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].

Financial Performance - The company's revenue for the first half of 2021 reached RMB 4.342 billion, representing a year-on-year increase of 33.2% compared to RMB 3.260 billion in the same period of 2020[7]. - Gross profit for the same period was RMB 2.288 billion, up 32.2% from RMB 1.731 billion in the previous year[7]. - Operating profit turned positive at RMB 1.284 billion, a significant recovery from an operating loss of RMB 3.556 billion in the first half of 2020[7]. - The company reported a net profit attributable to equity holders of RMB 1.083 billion, a substantial rebound from a loss of RMB 3.296 billion in the same period last year[7]. - Revenue for the six months ended June 30, 2021, reached RMB 4,342,146 thousand, a 33% increase from RMB 3,260,206 thousand in the same period of 2020[15]. - Gross profit for the same period was RMB 2,288,065 thousand, up from RMB 1,731,312 thousand, reflecting a gross margin improvement[15]. - The company reported a net profit of RMB 1,080,950 thousand for the first half of 2021, compared to a net loss of RMB 3,310,525 thousand in the prior year[15]. - The company reported a significant increase in other income, amounting to RMB 901,146 thousand, compared to a loss of RMB 3,529,736 thousand in the previous year[78]. - The company reported a net profit attributable to equity holders of RMB 1,082,742,000 for the six months ended June 30, 2021, compared to a net loss of RMB 3,295,874,000 for the same period in 2020[131]. User Engagement - The number of active users for the online business reached 232.7 million, showing a quarter-on-quarter growth of 4%[8]. - Daily active users for the free reading service reached 13 million in June 2021, a 30% increase from 10 million in December 2020[8]. - The number of new authors on the platform increased significantly, with 86% of new authors being born in the 1990s, and they accounted for 57% of the top 100 new book sales[11]. - Average monthly active users for proprietary platform products and Tencent's self-operated channels slightly decreased by 0.3% year-on-year to 232.7 million[20]. - Average monthly paying users decreased by 12.3% year-on-year to 9.3 million[20]. Revenue Segmentation - The copyright operations and other segments saw revenue growth of 125% to RMB 1.8 billion, accounting for 42% of total revenue[8]. - Online business revenue grew by 3.4% year-on-year to RMB 2,540.0 million, accounting for 58.5% of total revenue[18]. - Revenue from proprietary platform products in the online business decreased by 5.5% year-on-year to RMB 1,880.7 million[18]. - Revenue from third-party platforms in the online business surged by 91.9% year-on-year to RMB 305.8 million[18]. - The revenue from the online business segment was RMB 2,539,956 thousand for the first half of 2021, compared to RMB 2,457,276 thousand in the same period of 2020, indicating a growth of approximately 3.4%[112][113]. Cost and Expenses - Cost of revenue increased by 34.4% year-on-year to RMB 2,054.1 million, primarily due to expansion in copyright licensing and free reading business[21]. - Sales and marketing expenses increased by 6.1% to RMB 1,348.2 million, while the percentage of sales and marketing expenses to revenue decreased from 39.0% to 31.0%[23]. - General and administrative expenses rose by 81.1% to RMB 635.1 million, mainly due to increased employee compensation and related costs[24]. - The total costs of revenue for the first half of 2021 were RMB 2,054,081 thousand, up from RMB 1,528,894 thousand in the same period of 2020, reflecting an increase of approximately 34.3%[112][113]. Investments and Acquisitions - The company has launched over 70 comic adaptations of its IPs on Tencent Comics, with plans for 300 adaptations over three years[9]. - The company aims to expand its international market presence, with approximately 1,700 translated Chinese works and 280,000 local original works available on its overseas platform WebNovel[14]. - The company completed the acquisition of New Classics Media Holdings Limited on October 31, 2018, expanding its copyright operation business in film and television production[90]. - The company completed an investment of approximately RMB 299,282,000 for a 5% stake in a mobile reading and copyright operation company on July 30, 2021[196]. Shareholder Information - The total number of issued shares as of June 30, 2021, was 1,018,805,679 shares[49]. - Tencent Holdings Limited holds a total of 587,128,824 shares, representing approximately 57.63% of the company's equity[54]. - The company has adopted a Restricted Share Unit Plan, which was approved on December 23, 2014, and is effective for a period of ten years[56]. - The company has adopted a share incentive plan allowing for a total of 40,409,091 new ordinary shares to attract and retain talent[172]. Financial Position - Total assets increased from RMB 21,315.8 million as of December 31, 2020, to RMB 22,609.4 million as of June 30, 2021, while total liabilities rose slightly from RMB 6,217.3 million to RMB 6,227.7 million[35]. - The company's debt-to-equity ratio improved from 29.2% to 27.5% during the same period[35]. - The company's cash net amount increased from RMB 5,011.0 million to RMB 5,691.9 million, primarily due to cash generated from operating activities and the sale of equity[37]. - The company maintained a current ratio of 276.1% as of June 30, 2021, up from 272.7% at the end of 2020[35]. Risk Management - The company’s risk management and internal control systems have been deemed effective and adequate by the audit committee[43]. - The group faces various financial risks, including market risk, credit risk, and liquidity risk[98]. - The financial risk management policies remained unchanged during the six months ended June 30, 2021[98]. Future Outlook - The company plans to continue developing quality IP series and expand into new areas such as online movies and short dramas[9]. - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[83]. - The company has set a performance guidance of 15% revenue growth for the next quarter[200]. - The implementation of a new user engagement strategy is projected to improve retention rates by 10%[200].

