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Dear friends, good morning. Thank you for joining NetDragon Websoft Holdings Limited today for our 2020 interim results presentation.
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Our presentation PPT will be broadcast on the live streaming platform, and the PPT is also available for download on our company website at www.nd.com.cn, under the Investor Relations Pack in IR Webcast section.
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Before the start of our presentation, please allow me to introduce the management who are joining us today.
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Dr. Simon Leung, Group Vice Chairman and Executive Director; [Foreign Language]
Mr. Ben Yam, Group CFO; [Foreign Language]
Mr. Lin Chen, Group Senior VP; [Foreign Language]
Mr. Vin Riera, CEO of Promethean; [Foreign Language]
Ms. Susan Kim, CEO of Edmodo; [Foreign Language]
Now let's pass our time to Dr. Simon Leung to host our presentation today. [Foreign Language]
Well, thank you. Thank you, everyone, to attend our call today. Good morning, good afternoon and good evening to our friends in the U.S. It's good to be here. So just FYI, I'm now doing this call to you in a hotel room in Hong Kong because I will be locked up for 14 days because I just came back from Egypt. Later on in the call, you will know why I had to go to Egypt. So -- but anyway, and that's why I'm not wearing a mask and -- because I'm by myself.
So okay, let's get the call going. I think the agenda is very simple. I think you all are very familiar with the sequence and most of the people. Of course, we have a new join today, Lin Chen, so welcome.
If I may, I'll bring everyone back to our last announcement, which is in March, which is the one that we did for 2019. We did touch a little bit on the year because this question coming up -- came up about the impact of COVID-19. So at that time, we did talk about the different businesses, for example, like in -- for Promethean, which Vin will talk a little bit more about it later on. But the message we gave last time was, yes, there is some impact on the business, but more from a timing perspective than from a revenue perspective. And so that's why you've seen some of the impact.
There's also impact on Edmodo. It's actually -- the impact will be quite interesting. I'll let Susan talk about it later on during the call.
So if you look at our results in the first half, it's actually our revenue grew. Some -- the reason is actually the smaller growth is actually -- is because the impact on -- with COVID. And then there is some impact in terms of the profit because of the combination of deal being pushed out to third quarter and fourth quarter, product mix and also because we -- the way we cast our budget is actually casted according to our original forecast. Even though we have made some rapid changes in terms of how we do our businesses, is actually there is some impact because of that. Because our changes, it doesn't match the rapid change of the timing of the sales.
Okay, next page. So there's a little bit of delay in the slide. So maybe I'll start talking about it. So if we kind of look at the timing of the gaming business. Sorry, I'm really struggling with the slides here. So I hope you're seeing the slide now, I'll jump on the one that says operating metrics.
So if you look at -- every time we show you some metrics, so we -- so you know the progress that we have. Gaming, pretty well remain the same. And the big changes is that all around learning. Wow, it takes about 30 seconds to get the slide going. So if you kind of look at learning, it changed quite a bit. If you look at our MAU, it went up to over 20 million. And our DAU is actually at 12 million plus. It's actually -- our peak, it's actually over 5 million, so that's where we are. So it's actually -- there's a lot of positive changes in terms of our operating metrics. And then you will see some of the result after that.
A quick comment on gaming because Lin Chen is going to go into the detail. It actually we grew a little bit. It's actually COVID did impact our gaming business because the nature of our player is actually is -- the age group is a little bit more mature, and they are more small, medium business people. So COVID, it did impact their spending. The impact is actually they're not spending as much. So that's why we're still growing, but growing at a single-digit year-over-year. But the good news is that actually we took advantage of the first half. We spent a lot of time working on kind of accelerating the metrics of the gaming business and also expanding it in overseas. So we're seeing very good progress on that one. And also because of COVID, we didn't launch any new games in Q1, which is not going to be the case in the second half, which, again, Lin Chen will talk about it.
So if I may, I'll move into learning. The biggest impact for us is actually is our Edmodo business. Because if you remember how we position our education business, it has always been around the ability to learn in this group, in the classroom, at home and also when you're mobile. That's exactly what blended learning is all about. So COVID-19 not only supported our vision, but also accelerated that vision. So again, it's actually -- we are very excited about it, not excited about COVID-19, but excited about the fact that with COVID-19, so it's going to allow our vision of blended learning to realize earlier. So that's really exciting for us.
