Group 1 - The company announced a collaboration with Kaiying Network to jointly invest in Hangzhou Jiyi Artificial Intelligence Technology Co., aiming to advance AI large model technology in the gaming sector [1][2] - The total investment amount for the AI company agreement is RMB 10 million, with the investment completed by May 16, 2025, making the company a shareholder in Jiyi Artificial Intelligence [1] - The partnership is seen as a strategic move to enhance resource integration and build a long-term win-win ecosystem, aligning with the company's diversified product matrix strategy and "AI+" core industry layout [2][4] Group 2 - The company has established a three-year game product cooperation memorandum with Kaiying Network, covering various IP and game products, including classic IPs like "Dragon Legend" and "Blood of Heroes" [2][4] - The collaboration has yielded significant results in the development and global distribution of classic IP games, with successful titles like "Original Legend" and "All People Jianghu" topping local mobile game sales charts [3] - The strategic upgrade signifies a shift from single project cooperation to ecosystem co-construction, focusing on the boutique and diversified development of game products for a continuous entertainment experience for global players [4]

Group 1 - The core point of the article is that Zhongxu Future has entered into an investment agreement with Kaiying Network to jointly invest in Hangzhou Jiyi Artificial Intelligence Technology Co., Ltd. for a total amount of 10 million RMB [1] - After the investment is completed, Yuanda Future will become a shareholder of Jiyi Artificial Intelligence [1] - Additionally, Zhongxu Future and Kaiying Network have signed a three-year cooperation memorandum for game product development, which includes popular IPs such as "Legend," "Miracle," and "Hot Blood Jianghu" [1]

Group 1 - The gaming industry is facing intense competition, leading to overall performance pressure and declines, prompting market attention on executive compensation as several listed gaming companies disclose their 2024 annual reports and Q1 2025 results [2] - There is a noticeable difference in executive compensation between Hong Kong-listed and A-share listed companies, with Hong Kong companies generally incorporating stock incentives into their compensation systems, while A-share companies prefer cash [2] - The chairman of Zhongxu Future has seen a salary reduction of over 20 million yuan for 2024, which is primarily attributed to the significant portion of total compensation being related to stock-based compensation, rather than a direct correlation with performance decline [2] Group 2 - Zhongxu Future is transitioning from a "one-stop service for entertainment" strategy to a core focus on gaming business, with a portfolio of well-known IPs such as "Legend," "Miracle," and "Hot Blood Jianghu" [3] - The company has successfully obtained approval for several premium games, including "Free and Easy Jianghu," "Kingdom Crisis," "Laughing Proudly: Heroes' Transmission," and "Hot Blood Jianghu: Awakening" [3] - The primary factors contributing to the revenue decrease in 2024 include several existing games entering the later stages of their lifecycle, new game categories still in the early stages of recouping costs, and a decline in revenue from consumer goods and other non-gaming businesses [3]

Core Viewpoint - The Chinese gaming industry in 2024 is characterized by a duality of "stronger becoming stronger" and "innovative disruption," with leading companies leveraging IP and technology while smaller teams utilize AI and differentiated content to break through [1] Group 1: Globalization Strategy - The survival rule in the gaming industry is "if you don't go global, you will be eliminated," which is exemplified by the company's financial report showing overseas revenue reaching 623 million yuan, a 44.9% increase from 430 million yuan in 2023, accounting for 11.2% of total revenue [2] - The company has successfully launched and operated over 30 multilingual games in various international markets, including Southeast Asia, Hong Kong, Macau, Taiwan, Japan, South Korea, and Europe and the United States [2] - The classic IP "Miracle MU: Infinite Golden Egg" gained 800,000 new users in Vietnam within its first month, dominating local app store sales charts [2] Group 2: Product Diversification - The company has addressed previous criticisms of over-reliance on legacy