Good evening, ladies and gentlemen. Welcome to NetDragon's 2017 second quarter and interim earnings conference call. Accompanying this call, we also have a live webcast on our website where you will be able to view the earnings presentation. After the presentation, there will be time for a Q&A session, but until the Q&A session, all participants are in listen-only mode. Before the presentation, I would like to remind you all that this call may contain forward-looking statements, which may not be relied upon in the future for various reasons. Non-GAAP data is included as part of this presentation. Non-GAAP data is not expressly permitted by the Hong Kong Financial Reporting Standards and therefore may not be comparable with other similar indicators. For more detail on non-GAAP financial measures, please refer to the disclosed documents on the company's IR website at www.nd.com.cn/ir.
The company's results were released earlier today and are available on our IR website. A webcast replay of the conference call can also be found there following the conclusion of this call. Now, please allow me to introduce our management team who will join us today, Dr. Simon Leung, Vice Chairman and Executive Director of NetDragon, and Mr. Ben Yam, Chief Financial Officer. Simon will begin with a review of recent developments at NetDragon, operating performance, and followed by Ben, who will review the company's financial performance. Following the presentation, they will both be available to answer your questions during the Q&A session. With that, I would like to turn the call over to Simon. Simon, please go ahead.
Well, thank you, Joseph. Good morning, good afternoon, good evening. Thank you for joining us on this call. I would like to start the call with a quote from Winston Churchill because I think that probably a lot of you have on your mind, and it is actually because we have been talking about our strategies along, and you guys are very excited to anticipate some of the results. I think this is actually what we are all about with Q2. Hopefully, we demonstrate to you that we are moving as planned. We are making progress. Our job is not done, but I think we are really making definite progress. Our goal is to be a very boring company. We do everything as expected, so well-planned. Hopefully, there wouldn't be any more new surprises for you.
The good news is actually we have a very good surprise for you because we did a profit alert. With that, I am going to take you through very quickly some of the highlights, and I am going to turn it over to Ben to take you through the details, and I will come back and talk about the outlook for the rest of the year. Also, I would like to talk a little bit about our recent acquisition of JumpStart because we didn't have a chance to tell you why we bought the company and what we intend to do with it. With that, let's take a look at the highlights in H1. We became profitable as we indicated at the end of last year.
I think the keyword on this one is all-round strong performance in both of our segments, which is actually what we are aiming to do. On the gaming side, again, very boring because we told you we will have a very good Q2. So it is a record Q2. We executed our basic strategy, which we will go into the details a little bit more. Then we have a very good pipeline for growth for the rest of the year and going to 2018. On the learning side is actually again, we are progressing in all cylinders, both the international market and also in the China market.
In the international market, the good news is actually we are not only making progress in our stronghold, which are the developed markets, but we are also making progress in the emerging markets, i.e., some of the countries in One Belt, One Road kind of initiative that we embarked on earlier in the year. Of course, the acquisition of JumpStart is another highlight, which is our continuation towards moving us not only from a B2B to also to a B2C company. Good news is actually we declare a dividend for the first time. With that, let me go into some of the operational highlights. I think I already talked a little bit about it. Start with learning. We have a very strong Q2, like I said, both the international market and China. The thing I want to highlight is actually for the international market.
Our year-over-year growth is actually up 30%, it is quite significant, not only just on the percentage itself. If you remember, Q2 2016 was also a very high-growth quarter from 2015. So this is actually quite exciting for us. As a result, because the entire market worldwide is only growing a single digit, but we grow at 32.5%. So we gain market share in these markets, which is another significant progress because the more market share we gain, the bigger base that we have that will support our strategy on building our community. One thing will always be in this slide is actually our continuous improvement on our cost structure. Because of all the work that we have done and continue to do, we are growing our business without increasing our SG&A costs, which is actually, I will give a lot of credit to the team.