So the next page actually is really just a quick snapshot of what we do. it's actually besides the hardware and software that goes into the classroom, that goes into your devices and everything. But also we support services and content. So that's what everybody is looking for. So I can give you a very quick case study on the next page, which is about Egypt, which is the place I came back from. It's actually 5, 6 days ago, I'm still in quarantine. So but I'm kind of happy because of Egypt.
If you have seen our previous press releases about Egypt. What happened in Egypt last week is it's actually we visited them, spent a lot of time with the Ministry of Education, we signed an MOU with the ministry, covering basically the entire software architecture of the education system in Egypt. So we are supporting them is actually with our software and hardware and all the tools that we have. Number one is for their branded learning and also start to integrate all their resources, so the student can do learning any way, any time.
So right now, we -- Edmodo is actually supporting over 12 million student vintages with the goal of going up to 22 million. And also content is actually integrated. And we also signed an agreement with them it's actually to deploy -- continue to deploy the Promethean panel into all the classrooms and also continue to work with them on the mobile classroom opportunities that we have.
We also talk about creating a joint venture so we can really support them, not only in Egypt, but also once everything is implemented and proven. We're going to take it outside of Egypt. Because it's actually very comprehensive. The solution will be very well suited, not only for our developing countries, but also for developed countries.
A couple of other projects I can mention is actually -- one is actually we call Leave No Child Behind project. The idea is to give devices to all the students in Egypt. It could be a handset or it could be a tablet. The key is, actually, we have all the resources on the device. So students can use that device to access everything through Edmodo or through the Promethean panel to access everything.
Another notable kind of initiative is actually is our online tutoring platform putting in -- this is a service that we launched last year, piloted in the U.S. We're getting a lot of good support. And we're going to take it and we're going to be using it to complement all the learning that the Ministry of Education is providing to all the students in Egypt.
We also start to do some vocational training with them. As you all know, we are not only just an education company, but we're also a gaming company. So we are going to be helping them through Edmodo so that vocational students can learn coding, graphics and also game design. And we also provide them with our game engine to allow the student to start innovating and be an entrepreneur after they learn our system, so which is actually very, very exciting.
So our work with Egypt is actually very comprehensive. We're going to impact the education system. But even more exciting is actually, we can take that outside Egypt and go into the other countries.
Okay. With that, so I talked a lot about Promethean. I'm going to hand this over to Vin, our CEO of Promethean, and he will take you through what he has done and the impact of the market and the outlook for the rest of the year. Vin?
Great. Thank you, Simon. Hi, everybody. My name is Vin Riera, and I'm the CEO of Promethean. Today, I'm going to talk about the new market dynamics that emerged with the onset of COVID, our first half 2020 performance and share some information about our top markets and areas of growth.
I'm not able to see the slide, so I'm going to queue the -- change them up. We should be on the first slide now, which is the first half highlights.
Let's start with the first half highlights. Promethean's revenue was up 8% and unit volume was up 10% compared to our prior year. Given the first half of the year was impacted by school shutdowns and a push to blended learning and remote learning, I'll provide more context on some of the trends that we saw as schools tried to refocus their efforts from educating students in a classroom setting to educating their students in a remote and blended setting.
In January and February, it was mostly business as usual. We are selling interactive panels with lesson delivery software. In March, many schools began to shut down. And by April, we saw the shift in interest on how our products can be used in a blended learning environment. Even though many schools were shut down, administrators and decision-makers were still working and sales cycles continued. Some schools began to focus on remote and blended learning solutions, while others took advantage of placing orders to install while the classrooms were temporarily empty so that they are ready for the upcoming school year. Other schools sought out more permanent blended learning solutions.
In all cases, this was a priority shift for our customers. And as their priority shifted, so did ours. Promethean used this as an opportunity to align our resources on the markets that we're continuing to make buying decisions and work with schools that need a blended learning solutions by emphasizing how our panels and lesson delivery software can be used in the classroom, in a blended environment and even remotely.
