Good evening, ladies and gentlemen. Welcome to NetDragon's second quarter and interim 2015 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a Q&A session. I would now like to hand the conference over to your host today, Ms. Maggie Zhou, Director of Investor Relations at NetDragon. Maggie, please go ahead.
Thank you. Ladies and gentlemen, good evening. I would like to welcome everyone to our 2015 second quarter and interim results earnings call. 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 explicitly permitted by the Hong Kong Financial Reporting Standard, and therefore, may not be comparable with other similar indicators. For more details on the Non-GAAP financial measures, please refer to the disclosed documents on the company's IR website at ir.netdragon.com. 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. Please allow me to introduce our management team who joined us today.
Mr. Simon Leung, our Vice Chairman, who also holds the position of CEO of our education business, and Mr. Ben Yam, our Chief Financial Officer. Simon will begin with a quick review of recent development in NetDragon's online education business and further strategy, followed by Ben, who will then review the company's game business and go through the financials. They will both be available to answer your questions during the Q&A session that follows. I will now turn the call over to Simon.
Thank you, Maggie. Thank you, everyone, for joining us today or tonight or this afternoon, depending on where you are. This is my second time talking to you, so it is a great pleasure for me to be here again. Last time, I basically lay out the strategy for the company and in particular, for our education learning business. What I would do today is quickly recap some of the key points to remind everybody, but I will spend more time on the progress since our last conference call. Towards the end, I will also spend a couple minutes on the monetization strategy for our education business, because I am sure a lot of you will get questions on that one. Maybe remind everybody, last time I talk about the company. We have a very balanced approach in terms of our businesses.
We have a steady but growing business in gaming. We have something that we believe in and we will invest, which is our education and learning business. We are also incubating some new businesses. That strategy has not changed in the last three months. The way we're going to grow our businesses, this actually is applied across all the businesses, including gaming and education. We're going to build, we're going to acquire, and we're going to partner. This will be our continual theme if you listen to what I'm going to be talking about, what Ben is going to be talking about. We talk about our commitments. We'll continue to invest into the education business because we really do believe there is a great future. Just a few words on gaming. We maintain steady growth. Our new games, PC games and mobile games are progressing well.
We also expanding into overseas. There will be a lot of activities in the second half. When Ben goes through the financials, he'll be a lot more specific on the gaming business. Now, with this, let me kind of focus on the education and the learning business. Let me recap a little bit. Last time we talk about what we're going to be building. We're basically building an ecosystem so we and our partner can really work together to address the entire kind of value chain. I'll talk a little bit more about that later on. At the same time, we're going to build the community. Together, we're going to address what we call lifetime learning. I think this is a very important concept, and I don't believe there's a lot of company, or if any, focusing on that one right now.
The value chain we're talking about is basically, I look at it as three different dimensions. One is lifetime learning. What we refer to is actually preschool, K12, higher education, vocational training, and enterprise training. We also want to capture the different scenario where learning happens, both in the classrooms, whether it's actually in a tutor center or in a school, while they're at home, and also when they're on the go, which is actually where the mobile piece will come into play. And of course, we are looking at it from a global perspective. It's not a China play alone. So we're going to be looking at it from these three dimensions. Now, maybe this is the time so we can start double-clicking and dig deeper into our progress. Last time, we talked about strategy a lot.
Let me report and take everybody through the progress of our products. Before I talk about the specific products, I like to remind everybody, all these products are built based on a common platform, which is actually cloud-based, big data, and then of course, there's system software, and there's a lot of APIs in there that allow us to build applications on top of it. The three products I will talk about is our 101 pad, which is not only just hardware, but also have software designed for education for both students and teachers, and also content in there. Our collaborative classroom, which is actually very important because that's where learning and collaboration starts, and that is also the basis for the enterprise business, which I will mention later on. Actually, the classroom system is comprised of devices, which is the 101 pad, a network element, and also display.