Financial Performance - The company's revenue for 2020 was RMB 8,525,701 thousand, representing an increase from RMB 8,347,767 thousand in 2019, which is approximately a 2.1% growth[9]. - Gross profit for 2020 was RMB 4,234,076 thousand, up from RMB 3,692,023 thousand in 2019, indicating a growth of about 14.7%[9]. - The operating loss for 2020 was RMB (4,474,668) thousand, compared to an operating profit of RMB 1,193,907 thousand in 2019, reflecting a significant decline[9]. - The net loss attributable to equity holders for the year was RMB (4,483,869) thousand, a stark contrast to the profit of RMB 1,095,953 thousand in 2019[9]. - The company reported a total comprehensive loss of RMB (4,532,508) thousand for the year, compared to a comprehensive income of RMB 1,167,355 thousand in 2019[9]. - The company reported a net loss of RMB 4,500.2 million for the year, compared to a profit of RMB 1,112.1 million in the previous year[16]. - Non-IFRS net profit for the year was RMB 900.8 million, down from RMB 1,210.8 million in the previous year[16]. - The company's gross profit increased by 14.7% to RMB 4,234.1 million for the year ended December 31, 2020, with a gross margin of 49.7%, up from 44.2% in 2019[26]. - The operating profit margin for 2020 was -52.5%, compared to 14.3% in 2019, indicating a significant decline in profitability[36]. - The company's basic loss per share for 2020 was RMB -4.48, compared to a profit of RMB 1.10 per share in 2019[36]. Assets and Liabilities - Total assets as of December 31, 2020, were RMB 21,315,760 thousand, down from RMB 26,250,004 thousand in 2019, marking a decrease of approximately 18.5%[9]. - The total equity attributable to equity holders was RMB 15,093,507 thousand, a decrease from RMB 19,396,567 thousand in 2019, which is a decline of about 22.1%[9]. - Current assets amounted to RMB 11,500,331 thousand, compared to RMB 12,190,525 thousand in 2019, indicating a decrease of approximately 5.7%[9]. - Non-current liabilities were RMB 2,000,091 thousand, an increase from RMB 925,546 thousand in 2019, reflecting a rise of approximately 116.5%[9]. - The company’s total liabilities were RMB 6,217,253 thousand, down from RMB 6,839,193 thousand in 2019, indicating a decrease of about 9.1%[9]. - The net cash position as of December 31, 2020, was RMB 5,011.0 million, a decrease from RMB 5,139.3 million at the end of 2019[39]. - The total debt amounted to RMB 1,245.9 million as of December 31, 2020, with a leverage ratio of 8.3%, up from 6.7% in 2019[39]. User Engagement and Content - As of December 31, 2020, the platform accumulated over 9 million writers and a total of 13.9 million works, with approximately 46 billion new words added throughout the year[10]. - The average daily active users (DAU) for free content in December 2020 was approximately 10 million, indicating a strong engagement in the free reading sector[10]. - The average number of comments on the platform exceeded 1 million for over 100 works, showcasing increased user participation and engagement[11]. - Average monthly active users for self-owned platform products and Tencent's self-operated channels rose by 4.2% year-on-year to 228.9 million[22]. - Average monthly paying users increased by 4.1% year-on-year to 10.2 million, supported by growth in self-owned platform products[23]. - Average revenue per paying user per month increased by 37.2% year-on-year to RMB 34.7, attributed to enhanced content operations and distribution channels[24]. Revenue Streams - Online business revenue grew by 32.9% year-on-year to RMB 4,932.2 million, accounting for 57.9% of total revenue[20]. - Revenue from self-owned platform products in the online business surged by 61.0% year-on-year to RMB 3,903.4 million, driven by expanded distribution channels and increased user willingness to pay for reading content[20]. - Revenue from copyright operations and others decreased by 22.5% year-on-year to RMB 3,593.5 million, primarily due to delays in production and release dates caused by the COVID-19 pandemic[24]. - Cost of revenue decreased by 7.8% year-on-year to RMB 4,291.6 million, mainly due to reduced production costs for TV dramas and films[24]. - The total revenue generated under the advertising cooperation framework agreement for the year ended December 31, 2020, was RMB 754.6 million, with an actual transaction amount of approximately RMB 382.7 million[127]. Strategic Initiatives and Partnerships - The company aims to continue upgrading its business around content, platform, and ecosystem, focusing on sustainable growth and new business exploration[14]. - The company launched a new writer contract grading system to enhance service and experience for writers, reflecting a commitment to improving the writer ecosystem[11]. - The company’s