Alexa that is not specific to a specific environment, usage is significantly higher. So, we're thrilled to see that this product designed for the classroom is being used in the classroom as intended. Next slide, please. So, a quick recap. When you take a look at today's classroom and where we're going, there's all sorts of technology that exists in the marketplace today. But the devices are siloed, and there's not any integration or AI in the classroom setting on a broad basis. Merlin's the first to really step into that. Teachers are tethered to the Blackboard or panel. They have to teach from the front of the classroom. They have to teach from their laptop, which is not always ideal. And there's just too many applications that are not connected together, which really leads to teacher fatigue and burnout. Our vision of the future AI-enabled classrooms is devices and applications are connected with AI. Micro automations between the products and applications that are most frequently used really enable a teacher to do what they're there to do, which is to teach. We're untethering teachers and engaging students. We're allowing teachers to roam around the classroom and teach in a natural way and use their voice to share lesson plans or do searches or show additional content. And it's just a natural interaction of tech for teachers and students. This is something that they do today, but it's bringing it together in a package that makes it much easier for them in the future. Next slide, please. So our roadmap on how we're going to become a category-dominant leader in AI-enabled classroom solutions are we're going to focus on delivering AI with our panel, and we're going to leverage our existing channels and install base. So we're working to deliver an AI enabled panel in the next panel release. We're gonna introduce our install base, which is greater than 1.9 million classrooms to AI powered technology. And we're gonna leverage the 275 sales professionals and over 2000 channel partners to accelerate penetration of our new AI solution in the market. It's important to understand that this is a new technology and a new solution. We think that we can take a bigger share of wallet when we're competing for new front of class business. But I also think it's a compelling technology that makes teachers' lives easier. And in essence, that expands our total addressable market because I think instead of a natural replacement rate, people will replace their products sooner to get to the latest and greatest technology because it will really make a difference. We then can take that base that we're building of AI powered panels and expand our offerings with generative AI solutions and education. This allows us to bring new solutions to the classroom, and then we can also focus on what we can do not only for teachers, but also for students and administrators. So, we're taking this really healthy market that is growing and we're addressing, we're increasing the total addressable market with people coming toward new technology. And then finally, there's a lot of excitement and enthusiasm around AI. But the ability to control what teachers are using or what schools want to see the educators using is something that people can control. And we're going to make sure that we incorporate controls into the AI so people can set up the settings that they want to use, the content that they want to use, and overall functionality that's customized to the school. So, we're putting a lot of thought into the products that we're going to be bringing to market. Next slide, please. Excellent.

Thank you. I'll hand it over to Simon. Yeah.

Thank you, Simon. Thank you.

Actually, let me kind of take you back on what the enthusiasm you can see in Vin's presentation about us embracing the new technology, whether it's actually explain everything, which is a technology that we find in some of the future that we're working on, which is actually all around AI. I think this basically has been across both businesses. However, I do believe it will make much quicker impact in education. I just want to reiterate Vin's point about expanding the market share. What we have done by embracing AI, we basically create a new category of market for us. So instead of looking at the traditional panel, market. We're looking at somebody who's looking for AI to help, whether the teacher, the student, or whether they're at home or they're in the classroom. So we were able to address all that. So number one is actually create our TAM in both ways. One is actually, I mean, we will take share. The other one is actually, I do believe that we will also speed up the replacement cycle because it's the kind of the benefit of using our AI panel, which got me very, very excited. The other thing is actually we're going to, in addition, we're going to add to our revenue stream, which is actually we monetize AI by creating SaaS opportunity for us, which again, alongside with Explain Everything. We do believe education for us in 2023 is a transformative year. And go back to your gaming. We are equally excited about the fact that gaming will also be improving AI technology, the whole console of metaverse, because it's actually that's what we do well for the last many years. It's like MMORPG games, but with a lot of new technology. In case you don't know, we have made quite a bit of investment in the metaverse area. I think Vincent talked about live streaming. We invest in a company like that. We're also looking into investing into other companies that will enable us to embrace the whole concept of metaverse. Of course, that's going to be a multi-year effort to get us to a metaverse, but we are starting like last year, and we're going to continue to make progress. With that, we are cautiously optimistic about 2023. There's going to be some challenges along the way. because it's actually the economy around the world, some of the geopolitical issue, but we're very confident we have a good team to support us, and we'll find ways to navigate through all these challenges and continue to grow our business. So with that, I'm going to stop, and then I think we're going to open up for Q&A.