Aside from adjusting the messaging on our products, we adjusted how we engaged with our customers. We made the shift away from events, trade shows and in-person selling. By the end of March, Promethean was completely virtual just like our customers. By the end of Q2, approximately half of our orders were being purchased as part of a blended learning application. There is no single-use case. Schools wanted to be prepared for multiple scenarios. Some schools planned on returning to the classroom this fall. Others planned on a partial return and many opted to have a plan to be fully remote or have students remote where a teacher was in the classroom, engaging with students virtually.
This shift in the first half happened fast. While engagement with customers and partners did not slow down, volumes had a sharp drop-off in April and May before picking back up again in June. By June, many of our sales were made with the intention to be used for blended instruction.
Outside of our run rate business, the tender business that is typically sold into ministries of education was slow in much of March, April and May. Tenders did increase to -- and conversations around tenders began to increase in late June. A great example is the project in Egypt that Simon mentioned earlier that incorporates products from all of the NetDragon companies and includes hardware, software and even pop-up classrooms.
I'm going to move on to the next slide, which is the volume growth. This next slide shows that volumes grew year-over-year above the pace of the market. Overall, Q1 was a strong quarter, and much of the momentum that was created in Q1 was converted to orders in late Q2. Many of our larger customers stayed on track and continued to place and install orders consistently throughout the first half of the year. Egypt also took delivery of their orders during the first half of the year, allowing us to work through the backlog.
In geographies that were inaccessible during periods of mandatory shutdown, Promethean focused on recruiting new channel partners and by emphasizing our brand recognition, financial stability and availability of inventory. In multiple cases, we were successful in recruiting new channel partners. Many of these partners we recruited were seeking an interactive flat panel provider that had our financial stability, available inventory and saw value and differentiation in our hardware and software products.
As I mentioned earlier, a shift to virtual events allowed us to stay engaged with our customers and channel partners while we work remotely, and I believe that these activities and the quick response to a blended learning solution had a positive impact on our volume growth.
We're now going to move on to the next slide, which is the volume growth trend. The next slide is a 3-year view on first half shipments. The dark bar represents the panels that we sold, excluding the large tenders that we won in Russia and Egypt. The light bar shows the overall panel volume. There are 2 points that I want to make on this slide. The first is that Promethean has successfully competed for and won large tenders in both Russia and Egypt, with bespoke products over the last 3 years. This business, while initially new to us, has become part of our company's core competency. As you can see, volumes may vary year-to-year. But to the extent that there are tenders that we can compete for, we have a solid track record of winning that business.
The second point I want to make on this slide is that our core business, excluding tenders, was flat in the first half of the year. This reiterates my point that in parts of the world that were open for business, we are able to sell our products. In geographies that were completely shut down, sales opportunities shifted into late Q2 are pushed into the second half of the year. Just to be clear, not all regions recovered in Q2. And some regions continued to be impacted in Q3. But in the regions that are open, we are engaged and winning business.
Moving on to the next slide. This next slide illustrates that we are the #1 provider of interactive front-of-classroom devices. In the first half of 2020, Promethean was successful at holding our leadership position in our primary markets. And in some countries like the United States, we were able to grow share in the first half. We have an established base of customers that buy from Promethean as they upgrade to newer technologies or expand into new school buildings. Many of the teachers using Promethean panels or whiteboards also use our lesson delivery software, ActivInspire and ClassFlow to teach their lessons. This combination of hardware and lesson delivery software makes Promethean use case much more integrated of a solution than our competitors that only have a hardware solution.
Our engaged user base, coupled with the differentiated offering of hardware and software, helped us retain our earned installed base and win new customers.
Moving on to the next slide. I'm going to talk about the growth trajectory in our major markets. Even during this pandemic, Futuresource estimates that the global IFP volumes to return to near-normal levels in Q4 and begin to grow again on a full year basis in 2021. Our largest market is -- our largest markets in the U.S., U.K., Germany and Egypt are projected to grow between 12% and 20% through 2024. The growth will come from mature markets like the U.K. that have been using interactive devices for decades and have been through multiple replacement cycles that are now replacing legacy technologies with newer interactive flat panels. In other markets that have recently adopted interactive flat panels and are outfitting their classrooms for the first time.