collaboration with Tencent channels allowed for broader distribution of free works, enhancing user reach and engagement[10]. - The company is actively involved in various subsidiaries and affiliated companies, enhancing its market presence and operational capabilities[52]. - The company is exploring new market opportunities and potential acquisitions to expand its business footprint[52]. - The company is focused on expanding its market presence through strategic partnerships and agreements with Tencent[116]. Corporate Governance - The board of directors consists of 9 members, including 2 executive directors, 4 non-executive directors, and 3 independent non-executive directors[169]. - The company has adopted a corporate governance code in compliance with the listing rules, ensuring adherence to all applicable codes during the reporting period[169]. - The board has established four board committees, including audit, remuneration, nomination, and strategic investment committees, to oversee specific areas of governance[173]. - The company has implemented appropriate and sufficient liability insurance for directors, which is reviewed annually[173]. - The board's composition and independent non-executive directors provide adequate checks and balances to protect the interests of shareholders[170]. Risks and Compliance - The company may face significant risks related to the contractual arrangements, including potential conflicts of interest with the ultimate shareholders of the Chinese operating entities[157]. - The company may incur substantial costs and restrictions if it exercises options to acquire equity and assets of the Chinese operating entities[157]. - The company’s consolidated net profit and the investment value of its shares may significantly decrease if additional tax liabilities are identified by Chinese tax authorities[158]. - The implementation of the Foreign Investment Law may create significant uncertainties affecting the group's corporate structure and operational feasibility[162]. Employee and Shareholder Information - The group had approximately 2,000 full-time employees as of December 31, 2020, primarily located in China[43]. - The board of directors and senior management hold a total of 5,100,626 shares in a controlled corporation, representing 0.50% of the company's equity[77]. - The company has established a remuneration committee to review the remuneration policies for directors and senior management, considering the group's operating performance and market practices[71].

Financial Performance - Revenue for the first half of 2020 was RMB 3,260,206 thousand, representing a 9.7% increase from RMB 2,970,951 thousand in the same period of 2019[7]. - Gross profit for the first half of 2020 was RMB 1,731,312 thousand, up 6.8% from RMB 1,621,150 thousand year-on-year[7]. - The company reported an operating loss of RMB (3,555,563) thousand, a significant decline compared to a profit of RMB 527,722 thousand in the first half of 2019, marking a 773.8% decrease[7]. - The net loss attributable to equity holders for the first half of 2020 was RMB (3,295,874) thousand, compared to a profit of RMB 392,722 thousand in the same period of 2019, reflecting a 939.2% decline[7]. - The company recorded a non-IFRS profit of RMB 21,679 thousand, down 94.4% from RMB 389,999 thousand in the previous year[7]. - EBITDA for the six months ended June 30, 2020, was RMB 59.6 million, down from RMB 298.2 million in the same period of 2019[30]. - Adjusted EBITDA margin decreased to 0.5% for the six months ended June 30, 2020, compared to 15.5% in the previous year[30]. - The company reported a significant increase in sales and marketing expenses, rising to RMB 1,270.3 million from RMB 976.7 million year-on-year[18]. - The company reported a net loss of RMB 3,310.5 million, with a net profit margin of -101.5%[34]. Market Challenges - The company faced challenges including increased competition in the free reading app market and a decline in traditional distribution channel traffic, exacerbated by the COVID-19 pandemic[8]. - The free reading app "Feidu" did not meet performance expectations despite having strong influence in specific markets[14]. - The impact of the COVID-19 pandemic has led to delays in film production and uncertain release schedules, affecting the overall project cycle for New Media[40]. - The ongoing COVID-19 pandemic may adversely affect the financial performance of the group in the future, despite some impacts already reflected in the first half of 2020[183]. Strategic Initiatives - New leadership, including CEO Cheng Wu and President Hou Xiaonan, is expected to drive transformation and strengthen ties with Tencent[9]. - The company aims to enhance its position as a leading Chinese content intellectual