It can be an interactive whiteboard or can be a panel, so it sits in a classroom or in a room, allows students and teachers or employees to collaborate within a room. It is quite important. The third one is actually our IM product. In China, of course, it is actually known as [Non-English content] . The first one is actually 101 pad. The area that we have been focusing on this year is actually the B2B element. I will talk a little bit about B2C. We are going into getting ready for commercial launch, so the date is actually imminent. Again, I talk about the hardware, software, and all that, but with B2B focus initially, and it is part of our collaborative classroom offering. Let me talk about collaborative classroom. We are going to launch at the same time as the 101 pad.
This system is actually designed to address very important, the pain points of the teachers. I mentioned in the last call, we did extensive study on the pain points of the teachers and how we can help them to improve their teaching. This is actually the result of the study and of course, a lot of R&D effort. It is designed to make learning fun, designed to encourage creativity in the classroom. Again, that allows you to access content. When we say content, it is actually the wide range of content. We are talking about there will be lessons, pictures, audios, and video clips, and maybe even 3D objects. Again, all designed to make learning more effective. Our IM product, just an FYI, this is actually the same product that we use to manage our company. It is something that we know very well.
This is actually designed to facilitate communication between teachers, students, and parents, which is actually a foundation to build our community. When I talk about monetization, you will know why community is important for us. We have some pilots that are going on right now, is actually in China. It is going quite well. That IM product will allow you to also access content at the same time. While we talk about all these product, I think it is also important to touch on our go-to-market strategy. Having a product is only part of the equation. We need to sell it. Like I said, we have done extensive studies, not only on the pain points of parents and teachers and students, but we also analyzed the entire market in China by city, by province. A lot of effort went in.
We basically categorized the country into different categories and basing on the opportunities, the maturity and also the competition. We have very specific strategy for each of the categories. In terms of going after the market, we have a two-pronged approach. We are going to use channels and direct sales to cover the B2B part, but we will also do overall marketing. You will see a lot more effort in Q4 this year and then leading into next year, of course. We divide the country, like I said, in different district. We can cover it very effectively with our channels. That is what we are going to be doing. In terms of marketing activities, I was referring to road shows, events, press. We actually started to do some case in point.
A month ago, we have about 500 stakeholders, mostly people from the government to come to Fuzhou to listen to us, to work with us. We took them through all our strategies. Those are some of the marketing effort we will be doing. Let me characterize the commercial launch a little bit here. I will call it a controlled commercial launch right now because we are talking about going into a lot of schools and a lot of classrooms to install the system. A lot of students in the classroom, their learning is actually depending on the system. We do not want to rush the rollout. We will be rolling out in a very controlled fashion because the other thing is, since it's a new system, both the teachers and the students need to get used to the system.
Training is going to be a big part. Supporting is going to be a big part. That's why we're going to be taking this controlled approach. We're going to roll the system out across 15 different cities. Our target is about 500 to 1,000 classrooms between now and the end of the year. That's on the B2B side, on the education side. Let me move on to the enterprise business a little bit. We have made very good progress on that one. Again, all the programs that we have, all the products that we have are all built on a common platform. The enterprise training products that we have built on the same common platform is actually as part of our overall ecosystem. We're making very good traction.
We have signed up 16 different enterprises that is utilizing our system, and then there are small enterprises and also larger enterprises. I have to apologize, can't give you the name right now because it's actually a new sign-on, but we're getting good feedback. We continue to roll that out in China. Another case in point, I talk about a collaborative classroom. The same system, actually, we can use it in the enterprise for collaboration and also for remote learning. That's another part of our common platform. The system can be used across different areas. Let me talk a little bit about B2C. Even though I said it earlier, a lot of our focus between now and the end of the year will be B2B, but I think we're going to have good activities in B2C.
