天娱数科(002354) - 2017 Q4 - 年度财报

Important Notice, Table of Contents and Definitions This section provides crucial disclaimers, outlines the report structure, and defines key terms for clarity Important Notice The company's management ensures the report's accuracy and completeness, with a proposed 2017 cash dividend of 0.20 CNY per 10 shares - The 2017 profit distribution plan proposes a cash dividend of 0.20 CNY (tax inclusive) per 10 shares to all shareholders, based on 936.85 million shares, with no bonus shares or capital reserve conversion[4] - Investors are advised to review Section IV 'Management Discussion and Analysis' and Part IX 'Outlook on Company's Future Development' for detailed risk disclosures[4] Definitions This chapter defines key terms and company abbreviations, providing essential context for understanding the report's content Company Profile and Key Financial Indicators This section details the company's fundamental information and highlights its significant financial performance and asset growth in 2017 Company Information This section provides Dalian Tianshen Entertainment Co., Ltd.'s basic corporate details, listing information, and contact channels | Item | Information | | :--- | :--- | | Stock Abbreviation | Tianshen Entertainment | | Stock Code | 002354 | | Listing Exchange | Shenzhen Stock Exchange | | Legal Representative | Zhu Ye | | Office Address | 16th Floor, T4 Building, Damei Center, No. 8 Youth Road, Chaoyang District, Beijing | Key Accounting Data and Financial Indicators The company achieved substantial growth in 2017, with operating revenue reaching 3.10 billion CNY and net profit attributable to shareholders at 1.02 billion CNY 2015-2017 Key Financial Indicators | Indicator | 2017 | 2016 (Adjusted) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Operating Revenue (CNY) | 3,101,374,995.27 | 1,674,860,621.67 | 85.17% | | Net Profit Attributable to Parent (CNY) | 1,019,676,231.19 | 546,734,115.53 | 86.50% | | Net Cash Flow from Operating Activities (CNY) | 894,259,231.53 | 502,161,696.61 | 78.08% | | Basic Earnings Per Share (CNY/share) | 1.1742 | 0.6695 | 75.38% | | Weighted Average Return on Net Assets | 13.62% | 10.24% | 3.38% | | Total Assets (CNY) | 14,400,438,534.80 | 7,390,260,222.32 | 94.86% | | Net Assets Attributable to Parent (CNY) | 9,186,709,367.54 | 5,684,385,798.37 | 61.61% | 2017 Quarterly Key Financial Indicators (Unit: CNY) | Indicator | Q1 | Q2 | Q3 | Q4 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 639,633,152.34 | 949,532,213.14 | 647,986,903.17 | 864,222,726.62 | | Net Profit Attributable to Parent | 236,019,489.96 | 269,181,625.11 | 245,199,707.83 | 269,275,408.29 | - Total non-recurring gains and losses in 2017 reached 279 million CNY, primarily from investment income on disposed financial assets (287 million CNY) and performance compensation (155 million CNY)[25] Business Overview This section outlines the company's core business activities, significant asset changes, and key competitive advantages Main Businesses The company primarily operates in game development and publishing, mobile internet platform services, and film and television entertainment, achieving significant growth through synergistic development - The company's main businesses encompass game development and publishing, mobile internet platform services, and film and television entertainment, aiming to expand its pan-entertainment platform[28] - The 'i4Tools' mobile app distribution platform holds a 60% market share in China's iOS third-party mobile assistant market, with over 6 billion cumulative downloads[28] - The film and television entertainment business, centered on IP, has integrated content production, marketing, and ticketing channels through strategic acquisitions and investments[29] Significant Changes in Major Assets The company's asset structure underwent substantial changes in 2017, driven by M&A activities that significantly increased long-term equity investments, goodwill, and monetary funds Explanation of Significant Changes in Major Assets | Major Asset | Period-end Balance (CNY) | Change from Beginning of Period | Main Reason | | :--- | :--- | :--- | :--- | | Long-term Equity Investment | 2,319,702,475.14 | +3,328.78% | Due to capital contribution to DotC with subsidiary Avazu equity | | Goodwill | 6,541,432,761.15 | +43.68% | Due to acquisition of Huanxiang Yueyou, Herun Media, Jiaxing Lewan | | Monetary Funds | 1,821,935,167.82 | +226.87% | New share issuance proceeds not yet fully utilized | | Prepayments | 145,316,958.97 | +521.24% | Due to increased consolidation scope | Core Competitiveness Analysis The company's core strengths include robust R&D, a comprehensive game industry chain, IP-centric film/TV investments, global advertising resources, and a dual-driven growth strategy - The company possesses industry-leading proprietary game engines and a scientific game management system, with the 'Tianshen Game Research Institute' focused on creating hit games[33][34] - A well-established game industry chain covers R&D (Yihua Technology, Lewan Technology), channel distribution (i4Tools), and overseas publishing (Huanxiang Yueyou)[34][35] - Film and television entertainment expansion through investments and acquisitions (Herun Media, Kungfu Pictures, Weying Times) includes high-quality IP reserves like 'Zhetian' and 'Jiangye' to foster film-game synergy[35][36][37] - Integrated global internet advertising platform resources, including Huanxiang Yueyou's subsidiary Chuju Technology and invested DotC, provide a strong marketing and user