IPs by successfully launching new products in 2024, maintaining stable user engagement for classic IPs like "Legend" and "Miracle" [4] - The upcoming game "Dragon Legend" is set to launch in January 2025, featuring high gameplay freedom and innovative elements, ensuring the longevity of the legacy game genre [4] - The company has expanded its IP portfolio through partnerships, with the game "Douluo Dalu: Shrek Academy" achieving top rankings on app stores upon release [5] Group 3: Financial Stability and AI Strategy - The company has strengthened its financial position, with cash reserves increasing by 5.8% to 515 million yuan and a significant reduction in notes payable by 45.5%, improving liquidity [7] - The establishment of a wholly-owned subsidiary in Hong Kong focuses on AI technology applications in the gaming industry, enhancing game art production, creative writing, and marketing efficiency [6] - The integration of AI technology aims to optimize user acquisition and improve return on investment in marketing, with plans to explore AI applications in various game functionalities [6] Group 4: Future Outlook - The company's strategies of global expansion, AI integration, and diversified product offerings are expected to drive future growth, with overseas business becoming a new growth engine [8] - The focus on product matrix innovation, technology-driven strategies, and financial stability positions the company well for the next growth cycle [8]

Financial Performance - Total revenue for 2024 was RMB 5,580,112 thousand, a decrease of 14.4% compared to RMB 6,514,585 thousand in 2023[7] - Gross profit for 2024 was RMB 4,024,343 thousand, down 12.0% from RMB 4,573,318 thousand in 2023[7] - The company reported a net profit of RMB 44,019 thousand for 2024, a significant decline from RMB 273,289 thousand in 2023[7] - The company's revenue for the reporting period was RMB 5,580.1 million, a decrease from RMB 6,514.6 million in 2023, with a net profit of RMB 44.0 million compared to RMB 273.3 million in 2023[22] - The revenue from self-operated game products was RMB 4,118.8 million, accounting for 73.9% of total revenue, while revenue from cooperative operations with game developers was RMB 3,844.4 million, representing 69.0%[39] - The revenue related to contract arrangements for the year ending December 31, 2024, is approximately RMB 4,721.6 million, a decrease from RMB 5,698.9 million in 2023[200] - The total assets related to contract arrangements as of December 31, 2024, are approximately RMB 4,538.1 million, down from RMB 6,302.8 million in 2023[200] Overseas Business - Overseas business revenue reached RMB 623.4 million, representing a 44.9% increase year-on-year and accounting for 11.2% of total revenue[13] - The overseas business revenue reached RMB 623.4 million, representing a year-on-year growth of 44.9%, increasing its share of total revenue from 6.6% in 2023 to 11.2%[22] Game Development and Strategy - The company launched its first strategy mobile game "Beast Lord: New World" in June 2024, marking its entry into the SLG game segment[12] - The company plans to launch multiple new games in 2025, expanding its product line and enhancing user engagement[11] - The company is focusing on a strategic transformation towards "AI + gaming" to enhance innovation and market competitiveness[10] - The company is implementing a "diversification + premiumization" strategy for its game product matrix, covering all categories and user groups[23] - The classic IP games, such as "Legend" and "Miracle," continue to maintain stable user activity and are supported by ongoing content updates[24] - The "Legend" IP games, including "Original Legend" and "Ancient Cloud Legend," are expected to capture approximately 6.1% to 9.2% of the total Chinese gaming market in 2024[25][27] - The company has a pipeline of 17 games ready for release, indicating a strong future product lineup[33] Financial Position and Assets - Non-current assets totaled RMB 1,599,422 thousand in 2024, a decrease from RMB 3,204,232 thousand in 2023[8] - Current liabilities amounted to RMB 3,101,143 thousand in 2024, down from RMB 4,836,197 thousand in 2023[8] - The cash and cash equivalents as of December 31, 2024, were RMB 515.0 million, an increase from RMB 486.9 million as of December 31, 2023[60] - The company's trade receivables net amount decreased by 23.7% to RMB 237.2 million as of December 31, 2024, from RMB 310.7 million in 2023[57] - The company's