智通财经APP获悉，阅文集团(00772)早盘再涨近6%，截至发稿，涨5.49%，报25港元，成交额3910.08万港元。 消息面上，2024年春节档全国电影票房为80.16亿元，刷新档期票房纪录。贾玲执导并主演的《热辣滚烫》凭借27.18亿票房成为春节档冠军。该片由阅文集团旗下新丽电影、阅文影视共同出品。 此外，2月16日，OpenAI推出其首款文生视频大模型Sora。华福证券指出，IP版权公司积累的IP形态以文字、卡通人物形象等为主，文生视频模型可帮助此类公司迅速产出中短视频，公司业务范围将得到极大扩展，运营效率将发生巨大跃升。考虑到Sora模型的可得性，文生视频的应用会最先在海外落地。 ...

智通财经APP获悉，天风证券发布研究报告称，维持阅文集团(00772)“买入”评级，预测2023E-2025ENon-IFRS净利润分别为10.6/12.6/15.3亿元(前值13.8/16.2/19.4亿元)。该行认为集团作为数字阅读龙头，以在线阅读业务为基石，全面发力IP全产业链条运营。公司2023年业绩短期承压，2024年有望充分受益于内容端供给加速，长期有望依托IP生态链成长为全球顶尖的文化产业集团。 天风证券主要观点如下： FY23前瞻：AI布局及剧目上线推迟或致收入承压 该行预计FY23阅文集团收入为69亿元，yoy-9%;Non-IFRS归母净利润为10.6亿元，yoy-21%，主要系《与凤行》推迟及AI投入的影响。《与凤行》由赵丽颖、林更新主演，系古装小说IP改编而成，将在央视、江苏卫视、腾讯视频首播，目前腾讯视频平台预约人数超470万。2023年7月，阅文发布行业首个大模型“阅文妙笔”以及基于此的应用端产品“作家助手妙笔版”，主要服务于作家创作辅助、运营数据等方面，AI投入或带动作家创作效率提升。 FY24：关注重点剧目、电影情况 该行认为阅文集团2024年或有多部重点剧目值得关注： 1)电 ...

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告之內容概不負責，對其準 確性或完整性亦不發表任何聲明，並明確表示，概不對因本公告全部或任何部分內容而產 生或因倚賴該等內容而引致之任何損失承擔任何責任。 CHINA LITERATURE LIMITED 閱 文 集 團 （於開曼群島註冊成立的有限公司） （股份代號：772） 有關截至二零二二年十二月三十一日止年度 年度報告的 補充公告 茲提述本公司於二零二三年四月十八日刊發的截至二零二二年十二月三十一日止年度的年 度報告（「二零二二年年報」）。除文義另有所指外，本公告所用詞彙與二零二二年年報所界 定者具有相同涵義。 除二零二二年年報所提供的資料外，董事會謹此根據上市規則第十七章提供有關二零二零 年受限制股份單位計劃及二零二一年購股權計劃的進一步資料。 於二零二二年年報日期，根據二零二零年受限制股份單位計劃可供發行的股份總數為 43,669,204股，佔已發行股份的4.30%。 於報告期初及期末，根據二零二零年受限制股份單位計劃的計劃限額可供授出的受限制股 份單位總數分別為40,504,211份及37,008,888份。 ...

Financial Performance - Revenue for the six months ended June 30, 2023, was RMB 3,283,026 thousand, a decrease of 19.7% compared to RMB 4,087,214 thousand in the same period of 2022[5]. - Gross profit for the same period was RMB 1,604,762 thousand, down 25.2% from RMB 2,146,326 thousand year-on-year[5]. - Operating profit increased by 23.8% to RMB 310,948 thousand, compared to RMB 251,209 thousand in the previous year[5]. - Profit before tax rose by 25.0% to RMB 425,589 thousand, up from RMB 340,436 thousand in the prior year[5]. - Net profit for the period was RMB 375,979 thousand, representing a significant increase of 61.9% from RMB 232,276 thousand year-on-year[5]. - Profit attributable to equity holders of the company was RMB 376,680 thousand, a 64.8% increase compared to RMB 228,545 thousand in the same period of 2022[5]. - Non-IFRS profit attributable to equity holders was RMB 603,119 thousand, down 9.4% from RMB 665,995 thousand year-on-year[5]. - Basic earnings per share decreased to RMB 0.37 from RMB 0.60 year-on-year, representing a decline of 38.3%[43]. - The company reported a net profit attributable to equity holders of RMB 376,680,000 for the first half of 2023, an increase of 65.0% from RMB 228,545,000 in the same period of 2022[167]. Market Strategy and Growth - The company is focusing on expanding its market presence and enhancing user engagement through new product offerings and technology advancements[5]. - Future outlook includes strategic initiatives aimed at improving financial performance and market share[5]. - The management is committed to exploring potential mergers and acquisitions to drive growth and innovation[5]. - The company reported significant growth in user numbers and revenue for its reading products, particularly for Qidian Reading, due to collaborative efforts with the government and the publishing industry to combat online literature piracy[7]. - The CEO highlighted that the paid reading model is the most effective incubator for intellectual property (IP), emphasizing the long-term commitment to enhancing the author ecosystem and driving platform growth[8]. - In 2023, the company identified key opportunities in AI technology, which is expected to empower content production and enhance user engagement across various content forms[9]. - The company launched several successful IP content over the past three years, including popular titles such as "Celebrating the Remaining Years," "The Novelist," and "The World of Humanity," contributing to its growth strategy[9]. - The establishment of four major business units aims to strengthen the integration of content and platforms, enhance the success rate of film and television projects, and leverage AI technologies for innovative applications[11]. - The company is focusing on a quality-first strategy, moving away from traditional growth methods, and prioritizing the creation of premium IP[9]. - AI technology will play a crucial role in the company's strategy, particularly in enhancing the efficiency of IP development and translation for global reach[9]. - The company aims to build a multi-modal content platform, integrating various forms of IP to create a comprehensive ecosystem[9]. - The company is optimistic about the future collaboration between human authors and AI, believing it will enhance the storytelling experience[7]. - The company is committed to maintaining strong protections for authors and copyright holders in light of emerging generative AI technologies[7]. User Engagement and Product Development - The number of new authors on the online reading platform increased by approximately 200,000, and the number of new novels added was 350,000, with a total word count exceeding 19.5 billion[13]. - The average subscription count for new works increased by over 120% year-on-year, with the number of works having over 10,000 subscriptions per month rising by over 50%[13]. - The company launched the first large language model in the online literature industry, "Yuewen Miaobi," aimed at enhancing user engagement and content creation[13]. - The overseas reading platform WebNovel offers approximately 3,200 translated Chinese works and around 560,000 local original works as of June 30, 2023[17]. - The company plans to leverage AI technology to enhance user products and streamline business processes, aiming for a transformative impact on the industry[12]. - The company is focused on expanding its IP ecosystem and enhancing the quality of its content offerings across various media, including film, television, and gaming[15]. Financial Position and Cash Flow - Total assets as of June 30, 2023, were RMB 22,374,085 thousand, a slight decrease from RMB 22,734,478 thousand at the end of 2022[113]. - Total liabilities decreased to RMB 3,810,512 thousand from RMB 4,779,756 thousand, reflecting a reduction of 20.3%[114]. - Cash and cash equivalents were RMB 3,359,906 thousand, down from RMB 5,545,766 thousand, indicating a decrease of 39.4%[113]. - The company reported a total comprehensive income of RMB 447,241 thousand for the period, compared to RMB 343,137 thousand in the previous year, an increase of 30.4%[111]. - The company’s equity attributable to owners increased to RMB 18,563,573 thousand from RMB 17,954,722 thousand, reflecting a growth of 3.4%[113]. - For the six months ended June 30, 2023, the operating cash flow generated was RMB 719,577,000, a decrease from RMB 969,592,000 in the same period of 2022, representing a decline of approximately 26%[120]. - The net cash generated from operating activities was RMB 615,638,000, compared to RMB 706,767,000 in the previous year, indicating a decrease of about 13%[120]. - The company incurred a net cash outflow from investing activities of RMB 2,382,543,000, contrasting with a net cash inflow of RMB 106,106,000 in the same period last year[120]. - The financing activities resulted in a net cash outflow of RMB 466,370,000, compared to RMB 674,036,000 in the previous year, showing a reduction in cash outflow by about 31%[121]. Shareholder and Governance Information - The company did not recommend the distribution of an interim dividend for the six months ended June 30, 2023, compared to zero for the same period in 2022[56]. - As of June 30, 2023, the total number of shares issued was 1,018,259,788[59]. - The company’s executive director and president, Mr. Hou Xiaonan, was appointed as the Chief Executive Officer effective May 10, 2023[56]. - The audit committee reviewed the interim results for the six months ended June 30, 2023, and found the risk management and internal control systems to be effective and adequate[56]. - The company’s board of directors has adopted the corporate governance code and complied with all applicable provisions during the reporting period[56]. - Tencent Holdings Limited holds a controlling interest with 577,643,604 shares, representing approximately 56.73% of the company's equity[64]. - The company has adopted a Restricted Share Unit Plan aimed at incentivizing outstanding performance among employees and directors, effective for a period of 10 years since December 23, 2014[66]. Risk Management and Compliance - The company faces various financial risks, including market risk, credit risk, and liquidity risk, which are managed through established policies[136]. - The company has not made any significant changes to its risk management policies as of June 30, 2023[136]. - The company is continuously evaluating the impact of new tax regulations on its financial statements, particularly regarding deferred tax accounting[134]. - The company plans to disclose new tax risks starting December 31, 2023, in line with the recent tax reforms[134].

[Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) [Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) In the first half of 2023, the company's revenue decreased by 19.7% year-on-year to RMB 3.28 billion, and gross profit fell by 25.2%, while operating profit and profit attributable to equity holders increased significantly by 23.8% and 64.8% respectively, with non-IFRS profit attributable to equity holders seeing a slight decrease of 9.4% H1 2023 Financial Highlights (Unaudited) | Financial Metric | H1 2023 (RMB '000) | H1 2022 (RMB '000) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 3,283,026 | 4,087,214 | (19.7) | | Gross Profit | 1,604,762 | 2,146,326 | (25.2) | | Operating Profit | 310,948 | 251,209 | 23.8 | | Profit Before Income Tax | 425,589 | 340,436 | 25.0 | | Profit for the Period | 375,979 | 232,276 | 61.9 | | Profit Attributable to Equity Holders | 376,680 | 228,545 | 64.8 | | Non-IFRS Profit Attributable to Equity Holders | 603,119 | 665,995 | (9.4) | [Business Review and Outlook](index=2&type=section&id=Business%20Review%20and%20Outlook) [Overview](index=2&type=section&id=Overview) The company has proposed an "IP upgrade strategy" focusing on the full lifecycle development of IPs, emphasizing quality and efficiency, viewing AI, particularly AIGC, as a core engine for future growth, aiming to build a multi-modal content platform and an integrated IP ecosystem, supported by a restructured organization and the launch of "Yuewen Miaobi" - The company has established a new vision and mission: "Let good stories live on" (讓好故事生生不息), shifting its strategic focus to creating high-quality, enduring IPs[3](index=3&type=chunk) - AIGC is identified as the new engine to drive quality and efficiency in the IP ecosystem, enabling a multi-modal content platform and an integrated upstream-downstream IP system[4](index=4&type=chunk) - The company restructured into four business units to better integrate content, platforms, and film/television production, and to advance AI technology development and application[4](index=4&type=chunk) - In July, the company launched "Yuewen Miaobi," the online literature industry's first large language model, and its application "Writer's Assistant Miaobi Version," marking its first step in embracing AIGC to empower the creative ecosystem[5](index=5&type=chunk) [H1 2023 Business Highlights](index=4&type=section&id=H1%202023%20Business%20Highlights) In H1 2023, the company strengthened its content ecosystem, with significant growth in high-quality works and an 8.6% YoY increase in Monthly Paying Users (MPU) to 8.8 million, while advancing IP visualization with popular TV series and IP commercialization through derivative products and game adaptations, and expanding its overseas platform WebNovel with approximately 3,200 translated Chinese works and 560,000 local original works [IP Creation](index=4&type=section&id=IP%20Creation) The online reading platform saw the addition of approximately 200,000 new writers and 350,000 new novels, with the number of new works with an average subscription per chapter exceeding 10,000 growing by over 120% YoY, contributing to an 8.6% YoY increase in Monthly Paying Users (MPU) to 8.8 million - In H1 2023, the platform added **~200,000 writers** and **~350,000 novels**, with over **19.5 billion new words**[6](index=6&type=chunk) - The number of new works with an average subscription per chapter of over **10,000** increased by more than **120% YoY**[6](index=6&type=chunk) - Monthly Paying Users (MPU) grew by **8.6% YoY** and **12.8% sequentially** to **8.8 million**[6](index=6&type=chunk) [IP Visualization](index=4&type=section&id=IP%20Visualization) The company successfully launched several high-quality visual adaptations, including the TV series "The Ordinary Road" (平凡之路) and "Turn on the Right Way of Life" (縱有疾風起) which achieved top viewership ratings, and maintained high popularity for animation sequels like "Stellar Transformations" (星辰變), while comics such as "The Guardian of the Great Feng" (大奉打更人) were well-received - The TV series "The Ordinary Road" (平凡之路) ranked first on Tencent Video's drama chart for **16 consecutive days** and topped multiple third-party data platforms[7](index=7&type=chunk) - The second season of the annualized animation "Battle Through the Heavens" (斗破蒼穹) was launched, consistently ranking in the top three on Tencent Video's animation channel[8](index=8&type=chunk) [IP Commercialization and Monetization](index=5&type=section&id=IP%20Commercialization%20and%20Monetization) The company advanced its IP commercialization through derivatives and gaming, launching proprietary blind boxes for popular IPs like "Lord of the Mysteries" (詭秘之主) and "Battle Through the Heavens" (斗破蒼穹), and successfully launching licensed games based on "A Record of a Mortal's Journey to Immortality" (凡人修仙傳) and "Swallowed Star" (吞噬星空), while updating the self-operated game "New Douluo Dalu" (新斗羅大陸) - Launched proprietary blind boxes for key IPs such as "Lord of the Mysteries" and "Battle Through the Heavens"[9](index=9&type=chunk) - Licensed games "A Record of a Mortal's Journey to Immortality" and "Swallowed Star" were successfully launched in H1 2023[9](index=9&type=chunk) [Overseas Business](index=5&type=section&id=Overseas%20Business) As of June 30, 2023, the company's overseas reading platform, WebNovel, offered approximately 3,200 translated Chinese works and around 560,000 local original works to international users, demonstrating continued expansion in the global market - WebNovel provided overseas users with approximately **3,200 translated Chinese works** and **560,000 local original works**[10](index=10&type=chunk) [Management Discussion and Analysis](index=6&type=section&id=Management%20Discussion%20and%20Analysis) [Financial Performance Comparison (H1 2023 vs H1 2022)](index=6&type=section&id=Financial%20Performance%20Comparison) Revenue for H1 2023 decreased by 19.7% YoY to RMB 3.28 billion, primarily due to a 30.1% decline in copyright operation revenue from fewer film/TV projects and an 11.6% fall in online business revenue due to reduced marketing spend and channel optimization, resulting in a gross margin drop from 52.5% to 48.9%, yet operating profit grew 23.8% to RMB 310.9 million, driven by a 26.0% reduction in sales and marketing expenses and a significant positive swing in 'Other gains/(losses), net' [Revenue](index=7&type=section&id=Revenue) Total revenue decreased 19.7% YoY to RMB 3.28 billion, with online business revenue falling 11.6% to RMB 2.04 billion due to strategic reductions in marketing spend and channel optimization, and copyright operation and other revenue dropping 30.1% to RMB 1.24 billion primarily because fewer film and TV projects were launched, while Average Monthly Active Users (MAU) decreased by 20.0% to 211.7 million, Average Monthly Paying Users (MPU) increased by 8.6% to 8.8 million, and Average Monthly Revenue Per Paying User (ARPPU) declined by 14.2% to RMB 33.3 Revenue Breakdown by Segment (RMB '000) | Segment | H1 2023 | % of Total | H1 2022 | % of Total | | :--- | :--- | :--- | :--- | :--- | | **Online Business** | **2,038,736** | **62.1%** | **2,307,016** | **56.4%** | | - Own Platform Products | 1,763,999 | 53.7% | 1,763,077 | 43.1% | | - Tencent Products Channel | 177,008 | 5.4% | 347,482 | 8.5% | | - Third-party Platforms | 97,729 | 3.0% | 196,457 | 4.8% | | **Copyright Operation & Other** | **1,244,290** | **37.9%** | **1,780,198** | **43.6%** | | - Copyright Operation | 1,190,119 | 36.3% | 1,731,258 | 42.4% | | - Other | 54,171 | 1.6% | 48,940 | 1.2% | | **Total Revenue** | **3,283,026** | **100.0%** | **4,087,214** | **100.0%** | Key Operating Data | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Average MAU (million) | 211.7 | 264.7 | | Average MPU (million) | 8.8 | 8.1 | | ARPPU (RMB) | 33.3 | 38.8 | - The decrease in online business revenue from Tencent and third-party channels was mainly due to optimizing distribution channels and discontinuing cooperation with certain partners[13](index=13&type=chunk) - The decrease in copyright operation revenue was mainly due to fewer TV series, web series, and films launched in H1 2023 compared to H1 2022[15](index=15&type=chunk) [Cost of Revenue, Gross Profit, and Gross Margin](index=10&type=section&id=Cost%20of%20Revenue%2C%20Gross%20Profit%2C%20and%20Gross%20Margin) Cost