If you remember, we acquired a company called [ChiVox], who was actually based in Suzhou. They are specialized in the voice technology and also assessment. One opportunity that came up in China is actually the government decided English is actually absolutely critical for everybody, so all of them is mandatory. Just think about the challenges of doing that with 200 million students in the K12. How many people do you need to go get it done? The challenge is huge, because the current model, having real person doing this is actually not scalable and it's not effective. I can argue it's not fair. We're going to be offering our system to help the government to assess, to do tests. This is actually one of the reason why we acquired this company.
To monetize it, then we can help the student by using our technology, to allow them to be efficient in oral English. This is actually a very important program that we have started, and that market is going to be very, very big. Once we are successful, if you think about it, we can roll this program out to all the other countries outside of China. We talk about being a global company. I will give you a quick update on overseas expansion. India is going very well. I fully expect we will give you some good news when we announce our earning the next quarter. Then, what we are going to be doing is actually, we are going to be building the same community in India as we did in China.
We are going to be working with a partner, which I think is very critical with our success in a foreign country. This is actually going to be our strategy in every single country we go into. Of course, the partner have complementary skill sets and products than us. Other expansion possibility is definitely the Americas, leading by the U.S. We are talking to different countries in Southeast Asia. Then we start to look into West Africa, which is actually a very growing market. Maybe now is the time to talk about this big project that we are working on called Promethean. As you may or may not know, that we have made an announcement for Promethean quite some time ago. Their board has recommended the deal to the shareholders. So right now we are going through the process.
In the due time, we will give you specific updates. The one thing I can tell you is actually it is going as planned right now. We did not talk a lot last time about why we plan to acquire Promethean. Let me kind of address it very quickly. This is part of our strategy in build, acquire, and partner. We are acquiring right now. When we look at acquisition, we are looking at market, technologies and product, and talent. If you look at Promethean, there is a lot of synergy in those areas. They have complementary products that will form part of our ecosystem, which is actually very exciting for us. They have a market share, which is complementary to our skill set. They are more in the developed market, be it for example, U.S. and U.K. and European countries.
Our expertise is actually in the developing market, so very good synergy. They have R&D capability. Then we also see synergy in R&D and also manufacturing synergy. Of course, they have people and talent, and also they have partnerships that we can leverage. Just to give you a couple of data point, so I think it will be more clear to you. Promethean has 1.1 million classroom in their user base. They have something called Promethean Planet, which is actually a community of teachers. To date, they have about 2.3 million teachers in that community. So very exciting. That is a good segue into the last point I want to make is actually on community. I talk a lot about community. A lot of people keep asking, why do you want to build a community?
Because I think this is actually the right way to approach education. This also is the right way to build a business because we can monetize not only by the B2B part, but also B2C, when you build the user base. Just very quickly on monetization. The B2B part is actually very simple. We sell our system to the different institutions, right? For B2C, from an end user perspective, once we build the community, then we get to know more about each individual, don't forget our ecosystem has big data. We have a big cloud implementation. When they are learning on our platform, we get to know them very well. We can be offering services, become a user in our community. Not only you will be enjoying all the different activities, then we can push personalized offering to the users.
This is actually, we can continue to monetize the users. While versus a one-to-one buy and sell relationship. With that's the end of my presentation. Last time we talked about strategy, today we talk about progress. We as a company, feel very good about our directions and where we are. We also feel very confident we will continue to make progress on all fronts. One more time, we are going to be focusing on lifetime learning and also we are going to build, acquire, and partner. With that, I am going to turn the microphone over to Ben Yam, our CFO.
Thank you, Simon. First I will talk about our gaming business performance, then I will talk briefly about the numbers in our education business. Finally, I will go over the overall financials. For the gaming business, during the quarter, we have achieved very robust performance. In terms of revenue, our revenue from our gaming business, for the six months ended June 30, achieved 7.4% year-over-year growth. That growth is driven primarily by two games, Calibur of Spirit and also Eudemons Online mobile version. Let me talk a little bit about Calibur of Spirit. During the quarter, specifically in May, we reached CNY 26 million of gross revenue for that month. Basically, revenue continues to grow very healthily. We continue to get a very good player traction, and we continue to optimize monetization within the game.