bank borrowings as of December 31, 2024, were RMB 199.6 million, down from RMB 213.7 million in 2023[61] - The debt-to-equity ratio as of December 31, 2024, was 0.10, compared to 0.18 in 2023[62] - Total capital expenditure for the year ending December 31, 2024, is approximately RMB 50.7 million, an increase of 120% compared to RMB 23.0 million for the same period in 2023[68] Employee and Management - The total employee compensation cost for 2024 is RMB 366.5 million, a decrease of 26.9% from RMB 501.7 million in 2023[71] - The group currently has 912 employees, down from 1,305 employees as of December 31, 2023[71] - The company has enhanced its internal training to improve employee skills and innovation capabilities, optimizing its talent structure to strengthen core competitiveness[16] - The company has established a compensation committee to determine and recommend the compensation policy for directors and senior management[166] Legal and Regulatory Compliance - The company has established mechanisms to manage underage consumer protection in response to new regulations, ensuring a healthy online environment for minors[20] - The company has complied with all relevant laws and regulations that significantly impact its business and operations[100] - The company has not incurred any fines or penalties for violations of health, safety, or environmental regulations during the reporting period[98] - The company is subject to various legal, regulatory, political, and economic risks that could adversely affect its international strategy and market capabilities[101] Corporate Governance - The board consists of two executive directors and three independent non-executive directors[90] - The company appointed a new independent non-executive director, Ms. Zheng Yi, on March 30, 2023[81] - The company has a strong management team, including Ms. Liang Wenhong as the newly appointed CEO[83] Shareholder Information - The interests of directors and major executives in the company's shares included Mr. Wu Xubo holding 49.45% and Ms. Wu Xuan holding 7.20% of the total issued share capital[141] - The company did not issue any debt securities during the reporting period[123] - The board does not recommend the distribution of a final dividend for the year ending December 31, 2024, consistent with 2023[125] Charitable Contributions - The group made charitable donations of RMB 5.2 million for the year ending December 31, 2024, compared to RMB 12.9 million in 2023[122] Contractual Arrangements - The company has established control over its Chinese operations through contractual arrangements, which may face legal uncertainties under the new Foreign Investment Law[188] - The board believes that the contractual arrangements are essential for the company's operational framework and economic benefits from Chinese entities[194] - The independent non-executive directors and auditors have confirmed compliance with contract arrangements and overall performance during the relevant period[196]

Core Insights - The company reported a revenue of 5.58 billion yuan for the fiscal year 2024, a decrease of 14.3% year-on-year [2] - The net profit for 2024 was 44 million yuan, down 83.9% from 273 million yuan in 2023, with a net loss attributable to the parent company of 3.62 million yuan [2] - The decline in revenue is attributed to decreased game income under the cooperative operation model, underperformance of new game launches, and reduced income from consumer goods [2] Revenue Breakdown - The company achieved overseas revenue of 623 million yuan in 2024, marking a year-on-year increase of 44.9%, accounting for 11.2% of total revenue [3] - The self-operated game products generated 4.12 billion yuan in revenue, a decrease of 3.4%, while revenue from cooperative operations fell by 31.6% to 1.33 billion yuan [6] Cost Management - Research and development costs decreased by 25.4% to 128 million yuan in 2024, primarily due to a reduction in overall compensation related to R&D personnel [4] - Sales and distribution expenses remained high at 3.517 billion yuan but decreased by 9.4% from 3.88 billion yuan in 2023 [5] - Administrative expenses were recorded at 192 million yuan, down 27.6% from 265 million yuan in 2023 [5] Strategic Initiatives - The company is focusing on product matrix innovation, technology-driven strategies, and global expansion [6] - It has entered into a partnership to develop AI game business, aiming to optimize R&D processes and reduce costs [4] - The company is also expanding its portfolio in the mini-game sector, with successful launches such as "Little Soldier Battle" [7] Consumer Goods Performance - Revenue from the consumer goods sector fell by 52.2% to 102 million yuan in 2024, primarily due to a strategic focus on core gaming operations and intense market competition [7]

