Corporate Presentation October 2018 Disclaimer This presentation is - - PowerPoint PPT Presentation

October 2018 Corporate Presentation

Disclaimer

This presentation is prepared by NetDragon Websoft Holdings Limited (the “Company”) solely for information purposes and is not to be construed as a solicitation of an offer to buy or sell any securities of the Company in any jurisdiction. Information is given in summary form and does not purport to be complete. This presentation is prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. In this connection, information in this presentation is not investment advice and is not intended to be used as a basis for making an investment decision. This presentation may contain forward-looking statements that are based on current expectations of the Company’s management about future events and past performance. These expectations are, however, subject to known and unknown risks, uncertainties and assumptions, many of which are outside the control of the Company, and may involve significant elements of subjective judgment and assumptions as to future events that may or may not be correct. Past performance is no guarantee of future performance. Therefore, there is no assurance that actual results or performance will not differ materially from future results or performance expressed or implied by the forward-looking statements. Information in this presentation is made only as at the date of this presentation unless otherwise stated and subject to change without notice. None of the Company’s directors, employees or agents undertakes any obligation to correct or update information in this presentation as a result of new information, future events or otherwise.

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Education

The One-Stop Solution For the Next Generation of K12 Education

5M+ 90M+

Registered Users MAU

190+ 1.3M

Classrooms Countries

400K+

Schools

650M+

Learning resources created and shared 4

The Largest Global Learning Community

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Integrated across Education Value Chain

Lesson Preparation Lesson Delivery Homework Resources Sharing Teacher- Student-Parent Communica- tions Tutoring In Class Post Class Teachers Students / Parents

Classroom Interactive Delivery System Content, Communications & Resource Sharing On-Demand Tutoring

Interactive Lesson Preparation & Delivery Communications & Resource Sharing

1 2

Easy-to-use lesson building tools to make interactive and media- rich content Library of customizable courseware PPT, insert- able mini learning modules and questions In-class delivery through state-of-the-art hardware displays Tools for-in-class assessments that allow for immediate student feedback Share & discover resources Messaging for students, teachers and groups Real-time progress monitoring On-demand virtual tutoring

640K

WAU teachers on ActivInspire

2M+

Installed base teachers on 101 Education PPT

1B+

Messages sent through Edmodo platform

650M+

Shared assets & resources

7M+

Quizzes administrated

20M+

Assignments completed

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Re-inventing Education by Creating an Interactive Community

▪ Easy and efficient teaching preparation ▪ Rich resources of teaching content ▪ Enhances interaction between students and teachers ▪ Real-time progress monitoring

Students

▪ Community building and peer interaction ▪ Enhances engagement among students ▪ Personalized learning through big data analysis ▪ On-demand assistance through on-line tutoring

Parents

▪ Real-time progress monitoring ▪ Easy-to-use communication tools with teachers and fellow parents ▪ Ability to react to problems

✓

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Teachers

✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Value Proposition for Our Users

Large Addressable Market and Untapped Market Opportunity

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Classroom Penetration

29%

71%

Classrooms with Interactive Displays Classrooms without Interactive Displays

Source: Euromonitor, Futuresource Consulting

2017A Consumer Education Expenditure

US Market

US$293bn

Global Market

US$1,160bn

China Market

US$232bn

Global Leader in K-12 Interactive Technologies*

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#1 USA #1 EMEA

*Source: Futuresource Consulting

• Valuable long-term physical access to
• ver 1.3M classrooms
• Well-positioned to capture the shift to

digital in classrooms as interactive panels are the gateway to bring users online

• In-class delivery system enables insight

in classroom engagement

Global Market Share: 16% in 2Q18

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Continue our market leadership in front-of-class hardware as gateway to gain users Engage users with killer offerings that empower them to connect, share and socialize in a learning context

Monetize Users with Internet Services

Our Three-Pronged Strategy

Machine Learning Advertising Live Tutoring

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Our Monetization Strategy

Gaming

9 Million 180

MAU Countries

RMB585

Monthly ARPU

Gaming Business Snapshot

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• One of the most legendary MMORPG in China
• Accumulated gross revenue of over RMB10 billion
• 5 months of monthly gross billings over RMB100 million during 1H18
• Accumulated more than 200 million gamers

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Eudemons Online

Member of 10 Billion Club

• Top #2 MOBA mobile game in China
• Registered users > 150M
• Mobile MAU 4M
• Multiple eSports events hosted by Information Centre of General Administration of