of revenue decreased by 13.5% YoY to RMB 1.68 billion, primarily due to lower production costs for film and TV series in line with reduced revenue, and decreased platform distribution costs, yet gross profit fell by 25.2% to RMB 1.60 billion, and the gross margin contracted to 48.9% from 52.5% in the prior year period Cost of Revenue Breakdown (RMB '000) | Cost Component | H1 2023 | % of Revenue | H1 2022 | % of Revenue | | :--- | :--- | :--- | :--- | :--- | | Content costs | 751,939 | 22.9% | 743,142 | 18.2% | | Platform distribution costs | 383,224 | 11.7% | 475,040 | 11.6% | | Production costs of TV/web series, animations and films | 268,714 | 8.2% | 451,389 | 11.0% | | Amortization of intangible assets | 74,989 | 2.3% | 102,106 | 2.5% | | **Total Cost of Revenue** | **1,678,264** | **51.1%** | **1,940,888** | **47.5%** | - Gross profit decreased by **25.2% YoY** to **RMB 1,604.8 million**. Gross margin was **48.9%** in H1 2023, compared to **52.5%** in H1 2022[17](index=17&type=chunk) [Operating Expenses and Profitability](index=11&type=section&id=Operating%20Expenses%20and%20Profitability) Operating profit increased by 23.8% YoY to RMB 310.9 million, mainly driven by a 26.0% reduction in sales and marketing expenses to RMB 822.1 million due to cost-saving initiatives and fewer film/TV projects, a 4.1% decrease in general and administrative expenses, and a significant positive swing in other net gains, resulting in profit attributable to equity holders growing by 64.8% to RMB 376.7 million - Sales and marketing expenses decreased by **26.0% YoY** to **RMB 822.1 million**, primarily due to reduced promotion and advertising expenses for the online business and fewer film/TV projects[19](index=19&type=chunk) - General and administrative expenses decreased by **4.1% YoY** to **RMB 534.5 million**, mainly due to lower employee benefit expenses[19](index=19&type=chunk) - The company recorded other net gains of **RMB 5.8 million**, compared to other net losses of **RMB 235.4 million** in H1 2022, mainly due to the absence of fair value losses on certain investments recorded in the prior year[18](index=18&type=chunk) - As a result of the above factors, operating profit increased by **23.8% YoY** to **RMB 310.9 million**[19](index=19&type=chunk) [Segment Information](index=12&type=section&id=Segment%20Information) The Online Business segment's revenue decreased by 11.6% to RMB 2.04 billion, with its gross margin remaining stable at 50.0%, while the Copyright Operation and Other segment's revenue saw a larger decline of 30.1% to RMB 1.24 billion, and its gross margin fell significantly from 55.4% in H1 2022 to 47.0% in H1 2023, reflecting the impact of fewer high-margin film and TV projects Segment Performance (H1 2023 vs H1 2022) | Segment | H1 2023 Revenue (RMB '000) | H1 2023 Gross Profit (RMB '000) | H1 2023 Gross Margin (%) | H1 2022 Revenue (RMB '000) | H1 2022 Gross Profit (RMB '000) | H1 2022 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Online Business | 2,038,736 | 1,020,014 | 50.0% | 2,307,016 | 1,160,271 | 50.3% | | Copyright Operation & Other | 1,244,290 | 584,748 | 47.0% | 1,780,198 | 986,055 | 55.4% | | **Total** | **3,283,026** | **1,604,762** | **48.9%** | **4,087,214** | **2,146,326** | **52.5%** | [Other Financial Information & Non-IFRS Measures](index=13&type=section&id=Other%20Financial%20Information%20%26%20Non-IFRS%20Measures) Adjusted EBITDA decreased to RMB 471.4 million from RMB 745.1 million in H1 2022, with the adjusted EBITDA margin falling from 18.2% to 14.4%, and Non-IFRS profit attributable to equity holders was RMB 603.1 million, down from RMB 666.0 million, as the company provides these non-IFRS measures, which exclude items like share-based compensation and investment-related gains/losses, to offer a clearer view of its core operational performance Other Financial Data | Metric | H1 2023 (RMB '000) | H1 2022 (RMB '000) | | :--- | :--- | :--- | | EBITDA | 372,213 | 600,560 | | Adjusted EBITDA | 471,354 | 745,058 | | Adjusted EBITDA Margin | 14.4% | 18.2% | | Net Cash | 7,541,645 | 6,555,723 | | Capital Expenditures | 99,296 | 136,603 | Reconciliation of IFRS to Non-IFRS Profit (Attributable to Equity Holders) | (RMB '000) | H1 2023 | H1 2022 | | :--- | :--- | :--- | | **Reported Profit** | **376,680** | **228,545** | | Share-based compensation | 70,892 | 116,659 | | Net loss from investments and acquisitions | 147,219 | 305,897 | | Amortization of intangible assets from acquisitions | 10,085 | 20,059 | | Tax effects | (1,757) | (5,165) | | **Non-IFRS Profit** | **603,119** | **665,995** | [Capital Structure, Liquidity and Financial Resources](index=16&type=section&id=Capital%20Structure%2C%20Liquidity%20and%20Financial%20Resources) The Group maintained a strong and healthy financial position, with net cash increasing to RMB 7.54 billion as of June 30, 2023, the asset-liability ratio decreasing to 17.0%, the current ratio improving to 361.6%, a zero gearing ratio with no outstanding borrowings and RMB 1.77 billion in undrawn banking facilities, and free cash flow for the period of RMB 475.7 million - The asset-liability ratio decreased from **21.0%** at year-end 2022 to **17.0%** as of June 30, 2023[27](index=27&type=chunk) - Net cash increased to **RMB 7.54 billion** from **RMB 7.09 billion** at the end of 2022[28](index=28&type=chunk) - The gearing ratio was **zero**, with no borrowings as of June 30, 2023, compared to a **2.3%** ratio at year-end 2022[28](index=28&type=chunk)[29](index=29&type=chunk) - Free cash flow for H1 2023 was **RMB 475.7 million**[28](index=28&type=chunk) [Employees and Subsidiaries](index=18&type=section&id=Employees%20and%20Subsidiaries) As of June 30, 2023, the Group had approximately 1,720 full-time employees, primarily based in China, and its key subsidiary, New Classics Media (新麗傳媒), which focuses on TV and film production, recorded revenue of RMB 543.6 million and a net profit of RMB 172.0 million attributable to equity holders in H1 2023 - As of June 30, 2023, the Group had approximately **1,720 full-time employees**[32](index=32&type=chunk) - For H1 2023, subsidiary New Classics Media recorded revenue of **RMB 543.6 million** and profit attributable to equity holders of **RMB 172.0 million**[33](index=33&type=chunk) [Financial Information](index=19&type=section&id=Financial%20Information) [Consolidated Statement of Comprehensive Income](index=19&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income) This statement details the Group's revenues, costs, and expenses, leading to a profit for the period of RMB 376.0 million, a 61.9% increase from RMB 232.3 million in H1 2022, primarily driven by lower sales & marketing expenses and a shift from net other losses to net other gains, with basic earnings per share at RMB 0.37, up from RMB 0.23 in the prior year period Condensed Consolidated Statement of Comprehensive Income (RMB '000) | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Revenue | 3,283,026 | 4,087,214 | | Gross Profit | 1,604,762 | 2,146,326 | | Operating Profit | 310,948 | 251,209 | | Profit before income tax | 425,589 | 340,436 | | Profit for the period | 375,979 | 232,276 | | Profit attributable to equity holders | 376,680 | 228,545 | | Total comprehensive income for the period | 447,241 | 343,137 | - Basic earnings per share was **RMB 0.37**, compared to **RMB 0.23** in H1 2022. Diluted earnings per share was **RMB 0.37**, compared to **RMB 0.22** in H1 2022[36](index=36&type=chunk) [Consolidated Statement of Financial Position](index=21&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the Group's total assets stood at RMB 22.37 billion, a slight decrease from RMB 22.73 billion at year-end 2022, while total liabilities decreased to RMB 3.81 billion from RMB 4.78 billion, consequently increasing total equity to RMB 18.56 billion, with key assets including RMB 7.41 billion in intangible assets (mainly goodwill) and a strong cash and deposits position Condensed Balance Sheet - Assets (RMB '000) | Asset Category | Jun 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Non-current Assets** | **10,790,143** | **10,258,566** | | Intangible assets | 7,413,232 | 7,421,639 | | Investments in associates and joint ventures | 1,112,888 | 1,008,754 | | **Current