Also in China, we are making very good progress in terms of acquisition of teachers with our product called 101 PPT. Going to our gaming. I do not know what else to say, but it is a very strong quarter. We are growing in every single direction. In ARPU and APA, which has actually grown very significantly, which is actually good news. Again, Ben will go into more details in the specific numbers. The other thing we did not talk about before, but we thought we would bring it up is actually if you look at our prepaid income, it actually has been very steadily increasing, which is actually good news. Which supports our growth in the subsequent quarter, which we thought is a good metric to share with you this time.
And we will continue to leverage our IP with our flagship games, and we will also launch new games, which will be a theme for us for the rest of the year. A couple of highlights is actually one of our games called Heroes Evolved. It is actually being recognized, which is actually very exciting. And of course, MAU grew to 6 million in such a short time, also something that we should be pretty happy about. And we have also launched an MMO game called Tiger Knight. Well, not launched. We just launched it, and we are also getting very positive feedback, which adds to the confidence we have in the gaming business going forward. With that, I am going to turn the microphone over to Ben. Ben is going to give you a lot more details in terms of the numbers.
Thank you, Simon. On the financial side, we are excited to report that in Q2, we have reported record high revenue in Q2, both in Q2 and also in the first half. And in fact, we recorded record high revenue, not just for the entire business, but also for gaming and also for education business on a standalone business. So we are doing extremely well in both businesses. On the bottom line side, we have reported over CNY 80 million of operating profits, which is multiples of what we recorded in the same period last year. And the Non-GAAP operating profit, we have over CNY 93 million in Q2. That is also a significant increase compared to last year. And we achieved a growing operating profit on the back of operating leverage because we have been able to keep our overhead cost and also our headcount largely stable in the past several quarters.
And in addition to that, we are seeing a lot of our cost savings or cost rationalization measures in our international education business starting to bear fruit. So on the cash side, we have close to CNY 1 billion cash or cash equivalent, so we are in a fairly comfortable position on that front. In the next couple of pages, we have the operating profit bridge. So we have that bridge on a year-over-year basis and also on a quarter-over-quarter basis. So if you look at a year-over-year, you can see that our operating profit has been growing on the back of two engines, right? Games and education business.
And if you look at this page, if you take out government grants and also exchange difference, which is largely non-operational, the increase in the operating profit actually will be even higher by another CNY 16 million, which would result in a more normalized operating profit figure of over CNY 150 million in Q2. On a quarter-over-quarter basis, again, you are looking at the education having the most contribution from a sequential standpoint. And I think if you look at Q3 and Q4, if you look at the bridge for the next couple of quarters, I think we will be looking at a very similar pattern compared to what you are seeing here. Let me go over the financial highlights for both learning and gaming business. Looking at the learning business, as Simon mentioned, we have a broad-based strong performance, all-around strong performance.
In terms from an international standpoint, we have over 30% revenue growth on a year-over-year basis, and that is on an already strong Q2 last year. Again, Q2 has always been the traditional peak season in the international sector. We are pleased to report that we have a high revenue on an absolute basis, and also we have been growing healthily compared to an already strong Q2 last year. Gross margin, we have been able to maintain a gross margin of over 30% at 32%. Operating profit of CNY 78 million we have been able to achieve in Q2, and that is a significant achievement compared to the past few quarters.
Looking forward into Q3, we actually have a very strong sales backlog, and we believe that that will pave the way for a strong Q2 that we are looking forward to, and we expect that Q3 is going to have a robust year-over-year growth. In fact, we expect the year-over-year growth in Q3 is going to exceed that of in Q2. On the cost front, we are looking at, as I mentioned, we have been doing a lot on cost optimization. We are starting to see that effort paying off as you can see that SG&A was reduced by over 14% in Q2 year-over-year. Looking to China, again, we are doing extremely well. We are looking at, in Q2, over 70% increase in revenue.
Particularly, we are very encouraged by the very strong sales backlog that we are seeing in China as we have been able to win quite a number of major tenders. If you look at Q2, the contracted sales in Q2, it is over CNY 110 million, which is actually over five times the amount in Q2 of last year. As of the end of Q2, the amount of sales backlog is CNY 230 million, and this is the amount which is representing the sales order that have been invoiced or signed but the goods have not been delivered or been validated by the customers. All around, we are seeing that the robust sales momentum is demonstrating that our product in China is starting in the beginning stage of gaining widespread product adoption.