Sports of China in 1H18

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Heroes Evolved

6 Million+ MAU

IP GAME TITLE/CATEGORY PC MOBILE AR/VR

PC & Mobile Cross-Platform Version

√

3D Eudemons Online

√

H5 Game

√

Third Person Shooting

√

√

VR Trading Card Game

√

Strategy MOBA Game

√

SLG

√

H5 Game

√

New IPs

3D ARPG Game

√

H5 Game

√

Gaming Pipeline

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Financials

1H18 Results

Revenue: RMB2.5 Billion Net Profit: RMB201 Million

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1,775.3 2,469.9

• 500.0

1,000.0 1,500.0 2,000.0 2,500.0 3,000.0

1H17 1H18

(RMB million)

25.8 200.7

• 50.0

100.0 150.0 200.0 250.0

1H17 1H18

(RMB million)

Segmental Results

Gaming Segment Education Segment

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802.4 1,039.3 334.1 524.4

• 200.0

400.0 600.0 800.0 1,000.0 1,200.0 1H17 1H18 (RMB million) Revenue Core Segmental Profit/(Loss)

934.1 1,384.1 (189.2) (158.7)

(400.0) (200.0)

• 200.0

400.0 600.0 800.0 1,000.0 1,200.0 1,400.0 1,600.0 1H17 1H18 (RMB million) Revenue Core Segmental Profit/(Loss)

Condensed Income Statement

(RMB million) 1H18 1H17 YoY (%) Revenue 2,469.9 1,775.3 +39.1% Education 1,384.1 934.1 +48.2% Gaming 1,039.3 802.4 +29.5% Gross Profit 1,402.1 1,033.3 +35.7% Selling & Marketing Expenses 332.6 292.5 +13.7% as a % of Revenue 13.5% 16.5%

• 3.0 ppts

Administrative Expenses 409.5 344.9 +18.8% as a % of Revenue 16.6% 19.4%

• 2.8 ppts

R&D Expenses 442.2 396.3 +11.6% as a % of Revenue 17.9% 22.3%

• 4.4 ppts

Net Profit attributable to Shareholders 200.7 25.8 +678.8%

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(RMB million) Education Gaming 1H18 1H17 YoY (%) 1H18 1H17 YoY (%) Revenue 1,384.1 934.1 48.2% 1,039.3 802.4 29.5% Gross profit 421.5 273.2 54.3% 978.5 755.2 29.6% Gross profit margin (%) 30.5% 29.2% +1.3 ppts 94.1% 94.1%

• Core Segmental profit (loss)1

(158.7) (189.2)

• 16.2%

524.4 334.1 56.9% Segmental operating expenses2

• Research and Development

(214.5) (183.8) 16.7% (222.4) (203.2) 9.5%

• Selling and Marketing

(224.2) (192.1) 16.7% (102.6) (97.1) 5.7%

• Administrative

(113.0) (68.8) 64.2% (143.8) (133.9) 7.4%

Segmental Financial Highlights

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Note 1：Core segmental profit (loss) figures are derived from the Company’s reported segmental profit (loss) figures (presented in accordance with Hong Kong Financial Reporting Standard 8 (“HKFRS 8”) but exclude non- core/operating, non-recurring or unallocated items including government grants, fair value change and finance cost of financial instruments and fair value change of convertible preferred shares. Note 2: Segmental operating expenses exclude unallocated expenses such as depreciation and amortisation that have been grouped into SG&A categories on the Company’s reported consolidated financial statements but cannot be allocated to specific business segments for purpose of calculating the segmental profit (loss) figures in accordance with HKFRS 8.

Management Team

Dejian Liu

Group Founder and Chairman

▪ Ahead-of-the-curve product designer ▪ Conceived, successfully scaled and commercialized “first-mover” ideas including:

• 1st gaming portal (17173.com)
• 1st “free-to-play” MMORPG (Eudemons Online)
• Largest smartphone appstore (91 Wireless)
• Dr. Simon Leung

Vice Chairman, NetDragon; Chairman, Edmodo

▪ Former Chairman & CEO, Greater China, Microsoft ▪ Former President, Asia Pacific, Motorola ▪ Doctorate in business administration from Hong Kong Polytechnic University and honorary doctorate in laws from University of Western Ontario 23

Visionary Leadership…

• Dr. Vibhu Mittal

CEO, Edmodo

◼ Former Senior Scientist of Google ◼ Former Co-Founder and CEO of Root-One ◼ Ph.D in Computer Science from University of Southern California