Another point to consider is with the onset of COVID, many schools purchased a one-to-one device for their students. In a blended learning environment, schools will need to consider their classroom technology to support the student's new one-to-one technology.
In the next few slides, I'll give an overview of some of our largest markets to illustrate how each have room for growth over the next few years. So moving on to the next slide, the U.K. and Ireland growth opportunities slide.
Let's start with the U.K. Ireland market, which happens to be the first market that Promethean entered over 20 years ago. This market had 644,000 classrooms, of which 96% of them have an interactive front-of-class device. At the end of 2019, only 35% of the classrooms had installed an interactive flat panel, which is the latest technology. Futuresource estimates by the end of 2023, 60% of the U.K. and Ireland market will have moved to interactive flat panels. The growth that we can expect in the U.K. market will be coming -- will be from converting classrooms from interactive whiteboards to interactive flat panels.
The U.K. market is an example of a growing market that is in a replacement cycle with a very small number of classrooms that never adopted a front-of-class device. There are also funding sources to assist us with this technology change. An example in the U.K. is the transformative rebuilding program, which provides GBP 1 billion per year over the next 10 years.
Moving on to the next slide, which is the growth opportunity in the U.S. I'll provide context on the U.S., which is currently Promethean's largest market. The U.S. has approximately 2.8 million classrooms. At the end of 2019, 81% of the classrooms had an interactive display, but only 17% of those classrooms had an interactive flat panel. Promethean's market share in the first half of 2020 was 28%. Futuresource estimates that the U.S. market will increase adoption of interactive flat panels from 17% to 58% by the end of 2024.
Growth in the U.S. will come from classrooms upgrading to newer technology and from schools buying interactive panels for the first time. Funding for schools in the U.S. comes from federal, state and local government. And the most recent change in funding was the addition of the CARES Act, which will provide an additional $13 billion in funding to help offset the costs that schools incurred as a result of COVID.
Moving on to the next slide, which is the growth opportunity in Germany. Germany, which has a much different market dynamic than the other 2 markets that I've talked about. At the end of 2019, there were 528,000 classrooms, yet only 36% had implemented an interactive display. Of the 36%, only 7% were interactive flat panels. Futuresource estimates that the interactive market will grow to 55% by the end of 2023, and the largest growth area being interactive flat panels.
The German market is an example of one that has significant room to grow, a critical element in growth is funding. And the German digital school reform initiatives are being supported by over EUR 5 billion in DigitalPakt funding. The DigitalPakt funding, coupled with the rapid adoption of interactive flat panels, make this a great market for Promethean.
The next slide talks about the growth opportunity in Egypt. The Egyptian market is different than other markets I've discussed today. In Egypt, we're working with the Ministry of Education on many of the teaching and learning initiatives. Promethean plays an important role by providing our classroom technology in a blended learning environment with other companies within the NetDragon family of products. This model, where we sell multiple products to the Ministry of Education of a country is something that we believe we can replicate with other countries.
Finally, on the second half 2020 outlook slide. I'll provide some insight into the second half of the year. There will continue to be several unknowns due to COVID as different geographies continue with waves of shutting down due to the pandemic. As we did in the first half, we're going to apply all of our focus and resources on the markets that are doing business and continue to drive demand and awareness in the markets that may be slower to come back.
Distance learning will continue to be at the heart of our message, specifically how our products work in the classroom and with blended instruction. In the second half, we're going to build on our K-12 market leadership position. We will continue to work with our channel partners and win new business, replacement business and continue to work in emerging markets.
We will have meaningful product releases that enhance the teacher experiences and assist IT managers in remote management of their devices. We're going to stay on track for recovery back to pre-COVID business. It may be a while in some countries, but the trends that we're seeing matches Futuresource's unit volume estimates that we will see a near-full return in Q4 volumes. I personally believe that COVID has escalated the need for schools to have a blended learning model in place and that students will return to the classroom at some point.
Promethean will also capitalize on the trend to adopt classroom technology for use as part of a blended or distance learning solution. There are large funding sources that we will work with and work with our customers to access and we'll work together with NetDragon and Edmodo to provide a more comprehensive solution for our customers.
Thank you for your time today. I'm now going to turn it over to Susan Kim, CEO of Edmodo.