Financial Performance - The company's total revenue for the reporting period was RMB 5,580.1 million, a decrease of 14.3% compared to RMB 6,514.6 million in 2023[10]. - The net profit for the year was RMB 44.0 million, down 83.9% from RMB 273.3 million in 2023, with a net loss of RMB 385.0 million recorded for the six months ending June 30, 2024[10]. - Revenue from overseas operations reached RMB 623.4 million, representing a year-on-year increase of 44.9% from RMB 430.3 million in 2023, accounting for 11.2% of total revenue[10]. - The revenue from self-operated game marketing and operations for the year ended December 31, 2024, was RMB 4,118.8 million, a decrease of 3.4% compared to RMB 4,264.5 million in 2023[28]. - The revenue from joint-operated game marketing and operations for 2024 was RMB 1,329.8 million, down 31.6% from RMB 1,944.8 million in 2023[28]. - The total gross profit for 2024 was RMB 4,024.3 million, a decrease of 12.0% from RMB 4,573.3 million in 2023[31]. - The gross margin for 2024 was 72.1%, compared to 70.2% in 2023[32]. - Other income and gains for 2024 were RMB 162.9 million, a decrease of 65.2% from RMB 468.1 million in 2023[33]. - The company reported a total comprehensive income of RMB 42,765 thousand for 2024, compared to RMB 212,339 thousand in 2023, reflecting a decrease of 80.0%[71]. - The group’s profit before tax for 2024 was RMB (3,624) thousand, a significant decrease from RMB 235,487 thousand in 2023, indicating a decline in profitability[99]. - The total income tax expense for 2024 was RMB 54,396 thousand, down 61% from RMB 140,102 thousand in 2023, primarily due to lower taxable profits[97]. Market Trends - The domestic gaming market in China is projected to generate actual sales revenue of RMB 3,257.8 million in 2024, reflecting a year-on-year growth of 7.53%[7]. - The global gaming market is expected to reach RMB 12,163.4 million in 2024, with a year-on-year growth of 3.31%[5]. - The company aims to expand its overseas market presence as part of its global strategy[10]. - The company plans to deepen its global strategy by introducing quality game products to Southeast Asia, Europe, and the Middle East markets[23]. Product Development - The company is focusing on a diversified and premium product matrix strategy, which includes classic IP games and innovative new IP games[11]. - The game "Douluo Dalu: Shrek Academy" launched in January 2024 achieved top rankings on both the Apple App Store and TapTap[16]. - The classic IP games, such as "Legend" and "Miracle," continue to maintain stable user activity and are supported by ongoing content updates[12]. - The company launched the mobile network SLG "Beast Lord: New World" in June 2024, which topped multiple charts, including the iOS free list[17]. - The classic IP "Miracle MU: Infinite Golden Egg" gained 800,000 new users in Vietnam within the first month of release, achieving top rankings in both Google Play and App Store[21]. - The company has a pipeline of 17 game products ready for release, indicating a strong future product lineup[21]. - The AI-driven platforms "Luoshu" and "Hetu" have accumulated a machine learning training set of over 100 billion parameters, enhancing user acquisition and operational efficiency[20]. - The company has successfully launched over 30 multilingual games in various international markets, including Southeast Asia and Europe, demonstrating significant global expansion[21]. - The company has received approval for multiple high-quality game titles, strengthening its game portfolio for future growth[24]. Financial Position - The cash and cash equivalents as of December 31, 2024, were RMB 515.0 million, an increase from RMB 486.9 million in 2023[47]. - The current ratio as of December 31, 2024, was 1.28, up from 0.84 in 2023[50]. - The goodwill as of December 31, 2024, was zero, down from RMB 27.9 million in 2023, primarily due to poor performance in the consumer goods segment[43]. - Total capital expenditure for the year ended December 31, 2024, was approximately RMB 50.7 million, compared to RMB 23.0 million for the same period in 2023, indicating a significant