Ben Yam

Chief Financial Officer

◼ Former Senior Vice President, SAIF Partners (Asian PE fund with US$4B AUM) ◼ Sat on board of 7 TMT portfolio companies ◼ MS from Columbia University ◼ CFA, CA, CPA

Vin Riera

CEO, Promethean

◼ Former Director and CEO of Collegis Education ◼ Former Director and CEO of Edmentum ◼ Served in executive leadership roles at Gateway, Inc. and Orange Business Services

Song Wang

Chief Product Officer

◼ Chief Designer of “Eudemons Online”, NetDragon’s most popular and most profitable MMORPG ◼ Expert in gamification and user experience

Wei Lin

President of Fujian Huayu (China)

◼ Head of sales of educational products of Huayu Education (China) ◼ 15+ years of experience in IT, mobile Internet, and education industries

Biao Yu

Chairman of Fujian Huayu (China)

◼ Head of planning, consolidation and operation of Huayu Education (China) ◼ 15+ years of experience in education management

Hongzhan Chen

Chief Technology Officer, Executive Director

◼ Head of game development & technical support ◼ Former CEO of 91 Wireless ◼ 15+ years experience in online game development, management, & hardware development

Xin Lin

VP, Gaming Operation

◼ Head of operations of gaming business, having served 8+ years in the company ◼ Former senior management of Ogilvy, China, with 10+ years of experience in marketing and brand management

• Dr. Li Xiong

Rotating CEO

◼ Associate Director of National Engineering Laboratory for Cyberlearning and Intelligent Technology ◼ 12+ years of management experience in TMT industry

And a seasoned executive management team with track record in execution…

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Hong CHEN

Chief Technology Officer

• f Fujian Huayu (China)

◼ Former CTO of SVMsoft (Joint Venture of VMware and Sugon) ◼ Former Director of VMware ◼ 10+ years of experience in software engineering and development ◼ MBA from Tsinghua University

Company Overview

Pioneer in Building Online Communities

26 2014 Acquired cherrypicks 1999 Founded by Group Chairman Liu Dejian 2003 Sold 17173.com to Sohu for US$20.5M 2007 IPO in HK 2013 Sold 91 to Baidu for US$1.9B 2015 Acquired ChiVox 2017 Included in Hang Seng Composite Large Cap & Mid Cap Index 2015 Acquired Promethean 2016 JV with ARHT 2017 Acquired JumpStart 2018 Acquired Edmodo

Building Global Online Communities

• User Acquisition Track Record: Largest 3rd party smartphone appstore 91

Wireless with 200M+ users

• Strong Monetization: 300M+ gamers, recorded over RMB1,600M of gaming

revenue in 2017

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Expertise in Online Communities Cutting-Edge Technologies Global Team

• Developed and applied innovative VR, AR, AI, big data and speech

assessment technologies to gaming and education businesses

• Globalized team of 6,000+ headcounts, with >60% R&D staff
• Significant presence in China (Fuzhou, HK) and the US (Silicon Valley, Seattle,

Los Angeles) with 10+ regional offices in countries including UK, India, Germany, Canada and Thailand

Synergy between Gaming & Education

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Community Building Big Data Technology Application Gaming

Education

ARPU RMB585 Countries 180 MAU 9M ARPU TBD Countries 200 MAU 5M

Data Analytics Understand Gamer Patterns Drive Gamer Engagement Increase Gamer Conversion Optimize Gaming Experience

VR AR Big Data Speech AI

Data Analytics Understand Students’ Interests, Strengths & Weaknesses Drive Student Engagement Provide Personalized Learning Increase Learning Efficiency & Experience

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Investor Relations Contact ir@netdragon.com

Appendix

Product Portfolio

31 Easy Preparation; Efficient Delivery

E-Learning Games

Educational Resources

Announcements Quizzes Assignments Printables

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Lesson Builder Activities Productivity Apps Lesson Delivery

Platform

[Identity, Storage, Roster, Telemetry…]

Future Platform

The PLATFORM is the glue that connects these experiences –

It creates a consistent user experience across personas, apps and devices – in school and at home – and allows large-scale

• nboarding of new content and resources.

2M+

Current installed base

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Parents’ Communication

4M

Teachers

80M

Students

120M

Parents

2M+

Teachers in 1.3M classrooms as current installed base

Interactive Lessons & Homework

China Overseas

Online Community Engagement

• Resources sharing, homework
• Active community with MAU of 5M+

User Acquisition Strategy