Thanks, Vin. Hello, everyone. So Slide 24. Edmodo has always been at the forefront of education technology, offering an all-in-one solution for hybrid learning and is the only learning platform that brings all the stakeholders together, teachers, students and parents to support learning everywhere. And even before COVID made distance learning tools a necessity, Edmodo offered the best of classroom tools, enabling synchronous and asynchronous learning, content integration and robust collaboration and community features.
Next slide. Around the world, user engagement and active user growth have grown tremendously in a short span of time. I think there's probably a lag on the slide.
Yes.
I'm just going to wait a second because this chart is really good. Slide 25.
I think you should just keep talking because the delay is actually quite a bit.
It's pretty severe, yes. So in the world, user engagement and active user growth have grown tremendously. Italy has grown at over 11x. This is where when you compare pre and post COVID; Spain at almost 4x; Indonesia at almost 6x; Egypt at 126x. Overall, we've seen our global numbers increase by 4x for our daily active users.
Next slide. Edmodo BM as a free business-to-consumer for free 2C products focused on bottoms-up acquisitions, acquiring users on a teacher by teacher basis. This year, we have rapidly shifted our focus to schools, districts and country-level customers, moving to a top-down acquisition model, driving rapid scaling of user acquisition and driving even higher levels of user engagement.
Slide 27, next slide. With our global reach and large installed user base, Edmodo has signed on key partnerships. We are the only learning platform offering a seamless Zoom integration, and we've recently signed a global partnership with one of the leading content publishers around the world, Pearson.
Slide 28. With renewed focus on schools, districts, country level customers, we have launched an annually recurring business model. So in this model, the non enterprise version of our offerings, teachers will continue to be able to use Edmodo for free. However, schools and districts will pay an annual subscription license, their offering is more robust with states, countries -- and with states and countries, they will pay on top of an annual subscription license, an upfront implementation fee. The enterprise version of Edmodo offers far superior, robust administrative controls, privacy settings, private content repository.
Slide 29. In just a short amount of time, we have built a strong pipeline globally. In the U.S., driven by CARES funding that Vin referenced, we've got over 30 deals in the pipeline, which includes schools, districts as well as other organizations beyond schools. So for example, we've got the Girl Scouts of America, which represents 2 million users, as well as religious organizations and nonprofits. So demand for our product move beyond education. There is also strong demand globally with Ministries of Education and school districts looking to rapidly digitalize education.
And now I'll turn it over to Lin Chen, Senior Vice President of Gaming.
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Great. Thank you. Hello, everyone. I'm glad to be here virtually with all of you, and I'm going to quickly take you through our financials in the first half.
If you go to the first slide, on the top line, we got revenue growth for both our gaming and education business in an environment which has presented us with both short-term challenges and also tremendous opportunities in the near-term and over the long run.
On the cost side, we have been very disciplined on cost control. That resulted in relatively flat year-over-year selling and marketing, as well as administrative expenses. Overall, our SG&A increased by roughly about 6%. And I would say, most of that is due to increase in our staff salaries on a relatively stable headcount.
If you go to the bottom line, you'll notice that our net profits decreased by 20%. But the difference is primarily due to several accounting GAAP adjustments or charges, which are not really related to our operating performance. And I will go into more details on that in the later slides.
If you look at non-GAAP EBITDA and non-GAAP operating profit, I would say that is a much more fair representation of the true profitability picture of the company. You can see that the earnings show a slight drop of roughly about 3% to 6%. And that's due mainly to higher SG&A, as mentioned. And also, COVID-19 has affected our Promethean earnings in Q2, which actually typically is the peak season of the whole year for Promethean. And as Vin has pointed out, we do expect that the second half is going to come back strong, and we're going to be gradually getting back to normal in terms of our profits growth.
Last thing on this slide that I want to highlight is our operating cash flow, which increased by 26% year-over-year despite the drop in accounting profits, as we were able to exercise very strong discipline in working capital management to ensure that our cash flow stays healthy.
In the second slide, with the segmental breakdown, a little bit more details to go through. Top line of our education business continues to generate growth despite a challenging market for Promethean in Q2. The gross profit decline is actually due to product mix. Or more precisely, it's the mix between tender and [one way] business. Because in the first half, we recognized revenue for major tender. And because of the large kind of size of the tender and the strategic nature, the margins are lower than our usual [ runway ] business. And if you take out the tender business, ex tender, the gross margin is actually over 30% which is in line with our normal margin level.
