China Literature Announces 2023 Annual Results
- Total revenues for China Literature in 2023 were RMB7,011.8 million, with online business revenues at RMB3,948.1 million and IP operations revenues at RMB3,063.6 million.
- Operating profit increased by 12.8% to RMB709.3 million, while profit attributable to equity holders rose by 32.3% to RMB804.9 million.
- China Literature focused on enhancing content quality, adding new writers and literary works, and leveraging AI tools for innovation and content adaptation.
- The company saw growth in Monthly Active Users (MAUs) and Monthly Paid Users (MPUs) in 2023, with a strategic focus on operational efficiency and engaging core user base.
- China Literature made progress in IP visualization, offering a diverse selection of high-quality works in live action TV, animation, and comics segments.
- The company also focused on IP commercialization and monetization through merchandise, licensing, and gaming segments, aiming to drive sales and enhance the IP value.
- None.
Results Highlights (1)
- Total revenues were
RMB7,011.8 million (USD990.0 million ), compared withRMB7,625.6 million in 2022.
- Revenues from online business wereRMB3,948.1 million (USD557.4 million ), compared withRMB4,364.0 million in 2022. This was attributed to our ongoing initiative to shift away from channels with low return on investment ("ROI") and to focus on high-quality growth.
- Revenues from IP operations and others excluding New Classics Media ("NCM") increased by10.1% toRMB1,803.4 million (USD254.6 million ); when including NCM, revenues from IP operations and others decreased by6.1% toRMB3,063.6 million (USD432.6 million ). - On a non-IFRS (2) basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:
- Operating profit wasRMB1,049.8 million (USD148.2 million ), compared withRMB1,363,9 million in 2022.
- Profit attributable to equity holders of the Company wasRMB1,130.4 million (USD159.6 million ), compared withRMB1,348.2 million in 2022.
- Basic earnings per share wereRMB1.12 . Diluted earnings per share wereRMB1.11 . - On an IFRS basis:
- Operating profit wasRMB709.3 million (USD100.1 million ), compared withRMB628.8 million in 2022.
- Profit attributable to equity holders of the Company wasRMB804.9 million (USD113.6 million ), compared withRMB608.2 million in 2022.
- Basic earnings per share wereRMB0.80 . Diluted earnings per share wereRMB0.79 .
1. Figures stated in USD are based on |
Mr. Hou Xiaonan, Chief Executive Officer of China Literature, commented, "In 2023, China Literature continued to build a comprehensive IP development framework encompassing a variety of content formats and covering every stage of the content lifecycle. Additionally, we equipped creators with cutting-edge AI tools to enhance our content ecosystem. The number of literary works that newly reached 100,000 average subscribers per chapter across the platform increased
Over the course of the year, China Literature continued to make significant progress in both the visualization and monetization of its IP, offering users a strong lineup of high-quality works, including dramas series such as 'In Spite of the Strong Wind (纵有疾风起),' 'The Road to Ordinary (平凡之路),' 'Sunshine by My Side (骄阳伴我)' and 'The Infiltrator (潜行者),' as well as new animation seasons for classic IP franchises including 'Battle Through the Heavens (斗破苍穹),' 'Stellar Transformations (星辰变),' 'Almighty Mage (全职法师)' and 'Martial Universe (武动乾坤).' Within our comics business, we announced the acquisition of the assets of
2023 was a pivotal year for innovation and breakthroughs in AI technology. We launched the first Large Language Model designed specifically for the online literature industry, 'Smart Pen,' and the 'Smart Pen Edition for the Author Assistant Application,' making it available to all contracted writers. The AI features have generated weekly engagement rates of
Financial Review (3)
Revenues were
Revenues from online business were
i) Online business revenues from our self-owned platform products decreased slightly from
ii) Online business revenues from our channels on Tencent products were
iii) Online business revenues from third-party platforms were
Revenues from IP operations and others were
i) Revenues from IP operations were
ii) Revenues from the "others" category, consisting mainly of sales of physical books were
Cost of revenues increased slightly by
Gross profit was
Interest income increased
Other gains, net were
Selling and marketing expenses decreased
General and administrative expenses decreased
Net reversal of impairment losses on financial assets was
Operating profit increased
Income tax expense was
Profit attributable to equity holders of the Company increased
Key Operating Information
- Average MAUs on our self-owned platform products and self-operated channels were 205.6 million, a decrease of
i) MAUs on our self-owned platform products decreased
ii) MAUs on our self-operated channels on Tencent products decreased
- Average MPUs on our self-owned platform products and self-operated channels increased
- Monthly ARPU for our pay-to-read business was
Other Key Information
- EBITDA was
- As of December 31, 2023, the Company's net cash position was
- Free cash flow* was
- New Classics Media, on a standalone basis, recorded
* Free cash flow: operating cash flow deducts payments for lease liabilities and payments for capital expenditures.
