Thank you for joining NetDragon Websoft Holdings Limited 2026 interim results presentation. [Non-English content] Before we start, please allow me to introduce the management who are joining us today. [Non-English content] Dr. Simon Leung, Group Vice Chairman and Executive Director. [Non-English content] Mr. Wood Lau, Group Interim CFO. [Non-English content] Mr. Lin Chen, Group Senior Vice President. [Non-English content] Now, let's pass our time to Dr. Simon Leung to host our presentation. [Non-English content]
Okay. Thank you. Good morning, good afternoon, good night, or whatever. Thank you for joining us today. I'm not going to go through the agenda because you guys are probably very familiar with the agenda. What I'll do is, I'll hit the highlight of our half-year results, and then I'll hand it over to Wood, and then we'll also go into the details. Good news is, on the gaming side, we delivered a growth half-over-half, which is very good news for us. That shows the resilience of our flagship IP, which is really good news. The second big one is something we started much earlier, but I think we are kind of wrapping it up as a product. That is the AI Workforce OS, which I will talk about a little bit later.
That continues to support the cost reduction and in turn support the growth of our gaming business and also the education business going forward. Again, Lin Chen and I will talk about how it will support our business going forward. Last but not least, in gaming is, AI continued to help not only on the cost side, but also on the growth side. For Mynd.ai, the education business in the U.S. and in Europe is still facing a lot of headwind, because of the domestic issues in the U.S., the two wars in both Ukraine and Iran. So it's facing a headwind. We successfully narrowed our loss. I'll go into a little bit detail later on. Another milestone that we hit is, we delivered our latest product, which is ActivPanel 10 for premium market, and also the ActivPanel LE to address the value market.
The ActivPanel 10 premium is quite critical because that supports the third point I want to mention. The good news on SaaS is, we have grown our business year-over-year. This is going to be our future. When hardware has got commoditized, SaaS revenue is very important. The ActivPanel 10 is designed to support all the SaaS businesses going forward, including deploying AI on our panel, which I will talk a little bit more about. With that, I'm going to turn it over to Wood to talk about the results.
Thank you, Simon. Good morning, everyone, and I will walk you through the financial highlight for the first half of 2026. For the revenue, the total revenue of the group is RMB 2.1 billion for the first half of 2026, which is down 12.2% year-over-year. For segment, gaming and application service revenue was RMB 1.6 billion, which is down about 8.8% YoY. Despite the YoY decline, we have seen a significant signal of stabilizing and recover our hope with our half-over-half growth by 3.1% for this half over the second half of the last year. For Mynd.ai, revenue was about RMB 505 million, which due to the delayed pace of the industry-wide demand recovery. For the constant exchange rate, the decrease was a little bit lower to about 17%. Gross profit is about RMB 1.5 billion, which is in line with the revenue trend.
On the cost side, we continue to execute our AI strategy and the overall OpEx decreased about 15% to about RMB 1.1 billion. For the major OpEx and selling and marketing expense decreased about 15% YoY to about RMB 263 million. For the administrative expense, decreased about 12% to about RMB 416 million, reflecting our continuous effort to deploy AI applications to enhance our internal strategy and internal efficiency. R&D expenses decreased about 34% to about RMB 409 million, which is driven by the operational deployment of our AI Employee Matrix, which support structural transformation and efficiency gain. As a result, our profit attributable to owner of the company was about RMB 56 million. It increased 30% this year. I would like to draw your attention on the two major items here. First, we made a diligence impairment provision for the first half, about RMB 113 million.
Reflecting the Ethereum price hit the multi-year lows at around $ 1,600 as of our interim end, which the Ethereum price already recovered a bit as of now. Secondly, the one-off service payment was decreased about 42% to about RMB 88 million, which indicate our operational structure is gradually reaching a new normal. Exclude these two factors, adjusted profit attributable to our owner of the company was about RMB 254 million, which down about 8% year- on- year, which is relatively stable given the market situation. Finally, our board has declared an interim dividend of about HKD 0.5 per share, which unchanged from last year, reflecting our commitment to our shareholder return plan announced in March this year. Turn to the next page is our segmental financial highlight. Starting with a gaming and application services. The revenue was about RMB 1.6 billion, this down 8.7% year- on- year.