Assets** | **11,583,942** | **12,475,912** | | Cash and cash equivalents | 3,359,906 | 5,545,766 | | Term deposits | 913,947 | 1,848,660 | | Trade receivables and notes | 1,820,841 | 2,048,930 | | **Total Assets** | **22,374,085** | **22,734,478** | Condensed Balance Sheet - Equity & Liabilities (RMB '000) | Equity & Liability Category | Jun 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Equity** | **18,563,573** | **17,954,722** | | **Non-current Liabilities** | **606,912** | **796,000** | | **Current Liabilities** | **3,203,600** | **3,983,756** | | Borrowings | – | 417,876 | | Trade payables | 1,032,440 | 1,203,873 | | **Total Liabilities** | **3,810,512** | **4,779,756** | | **Total Equity and Liabilities** | **22,374,085** | **22,734,478** | [Consolidated Statement of Changes in Equity](index=23&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) Total equity increased from RMB 17.96 billion at the start of the year to RMB 18.56 billion as of June 30, 2023, primarily driven by the profit for the period (RMB 376.7 million attributable to equity holders) and other comprehensive income of RMB 71.2 million - Total equity attributable to company's equity holders increased from **RMB 17,957 million** to **RMB 18,563 million** during H1 2023[40](index=40&type=chunk) [Consolidated Statement of Cash Flows](index=25&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) The Group generated RMB 615.6 million in net cash from operating activities, while net cash used in investing activities was significant at RMB 2.38 billion, largely due to investments in financial assets, and net cash used in financing activities was RMB 466.4 million, mainly for repayment of borrowings, resulting in a net decrease in cash and cash equivalents of RMB 2.23 billion during the period Condensed Consolidated Statement of Cash Flows (RMB '000) | Cash Flow Category | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash generated from operating activities | 615,638 | 706,767 | | Net cash (used in)/generated from investing activities | (2,382,543) | 106,106 | | Net cash used in financing activities | (466,370) | (674,036) | | **Net (decrease)/increase in cash and cash equivalents** | **(2,233,275)** | **138,837** | | Cash and cash equivalents at beginning of period | 5,545,766 | 4,528,412 | | **Cash and cash equivalents at end of period** | **3,359,906** | **4,735,717** | [Notes to the Interim Financial Information](index=26&type=section&id=Notes%20to%20the%20Interim%20Financial%20Information) The notes provide detailed breakdowns and explanations for the figures in the primary financial statements, including the definition of operating segments (Online Business and Copyright Operation), a disaggregation of revenue by product line and timing, a breakdown of expenses by nature, and details on intangible assets, primarily goodwill from past acquisitions, also covering share-based payment plans, receivables aging, and other critical accounting policies [Note 5: Segment Information](index=28&type=section&id=Note%205%3A%20Segment%20Information) The Group's operations are divided into two reportable segments: Online Business (including paid reading, advertising, and game distribution) and Copyright Operation and Other (including production and licensing of film/TV, book sales, and self-operated games), with the Chief Operating Decision-Maker assessing performance based on segment revenue and gross profit - The Group has two reportable segments: Online Business and Copyright Operation and Other[51](index=51&type=chunk) - For H1 2023, Tencent was the only customer contributing over **10%** of the Group's total revenue[55](index=55&type=chunk) [Note 10: Earnings Per Share](index=33&type=section&id=Note%2010%3A%20Earnings%20Per%20Share) Basic earnings per share (EPS) for H1 2023 was RMB 0.37, calculated based on a net profit of RMB 376.7 million and a weighted average of 1,006.6 million shares, with diluted EPS also at RMB 0.37, considering the potential dilutive effect of restricted share units and share options Basic EPS Calculation | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net profit attributable to equity holders (RMB '000) | 376,680 | 228,545 | | Weighted average number of ordinary shares ('000) | 1,006,602 | 1,011,137 | | **Basic EPS (RMB per share)** | **0.37** | **0.23** | [Note 12: Intangible Assets](index=35&type=section&id=Note%2012%3A%20Intangible%20Assets) As of June 30, 2023, the Group's intangible assets had a net book value of RMB 7.41 billion, with the largest component being goodwill, valued at RMB 6.63 billion, allocated to the Online Business (RMB 3.72 billion) and the acquired TV and film business (RMB 2.92 billion), and management concluded that no impairment loss was necessary for the period - Goodwill of **RMB 6.63 billion** is the largest component of intangible assets[67](index=67&type=chunk) - Management performed an impairment test on goodwill related to the acquired TV and film business and concluded no impairment was required for H1 2023[68](index=68&type=chunk)[69](index=69&type=chunk) [Note 18: Trade Receivables and Notes Receivable](index=42&type=section&id=Note%2018%3A%20Trade%20Receivables%20and%20Notes%20Receivable) Net trade and notes receivables stood at RMB 1.82 billion, with the aging analysis showing that RMB 952.2 million (approximately 52%) of the net balance is within 3 months, while RMB 727.0 million (approximately 40%) is aged between 6 months and 2 years Aging Analysis of Net Trade and Notes Receivables (RMB '000) | Aging Period | Jun 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Within 3 months | 952,191 | 1,513,045 | | 3 to 6 months | 141,643 | 122,045 | | 6 months to 1 year | 434,227 | 190,646 | | 1 to 2 years | 244,498 | 162,705 | | Over 2 years | 48,282 | 60,489 | | **Total** | **1,820,841** | **2,048,930** | [Other Information](index=49&type=section&id=Other%20Information) [Dividend and Corporate Governance](index=49&type=section&id=Dividend%20and%20Corporate%20Governance) The Board of Directors has decided not to declare an interim dividend for the six months ended June 30, 2023, and the company confirms its compliance with all applicable provisions of the Corporate Governance Code and the required standards for securities transactions by directors during the period, with the Audit Committee having reviewed the unaudited interim results and the effectiveness of the risk management and internal control systems - The Board decided not to recommend the payment of an interim dividend for H1 2023[96](index=96&type=chunk) - The company has complied with all applicable code provisions of the Corporate Governance Code for the period[97](index=97&type=chunk) - The Audit Committee has reviewed the unaudited interim results for H1 2023[98](index=98&type=chunk)

Financial Performance - Total revenue for 2022 was RMB 7,625,622 thousand, a decrease of 12.0% from RMB 8,668,244 thousand in 2021[4] - Gross profit for 2022 was RMB 4,030,103 thousand, down 12.4% from RMB 4,599,443 thousand in 2021[4] - Operating profit for 2022 was RMB 628,834 thousand, a significant decline of 71.0% compared to RMB 2,172,640 thousand in 2021[4] - Net profit attributable to equity holders for 2022 was RMB 608,186 thousand, a decrease of 67.0% from RMB 1,846,609 thousand in 2021[4] - The company reported a total comprehensive income of RMB 722,435 thousand for 2022, down from RMB 1,764,723 thousand in 2021[4] - Online business revenue decreased by 17.8% year-on-year to RMB 4,364.0 million, accounting for 57.2% of total revenue[15] - Revenue from self-owned platform products in the online business decreased by 9.5% year-on-year to RMB 3,482.9 million, despite a 30% year-on-year increase in revenue from the core product "Qidian Reading"[15] - Average monthly paying users decreased by 9.2% year-on-year to 7.9 million, while the average monthly revenue per paying user decreased by 4.8% to RMB 37.8[17][18] - The company’s financial assets impairment loss was RMB 1,238,177 thousand, compared to RMB 1,323,845 thousand in the previous year, showing a slight improvement[13] Assets and Liabilities - Total assets as of December 31, 2022, were RMB 22,734,478 thousand, down from RMB 23,297,314 thousand in 2021[5] - Total equity attributable to equity holders was RMB 17,957,338 thousand, an increase of 4.5% from RMB 17,186,455 thousand in 