Business Review and Outlook
IP Creation
Our online reading business continues to make significant progress, adding 380,000 writers, 670,000 literary works, and more than 39 billion Chinese characters of content in 2023. New writers in particular are making a significant impact. The number of new writers whose books generated more than
Our growing library of creators and literary works continues to drive content quality to new heights. In 2023, the number of literary works that newly reached 100,000 average subscribers per chapter across the platform increased
- Anti-piracy measures which have continued to achieve breakthroughs. Throughout the year, we championed creativity by removing 1.1 million links to pirated content to safeguard authors' interests, boost subscription numbers, and foster a healthier content ecosystem.
- Our proprietary "Smart Pen Edition for the Author Assistant Application," leveraging our "Smart Pen" Large Language Model (LLM), is now accessible to all contracted writers. This cutting-edge tool sets a new benchmark in online literature creation. The weekly engagement rate with its AI features has reached
30% . - Our innovative approach to building an interactive user community has strengthened the bond between our readers and our IP. In 2023, the number of new literary works with over one million user comments grew
67% year-over-year while the number of literary works with more than 100,000 monthly user votes grew66% year-over-year. MPUs also grew nicely in 2023, increasing10.1% year-over-year to 8.7 million.
IP Visualization
In 2023, We continued to advance the visualization of our IP, offering our users a diverse selection of high-quality works.
- In the live action TV and film segment, following the debuts of "The Road to Ordinary (平凡之路)" and "In Spite of the Strong Wind (纵有疾风起)" in the first half of the year, we released a number of drama series in the second half, such as "Sunshine by My Side (骄阳伴我)" and "The Infiltrator (潜行者)." Among these, "Sunshine by My Side (骄阳伴我)" ranked first in daily viewership across all channels for 16 consecutive days, according to Kuyun. "The Infiltrator (潜行者)" ranked first in prime-time drama series ratings nationwide during its broadcast run, according to metrics from China Audio Video Big Data.
- In the animation segment, new seasons for classic IP franchises including "Battle Through the Heavens (斗破苍穹)," "Stellar Transformations (星辰变)," "Almighty Mage (全职法师)" and "Martial Universe (武动乾坤)" were released during the period as well as the new animated series "Transcending the Nine Heavens (傲世九重天)" and "Mysterious Treasures (神藏)." Each of these titles was released to widespread praise from audiences. In particular, the 52-week season of "Battle Through the Heavens (斗破苍穹)" was a fan favorite, dominating Weibo's domestic animation popularity rankings for three months straight, maintaining its position as the most popular animated series on the Chinese internet. Our animated works continued to lead the market in terms of quantity, quality and hit rate. According to Enlightent, six of the top ten most-streamed online animated series in 2023 were adapted from China Literature IP.
- In the comics segment, 13 of our newly released adapted comic series broke the 100 million benchmark in popularity in 2023. In addition, the acquisition of the assets of
Tencent Animation and Comics will further enrich our portfolio of IP including top Chinese comic IPs such as "The Outcast (一人之下)" and "The Fox Spirit Matchmaker (狐妖小红娘)." The move also bolsters our pipeline of comic adaptations and expands our production capacity for animated series. Going forward, we plan to leverage AI technologies to enhance the adaptation of online literature into animated series and comics, accelerate the adaptation process of text-based IPs into visual formats and enhance the efficiency of content commercialization.