increase[53]. - The total employee compensation cost for 2024 was RMB 366.5 million, a decrease of 26.9% from RMB 501.7 million in 2023[56]. - As of December 31, 2024, the group had pledged fixed deposits of RMB 2,176.3 million and fixed assets valued at RMB 56.6 million as collateral for bank loans and notes payable[58]. - The group had no significant contingent liabilities or unresolved major lawsuits as of December 31, 2024[54]. - The company had 912 employees as of December 31, 2024, down from 1,305 employees in 2023[56]. - The group’s trade payables totaled RMB 475,530 thousand in 2024, a slight increase from RMB 466,069 thousand in 2023, indicating stable supplier relationships[104]. - The fair value of listed equity investments increased to RMB 430,534 thousand in 2024 from RMB 412,800 thousand in 2023, showing a positive trend in market valuation[103]. Shareholder Matters - The company did not recommend a final dividend for the year ended December 31, 2024, consistent with no dividend in 2023[64]. - The group declared a special dividend of RMB 50,000 thousand on August 15, 2023, fully paid in cash, with no final dividend recommended for the year ending December 31, 2024[98]. - The company has scheduled its annual general meeting for June 19, 2025, to discuss shareholder matters[68]. - The company will suspend share transfer registration from June 16 to June 19, 2025, to determine shareholder eligibility for the upcoming annual general meeting[69]. Operational Efficiency - The company has implemented mechanisms to manage underage consumer protection in response to new regulatory requirements[8]. - The company has not encountered any significant labor disputes or difficulties in recruiting employees during the reporting period[57]. - The group reported a total of RMB 3,335,096 thousand in promotional expenses for 2024, down from RMB 3,685,013 thousand in 2023, showing a 9.5% reduction in marketing expenditures[6]. - Trade receivables at the end of 2024 amounted to RMB 237,194 thousand, a decrease of 23.6% from RMB 310,696 thousand in 2023, indicating improved collection efficiency[101]. - The company has no supplier financing arrangements, thus the recent accounting standards revisions had no impact on its financial statements[80]. - The company has clarified that liabilities classification is unaffected by the potential exercise of repayment rights[81].

Core Viewpoint - The company, Zhongxu Future (9890.HK), has issued a profit warning, projecting a net profit between 10 million and 50 million yuan for 2024, a significant decrease from 273 million yuan in the previous year, but is expected to reverse its losses by the end of 2024 [1][2]. Group 1: Financial Performance and Forecast - In the first half of 2024, Zhongxu Future recorded a net loss of 385 million yuan, primarily due to increased operating expenses and asset impairment provisions, which are expected to impact the overall performance for the year [1][2]. - Despite the challenges, the company anticipates a strong recovery in the second half of 2024, with operational improvements expected to enhance profitability beyond last year's levels [2]. Group 2: Strategic Focus and Market Environment - The company is focusing on its core gaming business, benefiting from a strategic transformation that aligns with the growth of the gaming market, which reached a record sales revenue of 325.78 billion yuan in 2024 [3]. - The gaming user base in China has also reached 674 million, indicating a robust market environment that supports the potential for revenue growth from new game launches [3]. Group 3: Product Development and Growth Potential - Zhongxu Future is actively developing and launching new games, with over 20 games in reserve and more than 10 IP resources, which are expected to contribute to revenue and maintain market interest [4]. - The company’s long-term growth is supported by its deep experience in game operations, allowing it to maximize the potential of new titles once they enter the revenue recovery phase [4]. Group 4: Globalization and Technology Integration - The company is expanding its global footprint, with successful game launches in overseas markets, such as Vietnam and Thailand, where its titles have topped app store charts [6]. - Zhongxu Future is integrating advanced technologies like VR/AR and AI into its operations, enhancing game quality and operational efficiency, which is expected to lower costs and increase profitability [7].