2021[5] - Non-current liabilities decreased to RMB 796,000 thousand in 2022 from RMB 1,598,833 thousand in 2021, a reduction of 50.1%[5] - Current liabilities decreased to RMB 3,983,756 thousand in 2022 from RMB 4,511,510 thousand in 2021, a decline of 11.7%[5] - The total liabilities decreased from RMB 6,110.3 million as of December 31, 2021, to RMB 4,779.8 million as of December 31, 2022[32] User Engagement and Market Expansion - The number of monthly active users (MAU) for the Qidian Reading App increased by 80% year-on-year as of December 2022, with annual revenue growth exceeding 30%[7] - The company plans to focus on new product development and market expansion strategies in the upcoming year[6] - The company plans to continue expanding its international market presence and enhance cultural exchange through its content offerings[11] - The company plans to expand its market presence in Southeast Asia, targeting a 30% increase in market share by 2025[39] - User retention rates improved to 85%, up from 80% in the previous year[39] Cost Management and Expenses - Cost of revenue decreased by 11.6% year-on-year to RMB 3,595.5 million, primarily due to reduced platform distribution costs and content costs[19] - Sales and marketing expenses decreased by 25.9% to RMB 2,002.6 million, with the percentage of sales and marketing expenses to revenue dropping from 31.2% to 17.9%[21] - Operating expenses increased by 5% due to investments in marketing and technology upgrades[39] Strategic Initiatives and Future Outlook - The company plans to use operating cash flow to fund planned capital expenditures and long-term investments[34] - New product launches are expected to contribute an additional $200 million in revenue over the next fiscal year[39] - A strategic acquisition of a smaller tech firm is anticipated to close by Q3 2023, expected to add $100 million in annual revenue[39] - The company is investing $50 million in research and development for new technologies aimed at enhancing user experience[39] Corporate Governance and Compliance - The board consists of 9 members, including 2 executive directors, 4 non-executive directors, and 3 independent non-executive directors, promoting diversity in expertise and experience[160] - The company has adopted the corporate governance code as its own governance guidelines, ensuring compliance with applicable rules throughout the year[159] - The board has established four committees: Audit Committee, Remuneration Committee, Nomination Committee, and Strategy and Investment Committee to oversee specific areas of governance[162] - The company emphasizes the importance of good investor relations and communication with shareholders and potential investors[159] Risk Management - The company has established a risk management system that includes a three-line defense model to ensure effective risk management and internal controls[186] - The internal audit team conducts independent audits across major business and management areas to effectively identify risks and provide timely assessments[186] - The company faces significant risks related to macroeconomic conditions, particularly the impact of the pandemic on consumer spending and business operations[188] Shareholder Engagement - The company encourages shareholder participation in meetings and maintains effective communication with shareholders through its investor relations team[198] - The annual general meeting provides a direct communication opportunity between shareholders and directors, with the presence of auditors to address inquiries[200] - The company announced a share buyback plan in August 2022, indicating its intention to enhance shareholder value[200] Related Party Transactions - The company has established a framework for revenue/profit sharing or fixed fees as part of its agreements with Ookbee Group and Cangqiong Group[129] - The auditor confirmed that there were no issues regarding the approval of disclosed related party transactions for the year ended December 31, 2022[130] - The company has maintained compliance with pricing policies in all significant aspects of related party transactions[130] Sustainability and Corporate Social Responsibility - The management team emphasized the importance of sustainability initiatives, allocating $20 million towards eco-friendly practices[43] - The group made charitable donations totaling approximately RMB 560,000 during the reporting period[150] - The company is committed to ensuring compliance with anti-corruption and whistleblowing policies, with regular reviews of adherence to these policies[170]

[Financial Performance Summary](index=1&type=section&id=%E8%B4%A2%E5%8A%A1%E8%A1%A8%E7%8E%B0%E6%91%98%E8%A6%81) The company's revenue and profits declined in 2022, though non-IFRS profit attributable to equity holders showed growth Key Financial Indicators | Indicator | 2022 (RMB in thousands) | 2021 (RMB in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | 7,625,622 | 8,668,244 | (12.0) | | **Gross Profit** | 4,030,103 | 4,599,443 | (12.4) | | **Operating Profit** | 628,834 | 2,172,640 | (71.1) | | **Profit Before Income Tax** | 773,820 | 2,303,068 | (66.4) | | **Profit for the Year** | 607,628 | 1,842,927 | (67.0) | | **Profit Attributable to Equity Holders of the Company** | 608,186 | 1,846,609 | (67.1) | | **Non-IFRS Profit Attributable to Equity Holders of the Company** | 1,348,216 | 1,229,721 | 9.6 | [Business Review and Outlook](index=2&type=section&id=%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7%E8%88%87%E5%B1%95%E6%9C%9B) [Overview](index=2&type=section&id=%E6%A6%82%E8%BF%B0) The company enhanced operational efficiency by focusing on a premium IP-centric content strategy amid market shifts Non-IFRS Profitability | Indicator | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | **Non-IFRS Profit Attributable to Equity Holders of the Company** | RMB 1,348.2 million | RMB 1,229.7 million | +9.6% | | **Corresponding Profit Margin** | 17.7% | 14.2% | +3.5pp | - The company's strategy aligned with market trends, shifting from volume to quality and strengthening its core competitiveness in the IP industry[3](index=3&type=chunk) [Business Highlights](index=2&type=section&id=%E6%A5%AD%E5%8B%99%E4%BA%AE%E9%BB%9E) The company achieved significant progress in IP creation, visualization, and merchandising, driven by hit content and strategic initiatives [IP Creation](index=2&type=section&id=IP%E5%89%B5%E4%BD%9C) Operational efficiency and core product growth were significantly boosted by focusing on premium content and effective anti-piracy measures - Effective anti-piracy measures were a key driver of premium content subscription revenue, with **40% of new users** on the Qidian App converting from pirated sources within 30 days of system implementation[4](index=4&type=chunk) - The premium paid product, Qidian App, saw its **MAU in December 2022 increase by 80% YoY**, with full-year revenue growing by over 30%[5](index=5&type=chunk) Platform Growth Metrics (2022) | Indicator | Quantity | | :--- | :--- | | New Writers | Approx 540,000 | | New Novels | 950,000 | | New Words Added | Over 39 billion | | YoY Growth in Works with >3,000 Average Subscriptions | Over 50% | [IP Visualization](index=3&type=section&id=IP%E5%8F%AF%E8%A6%96%E5%8C%96) The company produced numerous hit film, TV, animation, and comics adaptations, demonstrating strong IP visualization capabilities - The TV series *A Lifelong Journey* set a nearly 8-year viewership record, while *New Life Begins* broke records on iQIYI for reaching a heat index of 10,000 the fastest[6](index=6&type=chunk) - In animation, **7 of the top 10 new domestic animations** on Tencent Video's 2022 popularity chart were adapted from the company's IPs[7](index=7&type=chunk) - The 3-year, 300-IP comics adaptation plan with Tencent Animation & Comics is ahead of schedule, with **over 230 titles launched** by the end of 2022[7](index=7&type=chunk) [IP Merchandising and Monetization](index=5&type=section&id=IP%E5%95%86%E5%93%81%E5%8C%96%E5%92%8C%E8%AE%8A%E7%8F%BE) The company made key advancements in IP merchandising and gaming by building a derivatives system and adopting a dual-strategy approach - The company achieved initial success in merchandising, with several statues for *Battle Through the Heavens* generating a cumulative **GMV