IP Commercialization and Monetization
- In the IP merchandise segment, we unveiled a diverse array of trendy collectibles and merchandise based on popular IPs such as "Lord of the Mysteries (诡秘之主)," "The King's Avatar (全职高手)" and "Battle Through the Heavens (斗破苍穹)." We have a bunch of products including blind boxes, toy collectables, accessories and cards, all of which are highly sought-after. We've also broadened our IP licensing, collaborating with a diverse array of consumer brands across multiple industries such as digital 3C products, food and beverages, and automotive. This has been highly popular and is effectively driving sales for our partners. In 2024, we plan to enter new merchandise categories and explore synergies between our merchandise and various content formats. By strategically timing our merchandise launches with the release of the associated film, TV series and animated series, we aim to amplify the hype surrounding our IPs.
- In the games segment, licensed games based on our popular IPs were successfully launched in 2023 including "A Record of a Mortal's Journey to Immortality (凡人修仙传)" and "Swallowed Star (吞噬星空)". This will be followed up with the expected launch of several other licensed games this year, including "Soul Land (斗罗大陆)," "Battle Through the Heavens (斗破苍穹)" and "Cultivation Chat Group (聊天群的日常生活)" which have all received regulatory approval. In terms of in-house game operations, we launched expansion packs with enhanced graphics and interactive features for our classic game "New Soul Land (新斗罗大陆)". We will continue to roll out upgrades and improved gameplay to ensure our players have an exceptional gaming experience.
Innovation in Technology and Business
We have long maintained the conviction that only through innovation can we make true breakthroughs. In 2023, we identified several new opportunities which we will take advantage of.
- As previously mentioned, we launched the first LLM designed specifically for the online literature industry, "Smart Pen," and the "Smart Pen Edition for the Author Assistant Application," which will support writers with various aspects of content creation. As AI technology continues to evolve, we see its potential to unlock significant value in our IP. AI promises to open doors for the adaption of a wider range of literary works, accelerate the transformation from text to visual formats, and pave the way for faster commercialization.
- We've officially entered the high-quality short drama segment with the rollout of our "Short Drama Star Incubation Plan." This initiative will support more than 100 short drama series by establishing a creative fund with over
RMB100 million , as well as pioneer the interactive short drama format. So far, several of our short drama series have surpassedRMB10 million in gross revenue. - We continued to expand into overseas markets. By the end of 2023, our foreign language online reading platform, WebNovel, offered around 3,800 works translated from Chinese and about 620,000 original works created locally. We continued to enhance our AI translation models throughout the year, leading to a wealth of top-tier works being translated. In December 2023, AI-translated works accounted for 21 of the top 100 bestsellers on WebNovel. AI-driven translation is the catalyst for our multilingual expansion overseas and we expect it will continue to drive our growth and establish competitive advantages in specific genres in key overseas regions.
Outlook
We are confident that 2024 will be a year of blockbusters for China Literature. At present, the number of pre-registration for "Joy of Life 2 (庆余年2)" has exceeded 12 million, making the drama series the first to pass the 10 million pre-registration threshold across all platforms. In
About China Literature Limited
China Literature is dedicated to building a deep and immersive intellectual property ("IP") universe for the Mandarin-speaking world. It incubates original IPs from its online literature platform, which are subsequently adapted to a range of digital entertainment mediums, including comics, animation, film, TV series, web series and games. The virtual world created by these digital offerings becomes an inseparable part of a user's daily life. China Literature creates and promotes IPs mainly through Qidian Reading and QQ Reading, its leading online literature platforms, as well as New Classics Media, a renowned film and TV drama series production house in
Contact
For investors / analysts:
Maggie Zhou
Tel: +8621 6187 0500 ext. 80605
Email: IR@yuewen.com
For media:
Vivian Wang
Tel: +852 2232 3978
Email: vivian.wang@christensencomms.com
Non-IFRS Financial Measures
To supplement the consolidated financial statements of the Company prepared in accordance with IFRS, certain non-IFRS financial measures, namely non-IFRS operating profit, non-IFRS operating margin, non-IFRS profit for the year, non-IFRS net margin, non-IFRS profit attributable to equity holders of the Company, non-IFRS basic EPS and non-IFRS diluted EPS as additional financial measures, have been presented in this press release for the convenience of readers. These unaudited non-IFRS financial measures should be considered in addition to, and not as a substitute for, measures of the Company's financial performance prepared in accordance with IFRS. These unaudited non-IFRS measures may be defined differently from similar terms used by other companies. In addition, non-IFRS adjustments include relevant non-IFRS adjustments for the Company's material associates based on available published financials of the relevant material associates, or estimates made by the Company's management based on available information, certain expectations, assumptions and premises.