With all of that, you can see that with a better top line, a controlled expense overhead, we are looking at, we have seen the cost segmental loss in education in Q2 significantly narrowed by over 60% year-over-year to CNY 31.4 million, and that has a lot to do with a lot of cost optimization and a lot of the operating leverage. In the gaming business, again, we performed exceptionally well in Q2. Great top-line growth. We grew over 36% year-over-year on the back of the success of our user engagement strategy and also our monetization strategy. In fact, if you look at our Eudemons Online, one of our flagship IPs, we have been able to record over CNY 100 million of monthly prepaid income in both May and June. We have been seeing a lot of traction, a lot of momentum with Eudemons Online.
The mobile gaming revenue continuing strong performance with over 50% growth in terms of revenue. We expect that mobile games will continue to drive revenue growth. With a lot of top-line growth and also operating leverage, we've seen a 66% year-over-year increase in segmental profits. Looking forward into second half of 2017, we're expecting the momentum to continue. We're expecting one of our most looked forward to new games is the new Eudemons mobile game that we developed in partnership with Kingsoft. That is going to be launched in the second half of this year. For Heroes Evolved, we launched the pocket version of this game in December of last year. We've been doing a lot in terms of user ramp-up and user engagement, but we're really going to start the monetization in the second half of this year for that game.
Again, as Simon mentioned, Tiger Knight just recently launched in August on Tencent's gaming platform, and we're looking forward to also ramp up the revenue of that game. With that, I'm going to turn back to Simon, who will talk about the outlook.
Okay. Thank you, Ben. Let me do it quickly on the outlook, and I'll spend a little bit time on JumpStart. I know you're going to ask this question, so I might as well answer it now. We do expect profitability for the entire 2017 on the back of a good performance in the first half of the year. On the learning side, we expect to provide you with more information in the coming months on our progress in the emerging market. We'll maintain the momentum in the developed market. One key milestone for us is we are on track to launch social commerce, which is the way to monetize our community in Q4 which is something we committed to do and should not be news to you.
In China because of the strong backlog in the first half of the year and all the sales activities we're seeing, we are expecting a good second half, and we'll continue to scale our user acquisition in China. On gaming, we talk a lot about it. I think the bottom line is we are going to maintain our momentum. We'll drive our new games and then we'll continue to monetize. With that, let me talk very quickly about JumpStart. It's a company we acquired just recently. We closed the deal, I think, on July 1st. It's a leading education company in the world. It has a long history, with a lot of assets, and with strong education gaming DNA. They have two studios, one in L.A. and one in Bangalore. To me, that's a very good combination.
L.A. has a lot of design assets and Bangalore can go and execute, which is a good combination. We're going to be leveraging that to grow our education business and also the gaming business, by the way. Their current strong market is actually in North America and Europe. We talk a lot about JumpStart being an education company, but actually one of the key assets they have, Neopets, doesn't fall into the education segment. This acquisition will help us to grow not only in education but also in gaming. Some of the key assets they have is actually School of Dragons, JumpStart, and Neopets. The company has very strong relationship with a strong IP company like DreamWorks and Universal. We'll continue to expand that relationship. That's our plan. Then, of course, we will leverage their DNA.
The other key for us is actually this will become a very interesting platform for us, not only to expand into our B2B market, but also from a B2C perspective. Because they have millions of users with their games, and basically they are a B2C kind of direction which we can leverage, which is part of our monetization strategy. At the same time, it can also help us to acquire more customers in addition to what we are doing on the back of Promethean or in the back of our 101 PPT. Some of the quick comment on our growth strategy, low-hanging fruit is actually geographical expansion. Because like I said earlier, their stronghold is actually in U.S. and in Europe. From a platform perspective, they are very strong in iOS.