property repository, particularly in novels[8]. - The company is focusing on the development of paid reading services and has launched popular TV dramas like "Qing Yu Nian" to drive growth[8]. - The company aims to enhance its core business by strengthening IP incubation capabilities and accelerating cross-industry development[17]. - The company plans to improve its platform's social and community features and strengthen connections within Tencent's product matrix[17]. Financial Position - Total assets decreased from RMB 26,250.0 million as of December 31, 2019, to RMB 21,460.4 million as of June 30, 2020, while total liabilities decreased from RMB 6,839.2 million to RMB 5,027.8 million[36]. - Cash and cash equivalents, net of borrowings, stood at RMB 4,530.4 million as of June 30, 2020, compared to RMB 4,892.3 million in the prior year[30]. - The company maintained a stable paying ratio of 4.5% for the six months ended June 30, 2020[23]. - The company’s total equity decreased to RMB 16,432,650 thousand from RMB 19,410,811 thousand at the end of 2019[76]. - The company’s retained earnings showed a significant decline, moving from RMB 1,440,867 thousand to RMB 243,741 thousand, indicating a loss of approximately 83%[82]. Investments and Acquisitions - The company recognized impairment provisions for goodwill and trademarks related to New Media amounting to RMB 4,015.9 million and RMB 389.8 million, respectively[40]. - The fair value change of the consideration liability related to New Media resulted in a gain of RMB 1,240.3 million due to expected underperformance in 2020[40]. - The company recognized a loss of RMB 4,015,854,000 related to goodwill impairment in the six months ended June 30, 2020[110]. - The company recognized an addition of RMB 141,990,000 in intangible assets during the six months ended June 30, 2020, primarily from non-competition agreements[17]. Corporate Governance - The company is committed to maintaining high standards of corporate governance, which it believes is crucial for long-term success and sustainability[41]. - The company has adopted a code of conduct for directors regarding securities trading, ensuring compliance with applicable standards[42]. - The board decided not to recommend an interim dividend for the six months ending June 30, 2020, compared to zero in 2019[43]. Employee and Shareholder Information - As of June 30, 2020, the company had approximately 2,000 full-time employees, primarily located in China, with a significant presence in Shanghai[39]. - The company plans to continue granting share incentive awards to motivate employees towards growth and development[39]. - The company has not purchased, sold, or redeemed any of its listed securities during the six months ending June 30, 2020[44].

Financial Performance - Total revenue for 2019 reached RMB 8,347,767 thousand, a 65.3% increase from RMB 5,038,250 thousand in 2018[9] - Gross profit for 2019 was RMB 3,692,023 thousand, up 44.3% from RMB 2,557,979 thousand in 2018[9] - Operating profit for 2019 was RMB 1,193,907 thousand, representing a 7.0% increase compared to RMB 1,114,951 thousand in 2018[9] - Net profit attributable to equity holders for 2019 was RMB 1,095,953 thousand, an increase of 20.3% from RMB 910,636 thousand in 2018[9] - The company reported a comprehensive income of RMB 1,167,355 thousand for 2019, compared to RMB 1,342,293 thousand in 2018[9] - Revenue for the year ended December 31, 2019, increased by 65.7% to RMB 8,347.8 million compared to RMB 5,038.3 million in 2018[28] - Gross profit for the year was RMB 3,692.0 million, up from RMB 2,558.0 million in the previous year[26] - Operating profit for 2019 was RMB 1,193,907 thousand, compared to RMB 1,114,951 thousand in 2018, showing growth in profitability[47] - Net profit attributable to equity holders increased by 20.4% to RMB 1,096.0 million[38] - The company reported a net profit margin of 13.3% for 2019, down from 18.1% in 2018, reflecting increased costs or reduced pricing power[49] Assets and Liabilities - Total assets as of December 31, 2019, amounted to RMB 26,250,004 thousand, a decrease of 5.7% from RMB 27,834,606 thousand in 2018[10] - Total equity attributable to equity holders was RMB 19,396,567 thousand, an increase of 5.4% from RMB 18,403,478 thousand in 2018[10] - Non-current assets increased to RMB 14,059,479 thousand in 2019, up from RMB 13,556,968 thousand in 2018[10] - Current liabilities decreased to RMB 5,913,647 thousand in 2019 from RMB 6,596,311 thousand in 2018[10] - The total assets decreased from RMB 27,834.6 million as of December 31, 2018, to RMB 26,250.0 million as of December 31, 2019, while total liabilities decreased from RMB 9,419.6 million to RMB 6,839.2 million, resulting in a debt-to-asset ratio decline from 33.8% to 