Our management believes that the presentation of these non-IFRS financial measures, when shown in conjunction with the corresponding IFRS measures, provides useful information to investors and management regarding the financial and business trends relating to the Company's financial condition and results of operations. Our management also believes that the non-IFRS financial measures are useful in evaluating the Company's operating performances. From time to time, there may be other items that the Company may include or exclude in reviewing its financial results.
Forward-Looking Statements
This press release contains forward-looking statements relating to the industry and business outlook, forecast business plans and growth strategies of the Company. These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release. They are based on certain expectations, assumptions and premises, some of which are subjective or beyond our control. These forward-looking statements may prove to be incorrect and may not be realized in future. Underlying the forward-looking statements is a large number of risks and uncertainties. Further information regarding these risks and uncertainties is included in our other public disclosure documents on our corporate website.
CHINA LITERATURE | ||||
CONSOLIDATED INCOME STATEMENT | ||||
Year ended December 31, | ||||
2023 | 2022 | |||
(RMB in million, unless specified) | ||||
Revenues | ||||
Online business(1) | 3,948.1 | 4,364.0 | ||
Intellectual property operations and others(2) | 3,063.6 | 3,261.6 | ||
7,011.8 | 7,625.6 | |||
Cost of revenues | (3,640.3) | (3,595.5) | ||
Gross profit | 3,371.5 | 4,030.1 | ||
Gross margin | 48.1 % | 52.8 % | ||
Interest income | 166.3 | 160.9 | ||
Other gains/(losses), net | 11.5 | (207.1) | ||
Selling and marketing expenses | (1,719.5) | (2,002.6) | ||
General and administrative expenses | (1,161.0) | (1,238.2) | ||
Net reversal of/(provision for) impairment losses on financial assets | 40.6 | (114.3) | ||
Operating profit | 709.3 | 628.8 | ||
Operating margin | 10.1 % | 8.2 % | ||
Finance costs, net | (12.9) | (54.0) | ||
Share of net profit of associates and joint ventures | 205.0 | 199.0 | ||
Profit before income tax | 901.4 | 773.8 | ||
Income tax expense | (97.9) | (166.2) | ||
Profit for the year | 803.5 | 607.6 | ||
Net margin | 11.5 % | 8.0 % | ||
Profit attributable to: | ||||
Equity holders of the Company | 804.9 | 608.2 | ||
Non-controlling interests | (1.3) | (0.6) | ||
803.5 | 607.6 | |||
Earnings per share | ||||
(in RMB per share) | ||||
- Basic earnings per share | 0.80 | 0.60 | ||
- Diluted earnings per share | 0.79 | 0.59 |
Notes: (1) Revenues from online business primarily reflect revenues from online paid reading, online advertising and distribution of third-party online games on our platform. (2) Revenues from intellectual property operations and others primarily reflect revenues from production and distribution of TV, web and animated series, films, licensing of copyrights, operation of self-operated online games, and sales of physical books. |
CHINA LITERATURE | ||||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||
Year ended December 31, | ||||
2023 | 2022 | |||
(RMB in million) | ||||
Profit for the year | 803.5 | 607.6 | ||
Other comprehensive income: | ||||