What we're going to do is actually we're going to leverage that and we'll also put the game onto Android, and we'll take it to expand into China and Asia, then we'll include India. That will be a highly leveraged kind of expansion. We're going to double down on our own IP, because JumpStart and Neopets, we own the IP. We want to build the IP. At the same time, we're going to expand our relationship with DreamWorks and Universal, which is the same company. As you know, they have a lot of very interesting assets outside of the two that we are working with them on, which is Dragon and Madagascar. It's a very strategic acquisition for us. We spent quite a bit of time looking at different companies. We finally decided to pick up this company.
I think it's going to be one of our foundation to, number one, to make sure we execute on the monetization of our community, but also to expand into the B2C market, i.e., the home market. With that, I'm going to stop and I'll turn this back to Joseph and the operator, and then we'll open up for question and answer.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or the hash key. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. The first question comes from the line of Ryan Roberts from MCM Partners. Please ask your question.
Good evening. Management, I have a couple of just quick questions. The first one I want to ask about education in China. Some of the growth that you are seeing is remarkable. I am just wondering if you want to kind of give us some color on what are the main factors that are driving that? I have got a follow-up.
Oh, I thought you have two questions. That is fine. On the back of driving this is actually some of our software that we have and what we do in international. On the acquisition of customer side, we actually use our 101 PPT to drive it. From a revenue standpoint, we actually have our interactive classroom solutions, and also we have our VR classroom solutions that we have been using our channel to go and kind of put it out to the market. That is really at the back of some of the software solutions that we have that drive the growth.
Okay. If I could just ask one question kind of on the gaming side of things real quick. In terms of the monetization trends that we are seeing, which are phenomenal, I am just wondering if you can kind of give us an idea, any sense of sustainability on that level of growth, and how we should look at that as we look forward.
Well, I will answer at a high level. I will let Ben give you the detail. When I said in the outlook, we expect our momentum to continue. We are very confident that we will maintain that. Plus, with the introduction of the new games, that is going to help our growth. Ben, you want to give some specific on the gaming?
Yeah. I think in terms of the gaming side, actually, we have been doing a lot in terms of monetization strategy in the past several quarters. In terms of sustainability, I think the short answer is that, yes, it is going to be sustainable, and in fact, we are actually going to grow on that base. I think if you look at Eudemons Online, we have done a lot in terms of on user engagement. For example, we have introduced the MOBA, M-O-B-A, scheme into Eudemons Online. Actually, a lot of that is migrated from what we have learned from Heroes Evolved. With that, we managed to get players within that game to kind of compete with each other a little bit more, get people more engaged, and hence, more willing to pay money.
The other example of monetization is that, if you look at the skins, we have been able to monetize on the skins of not just the players, but also, for example, on the weapons and on the animals within that game. This is a bit more details, just to give a little bit more color. I think in the past, we have been kind of working on monetization gradually, but we have really been working on it more seriously in the past several quarters. Yes, we believe that it will be sustainable.
Okay, any kind of color on the pipeline, the game development pipeline, you can share?
The gaming pipeline, right?
Yes.
Yeah. In terms of the gaming pipeline, as I mentioned, if you look at the second half of this year, first of all, I think the most to look forward to is the Eudemons mobile game that we developed in partnership with Kingsoft. We expect to launch that game in October. Yeah. Actually within the next two months, I think, to give a little bit more buffer. In addition to that, we have launched Tiger Knight in August. Also, in terms of Eudemons Online, we also have several games that we have in the pipeline. One of them is actually going to be a mobile version of our current PC version of that game. You can imagine that a player who plays on that game will be able to continue to play that game on the PC version.
That, we believe, will increase our PC gaming revenue. We also have a couple of other games under the Eudemons IP that we are planning to launch next year. Both of those games will actually be mobile games. In addition, we also have a browser-based game under the Eudemons IP that we are planning to launch in the near future. If you look at Heroes Evolved, we also have a few games as well. We have a first-person shooting game that we're aiming to launch. We're aiming to start the testing of that game in the fourth quarter of this year, and that game will include both mobile and PC versions. On top of that, we also have an SLG game in the pipeline under that IP as well.
We also have a TCG card game under the Heroes Evolved brand. Yes, we have a lot of games. I can go on and on, but that's just to give you a little bit more color.
Okay, thank you.