Thank you, Dr. Leung and management. Now it's time for our Q&A section. You're welcome to raise questions in two ways. First, if you would like to raise questions through the teleconferencing system, you may press star 1, star 1 on your phone keypad, and our operator will bridge you through. Second, if you would like to raise questions on our webcast platform, please click the question mark on the screen and type your question in the Q&A box. Thank you, Dr. Liang, and everyone in the management team. Now, let's move on to the Q&A session. Welcome everyone to ask questions in the following two ways. If you would like to ask through the telephone meeting system, please press the new button. Our operator will help you. If you would like to ask through the online live broadcast platform, please click on the question mark on the left and enter your question in the Q&A frame. We welcome questions in both English and Chinese. 欢迎各位以英文或者中文提问。 No questions so far? There is a question coming from. We are checking. Okay. So investors are very excited about our AI, our AI path. The first question investors would like to know about our Merlin Mines AI technology. Is it a self-developed technology, or is it based on any existing platform? Is there any other future application in pipeline?

David, do you want to take that one?

Sure, yes. That is Merlin's technology that they've developed. They've been developing over the course of the past five years. We have an exclusive distribution agreement with the Symphony Hub for that product. And it is completely focused on the classroom, which is what makes it so differentiated. It's not generalized AI. It's specific to a teaching and learning environment. It's also specific to regional applications. So whether it's US or UK, it can be customized.

The other thing I want to say is actually it is based on Merlin's own technology, but that said, it doesn't stop us from working with other people like ChessGPT, right? So we are very open in working with other people because we want to integrate all the capability and offer the best solution and, you know, addressing the best use cases that we have in education.

Thank you, Simon. Thank you, Vin. Our next question is also for our education business. Is it that our education business revenue growth in the second half of the year actually decreased? What's the reason? And what is the revenue outlook for 2023?

Well, first of all, we don't give guidance, but Vin, maybe you can address the second half issue. And don't forget, I said it at the very beginning, I mean, it's actually you know, the economy in Europe and all these different challenges. So, anyway, Avin, go ahead.

Sure. I would attribute the biggest reason for the decline in the second half of the year is what we saw was buying behavior based upon COVID funding that existed. And schools could make decisions outside of typical times that they make decisions. So one thing, if you take a look back historically at the education performance with Promethean, it's been much more seasonal and much more cyclical. It doesn't mean that the volume changes per se, it just means the time of year that the volume, that customers place orders change. What we saw was as things became essentially more back to normal and more normalized in the second half of the year, it started to feel like a more normal buying behavior. where people go out to bid at this time of the year in Q1 and place orders in Q2. And that's what we saw in the back half of last year.

Yeah, it's actually, one of the things is actually, if you look at our tradition in the last many years, it's actually, I think Q2 and Q3 are the buying seasons and the market shifted a little bit. I think the market is actually kind of going back to the Q2 and Q3. So I think we're getting caught in terms of the shift And if you look at the first half of last year, our growth is tremendous. So I think we should kind of look at the year over year growth rather than a half year over half year or quarter over quarter because of the shifting.

Thank you, Simon. Thank you, Vin. Our next question is also for the education business. We would like to know more about our SaaS business at the moment. So what would be the contribution in 2023 and what is our expectation?

Vin, you want to take a crack first? Oh, yeah. Sorry, I missed the first part.

What's the first part of the question? Can you give us a brief on our current development on the SaaS business?

I'm hearing the word SARS.

Yes, SARS.

That's right. SAS model. SAS model. Oh, SAS model. Yes, SAS model. I apologize. Yeah, we have been focused on building on our SAS business, and we're super excited about the Explain Everything acquisition because the whiteboard is the cornerstone of the use case with the panel. And what it allows us to do is take an existing product that did not have a very large distribution channel, incorporate it into our distribution channel as the first step, put additional focus on using distribution methods like the Apple Store. But more importantly, building that product out and starting a tiered software stack that customers can buy what they want to buy from us for an enhanced experience. And we're gonna continue to bring high value, high quality software solutions that solve challenges in the classroom.

Yeah, if I may add to it. So when the integrated AI panel coming out, so there's a lot of opportunity for us to add and address the use cases. So that's also a great opportunity to continue to build our best revenue stream. Like I said at the very beginning, We, the management team, intend to separately set up a session so we can talk about all this going forward in a little bit more detail. So stay tuned. We probably won't be able to address all the details at this point in time.

Thank you, Simon. Thank you, Vin. Our next question is for our gaming business. 接下来是一条关于游戏业务的问题。 May I ask, in the game industry, the overall overseas income ratio is increasing. In the future, what games are we preparing for the overseas market? Thank you.

Good question. Linton.

Okay. Let me introduce it. First of all, we are divided into two parts. This is mainly the part of pure quantity and increased quantity that I just mentioned. The part of pure quantity is that first of all, our conquered product line uh, uh, uh, uh, At the same time, as Simon mentioned, NEOPAD Metaverse, which is the original version of the universe, will also be launched to the market, including our mid-term contract with 3A's issuer. This year's Q4 will also be launched first in Japan and will gradually be launched to more countries. At the same time, in the overseas part, our new代号DPS and代号仙霞 will probably be launched at the same time overseas. Thank you, Mr. Lin.

