NetDragon Websoft Holdings Limited

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.