Thank you, sir. We will move to the next question. The next question comes from the line of Alfred Su. Please ask your question.
Hi, management.
Hi.
Yes, and you are with?
Okay, thank you for taking my question. I just have one question about the gaming business. I noticed that the active paying user was 680,000 this quarter. It has grown a bit on a year-over-year basis. But I noticed that it has declined a little on a quarter-to-quarter basis. Could you please explain the reason behind that? Thank you.
Alfred, are you referring to the PCU and the ACU decline on a year-over-year basis?
I mean, the APA, the active paying account. I think it hasn't been separated.
Okay. I think if you look at the APA, right? The APA of that actually increased year-over-year to over 600,000.
Yeah, but I've noticed that it declined a little compared to last quarter.
Oh, really? Okay. Yeah. It's a little bit hard for us to. Yeah, I think it's really a mixed issue. It's really hard to kind of pinpoint a specific reason for that. But I think if you look at the gaming business on a whole, we're looking at increasing ARPU. We're looking at increasing the number of users. Our MAU and DAU both are increased drastically on a year-over-year basis. Yeah, I think that's what you should be looking at.
Well, the thing is actually, if you look at it, because it's a mixed issue, because we have more mobile game being pushed out, and then so that will kind of dilute the APA a little bit. But I think the key is actually looking at our overall performance quarter-over-quarter, right? So actually, last quarter is a very strong quarter. We're still growing over our last quarter. So I think those are things that hopefully you should be looking at rather than looking at the APA. But that said, I think maybe we can do a better job the next time to really break it down by mobile and PC, so we give you a better kind of visibility to that number.
Okay, got it. Thank you.
Thank you. The next question comes from the line of Susanna Chui from DBS. Please ask your question.
Hello, Simon, Ben, Maggie, and Terence. Congratulations on your very good result. I have mainly two questions. The first question is, we really see your company execute on the cost rationalizations of the international education business. The SG&A as a percentage of the sales decreased a lot. Will we see that the operating margin will continue to improve year-over-year on the coming quarter, or even till when, even with the investment in China on our education business? I think it is the first question.
Okay. Yes, we do expect the margin to improve, and at the end of the day, our profit will improve because that is the scaling part. We will continue to do that. So yeah, that I think is a very simple way to look at it. We will continue to look at also our cost structure. So we will continue to improve. That said, I think when our monetization of the community, actually the social commerce will come into play, then we need to look at the two separately, because I think those two, they have a very different cost structure.
Okay. Simon, can you give us more color of the educational e-commerce? You start the monetization of the teachers' content in the e-commerce platform?
Definitely, that is our plan. Social commerce is actually there to support either teacher-to-teacher transaction or teacher-to-student or teacher-to-parent or parent-to-parent or parent-to-teacher . That is the whole idea of first you build a community, then you launch this platform, and then you provide content, and then you recruit people, whether they are teachers or parents, to help you to recommend the product to fellow either teachers or fellow parents. That is definitely what we have been talking about, and we will launch it in Q4, and you will see the revenue ramped up in 2018, in addition to the hardware solution business that we have in Promethean.
Okay. Looking forward to it.
Thank you.
My second question is, yes. We see four games under the Eudemons Online IP under developed. I would like to ask who will be the publisher, will it be also Xiaomi or any other publisher?
Ben, you want to take it?
It wouldn't be Xiaomi.
Will it be the much stronger publisher, just like Tencent?
Sorry, Susanna, so you're referring to which Eudemons game? I just wanted to clarify.
You said that four games under your Eudemons Online IP are under development, so I would like to ask?
Got it.
Got it.
Understood. Susanna, I think the only one that is set in stone right now is the Kingsoft one, which is going to be launched in the next couple of months. For the other Eudemons game, we are in active discussions with multiple parties. Nothing has been determined yet, but we are actually seeing a lot of interest from the usual suspects, if you will. We are looking forward to progressing that discussion, and we will make announcements as we formally select those publishers.
Okay. Thank you.
Thank you.
Thank you.
Thank you. The next question comes from the line of Eric Qiu from CCBI. Please ask your question.