In terms of the core segmental loss, it has increased. And the main reason is due to the U.S. tariff impact on our Promethean products. That's actually a big one. And then the other one is actually increased server hosting costs due to multiple -- a lot higher kind of user traffic on our -- for our education business. And the last reason is increased kind of staff salaries.
On the gaming side, as mentioned, in the first half, we were able to maintain our revenue growth and with a stable bottom line.
Okay. If we go to the third slide, the third and fourth slide, I thought for this earnings presentation, it would be very helpful to show a couple of bridges. So first of all, for the net earnings before the accounting net earnings bridge. You can see that there's a drop of net earnings. But as you can see in this chart, 80% of the drop actually came from accounting GAAP charges which are largely noncash-related and are not related -- completely not related to the operating performance of the company.
In particular, just to note that the finance charge and exchange difference on the CB is actually related to the fundraising round, which we closed in March of this year with Ascendent Capital Partners on our education business, which actually value our education business at USD 1.35 billion. That run is actually more structured as they prefer round is technically structured as a CB round, so that's why we have those accounting charges that you can see on this chart.
Okay. On the fourth slide, this is actually a bridge that I think it shows a better picture of our operating performance because it shows a picture from a cash flow perspective. As you can see, we were able to maintain a healthy growth of cash inflow from operations despite accounting profits drop. And a big part of that, again, is due to our ability to execute on our operations process and working capital management with discipline and [vigor] .
Okay. With that, I'm going to turn it back to Simon, who's going to take us through the outlook.
Thank you, Ben. So let me reiterate, for the last many announcement, we have emphasized on operation excellence. I think once again, we show our ability to, number one, is actually manage our business. It's actually what Ben said about our cash flow. It's actually one of the very important metric, and then we have improved greatly managing our cash flow in a down market, mostly on the education side. So which is actually a lot of credit goes to our teams in education to do that.
The other thing -- the other point I want to reiterate, I think Vin has talked about it, is actually, we are growing our business in Promethean even at a down market. Now I mean, it's actually we got impacted by product mix and some tariff and all that. But if you kind of play the movie forward for the rest of the year, we are very confident, and then we will recover from that. So -- and also, if you kind of recall what Susan was talking about, it's like even though we take a short-term kind of expense because of the traffic went up, so we have to pay for more hosting costs. But at the end, that tiers up for our SaaS revenue coming in, in the second half of the year.
So we are very confident we can capitalize on kind of the trend of blended learning. We are also very confident starting in the second half, the monetization of Edmodo, especially is actually on the SaaS part, we are seeing -- we will be seeing a lot of good results.
It's actually also just to remind everybody, we were able to pivot our business from a very difficult COVID situation into the new operating model, both on the Promethean standpoint and also from Edmodo standpoint, which I believe is actually very impressive.
Of course, I cannot -- going to close this without talking about the Egypt MOU, it's a very comprehensive kind of framework that we're working with the Egyptian government. So we're going to be spending a lot of effort and a lot of time to implement that MOU, and the result will be shown in the second half of the year. Lin Chen talked a lot about gaming. So I'm not going to repeat that way too much, but we are confident that we're going to grow our gaming business half -- over half. And we will continue to launch new games for the rest of the year.
So with that, thank you. It's actually -- we are very confident that we will rise through this COVID-19 wave, and then we'll get into a growth phase with blended learning and also with the gaming business.
With that, I'm going to stop, and I think we go into the Q&A session. Thank you.
Thank you, Dr. Leung, and thank you, management, for the presentation. Now it's time for our Q&A session. [Operator Instructions] [Foreign Language] We will welcome questions in both English and Chinese. [Foreign Language] Now let's welcome our first question. [Foreign Language] Operator?
[Foreign Language] Susanna Chui, DBS.
I have mainly 2 questions. The first one is about the online games. Your online games revenue growth moderate a little bit to 5% in the first half versus peers around 20% to 40% growth year-over-year. May we -- may management elaborate more about the reason be high? You said because your company has not launched the expansion pack and any expansion pack pipeline in the second half can management share? And could we also know that the second half growth outlook and also 2021 as well?