exceeding RMB 20 million** in 2022[8](index=8&type=chunk) - A "two-pronged" strategy was adopted for gaming: collaborating with top-tier developers for IP adaptation while strengthening in-house game development and operational capabilities[8](index=8&type=chunk) [Overseas Business](index=5&type=section&id=%E6%B5%B7%E5%A4%96%E6%A5%AD%E5%8B%99) The company's international presence grew as its online literature gained recognition from prestigious institutions like the British Library - **16 of the company's works were included** in the British Library's Chinese collection, marking the first time Chinese online literature has been added to its catalogue[9](index=9&type=chunk) WebNovel Platform Content (as of 2022.12.31) | Content Type | Quantity | | :--- | :--- | | Translated Chinese Works | Approx 2,900 | | Local Original Works | Approx 500,000 | [Future Outlook](index=5&type=section&id=%E6%9C%AA%E4%BE%86%E5%B1%95%E6%9C%9B) The company will continue its long-term strategy of promoting the full-chain development of high-quality intellectual property - The company will adhere to a **long-term strategy** focused on fostering the enduring success of high-quality IP through full-chain development[10](index=10&type=chunk) [Management Discussion and Analysis](index=6&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E5%8F%8A%E5%88%86%E6%9E%90) [Financial Performance Overview](index=6&type=section&id=%E8%B2%A1%E5%8B%99%E6%A5%AD%E7%B8%BE%E6%A6%82%E8%A6%BD) Revenue declined due to online business contraction, but successful cost controls led to improved non-IFRS operating profitability Financial Highlights | Financial Indicator | 2022 (RMB in millions) | 2021 (RMB in millions) | YoY Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | 7,625.6 | 8,668.2 | -12.0% | | **Gross Profit** | 4,030.1 | 4,599.4 | -12.4% | | **Gross Profit Margin** | 52.8% | 53.1% | -0.3pp | | **Operating Profit** | 628.8 | 2,172.6 | -71.1% | | **Non-IFRS Operating Profit** | 1,363.9 | 1,299.8 | +4.9% | | **Non-IFRS Operating Profit Margin** | 17.9% | 15.0% | +2.9pp | - Selling and marketing expenses **decreased by 25.9% YoY** to RMB 2.00 billion, driven by cost reduction and efficiency enhancement measures in the online business[21](index=21&type=chunk) - The sharp decline in operating profit was primarily due to non-IFRS adjustments, including a **one-off gain of RMB 1.08 billion** from an asset disposal in 2021 and fair value losses on certain investments in 2022[22](index=22&type=chunk) [Segment Information](index=7&type=section&id=%E5%88%86%E9%83%A8%E8%B3%87%E6%96%99) Online business revenue fell due to reduced marketing, while copyright operations remained relatively stable Revenue by Business Segment | Business Segment | 2022 Revenue (RMB in millions) | 2021 Revenue (RMB in millions) | YoY Change (%) | | :--- | :--- | :--- | :--- | | **Online Business** | 4,364.0 | 5,308.5 | -17.8% | | **Copyright Operation and Others** | 3,261.6 | 3,359.8 | -2.9% | | **Total Revenue** | 7,625.6 | 8,668.2 | -12.0% | Gross Profit Margin by Business Segment | Business Segment | 2022 Gross Profit Margin | 2021 Gross Profit Margin | | :--- | :--- | :--- | | **Online Business** | 49.2% | 49.3% | | **Copyright Operation and Others** | 57.7% | 59.0% | Key Operating Data | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | **Average Monthly Active Users (MAU)** | 243.9 million | 248.6 million | -1.9% | | **Average Monthly Paying Users (MPU)** | 7.9 million | 8.7 million | -9.2% | | **Average Revenue Per Paying User (ARPPU)** | RMB 37.8 | RMB 39.7 | -4.8% | [Other Financial Information (EBITDA)](index=13&type=section&id=%E5%85%B6%E4%BB%96%E8%B2%A1%E5%8B%99%E8%B3%87%E6%96%99%20(EBITDA)) Adjusted EBITDA and its margin improved in 2022, reflecting enhanced core profitability despite a slight dip in reported EBITDA EBITDA Performance | Indicator | 2022 (RMB in thousands) | 2021 (RMB in thousands) | | :--- | :--- | :--- | | **EBITDA** | 1,052,762 | 1,094,005 | | **Adjusted EBITDA** | 1,350,632 | 1,335,815 | | **Adjusted EBITDA Margin** | 17.7% | 15.4% | EBITDA Reconciliation | Reconciliation Item (RMB in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | **Operating Profit** | 628,834 | 2,172,640 | | Add: Depreciation and amortization | 377,744 | 494,801 | | Less: Interest income | (160,893) | (125,353) | | Add/Less: Other net (losses)/gains | 207,077 | (1,448,083) | | **EBITDA** | 1,052,762 | 1,094,005 | | Add: Share-based compensation | 241,344 | 188,138 | | Add: Expenses related to acquisitions | 56,526 | 53,672 | | **Adjusted EBITDA** | 1,350,632 | 1,335,815 | [Non-IFRS Financial Measures](index=14&type=section&id=%E9%9D%9E%E5%9C%8B%E9%9A%9B%E8%B2%A1%E5%8B%99%E5%A0%B1%E5%91%8A%E6%BA%96%E5%89%87%E8%B2%A1%E5%8B%99%E8%A8%88%E9%87%8F) Non-IFRS profit attributable to equity holders grew 9.6% in 2022, reflecting stronger core performance after adjustments Non-IFRS Reconciliation (2022) | Item | Amount (RMB in thousands) | | :--- | :--- | | **Reported Profit Attributable to Equity Holders of the Company** | 608,186 | | **Total Adjustments** | 740,030 | | Of which: Share-based compensation | 241,344 | | Of which: Net loss from investments and acquisitions | 469,380 | | **Non-IFRS Profit Attributable to Equity Holders of the Company** | 1,348,216 | Non-IFRS Reconciliation (2021) | Item | Amount (RMB in thousands) | | :--- | :--- | | **Reported Profit Attributable to Equity Holders of the Company** | 1,846,609 | | **Total Adjustments** | (616,888) | | Of which: Share-based compensation | 188,138 | | Of which: Net gain from investments and acquisitions | (1,098,607) | | **Non-IFRS Profit Attributable to Equity Holders of the Company** | 1,229,721 | [Capital Structure, Liquidity and Financial Resources](index=16&type=section&id=%E8%B3%87%E6%9C%AC%E6%9E%B6%E6%A7%8B%E3%80%81%E6%B5%81%E5%8B%95%E8%B3%87%E9%87%91%E5%8F%8A%E8%B2%A1%E5%8B%99%E8%B3%87%E6%BA%90) The Group maintained a robust financial position with improved gearing, increased net cash, and strong free cash flow Financial Position Indicators | Indicator | Year-end 2022 | Year-end 2021 | | :--- | :--- | :--- | | **Gearing Ratio** | 21.0% | 26.2% | | **Leverage Ratio** | 2.3% | 6.8% | | **Net Cash** | RMB 7.09 billion | RMB 6.03 billion | | **Free Cash Flow (Full Year)** | RMB 1.18 billion | N/A | - The increase in net cash was primarily driven by cash generated from operating activities, partially offset by capital expenditures, investment activities, share repurchases, and earn-out consideration payments for New Classics Media[34](index=34&type=chunk) [Capital Expenditure and Long-term Investments](index=17&type=section&id=%E8%B3%87%E6%9C%AC%E9%96%8B%E6%94%AF%E5%8F%8A%E9%95%B7%E6%9C%9F%E6%8A%95%E8%B3%87) Capital expenditure and long-term investments decreased significantly in 2022 due to reduced investment spending Expenditure Breakdown | Item | 2022 (RMB in millions) | 2021 (RMB in millions) | | :--- | :--- | :--- | | **Total Capital Expenditure and Long-term Investments** | 575.5 | 1,400.2 | [Employees](index=17&type=section&id=%E5%83%B1%E5%93%A1) The Group maintained a stable workforce of approximately 1,800 employees, primarily based in China - As of year-end 2022, the company had approximately **1,800 full-time employees**, located mainly in Chinese cities such as Shanghai, Beijing, and Suzhou[38](index=38&type=chunk) [Acquisition of New Classics Media and Issuance of Consideration Shares under Special Mandate](index=18&type=section&id=%E6%94%B6%E8%B3%BC%E6%96%B0%E9%BA%97%E5%82%B3%E5%AA%92%E5%8F%8A%E6%A0%B9%E6%93%9A%E7%89%B9%E5%88%A5%E6%8E%88%E6%AC%8A%E7%99%BC%E8%A1%8C%E4%BB%A3%E5%83%B9%E8%82%A1%E4%BB%BD) [NCM's Performance and Earn-out Consideration Payment](index=18&type=section&id=%E6%96%B0%E9%BA%97%E5%82%B3%E5%AA%92%E6%A5%AD%E7%B8%BE%E5%8F%8A%E7%8D%B2%E5%88%A9%E8%A8%88%E9%85%AC%E6%94%AF%E4%BB%98) New Classics Media exceeded its 2022 profit target, triggering the payment of earn-out consideration in cash and shares New Classics Media 2022 Performance | Item | Amount (RMB in millions) | | :--- | :--- | | **Revenue** | 1,623.3 | | **Profit Attributable to Equity Holders of the Company** | 537.7 | - New Classics Media's actual net profit for 2022 was **RMB 512 million**, surpassing the highest reference net profit target of RMB 500 million and triggering the earn-out payment clause[41](index=41&type=chunk) Earn-out