Next, we would like to welcome a question from the telephone meeting system. We would like to welcome a question from our teleconferencing center. Operator, please bridge through. Thank you. The question on the telephone is from Hu Ke from Zhonggeng Fund.

Please start your question. Thank you, Ms. Guan. I would like to ask about our future business policy.

Thank you, Mr. Guan.

I would like to ask what our future policy is like. Mr. Ye also mentioned that we will mostly use cash flow to buy back or split the red. Then this time, it seems to be a little lower than this goal in 2022.

I don't know what kind of expectations it should give in the future. Ben, you answer.

This is not a little bit lower. OK, OK. Our share price is like this. This time we split 40 cents. In the future, according to our profit, we hope to have a stable payout ratio, and we will maintain stability. Of course, we also need enough cash to capitalize on our different opportunities. So I think we will have a stable share policy in the future.

Let me make a comparison. Last year, we had a special dividend, so you can compare. That was a one-time thing, so we said it was a special dividend. In fact, our dividend didn't change. We returned a little bit. Our shareholder dividend didn't change.

I understand. But before, the target was the cash flow, right? Maybe in the future, it will be more about the profit ratio.

I think it's not necessarily like that. Because Ben talked about it before. We also do some buyback. So we use different methods to return to our shareholders. It's not just about the share price.

Our next question comes from CGS DLMV, Ernest.

The question is, dear management, thanks for the informative presentation. The first question is for our gaming business. I understand that your plan is to significantly expand our pipeline of new games. Can investors look forward to new games to be launched in the next three months? You need to answer in English or in Mandarin? I think in Mandarin should be fine. Okay, we're good. Okay.

这个的话,如果是未来三个月的话, 我们预期是代号DBS, 预期在未来三个月, First of all, it can be tested overseas. This is probably the fastest project this year. As for the other one, as I mentioned earlier, it is a mid-term contract. In principle, it is in Q4, which is the same as our launch plan, which will be launched in Japan. This MOUYI手游2 with the code DPS and the mid-term contract are the three products that we mentioned this year. Next year, we should have more products on the line.

The next question from Ernest is that given the exciting development in our education segment, do you think it's likely to continue the trend of narrowing the segmental law of the business such that it may hopefully... We're asking for guidance again, so we're going to pass on that one. Thank you. So our next question would be, Our next question is also for our gaming business. It's from Wasted Research, Min-Hyung. He would like to ask, by extending Udemon into so many versions, would this dilute the player experiences or spread the existing player's true theme? Mr. Lin, because there are many different versions of UDEMON, will there be a discrepancy in our players' experience or feelings? Or will there be a discrepancy in the number of players? Thank you. This is actually a good question.

Because the reason we are doing our IP product line planning is for this purpose. In the past, whether it was a demo version or a demo mobile game, the information we sent to users was relatively vague. This year, we have made the IP product line plan, and we have clearly divided our product line into classic demos. The classic demos will be more suitable for players who are particularly nostalgic and want to continue the classic settings of demos. And in terms of quality upgrades, we will definitely do a lot of art upgrades in the existing module, and optimize the gameplay. This product line will be more suitable for module users, and it will be easier to accept new concepts and new gameplay. At the same time, it will integrate our more advanced IP users with more lost users. In this part, we will also differentiate it in promotion and strategy. At the same time, we will bring some parts of the product evolution of MoYu. In this part, it will face more of our entire IP loophole and more large-scale users. In fact, from the positioning of the overall product layout and marketing strategy, we will have an obvious gap to ensure that our users can satisfy different user groups, and to expand the entire MoYu user pool better. At the same time, in the past few products, we have found that our new products have not been greatly affected by the old products. This also gives us a lot of confidence. I hope that in the future, through this product positioning and marketing strategy, we will continue to broaden our user community. This is something that we will pay special attention to in the development and operation of the overall game. Thank you.

Thank you, Simon. Thank you, Lin Chengdu.

Our next question is also from Weham. What is our current plan or schedule on the spin-off of our education business?

What do you want me to say? So the only thing I would say is actually Either no comment or stay tuned.

Yeah. Thank you, Simon. Our next question is from Guangfa. Okay. Either Ben or Irvin. Maybe Ben, you can take it.

Yeah. Yeah. Yeah. Yeah. If we look at an experience and a forest neutral basis, I think we can still have a stable growth margin.

