NetDragon (00777) held its 2025 interim results conference on August 29th. According to the company, NetDragon's gaming business achieved a 26.7% year-on-year reduction in R&D expenses through comprehensive deployment of "AI Production Centers," with AI improving overall efficiency by approximately 15%. NetDragon emphasized its commitment to the dual-wheel drive of "AI+Education" and "AI+Gaming," aiming to capture new growth opportunities in global markets through technological innovation and ecosystem collaboration. The gaming business is expected to gradually stabilize, the education market is anticipated to recover as budget allocations and policies become clearer in regions like Germany and the United States, and Mynd.ai is projected to achieve EBITDA profitability in 2026.

According to Acting Chief Financial Officer Liu Kejian, NetDragon achieved revenue of RMB 2.381 billion in the first half of 2025, with gaming and application services contributing RMB 1.738 billion and Mynd.ai (education technology business) generating RMB 641 million. Despite revenue decline, the company significantly improved operational efficiency through various cost control measures, with group-wide sales and marketing expenses decreasing 4.6% year-on-year, administrative expenses falling 14.0%, and R&D expenses dropping 22.4%.

In the gaming business segment, Senior Vice President Lin Chen reported that NetDragon reduced R&D costs in gaming and application services by 26.7% year-on-year through comprehensive AI Production Center deployment, with AI improving overall efficiency by about 15%. The flagship IP "Eudemons Online" saw MAU growth of 11.3% year-on-year, with significantly enhanced user engagement. "Eudemons Online Mobile" revenue increased 6.7% quarter-on-quarter, and several core mobile game products achieved MAU growth exceeding 30% year-on-year. "Conquer" and "Heroes Evolved" IP revenues grew 2.1% and 18.0% respectively year-on-year, demonstrating strong resilience.

Additionally, the company continues promoting "Gaming+" cross-industry collaborations, including partnerships with Harbin cultural tourism, Xishuangbanna Rainforest Protection Foundation, and Chaoshan Yingge Dance, enhancing IP cultural content and social influence.

Regarding new product development, the company is focusing resources on the blockbuster title "Codename MY," which has undergone user testing with positive feedback. Meanwhile, "Eudemons Online" is actively expanding multi-language versions, with two new language versions planned for overseas launch in the second half of this year. "Codename Alpha," the localized version of the "Conquer" series, will also launch in Southeast Asia with partners in the second half of this year. Additional regions are under discussion, with 1-2 more regional launches expected in the second half of the year.

Furthermore, "Final Oath" launched a new version in tier-3 and tier-4 markets this month, bringing incremental revenue. The company will consider multi-channel promotion strategies in the future. NetDragon is also optimistic about the mini-game market, with "Eudemons Legend," a mini-game based on the "Eudemons Online" IP, launching on multiple mini-game platforms in the first half of this year, driving revenue growth through multi-channel integration.

In the Mynd.ai business segment, Vice Chairman Dr. Liang Nianjian mentioned that Mynd.ai revenue declined due to budget cuts in European and American education markets and last year's divestiture of Singapore early childhood education business. The company responded to industry adjustment period through cost optimization, debt reduction, and cash management, with second-quarter gross margin recovering to 31%. SaaS subscription services maintained steady growth with 8% quarter-on-quarter growth in the first half.

The company recently acquired AI voice assistant technology, expected to complete in the third quarter. The AI voice assistant technology will be integrated into large screens, with expectations for improved large screen sales in the future.

Additionally, NetDragon's subsidiary JingoAI reached strategic cooperation with MENGKE COMMUNICATION, jointly launching multiple AI application products, including X-Agent zero-code AI agent factory, WiSKY multilingual decision engine, and YOYA cross-cultural creative platform. The company actively participates in national and international projects, including collaboration with Thailand's Ministry of Education on AI vocational education platforms, partnership with Cameroon's Ministry of Education on digital education development, and announcement of education metaverse strategy at UN conferences, building a globalized AI education ecosystem.

Looking ahead to the second half of this year and next year, NetDragon management remains optimistic about performance. The gaming business is expected to gradually stabilize, and the education market is anticipated to recover as budget allocations and policies become clearer in regions like Germany and the United States. Comprehensive AI application will further enhance operational efficiency and product competitiveness. The company will continue advancing global expansion, focusing on Southeast Asia, Middle East, and African markets, while strengthening user experience and ecosystem development through innovative products like AI Production Centers and intelligent NPC systems.