Gross profit is about RMB 1.32 billion. This down about 11.8% this year, with the gross profit margin is over 83.3%. Our core segmental profit was about RMB 461 million, which is still a little bit lower compared with the same period last year. Our half- over-half , the core segmental profit has already improved. Segmental operating expenses was reduced across key three categories. For our R&D, the decrease about 23%, and for the selling expenses decrease about 9%, and the administrative expenses about 5%. Overall, the operating expenses for the gaming segment is down about 14.4% as of the cost saving impact our AI strategy continue to kick in. Importantly, our core segmental profit improved half-over-half, demonstrate our business stabilization and the operation efficiency.
Moving to the Mynd.ai, revenue is about RMB 505 million, which down about 21.2%, which mainly driven by a lower customer spending as the delayed time demand recovery. Our gross profit was about RMB 114 million, which down only 40%, which have a gross margin improved because of our cost savings strategy. Our core segmental loss level to about RMB 126 million. This down from the RMB 195 million in the last year. The improvement was mainly supported by our continued cost reductions. R&D expenses is down about 27%, selling and marketing expenses down about 25%, administrative expenses down about 56%. Overall, the Mynd.ai operating expenses is down about 39% YoY, as we continue to optimize our cost structure while waiting for order industry demand recovery.
To conclude, although the top line growth was under pressure in the first half, we make a solid progress in our cost control under the AI strategy. These actions help us to improve our operation efficiencies and maintain our stable shareholder return. This is the first half highlight. I turn to Lin Chen for talking about the gaming business.
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Thank you, Lin Chen. Let me kind of go through Mynd.ai very quickly, and then I'll go into one of our strategic move, which is the AI Workforce OS going forward. For Mynd.ai, I think we've talked about it, actually, we managed to increase our gross margin and also decrease our OpEx in a very hard time. By the way, in terms of optimization of costs, actually, we have continued and we will continue. You will see the results in the second half of 2026. If you look at the performance is actually really narrowed a lot in Q2. We are on the path to our EBITDA premium in second half of the year, which is a combination of cost reduction and optimization. Also the taking advantage of the buying season in Q3 and the ramp-up Q2 and Q3. We are encouraged.
Yeah, thanks. This is actually very critical to our path forward, like I said earlier. The ActivPanel 10 launch is very critical for the deployment of AI services. For the ActivPanel LE is actually our product that we can address the lower-end market, which we call it the value market, which mostly is the market outside of the U.S. That said, with budget pressure in the U.S., we also expect to see the ActivPanel LE will pick up momentum. That said, we also continue to look at whether we can provide an even better price performance product in the lineup, which you will hear from us very soon. Next. Again, very important. This is actually related to our AI Workforce OS. We have over a million classrooms around the world, which is a great user base to deploy AI services. We'll continue to work on this.
We call it million classroom agile socket. If we can deploy AI services into all of these sockets, we will create a very significant SaaS service going forward, which we are very excited about. Next. Okay, let me turn it into AI Workforce OS platform, which I talked about earlier. Lin Chen also talked about it. I'm not going to go into great big detail because these slides is really designed more like a product introduction. Since this is the earnings call, I will hit the high level. If you remember, we talked about a lot about using AI, embracing AI. This is the result of doing the embracing of AI. What we often realize, what we are using in AI to support our core gaming business and also our education business can be a great platform for us to support other businesses in other sectors.
We decided to productize all the AI features that we developed. Also with the introduction of an agentic AI, we feel this is actually a great opportunity. This is the result of that. If you look at this, it's actually, we basically create a foundation with all the features in there, and then we can create a workflow using agentic AI to help businesses to grow. We focus on different verticals rather than approaching it from a horizontal standpoint. You can think about it as really we are like an employment agency. Whatever employee you want to employ, you can come in and you can employ the AI employees, and to support your businesses, which we are very excited about. Next. From a go-to-market standpoint, we see many different ways to deal with it.
Well, first of all, first and foremost, our businesses, both gaming and education, will embrace this 110%, if you will. Then, of course, we'll go after other businesses, which I have a slide on the next page to show you. But the key on that one is actually is our differentiation, which is our moat. Our moat is actually not really about the AI technology itself, because we are not in the frontier model where we're going to be using whatever model that fit our purposes. So, we're going to be using all the models, if you will. But along the way, we're going to gain a lot of domain expertise and knowledge, which is our differentiation. That's why we call it the data flywheel that will drive our competitive edge.