I would like to add something. First, because in 2023, most of us will buy AP9 in the first half of the year. Because last year there was AP9 and AP7. Because we have launched a new product, there will be pressure on the old product, the ASP. So in addition to the rate, there is also that situation. In the second half of this year, we also talked about the AI integrated panel. I don't think there are any other competitive opponents. So we have the opportunity to maintain a relatively high ASP. So from different angles, we are actually dealing with that. Another one, because we are in Europe, the price, this price uses local currency, local currency. We also have this strategy to solve that problem. Finally, because of the gross margin, in terms of cost, Thank you Simon, thank you Ben.

The next question is from Integrated Asset Management. What is the main reason for the gap in the education business? Actually, we have talked about it.

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Thank you, Simon. Thank you, Ben.

Our next question is from K2 from Everbright Security. In terms of game business, what is the progress of NEOPAT in the original universe and its entire IP promotion plan? How is it? Thank you.

Lin Cheng, are you going to answer or should I answer NEOPAT?

Are you going to answer?

Yes, you go ahead. Okay, I'll answer. Because NEOPAT has two aspects. We have a classic version that we have saved. And then Web 3.0, we are actually promoting it together. Actually, we have already launched Alpha last year. Actually, we are now preparing for a relatively large release. It's not ready yet. We have a lot of things that are quite exciting for me. uh uh uh Okay, thank you, Simon.

The next question is for the analysts. Mr. Lin, I hope you can share with us the outlook of the game in 2023, especially in terms of income and profits. And they also want to ask, because we now have a relatively large user and player community, how do we manage such a community? What are your thoughts in the future?

Thank you. Let me start with this. Okay.

In terms of user group management, I think we may divide it into several circles to do this. The first one is especially within the game. Because after all, we are a game product. Maintaining everyone's activity within the game and increasing everyone's response. This is the first priority for us. So as I said before, the first priority, we still want our users to spend more time in our game. With the operation of these files, In fact, we hope that whether it is our more old-fashioned MOU or our more innovative MOU, from the point of view of user maintenance, our first priority is to keep our MOU users in our MOU. The second circle is actually what I just said. In fact, there are some different branches. What I just mentioned is that our PC MOU actually has a mobile phone interface. In addition to some game content, the interactive version also has some desktop functions or some wallpaper functions. In fact, it also creates a very good part to maintain our users. The third circle is actually that we will integrate marketing with this user system. It will open up some of the user pools of all games, our consumption pools. We hope to use our VIP system and this online service to do our entire user setting well. Of course, the next step, we also consider, because many of the companies in the same industry will do a unified user community app. In fact, we have tried it before, but we think the most important thing is the maintenance of the content of the user. We hope to be able to promote more content. We also have a layout for the app, but we will develop and upload it at the right time. Thank you, Mr. Lin.

Let's welcome our last two questions. Over to you, Ben. Ben? Hello, Ben? Yes, I'm here.

Sorry, my line was cut. I just lost... Okay.

This question is about our management's next resale plan.

Okay. We haven't changed our resale plan so far. I've already mentioned it. About a year and a half ago, our plan was to have a free cash flow of a substantial majority or vast majority every year. Thank you, Simon.

Thank you, Ben.

Our last question is for Vin. Actually, because Promethean has maintained a leading position in the market for a very long time, what is the expectation for the demand in 2023 and 2024 given the macro backdrop is quite weak this year, this two years?

So, I'll answer without giving any guidance. The interactive flat panel technology, we are at the stage of market adoption today where customers that were early users of the technology are now replacing the technology with new interactive devices. Customers that used to buy whiteboard technology, there is now products in the market in the interactive flat panel world that are in line with that. So the addressable market from a replacement cycle is bigger. And then there's still large portions around the globe that have not even adopted this technology yet. So overall, you know, overall, there's a significant amount of classrooms that don't have any type of front of class technology and which is all green space force.

Yeah, if I may ask, it's actually I'm ready to summarize what Ben said earlier. One is actually he'll continue to gain share. That's part of the growth strategy. The other one is actually he managed to expand our addressable market by introducing a value panel. I think we did talk about it. Maybe we didn't. I forgot. So because we have been selling the high end, but we're going to introduce a value panel. So our plan actually has increased. This is really looking at Promethean. Last but not least is actually what Vin has spent a lot of time talking about, creating a new category, which is actually AI-enabled, which is actually the first one to the market. So our ham is actually can expand even on the down market. Yeah, I think that's the point.

Thank you, Simon. Thank you, Ben. Thank you, Vin. Sorry. Okay. Thank you very much. Thanks, Dr. Lam, Ben, Lin Zong, and Vin. This successfully concludes our presentation today. Once again, I would like to thank you all for joining us. If you would like to communicate with the management further, please contact us for one-on-one meeting arrangements. Thank you, and we wish you all have a great day. Okay, thank you. Okay, have a good day.