We are getting increase in ACU and PCU quarter-over-quarter. Specifically, in July, we achieved over 400,000 of PCU. We have, in terms of marketing and promotion, we have a program underway right now. Between now and the end of the year, we are expecting to ramp up a lot of marketing efforts. That's why we expect the revenue for this game to ramp up significantly from the current level, for the remainder of the year. That's why we believe that Calibur of Spirit is going to be a major growth driver for this year, and next year for our online gaming business. The next game I am going to talk about is Eudemons Online mobile version or the pocket version, if you will. This game doubled in gross revenue, quarter-over-quarter, in Q2.
In May, we reached close to 15 million, 15 million of gross turnover. Other than Eudemons Online, we also have a healthy mobile gaming pipeline. We expect to launch three new mobile games by the end of the year. I also want to talk a little bit about Tiger Knight. Tiger Knight is our new game, which is under closed beta testing at the moment. This game has received a couple of awards from the Sina China Games Weight Ranking, which is a very highly regarded award within the industry. The game is getting a lot of media traction and also receiving very positive player feedback. We are expecting to have a second round of closed beta launch in August. Last year, as a matter of fact, I believe that launch has already started.
We also expect to carry out open beta launch by the end of this year. This game could provide us a potential growth driver for next year in the gaming business. All in all, for the gaming business, the gaming business basically remains very profitable, and it is a very good cash cow for our company. In terms of number, I can share that our gaming business has an EBITDA of approximately CNY 113 million in the first half. That number actually includes some shared overhead, such as HR and finance, which it is a little bit hard for us to allocate to the other business. The real EBITDA can even be higher. I will talk a little bit about the education business. I just wanted to, Simon has elaborated a lot on the strategy and the progress.
I guess what I would say is that we are continuing to invest heavily in product development as we try to capitalize on this market opportunity and to develop the best product in the market. In terms of timing of commercialization, we expect to commercialize or launch our product imminently. Basically, the start of the school year is in September, so we are basically going to gradually ramp up our commercialization effort within the next few months. In terms of revenue, we are expecting to achieve CNY 50 million-CNY 100 million of revenue for the remainder of the year. As Simon also has mentioned, this commercialization this year, for the remainder of the year, it is going to be in a controlled launch. That means we are intentionally pacing the commercialization optimally in order to ensure a smooth rollout.
We do not want to throw all the products into the market and then suffer from customer support and all that kind of stuff. With that, I will now briefly go over the financials for the second quarter. Revenue for the quarter was CNY 266 million, up 8% quarter-over-quarter, and 15.6% year-over-year. ACU and PCU for online games reached 318,000 and 708,000 respectively. ARPU for our games reached CNY 247 million, increased 21.7% over the previous quarter. Revenue from online games and other business in China was CNY 221 million, up 8.4% quarter-over-quarter and up 8.8% year-over-year. Revenue from other geographical markets was CNY 44.7 million, up 6.2% quarter-over-quarter and 67.6% year-over-year. Gross profit was CNY 223 million, up 7.7% quarter-over-quarter and 7.1% year-over-year. Non-GAAP operating profit was CNY 1.8 million.
In terms of our financial position, we continue to be in a very strong cash position. Our cash balance, bank deposit, and liquid investment stood at CNY 3.3 billion as of June 30, 2015. All the figures above are in renminbi, obviously. That's actually the end of my portion. Operator, we're now ready for questions. Hello? Hello? Operator, we're now ready for questions.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the pound or the hash key. We have the first question from the line of Jeff Hao from China Merchants. Please ask your question.
Hi. Good evening. Thank you for taking my question. First, I would like to thank Simon for the very clear opening remark for your education business. I have three questions. First is about your B2B strategy. Do you see any regulation risk from the government on the online education market, given this market, this industry is relatively unregulated, especially when you enter the classroom territory. Do you see or do you expect there will be any regulation to come out in the foreseeable future that may pull back your procedure of your education business? That's my first question, and I have two follow-up. Thank you.