And actually, about the second question is about the online education. The MAU growth of 22 million in the first quarter to 23 million in the second quarter, which is quite good. So maybe a lot about if management have an the target in monetization in the second half or next year? Any number of the target paying ratio or ARPU is helpful.
I'll suggest either Lin Chen or Ben take the first question. I'll take a crack at the second one.
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Okay. Just very quickly on the Edmodo kind of revenue and the SaaS revenue. It's actually, I don't think we have disclosed our Q1 MAU. So the MAU is showing the 23 million is for the first half. And MAU has grown tremendously in the last 6 months, if you go back to our last announcement.
So the nature of the SaaS business resigning is actually is multiyear. Our contract is actually recharged by the student and operated by teachers. So we can't disclose the detail of a lot of our contracts. But I can make a statement about you will see a lot of the effect coming in the second half of this year. Susanna, as you know, we don't give guidance. So I'll leave it at that.
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Ben, why don't you take the [Foreign Language]?
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Is it okay if I speak in English?
Of course.
Okay. Yes. Actually, we are a private investor from a family bank in Hong Kong. I have a few questions. Actually it is my first time attending the -- this kind of -- we actually invested a lot.
[Foreign Language]
[Foreign Language] Okay. No, but I think some of the audiences, they may not understand. Can they?
We can translate.
That's okay. I speak in English. Actually, we -- our family is watching your company situation for a few years. Besides -- and last year, we decided to invest quite heavily in the company. So that's why I had to attend this, and we would like to know what's going on in the company.
I would have to say, regarding the game business, I have to say the biggest disappointment, maybe is regarding the top line. We expect it will be in line with the China game business growth as published, which should be [indiscernible] and I just heard some of the audience questions, it seems to me there could be some one-off happened last year. That's why last year's business was boosted a lot, and that's why it looks like when you look at the growth rate, it slowed down a lot. Is that the case? Or that's really -- we are losing some market share to our competitors? And is it a temporary situation? Or do you expect that will continue in the coming 2 years? That's my first question.
Well. Let me make some general question. So -- general comment, and then I'll ask maybe Ben or Lin Chen to go into detail. Actually, it's not -- if you look at our gaming business, I would say, for the last 2.5 years, maybe 3 years, we've been growing actually double-digit year-over-year. So it's actually when you build...
So 25% when [indiscernible]. 25% actually?
Well, it's actually a double-digit year-over-year. I mean, so we've been growing. Did I say something. So my point on that one is actually, it's not just a last year's boost. So point #1. Point #2 is actually, when you're growing so fast, is that your base becoming bigger. So I mean, again, that will affect the growth rate.
So -- and also, because of the nature of the players, it's actually our player, mainly on Eudemons is different from a lot of the other mobile games because the other player you're looking at is that they are more in the mobile area. And then we are kind of both in mobile and also in PC games.
So with that, either Ben or Lin Chen can kind of comment on the specifics.
Yes, maybe I can elaborate a little bit, right? So I guess -- yes, so I guess if you -- just want to make sure that I'm not on mute. Yes. So I think if you look at the performance in the first half, right, I mean, as Simon mentioned, I mean, we've been growing at over 30% CAGR for the past few years on the gaming business. So in the first half, and Lin Chen also kind of mentioned the specific reasons, right?
First, COVID-19 is having an impact on the some of the spending pattern of our players, especially in Eudemons. Because Eudemons, we have a lot of high -- kind of high spending players, where they're spending kind of willingness, if you will, right? I mean, was affected a little bit by COVID-19, but that's not expected to be -- that's expected to be temporary, right?
And then the second thing is, if you look at our growth kind of forecast in the next few years, I mean, you cannot rely on just all the existing games to go forever, right? Obviously, you have to rely also on the new games.