Hi. Thank you. Good evening, Simon, Ben, and Maggie. Congratulations on the very strong result. My question is regarding the international education business. You have acquired this business for over two years and achieved a very solid result year-over-year. As we see the year-over-year revenue CAGR, it's about 30%. I was just wondering that comparing to that you buy it before, two or three years ago, the business mainly in U.S. and U.K. or global market is relatively mature, and the revenue growth was obviously not that fast as it is now. So what actually have you been doing or Promethean have been doing to really improve its top line as well as bottom line? I was wondering whether this about 20% or 30% revenue CAGR is sustainable for the next few years.
What is the driver and what is the current penetration rate of its product in mature market? I was wondering what is its ceiling, how much potential upside from now? Thank you.
Okay. Actually, that is a good question. Actually, our growth has actually come from two areas. When we look at the business, we anticipate this kind of growth, because we see there is a requirement for technology upgrades in the strong market that we have. We are seeing, for example, in the U.S. and U.K. and Europe, they go from the board to panel. That is the technology cycle refreshment that we are taking advantage of. We are pretty happy with that. At the same time, we do anticipate the emerging market, which is actually the One Belt, One Road kind of market, they do have the government backing to really push for more either statewide or nationwide deployment. One prime example is actually what we are doing with Moscow, is actually they are trying to standardize all the equipment within the city of Moscow with 27,000 classrooms.
Those are the reason that is kind of supporting the growth. We see this trend continue for the next couple of years, whether it is going to be a CAGR of 30% or If you do the math, if we are CAGR 30% in a few years, that will be pretty awesome. That said, we do expect we grow faster than the market or much faster than the market. Because the fact that we know this kind of growth cannot sustain forever, even though it will be a good growth in the next few years, that is why we are using this position to build a community, then we start to monetize it, starting towards the end of the year, so we can have additional revenue stream. While the growth slow down, then our whole social commerce business will pick up.
That will fill the void, if you will. That is the strategy that we have to ensure that we have enough revenue streams, when one slows down, the other one can pick it up.
Thank you. Can you elaborate more on this new revenue model? You mentioned the social commerce.
Oh, okay.
Can you elaborate more on that? Yeah.
Well, I would do it in a high level. I don't think I can elaborate it too much over the phone. The model is actually no different from anybody who builds a community, like a Facebook or LinkedIn or any of those people. Once they have the community, you can leverage it, and with all the technology that we have, we can recommend the right services to the right people, or the right product to the right people. The idea is actually to take e-commerce and the social network and combine it, i.e., social commerce, that we can start providing and recommending and providing services or software or hardware or products to the people within the community who has a common interest in learning. So that's kind of the high-level description that we have.
If you're interested in getting to know more detail, happy to take you through that offline, maybe not at this call at this time.
Thank you, sir.
Okay. Thank you.
Once again, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Please note, please limit your questions to one or two questions at once, so that we provide enough time for other callers to ask their questions as well. If you have further follow-up questions, please press star one and join the queue again. The next question comes from the line of Zongai Yu from CICC. Please ask your question.
Hello, management. Congratulations on the amazing quarter. This is Roger from CICC. I have two questions, one on learning and one on gaming. On learning, I am very impressed by the expansion we made on the 101 Education PPT. We know that this kind of B2B business is mainly driven by relationship or heavily rely on resources. I was wondering how can we make such a great expansion on the 101 product?
The 101 PPT is actually, in a way, it is B2B, but also in a way it is not. Because the target is actually the teachers. We need not selling directly go directly to the school, but also we can go directly individuals. So we have different go-to market kind of method to do that. That is why we can scale. So it is not really just a B2B implementation. So it is B2B and B2C. We work with partners, for example, like we work with companies like Dell, so we can bundle the software with their machine. That is one of the many go-to-market strategies that we have that we can scale.
Can we say that we are a reputation-driven business?
We are what?
Okay. I said we are a reputation-driven business, so we have this reputation among the teacher groups, and they will promote this product into different schools, right?