Okay. Well, thank you, Jeff, for the kind remarks, actually. In terms of regulation, I think we really don't see the issue. I presume your question is about China, so I address it that way. Because what we are doing is actually we are putting in the system to enable learning. We're not getting into the learning part. The content we're doing is actually really based on what the country has, and we enhance everything. So we really don't see the risk in there. I think maybe the so-called risk we're seeing is actually how slow or how quickly the system is going to be rolled out, because some of the hardware is actually being funded by the government.
But this is actually where we come into play, because our system can work with or without some of these hardware to go with it, because the government has rolled out all [Non-English content] , and actually that's one of the key elements. I'm hoping I'm addressing your issue.
Yeah. Just follow up on the B2B. You've mentioned your target this year is 500 to 1,000 classrooms.
Yep.
What about for next year? How many classrooms are you going to—
It will be more than 1,000. Sorry. All kidding aside. Can we answer that question maybe next quarter? Because it's actually one of the things is very important for us. We are doing it very deliberately, because we are talking about education. So we are taking it slower than we are capable of rolling it out. Of course, we will ramp it up. It really depends on how the training is going to go, because we are very high confident on our own system. I think the issue is going to be how effectively the teacher can use the system and how effectively the student will get benefit. The reason we're doing that is because we have studied extensively the situation in China. You will see a lot of system, but it's not being used. I'm not trying to avoid the question. I'm just telling you our strategy.
Okay. This is very helpful. My second question is about your B2C strategy. Can you talk a little bit more about how you are going to promote your product? Given your strength is in your system or your software side, have you ever considered to sell your software as a product, rather than bundle with your hardware? Thank you.
Well, I am not too sure what software are you referring to. Let me step back to guide on. It is actually, we are going to have a platform and we are going to have our own software, but our partner can build the software on top of it, too. We are going to have more than just one, but all based on the same platform. Okay? The way we go after it, the consumers, is, again, there is two prongs. One is, actually, we have some specific product, we can sell it. But more importantly is when you go and have your teacher utilizing your system, it very natural for them to extend that to their student. When their students start to use the system, guess what? Parents will start to use the system. This is actually, it is a multiple effect.
I do not think we can kind of step through all the math, but I think I am more than happy to take it offline to kind of run through some of the math with you to show you how we can get to a large community, and that is that. But after saying all that, some software will sell independently, and that is why when I talk about Qizen, it is actually that particular software to help kids to learn verbal English. That will be a standalone software that we sell, but still part of our ecosystem.
We have the next question from the line of Simon Tsoi from First Shanghai. Please ask your question.
Hi, Simon. Hi, Ben and also Maggie. Thank you for giving time for my questions. I got three questions. The first one is, I knew that last quarter and the first half of 2015, we've got like CNY 22.3 million from the educations. Could you please tell me what is from, and for the next few quarters, is there any amount of revenue from education that we can expect? This is my first question. I got also the other two questions follow up. Thank you.
Hi, Simon. This is Ben. Yes, thank you for your question. This is actually easy question for me because, the CNY 20-somewhat million revenue in the first half of 2015 for education, a majority part of that is the revenue from our college, from our Fuzhou Software Technology Vocational College, which is a school owned by us. So we've been getting this recurring revenue since we acquired the school or the college some years ago.
What about the next few quarter? The revenue from educations, can you elaborate a little bit?
Yeah, sure. As I mentioned earlier in the conference call, basically the guidance that we're giving right now is that we expect, for the remainder of the year-
We are going to have between CNY 50 million-CNY 100 million of revenue from our education products, and that is excluding the college revenue, which I just talked about.
That will be on top of the tuition revenue that we get from the college.
Exactly.
Yeah.