The gaming business will continue deepening AI integration and content innovation, focusing on premium content and cultural experiences to ensure long-term growth of flagship IP Eudemons Online. For Mynd.ai business, with gradual market recovery and continued cost optimization, EBITDA will approach break-even in the fourth quarter and turn EBITDA profitable in 2026.

Based on stable cash flow and asset conditions, Dr. Liang Nianjian expressed confidence in future development and announced plans to distribute no less than HK$600 million to shareholders through dividends and share buybacks within the next 12 months.

**Q&A Session:**

**Q1:** Will NetDragon potentially disclose revenue progress in AI education and education software business areas?

**A1:** First, we announced integrating AI voice technology into our platform, marking the beginning of our AI revenue advancement. As a listed company, I cannot comment further on internal operational details. However, analysis can be done from two perspectives: First, using our Thailand project as an example, this model is attracting widespread attention, especially in AI-driven education where significant progress has been made. Second, the AI Production Center I mentioned is a core project we're advancing company-wide, aimed at helping partners convert all content (including test questions, videos, etc.) into AI-processable formats. Technically, this is extremely challenging but also exciting.

**Q2:** Regarding the company's gaming business, can you explain the short-term factors causing growth slowdown in H2 2024 and H1 2025? Is it possible for gaming business to resume growth in H2 2025?

**A2:** The company's recent revenue challenges are mainly due to several reasons. In MMO games' long-term operation, as player content preferences and consumption patterns change, the proportion between numerical consumption content and content-based consumption will shift. Players increasingly prefer content-based consumption while fatigue with traditional numerical consumption gradually intensifies. Over the past period, the company proactively adjusted content launch structure and lowered payment thresholds. During games' long lifecycle, adjustments to user preferences and content are normal. We hope through such adjustments to gradually guide player payments and content consumption toward higher-quality content consumption, which is definitely healthier for the company's long-term development. Regarding revenue impact, the company expects to maintain stability quarter-on-quarter in the second half of this year.

**Q3:** What are the company's upcoming new game reserves? What are the launch plans?

**A3:** First is "Codename MY," our most significant next-generation high-quality PC game currently being developed. This product has undergone user testing this year with data meeting expectations. We hope to launch next year pending version number approval. For overseas expansion of existing products: "Eudemons Online" plans to launch multi-language versions, with two new language versions launching overseas in the second half of this year; "Codename Alpha," the localized version of "Conquer" series, will launch Southeast Asian version with partners in the second half. Additional regions are under discussion, with 1-2 more regional launches expected in the second half. Additionally, "Final Oath" launched a new version in tier-3 and tier-4 markets this month, bringing incremental revenue. The company will consider multi-channel promotion more in the future. The mobile version of "Mecha" is also being developed with partners, expected to launch next year. The company is also optimistic about mini-games market, with "Eudemons Legend," a mini-game based on "Eudemons Online" IP, driving revenue through multi-channel integration. If this track proves viable, the company expects more historical IPs to develop mini-game versions to activate users. Finally, regarding AI games, the next year will mainly focus on our AI capabilities assisting existing games' user engagement and revenue. Complete AI games will require another six months to a year of experience accumulation and refinement.

**Q4:** How does management view this year's domestic gaming competitive landscape? What content updates and new product iterations does the "Eudemons Online" product line plan to break through?

**A4:** The domestic gaming market has several characteristics. First is evergreen games and evergreen IPs - all gaming companies have increased investment in evergreen IPs because in today's stock market, evergreen IPs can continuously generate revenue for companies. A single IP can continuously refine and optimize existing content forms while expanding channels. The evergreen development of "Eudemons Online" IP is a significant advantage for NetDragon. The company will proactively embrace user-side increments, including mini-games and console increments, acquiring this traffic and actively responding to or even deploying live streaming events, mini-games and other traffic-driving tracks to help users achieve better traffic guidance. In terms of content formats, the company will proactively absorb popular gameplay appearing in the market into existing or new product lines. Finally, regarding AI, all companies will apply AI in both production and game content deployment, and NetDragon will be more proactive in this regard.

**Q5:** What are the company's prospects for Mynd.ai business from second half to 2026? What are the subsequent reserves in our education products?