Financial Performance - Revenue for the six months ended June 30, 2024, was RMB 3,225,776 thousand, a decrease of 5.1% compared to RMB 3,400,091 thousand for the same period in 2023[9] - Gross profit for the same period was RMB 2,364,169 thousand, an increase of 3.0% from RMB 2,294,078 thousand in 2023[9] - The company reported a loss before tax of RMB 416,350 thousand, compared to a profit of RMB 442,654 thousand in the previous year[9] - The net loss for the six months ended June 30, 2024, was RMB 385.0 million, compared to a net profit of RMB 300.3 million for the same period in 2023[36] - Basic and diluted loss per share for the period was RMB (0.74), compared to earnings of RMB 0.55 per share in the previous year[76] - Total operating expenses increased to RMB 2,288,845 thousand from RMB 1,953,214 thousand, reflecting a rise of 17.2%[76] - The company did not recommend the distribution of an interim dividend for the six months ended June 30, 2024[72] Assets and Liabilities - Total assets as of June 30, 2024, were RMB 6,245,898 thousand, down from RMB 7,268,210 thousand as of December 31, 2023[10] - Non-current assets decreased to RMB 2,535,951 thousand from RMB 3,204,232 thousand at the end of 2023[10] - Current liabilities decreased to RMB 4,196,424 thousand from RMB 4,836,197 thousand at the end of 2023[10] - The net asset value as of June 30, 2024, was RMB 1,902,261,000, down from RMB 2,275,785,000, a decline of around 16.5%[83] - Trade receivables as of June 30, 2024, totaled RMB 286,485,000, a decrease from RMB 310,696,000 as of December 31, 2023[109] - The company’s notes payable as of June 30, 2024, were RMB 2,334,580,000, down from RMB 2,806,551,000 as of December 31, 2023[114] Revenue Streams - Revenue from self-operated games reached RMB 2,481.6 million, an increase of 17.1% from RMB 2,118.9 million in the same period of 2023, driven by new game launches[22] - Revenue from co-operated games decreased by 39.5% to RMB 668.5 million, primarily due to the lifecycle stage of existing games[22] - Revenue from other marketing operations decreased by 60.9% to RMB 19.3 million for the six months ended June 30, 2024, compared to RMB 49.3 million for the same period in 2023[23] - Revenue from consumer products dropped by 55.5% to RMB 56.4 million for the six months ended June 30, 2024, down from RMB 126.8 million in the prior year[24] - Revenue from mainland China was RMB 2,938,751, down 10.1% from RMB 3,268,089 in the previous year[100] - Revenue from Hong Kong increased significantly to RMB 284,634, compared to RMB 132,002 in the prior year, representing a growth of 115.5%[96] Operational Highlights - The company plans to launch new games including "斗罗大陆：誅邪傳說" and "虎衛戰神" in the second half of 2024[6] - The company has successfully launched over 30 multilingual games in various overseas markets, with dozens more in preparation[6] - The company launched 29 new games in the first half of 2024, expanding its portfolio to over 380 games[12] - The company signed strategic cooperation agreements with major cloud service providers to enhance game development and operational efficiency[15] - The company is actively pursuing a global strategy, having published and operated over 30 multilingual games in international markets by June 30, 2024[17] Research and Development - A new AI-focused subsidiary has been established to enhance the application of AI technology in the gaming industry[6] - The company emphasizes a strategy of "self-research + cooperation + investment" for its R&D efforts moving forward[6] - The average revenue per paying user (ARPPU) for all games was RMB 476.8[12] - The company is developing new games, including "Codename 20" and "Codename HB," to diversify its product matrix[17] Cash Flow and Financial Position - Cash and cash equivalents increased to RMB 541.0 million as of June 30, 2024, from RMB 486.9 million as of December 31, 2023[41] - The company reported a net cash flow from operating activities of RMB (864,068,000) for the six months ended June 30, 2024, compared to RMB (408,833,000) for the same period in 2023, indicating a significant increase in cash outflow[86] - The net cash flow from investing activities was RMB 1,166,123,000 for the six months ended June 30, 2024, compared to RMB 1,009,393,000 in the previous year, showing an increase in cash inflow from investments[89] Corporate Governance - The company has maintained high corporate governance standards, with compliance to the corporate governance code, except for the separation of the roles of Chairman and CEO during the reporting period[69] - The company plans to separate the roles of Chairman and CEO, appointing Ms. Liang as CEO effective August 30, 2024[70] - The company has adopted a standard code for securities trading by directors, confirming compliance with the code by all directors as of June 30, 2024[68] Employee and Management Information - The group employed 1,247 employees as of June 30, 2024, down from 1,305 employees on December 31, 2023[48] - The total remuneration for key management personnel for the six months ended June 30, 2024, was RMB 20,572,000, a decrease from RMB 25,865,000 in the same period of 2023[122]