I do not know the definition of reputation-driven, but I think we are value-driven because we address the teacher's pain point, so they will embrace our software, and they will use it to help them to do their job. Then in turn, they will use it for teaching in the classroom, and then they can have interaction with the students, so the student will start using the software. So in turn, we can build a community. So I would say we are actually value-driven. I think we are more driven by the concept of learning. I would not say we are reputation-driven.
Okay. Thank you. On gaming, I do notice the Tiger Knight game. I know we have just launched it in October. Sorry, August. In August. And we have this on Steam last year, right? So would you like to share some feedback from players of Tiger Knight? Which market do you see will be the more important market for us, the China or international market, for Tiger Knight?
Yeah. So, in terms of Tiger Knight, yeah, we launched this game on the Steam platform last year. So if you look at the feedback from the customers, right? I think what we have achieved is a close to 90% positive rating from players on the Steam platform. We are talking about a game that has achieved over 1 million downloads. For that kind of size of downloads, 90% positive rating is actually quite rare. So I think that speaks to the quality of the game, and that is one of the main reasons why we have been able to get Tencent to work with us in China. So, so far, if you look at our feedback in China after the launch, we have got, I think, right after we launched the game, we have been able to maintain the top -three ranking, for new games under the Tencent's gaming platform .
And we've been able to achieve 88% in terms of positive player ratings. We are very encouraged by those ratings and we're looking forward to continue the user engagement and user ramp-up and also the monetization.
Okay. Thank you.
Thank you. The next question comes from the line of Yingzhi Xu from Haitong Securities. Please ask your question.
Hi, good evening, and congratulations for the financial progress. My question is, from my understanding, we didn't charge the teachers for the 101 Education Pad, which is combined, so the 101 Pad and whiteboards to the teachers and students. Would NetDragon charge the 101 PPT or the content in the future? Because I think the content is very valuable. The second question is, will NetDragon sell the 101 Pad and whiteboard through other e-commerce channels, things like Amazon? And what are the prices of the pad and the whiteboards at present? Thank you.
Well, let me make sure I understand your question. Well, first of all, we are not selling the 101 Pad for free.
Oh, okay.
Actually, we are providing 101-
Yeah
-free for free. So I think there's a very big distinction there.
I think you asked a few questions on that one, and I think we need to. Are you asking about China or you are asking about the-
Yes
-global market?
I mean the China market.
For the 101 Pad, the whole idea of having the pad is actually, is not really. Because essentially, we have an open system. We support all the devices. So actually, if you have an iPad or Android pad, we all support it. So the 101 Pad is actually, is really for us to really get into the business, to really understand the user requirements so we can build it into our software. So right now, our strategy with 101 Pad, the tablet itself, is actually is with limited distribution, is actually has gone into some of the pilot projects that we have. For most of the teachers that is using 101 Pad, is actually, is up to them. Oh, sorry, 101 PPT is really up to them on what devices they want to use.
It could be a pad, could be a 101 Pad, could be an iPad, could be an Android pad, or could be a PC. The way we monetize it is not really charge them on 101 PPT, and we are not going to charge them on the 101 PPT content. It is actually, we are using this to build a community. The way we monetize it is through something that we have talked about in the previous questions, is actually the social commerce. Because once you build a community, you can sell them other services, that we can start to make money. Our intention is continue to provide 101 PPT for free. As a matter of fact, we may have more software that we will provide for free, for them to help them to develop the teaching material or for the classes.
Okay. Would the 101 Pad sell through other e-commerce channels, or we just sell to schools?
Right now, we are only selling it to school. We have no intention to put the 101 Pad on the e-commerce channel.
Okay. I got it.
Okay. Thank you.
Thank you. There are no further questions at this time. I would like to turn the conference back to Simon for any closing remarks. Please go ahead, sir.
Okay. Thank you. Thank you for attending the call. Thank you for all the good questions. If you have more questions, feel free to contact us. You can do it through Maggie, who is actually in the room here. Again, our goal is to be a very boring company. We just continue to execute. There will be no surprises to you, and our goal, one more time, is actually for the rest of the year, we will be profitable, and we will have a good start for 2018. With that, thank you so much, and we will talk to you very soon.
Thank you.