My second question is about the SG&A percentage, because last quarter we are making a loss because we burn a lot of money for the R&D and also the SG&A. Is it the percentage will remain unchanged for the next few quarter?
Yeah.
Is there any guidance for this?
Yeah. We don't have a very concrete guidance for that, but I think it's fair to say that we expect that to increase, but we don't expect that to increase drastically. If you look at the first quarter and the second quarter education SG&A, it's actually quite similar. I don't have the exact figure with me, but those two quarter education SG&A, including mostly, I think the majority of which is the R&D, is actually pretty similar. So right now we're running at roughly about CNY 15 million of monthly SG&A, on the education side.
Okay. My last question is about, because we have our first round financing for our education subsidiary, like Best, right? What about the Series B rounds? We know the capital market now is cooling down, also the PE and VC market is cooling down also. Is there any idea that you can share with us that when and which amounts and what kind of issue that you would consider for your Series B rounds financing for the best education?
Yeah, sure. I think right now, as you know, our company is We have a big war chest, and we expect to still have over $300 million of net cash, even after the acquisition of Promethean. So with that, we don't have any pressure on the cash side, on the funding side, to raise Series B in the near future. But obviously, we would be making assessment on an ongoing basis. I think most definitely we are not going to raise I mean, we're not likely to raise Series B by the end of this year.
But you got a lot of money from the very beginnings. But up to now, you have already done two acquisitions, two M&A projects. So we expect that if you want to promote your education system, like a B2B and B2C market, you need to burn a lot of money. If you don't want to consider financing this year, maybe next year. Can you say more about, the valuations for your—
Well, it is actually—
For-
I do not think this is a fair question, sorry. Because it is actually, you are making a lot of assumptions which we have not been disclosed. We said it, we have no immediate plan to go and raise cash, period.
Okay. Thank you for the answer.
Yeah. Thank you, Simon. Thank you.
We have the next question from the line of Chen Wang from Essence Securities. Please ask your question.
Good evening, Simon and Maggie. Thank you for taking my questions. I have two questions. First, we noticed that we target to achieve sales coverage in over 15 cities to reach 500 to 1,000 customers by end of 2015. In view of the new semesters will begin, what the progress have been achieved? For example, how many teachers have been trained, and how many classrooms have been penetrated by now? What is the initial feedback of the educational solution in child schools? Thank you.
Let me kind of repeat what I just said. Actually, commercial launch of the product is imminent, means it will come very soon. From that standpoint, none of these 15 cities is actually has happened. The 15-city rollout will be between now and the end of the year. That said, I think your question is more on feedback. Don't forget, we have been doing pilots across China, in the eastern part of China and the southern part of China. That is why we have been kind of doing pilots, is actually getting also constant feedback, so we can continue to improve our system. It is actually the feedback is actually in different stages. We are going to have pilots, we are going to have control rollout, then I will have basically full-scale rollout next year.
The rollout of the 15 cities and the 500 to 1,000 classroom will happen between now and the end of the year.
Thank you.
Okay. Thank you. My second question is about the headcount. We see that the total headcount increased 13% year-over-year. Could management break down the overall headcounts in online gaming, and education, and mobile marketing? Going forward, how many headcount you plan to recruit in the second half of this year? Thank you.
Okay. Right now, well, I guess as of end of Q2, we have about 3,500 staffs in our payroll. Then we have over 2,000 in R&D, and then the rest is operation and admin. If you look at the breakdown, in terms of from a business standpoint, we have close to 1,000 in the gaming business, and then we have about 1,200 in the education business. Then we also have 200 in Cherrypicks, which is our subsidiary in Hong Kong. Then the remaining would be businesses that we are incubating. This would belong to the other business segment.
Okay. Thank you.
I don't know if I answered your question.
We have the next question from the line of Eric Qiu from CCBI. Please ask your question.