Game Performance and User Metrics - For the six months ended June 30, 2024, the company successfully launched 29 new games, with a total of over 380 games operated, achieving 603.2 million registered users[5]. - The average monthly active users (MAU) reached 10.2 million, while the average monthly paying users (MPU) stood at 1.1 million, resulting in an average revenue per paying user (ARPPU) of RMB 476.8[6]. - Revenue from self-operated game products reached RMB 2,481.6 million, an increase of 17.1% from RMB 2,118.9 million in the same period last year, driven by new game launches[21]. - Revenue from co-operated game products decreased by 39.5% to RMB 668.5 million, down from RMB 1,105.1 million, primarily due to existing games entering the later stages of their life cycle[21]. - Revenue from mainland China accounted for RMB 2,938,751,000, down 10.1% from RMB 3,268,089,000 in 2023[84]. Financial Performance - The company's revenue for the six months ended June 30, 2024, was RMB 3,225.8 million, a decrease of 5.1% from RMB 3,400.1 million in the same period of 2023[18]. - The company recorded a net loss of RMB 385.0 million for the six months ended June 30, 2024, compared to a net profit of RMB 300.3 million in the same period last year[38]. - Gross profit increased by 3.1% to RMB 2,364.2 million, with a gross margin of 73.3%, up 5.8 percentage points from 67.5% in the previous year[26]. - The total tax expense for the period was a negative RMB 31,397,000, significantly down from RMB 142,393,000 in the previous year[96]. - The group reported a pre-tax loss of RMB 382,924,000 for the six months ended June 30, 2024, compared to a profit of RMB 275,654,000 for the same period in 2023[101]. Cost and Expenses - Sales cost decreased by 22.1% to RMB 861.6 million from RMB 1,106.0 million, mainly due to reduced commissions from third-party distribution channels[25]. - The total salary cost incurred for the six months ended June 30, 2024, was RMB 218.9 million, a decrease of 16.0% compared to RMB 260.7 million in the same period of 2023[54]. - Promotion expenses increased to RMB 2,190,825,000, up 13.3% from RMB 1,851,249,000 in the previous year[6]. - The cost of sales for products decreased to RMB 38,208,000 from RMB 76,470,000 year-on-year, indicating a reduction of 50%[6]. Strategic Initiatives - The company has signed strategic cooperation agreements with major cloud service providers, enhancing its capabilities in game development and operations[9]. - The company is actively pursuing a global strategy, having published and operated over 30 multilingual games in various international markets[12]. - The company launched the AI-powered "X" smart marketing platform to enhance advertising precision and meet marketing needs in the gaming sector[13]. - The company has established a deep partnership with Huawei to explore opportunities within the HarmonyOS ecosystem for game development[11]. - The company plans to continue developing a diversified product matrix and is actively preparing multiple new games across different genres[15]. Financial Position and Liquidity - As of June 30, 2024, the group's cash and cash equivalents amounted to RMB 541.0 million, an increase from RMB 486.9 million as of December 31, 2023[44]. - Interest-bearing bank and other borrowings were RMB 49.8 million as of June 30, 2024, down from RMB 213.7 million as of December 31, 2023[45]. - The debt-to-equity ratio as of June 30, 2024, was 0.13, a decrease from 0.18 as of December 31, 2023[46]. - The current ratio as of June 30, 2024, was 0.88, compared to 0.84 as of December 31, 2023[47]. - The company believes it has sufficient cash flow to continue operations and meet its obligations in the foreseeable future[84]. Shareholder and Corporate Governance - The company did not declare an interim dividend for the six months ended June 30, 2024, consistent with the previous year[64]. - The company has established an audit committee consisting of three independent non-executive directors to oversee financial reporting and internal controls[66]. - The company has adopted a pre-IPO share option plan to incentivize eligible participants, including employees[56]. - The group has no specific plans for significant investments or acquisitions as of June 30, 2024[50]. - The company has not engaged in any buybacks or sales of its listed securities during the reporting period[63].