**A5:** This is our independent subsidiary's business, so I'll speak from a macro perspective. I believe stable business operation will yield returns. As I mentioned earlier regarding our promotion in Germany and the United States, I think the biggest issue is many schools don't know their budget situation, but we see this situation gradually improving. So as long as we operate stably, we'll see growth, but I can't say what the timeline will be. In the future, we've added some cost-effective products because some developing country institutions found our previous products too expensive. Now we're entering these markets with cost-effective products. Additionally, regarding AI, we'll integrate AI voice assistant technology into our large screens, expecting better large screen sales in the future. I hope revenue, profit and other financial data will also be higher.

**Q6:** Regarding the cooperation between the company's subsidiary JingoAI and MENGKE COMMUNICATION, how is the division of labor? What resources and advantages complement each other, and what are the goals for future market development?

**A6:** Very good question. I think our cooperation is quite perfect. MENGKE COMMUNICATION has excellent technology because they're spun off from a Chinese Academy of Sciences company, so they master AI very well. They have advanced large models and many AI applications that work very well domestically. Our JingoAI has good sales teams and staff, with an execution and implementation team. Simply put, AI technology is provided by MENGKE COMMUNICATION, and we handle promotion. Our promotion isn't just in Hong Kong but will extend to many Southeast Asian locations. Our cooperation is very close. Currently, Dr. Wang Lei, Chairman of MENGKE COMMUNICATION, has joined JingoAI's board of directors.

**Q7:** I'd like to understand the company's deep strategic deployment in AI.

**A7:** From the company's perspective, AI is our core development direction. As mentioned earlier, we apply many AI technologies in games and education - the entire company uses extensive AI technology. Basically, we consider two aspects: one is helping us reduce costs, so our financial condition is very healthy. Previously, many people would say more personnel is better, but now our development direction is opposite. So this planning is also very healthy - we have fewer people but accomplish more. The other part is AI helping achieve product design, including games and education. AI is our core driving factor, pushing us forward. Simply put, every aspect of NetDragon, every product has AI components.

**Q8:** How do you view the long-term operation of "Eudemons Online" in the future? What changes has "Codename MY" made? How does it activate users?

**A8:** First, MMO genre's biggest characteristic is content-oriented, so MMO genre can attract users with corresponding preferences across different themes and cultures. So for "Eudemons Online's" long-term operation, I think first we must persist in "Eudemons Online's" differentiated content approach. This content will continue to attract many users long-term, but simultaneously we'll keep pace with times, continuously improving "Eudemons Online's" content quality and accumulating its IP users. I think this is key to "Eudemons Online's" long-term operation. For "Codename MY," we mainly made more changes because existing products have many old users with established habits. We may focus most importantly on using new engines to improve game quality in "Codename MY." Second, very importantly, we've lowered many user barriers because whether for new users or lapsed users, "Eudemons Online" may have barriers that are too high due to historically accumulated numerous functions. We'll significantly simplify its applicability and barriers, allowing more user types to better integrate into our "Eudemons Online" product.

**Q9:** The company achieved good results in cost savings in the first half. Some adjustments and optimizations were made to R&D or production staff. What are our plans for this aspect going forward? What cost-saving measures are planned for the second half?

**A9:** We'll definitely find ways to reduce costs, but this won't affect our overall strategy. AI will participate in company operations - this is what we've been doing consistently, not just in games but also in education. To add, cost reduction and efficiency improvement actions showed some results in the first half, but you haven't seen subsequent effects yet because cost reduction and efficiency improvement measures started in H2 2024, and we continued in H1 2025. Including this second half, we're still arranging measures. The second half may be more effective because staff reduced in the first half can't immediately be rehired, so cost reduction and efficiency improvement will continue with potentially better results in the second half.

**Q10:** The AI education platform cooperation with Thailand is progressing well. What will we see in the second half? What other national-level strategies do we have in the future?

**A10:** I hope everyone can see some very exciting news in the second half - I won't announce it here myself. Actually, for every project we do, we don't just look at one country. We think Thailand is a representative place that will become our model. There will be great opportunities in Southeast Asian countries, Middle East, or African countries in the future. Recently we had a speech in Beijing with many African education ministers - I discussed this with all of them. I'll also give keynote speeches in other countries in the future. Not just Thailand, but Southeast Asia and many other places - we'll pay attention to cooperation opportunities. I'll also go to Africa at the end of September with two speeches to share our Thailand concepts and cases with them. Then you'll also see our strategic direction in education.