Consideration Payment Details | Item | | | :--- | :--- | | **Consideration Shares to be Issued** | 3,021,371 shares | | **Cash Consideration to be Paid** | RMB 204 million | [Financial Information](index=20&type=section&id=%E8%B2%A1%E5%8B%99%E8%B3%87%E6%96%99) [Consolidated Statement of Comprehensive Income](index=20&type=section&id=%E7%B6%9C%E5%90%88%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E8%A1%A8) Revenue and gross profit declined in 2022, with operating profit falling sharply due to a reversal from other net gains to losses Key Income Statement Items | Item (RMB in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | **Revenue** | 7,625,622 | 8,668,244 | | **Gross Profit** | 4,030,103 | 4,599,443 | | **Operating Profit** | 628,834 | 2,172,640 | | **Profit for the Year** | 607,628 | 1,842,927 | | **Profit Attributable to Equity Holders of the Company** | 608,186 | 1,846,609 | | **Basic Earnings Per Share (RMB)** | 0.60 | 1.83 | [Consolidated Statement of Financial Position](index=22&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81%E8%A1%A8) The company's balance sheet remained strong with decreased liabilities and increased total equity at the end of 2022 Key Balance Sheet Items | Item (RMB in thousands) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | 22,734,478 | 23,297,314 | | **Total Liabilities** | 4,779,756 | 6,110,343 | | **Total Equity** | 17,954,722 | 17,186,971 | | **Non-current Assets** | 10,258,566 | 10,567,004 | | **Current Assets** | 12,475,912 | 12,730,310 | | **Non-current Liabilities** | 796,000 | 1,598,833 | | **Current Liabilities** | 3,983,756 | 4,511,510 | [Consolidated Statement of Cash Flows](index=26&type=section&id=%E7%B6%9C%E5%90%88%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) Net cash from operating activities increased significantly, contributing to a higher year-end cash balance despite financing outflows Key Cash Flow Items | Item (RMB in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | **Net Cash Flow from Operating Activities** | 1,576,787 | 1,118,468 | | **Net Cash Flow from Investing Activities** | 528,102 | 936,225 | | **Net Cash Flow used in Financing Activities** | (1,145,364) | (349,987) | | **Net Increase in Cash and Cash Equivalents** | 959,525 | 1,704,706 | | **Cash and Cash Equivalents at Year End** | 5,545,766 | 4,528,412 | [Other Information](index=53&type=section&id=%E5%85%B6%E4%BB%96%E8%B3%87%E6%96%99) [Dividend](index=53&type=section&id=%E8%82%A1%E6%81%AF) The Board did not recommend a final dividend for the fiscal year ended December 31, 2022 - The company's Board of Directors did not recommend the payment of a final dividend for fiscal year 2022, consistent with 2021[112](index=112&type=chunk) [Purchase, Sale or Redemption of Listed Securities](index=53&type=section&id=%E8%B3%BC%E8%B2%B7%E3%80%81%E5%87%BA%E5%94%AE%E6%88%96%E8%B4%96%E5%9B%9E%E4%B8%8A%E5%B8%82%E8%AD%89%E5%88%B8) The company executed a share buyback program during fiscal year 2022, repurchasing and cancelling over 10 million shares Share Repurchase Summary (FY2022) | Item | | | :--- | :--- | | **Number of Shares Repurchased** | 10,681,200 shares | | **Total Consideration (before expenses)** | HK$232,985,758 | | **Purpose** | To enhance long-term shareholder value | [Corporate Governance and Compliance](index=54&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%8F%8A%E5%90%88%E8%A6%8F) The company maintained full compliance with the Corporate Governance Code and relevant securities trading regulations during the year - The company complied with all applicable code provisions of the Corporate Governance Code during the reporting period[116](index=116&type=chunk) - The company's directors adhered to the standard code for securities transactions throughout the reporting period[117](index=117&type=chunk) [Annual General Meeting and Closure of Register of Members](index=55&type=section&id=%E8%82%A1%E6%9D%B1%E9%80%B1%E5%B9%B4%E5%A4%A7%E6%9C%83%E5%8F%8A%E6%9A%AB%E5%81%9C%E8%BE%A6%E7%90%86%E8%82%A1%E4%BB%BD%E9%81%8E%E6%88%B6%E7%99%BB%E8%A8%98) The Annual General Meeting is scheduled for May 22, 2023, with a corresponding period for the closure of the register of members - The Annual General Meeting is scheduled to be held on Monday, May 22, 2023[118](index=118&type=chunk)

Financial Performance - Revenue for the first half of 2022 was RMB 4,087,214, a decrease of 5.9% compared to RMB 4,342,146 in the same period of 2021[8]. - Gross profit for the first half of 2022 was RMB 2,146,326, down 6.2% from RMB 2,288,065 in the previous year[8]. - Operating profit decreased by 80.4% to RMB 251,209 from RMB 1,284,000 year-on-year[8]. - Profit before tax fell by 75.1% to RMB 340,436 compared to RMB 1,365,378 in the same period last year[8]. - Net profit for the period was RMB 232,276, a decline of 78.5% from RMB 1,080,950 in the first half of 2021[8]. - Total revenue for the six months ended June 30, 2022, was RMB 4,087.2 million, a decrease of 5.9% compared to RMB 4,342.1 million for the same period in 2021[17]. - Gross profit for the same period was RMB 2,146.3 million, down from RMB 2,288.1 million, reflecting a decline in profitability[17]. - Operating profit for the six months was RMB 251.2 million, significantly lower than RMB 1,284.0 million in the previous year[17]. - The company reported a net profit attributable to equity holders of RMB 228.5 million for the six months ended June 30, 2022, compared to RMB 665.0 million in the previous year[26]. - Basic earnings per share for the six months ended June 30, 2022, was RMB 0.23, down from RMB 1.08 in the same period of 2021[34]. Revenue Breakdown - Online business revenue decreased by 9.2% to RMB 2,307.0 million, accounting for 56.4% of total revenue[20]. - Revenue from self-owned platform products in the online business fell by 6.3% to RMB 1,763.1 million, primarily due to cost optimization measures[20]. - Revenue from third-party platforms in the online business dropped by 35.8% to RMB 196.5 million, mainly due to the termination of partnerships with certain distributors[20]. - Total revenue for the online business segment was RMB 2,307.0 million, with a gross profit margin of 50.3%[27]. - Revenue from copyright operations and others was RMB 1,780.2 million, with a gross profit margin of 55.4%[27]. Cost Management - The company implemented cost control measures, reducing certain marketing expenses to optimize operational efficiency[11]. - Total revenue cost decreased by 5.5% year-over-year to RMB 1,940.9 million, driven by reduced amortization of intangible assets and lower content costs[23]. - Sales and marketing expenses decreased by 17.6% year-over-year to RMB 1,110.5 million, representing 27.2% of total revenue, down from 31.0%[25]. - General and administrative expenses decreased by 12.2% to RMB 557.5 million, accounting for 13.6% of revenue compared to 14.6% in the previous year[26]. User Engagement - The average monthly active users for the company's own platform and Tencent's self-operated channels increased by 13.8% year-over-year to 264.7 million, with Tencent's channel users growing by 22.7% to 144.9 million[22]. - The average monthly paying users decreased by 12.9% year-over-year to 8.1 million, primarily due to an increase in light users attracted by free reading content[22]. - Average revenue per paying user increased by 6.6% year-over-year to RMB 38.8, reflecting improvements in content operations and recommendation efficiency[22]. - The average daily active users for the free reading business increased by 7.7% year-over-year to 14 million[22]. Strategic Initiatives - The company plans to expand its IP development across various forms, including film, animation, and games, to meet diverse cultural demands[16]. - The company launched several new productions in the film and television sector, achieving high ratings and critical acclaim[11]. - The sci-fi genre became the fastest-growing category on the platform, with approximately 20,000 new sci-fi works being incubated[11]. - The company has launched new animated series, achieving significant viewership with 4 billion and 3 billion views for "Starry Change" and "Martial Universe," respectively[13]. Financial Position - The total assets decreased from RMB 23,297.3 million as of December 31, 2021, to RMB 22,775.3 million as of June 30, 2022[36]. - The total