Again, going back to what I talked about earlier, a lot of people think about doing AI is actually working on a large language model. That's not our case. But that said, we're going to be doing something, which I'll explain later on, which is sort of a large language model. But the key is actually is along the way, we're going to gain industry knowledge that will provide AIs that will be our big differentiator. Next one. This is the use cases that we talk about. So leveraging all the AI capability on our platform. The number one, we can go B2C, that we can do our games, which Lin Chen talked a lot about. We can do learning, whether we do it through comic books or interactive courses and all that. We can continue to do that.
But equally important, if not more important, is actually we can do support B2B and also B2G. We continue to use this platform to support our movement in Thailand, but not limited to Thailand. I cannot talk about it right now, but it is actually talking to a lot of countries in Southeast Asia to use the same concept that we have in Thailand to support their growth. A lot of the nation want AI education product that we can support, one being Cameroon that we talk about. That is the one that we will do what we call a sovereign large language model. Again, we are not going to do the large language model capability ourselves. We are going to leverage the open source or open weight model around the world, mainly the field from China and then in the U.S. probably will be Gemma.
In China, it will be either Qwen, DeepSeek or Kimi to support our education large language model. The idea actually is to localize and virtualize the education model in a school that can support it, because in some of the African countries, they do not have access to internet, and they do not have access to the large language model that is around the world. So with us doing what we call sovereign large language model, which basically run on a $5,000 GPU PC that you can support the entire school. So we see that as a great basis for us to help us in our education businesses. Now, that approach is not only limited to developing countries. We are also piloting that in Hong Kong as we speak in about four schools right now across different sections.
When I talk about that, I also cover the smart education platform, sovereign LLM. Sorry. In a nutshell, this is actually what we do. We started out internally, we embrace AI, but that whole effort has morphed into our future strategy, which is leveraging the AI workforce platform to support our growth in gaming and education, but also can help us to expand into other businesses. Next. Okay. With that, let me comment on the outlook very quickly. I think we talked about it, Lin Chen talked about it in gaming. We continue our growth. We continue to embrace AI, and then I am looking forward to the AI native game taking off in second half of the year. For Mynd.ai, I also talk about it. We will continue with cost optimization.
Actually, on that one, we have deployed a lot of AI services, especially in customer support and all the back-end services. To deploy AI services in U.S., a little bit more tricky because of the data privacy issues. The interesting thing applies to Europe, but we have ways to get around it, so we will continue to be optimistic. We are seeing some signs of market recovery in North America as the budget is being released, so that is why we are cautiously optimistic about the second half. Again, I talk ad nauseam about AI and also sovereign LLM, so that is going to be our future. So in a nutshell, we are cautiously optimistic about the second half. We believe it will be a heavy even in the second half of 2024. With that, I am going to close this presentation. Thank you for your patience.
Now we're going to open it up for questions and hopefully answers.
Thanks, Simon. Thanks, management. Now it's time for our Q&A section. {Non-English content] If you are joining us on the webcast platform, please click the Q&A button on the right-hand side of your screen and key in your question. If you are joining us via phone line, please press star one, star one, and our operator will bridge you through shortly. [Non-English content] We are welcoming questions in both English and Chinese. [Non-English content] Let's welcome our first question.
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Okay.
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[Foreign language] Lin Chen. Thanks, Simon. Our next question is regarding our education business. How does the company view the recovery outlook for our overseas education technology market in the second half of the year? Judging from our order on hand, do we see any customer demand rebound?
I thought I talked about it. Actually, we are cautiously optimistic. We are seeing some movement in the U.S., that is why we are cautiously optimistic. I have to admit it is actually quite slow in the Middle East for obvious reasons. I would not expect to see the Middle East recovering in the second half of the year. Europe is actually highly dependent on a couple of countries, one being Germany. Again, we are cautiously optimistic. I think 2027 will be the year of recovery for us.
Thank you, Simon. So due to the time constraint, we are welcoming our last question right now。[Non-English content]
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This successfully conclude our presentation today. Once again, thank you for joining us. We wish you all have a great day ahead. [Foreign language].