Hi. Hello, Simon, Ben, and Maggie. Good evening. My question is regarding the online gaming. I saw your revenue from online gaming does not change too much quarter-over-quarter, almost for the last 10 quarters. My question is, going forward, will this revenue factor still have much room to growth, or will it just keep in the range of between CNY 200 million- CNY 250 million? Because at least for the last 10 quarters, I didn't see a pattern or a trend for it to continuing going up. Of course, neither did it deteriorate much. Also regarding online gaming, I noticed that you have disclosed the segment profit. I noticed that for first quarter, second quarter, and also the first quarter of last year, the segment profit of the online gaming business fluctuated a lot.
Sometimes it's 16% of segment profit margin, sometimes it's over 40% or 30%. What's the usual trend of the segment profit margin do you expect going forward? Thank you.
Thank you, Eric, for your question. I guess to answer your question, let's talk about the gaming revenue trend. I think you're right in that the gaming revenue has been flat for some time, but when I look at my numbers here for the second quarter, our gaming revenue actually increased 3.5% quarter-over-quarter and 7.4% year-over-year. The year-over-year, especially the year-over-year increase, is actually pretty healthy for gaming business, especially for gaming business that include largely PC-based game business. I think if you look at the overall growth projection for the remainder of this year and also for next year, I think there are two near-term growth drivers. One is Calibur of Spirit. We commenced the open beta launch of Calibur of Spirit in January of this year.
As I mentioned, we have continued to get a very good player traction. ACU, PCU continue to increase. Monthly gross revenue is also increasing as well. We are going to be carrying out aggressive marketing campaign. As I mentioned earlier, we're expecting revenue from Calibur of Spirit to continue to ramp up. If you compare this year and last year, last year's Calibur of Spirit revenue was actually I don't have the number in front of me, but it's significantly lower than this year. If you look at next year, on a full year basis, we expect Calibur of Spirit to achieve higher revenue next year compared to this year as well. The second driver of revenue and also profitability for gaming business is Eudemons Online pocket version. As I mentioned, our gross revenue doubled from Q1 to Q2 for this game.
While it's hard to project the revenue trend for the next few quarters, I can say that this game is going well. At least if you compare this year to last year, last year, I should say Eudemons Online pocket version was launched close to the end of last year. Basically, if you compare this year and last year, that will be another growth driver as well. The other game I mentioned, Tiger Knight, we're expecting to do the beta launch by the end of this year. We have high hopes for this game, and this could also be another potential growth driver for 2016.
I think that is my response to your question on the revenue trend. I think it's actually a little bit hard to project gaming revenue for more than one year ahead of us. In terms of the segmental profitability, I would actually say that, because I don't have the segmental margins in front of me right now, but I guess I can say that the segmental profitability margin, the EBITDA margin for the first half of this year is actually quite representative of a normalized EBITDA margin for the gaming business. Again, I also mentioned earlier that this EBITDA margin actually included some shared overhead. Because we don't actually allocate some of those expenses out to our other businesses. I hope that answers your question.
Okay, thank you.
Yep, thank you.
Once again, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad 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, ladies and gentlemen, if you wish to ask a question, please press start one on your telephone keypad and wait for your name to be announced. We have the next question from the line of Simon Tsoi. Please ask your question.
Hi, Ben, Maggie, and also Simon. Maybe I want you to clarify again, because in the second half of this year, you are going to launch your education products, right? Do you have any feedback from your education products up to now, and how many schools? How about the teacher and also the student, do they have any feedback of the products? Can you share something about this with us?
I apologize if I didn't articulate that well. We have been doing pilots throughout this whole year. The reason to do pilot is to get feedback from teachers and students, and everybody around.
Yes.
That's why, of course, we have been getting feedback from them because we base on those feedback to continue to improve and enhance our systems. I think that I answered your question already.
Okay, but as I know that we have already seen some school in Fuzhou and also in some other province, some school, that they adopt our education systems, but in the testing periods. How about the feedback from those schools? Is there any news from that that you can share with us?