Item that may be subsequently reclassified to profit or loss | ||||
Share of other comprehensive (loss)/income of associates and joint ventures | (0.6) | 4.7 | ||
Currency translation differences | (21.7) | 62.9 | ||
Item that may not be reclassified to profit or loss | ||||
Net loss from change in fair value of financial asset at fair value through other comprehensive income | (4.3) | (7.5) | ||
Currency translation differences | 66.4 | 54.8 | ||
39.8 | 114.8 | |||
Total comprehensive income for the year | 843.3 | 722.4 | ||
Total comprehensive income attributable to: | ||||
Equity holders of the Company | 844.6 | 722.8 | ||
Non-controlling interests | (1.3) | (0.4) | ||
843.3 | 722.4 |
CHINA LITERATURE | |||||
SEGMENT INFORMATION | |||||
Year ended December 31, | |||||
2023 | 2022 | ||||
(RMB in million, except percentages) | |||||
Revenues | |||||
Online business | 3,948.1 | 4,364.0 | |||
Intellectual property operations and others | 3,063.6 | 3,261.6 | |||
Total revenues | 7,011.8 | 7,625.6 | |||
Cost of revenues | |||||
Online business | (1,983.5) | (2,217.2) | |||
Intellectual property operations and others | (1,656.8) | (1,378.3) | |||
Total cost of revenues | (3,640.3) | (3,595.5) | |||
Gross profit | |||||
Online business | 1,964.6 | 2,146.8 | |||
Intellectual property operations and others | 1,406.9 | 1,883.3 | |||
Total gross profit | 3,371.5 | 4,030.1 | |||
Gross margin | |||||
Online business | 49.8 % | 49.2 % | |||
Intellectual property operations and others | 45.9 % | 57.7 % | |||
Total gross margin | 48.1 % | 52.8 % |
CHINA LITERATURE | ||||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||||
As of | ||||
December 31, 2023 | December 31, 2022 | |||
(RMB in million) | ||||
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 128.3 | 132.9 | ||
Right-of-use assets | 207.7 | 183.1 | ||
Intangible assets | 7,330.1 | 7,421.6 | ||
Investments in associates and joint ventures | 924.7 | 1,008.8 | ||
Financial assets at fair value through profit or loss | 856.0 | 862.2 | ||
Financial asset at fair value through other comprehensive income | 4.1 | 8.0 | ||
Deferred income tax assets | 394.1 | 312.3 | ||
Prepayments, deposits and other assets | 291.6 | 329.6 | ||
Term deposits | 1,829.0 | - | ||
11,965.7 | 10,258.6 | |||
Current assets | ||||
Inventories | 743.7 | 760.3 | ||
Television series and film rights | 995.1 | 940.4 | ||
Financial assets at fair value through profit or loss | 2,442.7 | 119.3 | ||
Trade and notes receivables | 1,988.2 | 2,048.9 | ||
Prepayments, deposits and other assets | 1,212.6 | 1,212.5 | ||
Term deposits | 1,038.7 | 1,848.7 | ||
Cash and cash equivalents | 2,801.8 | 5,545.8 | ||
11,222.8 | 12,475.9 | |||
Total assets | 23,188.5 | 22,734.5 | ||
EQUITY | ||||
Capital and reserves attributable to the equity holders of the Company | ||||
Share capital | 0.7 | 0.6 | ||
Shares held for RSU schemes | (16.6) | (18.8) | ||
Share premium | 16,312.6 | 16,223.3 | ||
Other reserves | 2,173.3 | 1,955.1 | ||
Retained earnings/(accumulated losses) | 555.0 | (202.9) | ||
19,024.9 | 17,957.3 | |||
Non-controlling interests | (0.5) | (2.6) | ||
Total equity | 19,024.4 | 17,954.7 |
As of | ||||
December 31, 2023 | December 31, 2022 | |||
(RMB in million) | ||||
LIABILITIES | ||||
Non-current liabilities | ||||
Lease liabilities | 153.2 | 134.6 | ||