liabilities decreased from RMB 6,110.3 million as of December 31, 2021, to RMB 5,144.5 million as of June 30, 2022[36]. - The leverage ratio improved from 6.8% as of December 31, 2021, to 3.4% as of June 30, 2022[36]. - Cash and cash equivalents net amount increased to RMB 6,555.7 million from RMB 5,691.9 million year-on-year[29]. - The company reported a net cash inflow from operating activities of RMB 706,767 thousand, compared to RMB 430,027 thousand for the same period in 2021, representing a 64% increase[86]. Shareholder Information - The board of directors has decided not to recommend an interim dividend for the six months ended June 30, 2022, compared to zero in the previous year[45]. - As of June 30, 2022, the total number of issued shares was 1,023,033,672[49]. - Tencent Holdings Limited holds a controlling interest with 577,643,604 shares, representing 56.46% of the company's equity[52]. - The company has adopted a code of conduct for directors' securities transactions in accordance with the listing rules[42]. Employee Management - As of June 30, 2022, the company had approximately 1,900 full-time employees, primarily located in China, with the majority in Shanghai[39]. - The company has implemented competitive salaries, performance-linked bonuses, and other incentives as part of its employee retention strategy[39]. Compliance and Governance - The company has complied with all applicable provisions of the corporate governance code during the six-month period ending June 30, 2022[41]. - The audit committee, along with the board and auditors, reviewed the company's interim performance for the six months ended June 30, 2022, and found the risk management and internal control systems to be effective and adequate[43].

Financial Performance - The company's revenue for 2021 was RMB 8,668,244 thousand, an increase of 1.67% compared to RMB 8,525,701 thousand in 2020[8]. - Gross profit for 2021 reached RMB 4,599,443 thousand, up from RMB 4,234,076 thousand in 2020, reflecting a growth of 8.63%[8]. - Operating profit for 2021 was RMB 2,172,640 thousand, a significant recovery from an operating loss of RMB 4,474,668 thousand in 2020[8]. - The net profit attributable to equity holders of the company for 2021 was RMB 1,846,609 thousand, compared to a loss of RMB 4,483,869 thousand in 2020[8]. - The company reported a total comprehensive income of RMB 1,764,723 thousand for 2021, a significant recovery from a loss of RMB 4,532,508 thousand in 2020[8]. - Total revenue for the year ended December 31, 2021, was RMB 8.7 billion, representing a 2% year-over-year growth[10]. - Profit attributable to equity holders increased by 34% year-over-year to RMB 1.23 billion, benefiting from the growth of core business and New Classics Media's profits[10]. - The company reported a total of 1,022,026,549 shares outstanding as of December 31, 2021[56]. Assets and Equity - Total assets increased to RMB 23,297,314 thousand in 2021 from RMB 21,315,760 thousand in 2020, representing a growth of 9.30%[9]. - The total equity attributable to equity holders of the company rose to RMB 17,186,455 thousand in 2021, up from RMB 15,093,507 thousand in 2020, marking an increase of 13.87%[9]. - Non-current assets amounted to RMB 10,567,004 thousand in 2021, compared to RMB 9,815,429 thousand in 2020, indicating a growth of 7.66%[9]. - Current assets also increased to RMB 12,730,310 thousand in 2021 from RMB 11,500,331 thousand in 2020, reflecting a growth of 10.70%[9]. User Engagement and Market Expansion - Monthly active users for online business reached a historical high of 249 million in 2021, driven by content upgrades and community operation strategies[10]. - The company plans to continue expanding its market presence and investing in new product development to drive future growth[8]. - The company aims to enhance its IP development capabilities and expand into international markets, with a focus on creating long-lasting IPs[12]. - The company plans to expand its market presence in Southeast Asia, targeting a 30% market share by 2025[46]. Product Development and IP Strategy - The company is implementing a three-phase strategy to enhance the value of literary IP, including multimedia adaptation, commercialization, and extending the IP lifecycle[10]. - The company launched new hit series such as "Human World," which achieved the highest ratings in nearly 8 years for CCTV's prime time slot, and "Snow in the Sword" with a total view count of nearly 7 billion[11]. - The company is actively developing new adaptations of classic IPs, including sequels for popular series such as "Qing Yu Nian" and "Zhui Xu" to further capitalize on existing successes[12]. - The company is focused on expanding its market presence through strategic partnerships and acquisitions in the media and technology sectors[43]. Financial Management and Governance - The company has established a remuneration committee to review the remuneration policy for the board and senior management[52]. - The company has adopted the corporate governance code as its own governance code and has complied with all applicable provisions during the reporting period[115]. - The board believes that good corporate governance is crucial for the long-term success and sustainable development of the company[115]. - The company has established a risk management system that includes roles, responsibilities, and relevant risk management policies and processes, ensuring long-term growth and sustainability[136]. Environmental, Social, and Governance (ESG) Initiatives - The company has committed to full compliance with the ESG reporting guidelines set by the Hong Kong Stock Exchange, ensuring transparency in its disclosures[157]. - The company engages in community investment and charitable activities to enhance positive social impact[160]. - The company has established a management framework for ESG, supported by the board of directors and senior management, to guide daily operations and risk management[160]. - The company emphasizes the provision of high-quality and healthy works, protection of intellectual property, and maintenance of employee health as very important ESG issues[165]. Employee Management and Development - The company has a dual career path system for promotions, allowing employees to apply for advancement based on merit[179]. - The company offers competitive compensation linked to employee performance to attract and retain talent[180]. - The company has established a comprehensive employee assistance program, including a psychological counseling hotline and stress relief activities[183]. - The employee turnover rate for 2021 was 40.6%, with a higher rate of 45.7% for those under 30 years old[177]. Risk Management - The company has identified nine significant risks in 2021, including "macroeconomic risk," "product manufacturing risk," and "human resources risk," which were newly added due to the global economic uncertainty and the impact of the COVID-19 pandemic[136]. - The company faces various major financial risks, including foreign exchange risk, market risk, credit risk, and liquidity risk, with detailed measures outlined in the financial statements[136]. - The company has implemented appropriate measures to manage key risks to an acceptable level as determined by the board of directors[136]. Strategic Partnerships and Collaborations - The company is collaborating with Tencent for joint investments in film and television production, game development, and other products[96]. - The company has established a partnership with Sogou for content cooperation and game licensing[96]. - The company continues to explore new business opportunities and market expansion strategies to drive future growth[43]. Compliance and Regulatory Matters - The company has established contractual arrangements to gain actual control over the businesses operated by Shanghai Hongwen and New Classics Media, allowing it to consolidate their financial performance into its financial statements[101]. - The company has submitted a copy of the auditor's letter to the stock exchange, confirming the results of the review of related party transactions[100]. - The group has applied for and received exemptions from the stock exchange regarding certain contractual arrangements, ensuring compliance with relevant regulations[111].