Yeah, Simon, I think, we are still in the process of collecting those feedback. Right now, we are not in a position to share those feedback at the moment. But what I can say is that the feedback is generally very positive, and it's helping us a lot to hone our products. So, when we have more information or hopefully maybe in the next quarter, we can share a little bit more.
Okay. Thank you.
Once again, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. We have the next question from the line of Ryan Zhao. Please ask your question.
Hi, Simon.
Yeah.
I have a question about your student pads. How do you think about the profitability of your 101 pad for that?
How do I—
My second que— oh, okay.
No, keep going. Yeah.
My second question is about your CapEx. Can you give me more color on your CapEx with regard to your Haixi project?
I'm not too sure I understand the second question. Can you—
The CapEx, with regards the Haixi project. This year and next year.
Okay. You're talking about the CapEx. Sorry.
Yeah.
Okay. The first one is actually, how do I think about the profit? I'm not too sure I understand the question, but I'll answer it this way. It's our goal to make money on everything we do. It's actually, the pad, those are consumer products. When we have the volume, it's actually. We will get healthy margin from that one. Our expectation is actually we can get our fair share of the gross margin from our IP going forward. Okay? In terms of CapEx for our Changle, it's actually premise. I'll ask Ben to answer that question.
Okay. On the CapEx side, in the first half of 2015, we spent about CNY 300 million on the CapEx for Changle or the Haixi project, if you will. Going forward, we are still in the process of calculating or assessing the amount of money that we need to spend on this project. But likely for the second half of this year, we are projecting to spend another CNY 400 million on this project. So I think that's the visibility we have right now for the Haixi project for the remainder of this year.
Okay. I have a follow-up question. Can I ask how you value the Haixi project? How think about the value of your property?
The value of our property?
Yes.
As you may or may not know, so basically, the Haixi project is predominantly our headquarters, our new headquarters in Fuzhou. So, I think a lot of people have come to our campus, and as a matter of fact, it has been widely talked about in the media, in the overseas market. So basically, the campus is a place where our employees work, and it's a place where our employees not just work, but also play and have fun. Right? So at the end of the day, we want to create it as a community where our employees, our staff, will be able to work and live in this campus. So you can see that if you come to our campus, obviously we have a large working area, right? And then we also have staff quarters for our people.
And also we have a wide range of sports facilities for our staff as well. If you talk about the value, I think it's actually hard to put a value on it because we don't intend to sell it. I guess I just want to kind of lay out the intention, the purpose of this project. And I hope that is a satisfactory answer for you.
Maybe I'll add to it. I think what Ben is trying to say is actually there's two portion of the value. One is intangible, the other one is tangible. So the tangible part is whatever we spend, and if you really think about it, with what Ben is saying, we're creating somewhat of a small community in that area. So we fully expect the value of the entire property will go up. But to Ben's point is actually we're doing it not because of the commercial value. But that said, I think the commercial value will continue to go up. The more we put into it, the more people that move into it becomes a community.
But more importantly is the intangible value, which is actually this is how we attract our employees to come work with us and treat it as more like a home rather than a workplace, which is actually related to the culture of NetDragon, which is actually very critical because that differentiate ourselves from a lot of the other enterprises in China. Actually, if you really think about it, I'm not too sure you can find another one just like ours in China or anywhere in the world. So I think that value is really hard to put a price tag into it. But that said—
Yes.
—if you think about in this way, one is actually the tangible value will go up. The other one is actually when we create a happy environment for people to work in, it's actually that will help us to save costs. For example, like turnover will go down, is actually people will be referring people to come work with us. So all in all, I think this is actually a very valuable investment that we are making in that area to build this community. I think that's the important message.
Okay, great. Thank you.
Yep.
As there are no further questions, we will now conclude today's call. On behalf of the entire NetDragon management team, I would like to thank you for your participation in today's conference call. If you have further questions about NetDragon, please feel free to contact the investor relations department. Have a good day or a good evening.