And if you look at the new games, we have a very robust pipeline of new games, but none of them were launched in the first half. And I would say that the COVID-19 also has an impact on kind of the development and the testing kind of schedule of our new games, right? But if you look at kind of going forward, we got several games in the pipeline that will be launched by the end of the year. We got at least 3 Eudemons games launched kind of month-by-month in the next few months by the end of the year, right? We got Eudemons Storm, we've got Eudemons HTML 5, and we also have the Eudemons Mobile 2, right? So I think going forward, right, I mean, we're -- I think we'll be looking at kind of more growth coming from our new games, right, which we are confident about and maybe pushing internally [Foreign Language]
[Foreign Language]
Okay. So is it fair to say that the company did not have any intention to divert some resources from game to education and scale will maintain the original process?
Yes. Actually, we don't see that happening at all.
Yes. Because I saw that investment -- that your R&D on games is -- your run rate is about 18.5%. And it looks like you're keeping that rate in the past few years. So I do expect you would keep that in the future and we will...
You're right. Yes, you're absolutely right.
There is some concern in the market that because we see -- it looks like education do need a lot of resources. So that will divert some resources from gaming to education.
No, it's actually you can -- no, no, no. It's actually -- well, first of all -- no, exactly, if you remember, I mean, it's actually we did a fundraising for the education business actually at the beginning of the year. That's where the converted -- the CB is coming into play. So actually we are really separating the investment into education versus our investment into gaming.
Yes. Yes. Yes. Sorry, sorry, I still have one last question. It's regarding the education. Actually, up to now, why we invest heavily in the company last year because we still can see -- it looks like your company still have a lot of potential. And the market price to the company is seems it's not fully reflected.
For example, on the education side, we expect it will at least worth about CNY 10 billion in the market if I compare to other peers. Would you have any intention to spin-off the education from game in [indiscernible]? Yes, because look like for the game part, we believe it is at least worth CNY 10 billion, and education at least CNY 10 billion or even more than that. So it looks like now it's really unfairly -- you're being unfairly -- you're being unfairly treated in the market. If you can speed it off, you can actually get extra capital to support your education business.
Actually, we couldn't agree with you more. So I think that's why you also invested in our stock. So that's one maybe upside. So I think we did talk about this particular subject in previous calls and previous events. So it is our intention eventually to have education separate from the gaming business. So the sum of all parts if better than where we are. So we don't have to deal with the holdco discount and all that.
You're absolutely right. If you kind of look at the CB that we did is actually the fee money is actually USD 1.2 billion, and then post money it's 1.375 billion, I guess, 1.35 billion. So that's the RMB 10 billion. So actually, we do exactly the same math as you do. So that's why when you mentioned [indiscernible]
Yes, I look at all your peers saw, et cetera. And I just can't believe why you are so cheap in all those. And that's why we think there's huge potential to be honest. Yes.
And I think it's also a good timing because in the past, the investors for its shift they're very conservative regarding companies not making money because that's no longer the case. If you look at those companies not making money, they're still very highly regarded by the market. And you look like actually most of educational company, they are not making money. But they still can raise more funds. So because -- I think you have to change regarding some of your packaging, separating games from education and repackage it a little bit. I really can see you have very high potential.
We agree with. So we just can't go into the details. So the only thing I can say is that stay tuned. How's that?
And that's why today, when you know when your stock price dropped 15%, I think, great we should buy more. You guys should buy more. Because I really think your company at least worth 25 -- 23 billion to 25 billion, really.
We agree. First of all, thank you for the comments. And we couldn't agree with you more on that one. And thank you for investing into our company. I can assure you, your investment will be handsomely paid off soon. How's that?
Because actually, actually, we have to take it a little bit because I think there are so many smart investors in the market, why can't they see it? And so -- but of course, we will do it. Yes. This is, I think just a little bit to do with packaging. You see all the large education companies.
Well, it's actually -- I go back to the holdco discount because I think you're absolutely right. When you are a multi portfolio company, I mean people, to your point about packaging and then people got -- am I investing in the gaming company or am I investing in the education company. So I think that's kind of -- the confused the issue a little bit for some investors. So we totally agree with you on -- in terms of the direction. So I just -- I'm biting my tongue. I can't say way too much on this call, so.
Okay. I think that was the last question. So with that, thank you, everybody, for calling in. So and if you have any follow-up questions, do not hesitate to call us. And thank you to all my colleagues, especially the ones in the U.S. So with that, so, goodbye. Thank you.
Thank you.
Thank you. Bye-bye.
Thank you.
[Foreign Language]