Long-term payables | 1.2 | 4.7 | ||
Deferred income tax liabilities | 134.5 | 139.6 | ||
Deferred revenue | 24.2 | 26.5 | ||
Financial liabilities at fair value through profit or loss | 247.8 | 490.6 | ||
560.9 | 796.0 | |||
Current liabilities | ||||
Borrowings | 10.0 | 417.9 | ||
Lease liabilities | 74.9 | 65.5 | ||
Trade payables | 1,119.7 | 1,203.9 | ||
Other payables and accruals | 997.7 | 1,019.4 | ||
Deferred revenue | 879.3 | 619.1 | ||
Current income tax liabilities | 266.4 | 275.8 | ||
Financial liabilities at fair value through profit or loss | 255.1 | 382.2 | ||
3,603.1 | 3,983.8 | |||
Total liabilities | 4,164.0 | 4,779.8 | ||
Total equity and liabilities | 23,188.5 | 22,734.5 |
CHINA LITERATURE RECONCILIATION OF OPERATING PROFIT TO EBITDA AND ADJUSTED EBITDA | |||
Year ended December 31, | |||
2023 | 2022 | ||
(RMB in million) | |||
Reconciliation of operating profit to EBITDA and adjusted EBITDA: | |||
Operating profit | 709.3 | 628.8 | |
Adjustments: | |||
Interest income | (166.3) | (160.9) | |
Other (gains)/losses, net | (11.5) | 207.1 | |
Depreciation of property, plant and equipment | 33.4 | 21.4 | |
Depreciation of right-of-use assets | 82.0 | 95.1 | |
Amortization of intangible assets | 182.7 | 261.2 | |
EBITDA | 829.5 | 1,052.8 | |
Adjustments: | |||
Share-based compensation | 131.5 | 241.3 | |
Expenditures related to acquisition | 56.9 | 56.5 | |
Adjusted EBITDA | 1,017.9 | 1,350.6 |
| |||||||
Year ended December 31, 2023 | |||||||
Adjustments | |||||||
As reported | Share- based compensation | Net losses from investments and acquisitions(1) | Amortization of intangible assets(2)
| Tax effect | Non-IFRS | ||
(RMB in million, unless specified) | |||||||
Operating profit | 709.3 | 131.5 | 188.9 | 20.2 | - | 1,049.8 | |
Profit for the year | 803.5 | 131.5 | 182.2 | 20.2 | (8.3) | 1,129.0 | |
Profit attributable to equity holders of the Company | 804.9 | 131.5 | 182.2 | 20.2 | (8.3) | 1,130.4 | |
EPS (RMB per share) | |||||||
- basic | 0.80 | 1.12 | |||||
- diluted | 0.79 | 1.11 | |||||
Operating margin | 10.1 % | 15.0 % | |||||
Net margin | 11.5 % | 16.1 % | |||||
Year ended December 31, 2022 | |||||||
Adjustments | |||||||
As reported | Share- based compensation | Net losses from investments and acquisitions(1) | Amortization of intangible assets(2)
| Tax effect | Non-IFRS | ||
(RMB in million, unless specified) | |||||||
Operating profit | 628.8 | 241.3 | 461.6 | 32.2 | - | 1,363.9 | |
Profit for the year | 607.6 | 241.3 | 469.4 | 32.2 | (2.9) | 1,347.7 | |
Profit attributable to equity holders of the Company | 608.2 | 241.3 | 469.4 | 32.2 | (2.9) | 1,348.2 | |
EPS (RMB per share) | |||||||
- basic | 0.60 | 1.33 | |||||
- diluted | 0.59 | 1.32 | |||||
Operating margin | 8.2 % | 17.9 % | |||||
Net margin | 8.0 % | 17.7 % | |||||
Notes: (1) Mainly includes the disposal gain, impairment provision and the fair value changes arising from our investee companies, the fair value changes of consideration liabilities related to the acquisition of NCM, and the compensation costs for certain employees and former owners of NCM. (2) Represents amortization of intangible assets and TV series and film rights resulting from acquisitions. |
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SOURCE China Literature
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