26.1%[19] - The company's leverage ratio improved to 6.7% in 2019 from 13.4% in 2018, with total borrowings amounting to RMB 1,303.1 million[19] User Metrics and Market Challenges - The company reported a significant user growth challenge due to the rapid rise of free reading applications, which attracted millions of users and impacted the paid reading model[16] - As of December 31, 2019, the platform had 8.1 million authors and a total of 12.2 million works, including 11.5 million original literary works from its own platform[23] - The average monthly active users for proprietary platform products and Tencent's self-operated channels increased to 219.7 million from 213.5 million[31] - The average monthly paying users decreased to 9.8 million from 10.8 million, resulting in a paying ratio of 4.5%[31] - The average monthly paying users decreased by 9.3% from 10.8 million to 9.8 million, primarily due to user allocation changes in Tencent's self-operated channels[32] - The paid user ratio declined from 5.1% in 2018 to 4.5% in 2019[32] Strategic Initiatives and Future Outlook - The company plans to continue expanding its market presence and invest in new product development to drive future growth[9] - The company aims to strengthen its position in the film and television production sector through its acquisition of Xinli Media, focusing on high-quality productions[22] - The company continues to deepen relationships with major distribution and content partners, including Tencent, to enhance its content licensing and distribution strategy[22] - The company is optimistic about the commercial prospects of its core businesses, including literary creation, distribution, and film production[23] - The company recognizes the ongoing challenge of market volatility and the need for investors to endure short-term fluctuations for long-term returns[16] Cost and Expense Management - In 2019, the company faced higher costs than revenues from its initiatives, but expects platform benefits to materialize starting in 2020[20] - Total revenue cost increased by 87.7% to RMB 4,655.7 million, mainly due to rising production costs for TV series and online dramas[34] - Sales and marketing expenses increased by 60.4% to RMB 2,073.9 million, accounting for 24.8% of total revenue, down from 25.7%[37] - Interest expenses rose significantly to RMB 166,521 thousand in 2019 from RMB 48,510 thousand in 2018, suggesting increased borrowing costs[44] Shareholder Information and Corporate Governance - Tencent holds 577,643,604 shares, representing 57.06% of the issued shares[60] - The total number of issued shares is 1,012,336,846, with a slight decrease from 1,015,781,716 shares[60] - The board consists of 9 members, including 2 executive directors, 4 non-executive directors, and 3 independent non-executive directors, ensuring a balanced skill set and experience[181] - The company has adopted the corporate governance code as per the listing rules and has complied with all applicable code provisions during the reporting period[182] - The company maintains ongoing dialogue with shareholders through annual and special general meetings[189] Related Party Transactions - The actual transaction amount for related party transactions for the year ended December 31, 2019, was approximately RMB 102.2 million, against an annual cap of RMB 120 million[120] - The actual transaction amount for the paid service cooperation framework agreement for the year ended December 31, 2019, was approximately RMB 13.3 million, against an annual cap of RMB 26.5 million[121] - The independent non-executive directors confirmed that the related party transactions were conducted in the ordinary course of business and on normal commercial terms[148] - The auditor issued an unqualified opinion regarding the related party transactions, indicating compliance with the relevant agreements and pricing policies[150] Contractual Arrangements and Risks - The company has established contractual arrangements to gain actual control over the businesses operated by Shanghai Hongwen and New Classics Media, consolidating their financial performance into the company's financial statements[151] - The company faces several risks related to the contractual arrangements, including potential non-compliance with applicable Chinese laws and regulations, which could lead to severe consequences[167] - The interpretation and implementation of the Foreign Investment Law may create significant uncertainty regarding the company's existing corporate structure and operational feasibility[167] - The company is subject to potential scrutiny from Chinese tax authorities, which could significantly reduce its consolidated net profit and shareholder investment value if additional tax liabilities are identified[167]