base for international expansion[37] Management Discussion and Analysis This section provides an in-depth review of the company's operational performance, financial results, and strategic outlook for future development Overview In 2017, the company achieved enhanced strength through synergistic business development, organic growth, and strategic M&A across its game, mobile distribution, and film/TV segments - Game Business: Strengthened resource integration, acquired Jiaxing Lewan to bolster its chess and card game segment, and established 'Tianshen Game Research Institute' for organic growth[42] - Mobile Distribution Platform: i4Tools monthly active users exceeded 22 million, with its overseas version 3uTools surpassing one million users[44] - Film and Television Entertainment: Integrated the entire film and television production and marketing industry chain through investments in Kungfu Pictures, Haile Film & Television, and the acquisition of Herun Media[45] Analysis of Main Business The company's main business demonstrated robust performance in 2017, driven by significant revenue growth in the game segment and increased operational expenses due to expanded consolidation Revenue and Cost In 2017, game business revenue surged by 189.03%, becoming the largest contributor, while overall gross margins varied across segments due to cost fluctuations 2017 Operating Revenue Composition | Segment | 2017 Amount (CNY) | Proportion of Operating Revenue | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Game | 1,430,261,268.40 | 46.12% | 189.03% | | Platform Revenue | 510,186,542.92 | 16.45% | -8.00% | | Internet | 895,502,285.71 | 28.87% | 43.18% | | Film & TV Advertising | 265,424,898.24 | 8.56% | - | Gross Margin by Main Business | Segment | 2017 Gross Margin | Gross Margin Change from Prior Year | | :--- | :--- | :--- | | Game | 77.14% | -14.97% | | Platform Revenue | 64.67% | 0.11% | | Internet | 51.67% | 73.98% | - During the reporting period, the company expanded its consolidation scope through acquisitions of Huanxiang Yueyou, Herun Media, and Jiaxing Lewan, while also disposing of subsidiary Avazu via equity contribution[56][57] Expenses In 2017, the company experienced substantial increases in selling, administrative, and financial expenses, primarily driven by expanded consolidation scope and corporate bond issuance 2016-2017 Expense Overview (Unit: CNY) | Expense Item | 2017 | 2016 | Year-on-Year Change | Significant Change Explanation | | :--- | :--- | :--- | :--- | :--- | | Selling Expenses | 235,039,391.35 | 76,143,525.89 | 208.68% | Primarily due to increased consolidation scope | | Administrative Expenses | 645,302,065.19 | 343,751,924.87 | 87.72% | Primarily due to increased consolidation scope | | Financial Expenses | 117,203,541.00 | 14,493,930.49 | 708.64% | Primarily due to the company's issuance of corporate bonds | R&D Investment The company significantly increased its R&D investment in 2017, totaling 400.35 million CNY, and expanded its R&D team, with new games expected to launch in 2018 2016-2017 R&D Investment Overview | Indicator | 2017 | 2016 | Change Percentage | | :--- | :--- | :--- | :--- | | Number of R&D Personnel (people) | 890 | 527 | 68.88% | | R&D Investment Amount (CNY) | 400,349,260.95 | 161,573,123.36 | 147.78% | | R&D Investment as % of Revenue | 12.91% | 9.65% | +3.26% | - The company is developing multiple key games, including MMORPG mobile games based on well-known IPs like 'The Degenerate-Drawing Jianghu' and 'Shrouding the Heavens', with expected launches in 2018[61] Cash Flow In 2017, the company's cash flow from operations significantly increased, while investing activities became a net outflow, offset by substantial inflows from financing activities 2016-2017 Key Cash Flow Statement Items (Unit: CNY) | Item | 2017 | 2016 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 894,259,231.53 | 502,161,696.61 | 78.08% | | Net Cash Flow from Investing Activities | -1,775,667,571.21 | 927,948,426.68 | -291.35% | | Net Cash Flow from Financing Activities | 2,177,816,128.77 | -1,613,319,196.03 | 234.99% | | Net Increase in Cash and Cash Equivalents | 1,264,493,843.14 | -166,159,562.65 | 861.01% | Outlook on Company's Future Development The company plans to strengthen its pan-entertainment platform by focusing on premium game R&D, expanding overseas, leveraging IP, and addressing identified risks (I) Industry Development Trends and Market Structure The game industry is characterized by slowing growth, market concentration, a push for globalization, and increasing IP-driven synergy between games and film/TV - China's online game market growth is decelerating, but user quality and willingness to pay are improving[95] - The game industry is highly polarized, with major companies dominating, making refinement and high quality essential for smaller firms to succeed[95] - Supported by policies like the 'Belt and Road' initiative, overseas expansion of games is a key trend, with self-developed online games' overseas revenue growing by 14.5% in 2017[96] (II) Company Development Strategy and Operating Plan The company aims to become a comprehensive cultural entertainment platform by prioritizing premium game development, global expansion, and IP value maximization - The company's development strategy is to build a pan-entertainment platform covering games, advertising, and film/TV across the entire industry chain, focusing on premium mobile game R&D, expanding market share, and leveraging high-quality IP[97] Selected Game Products Planned for 2018 Launch | Game Name (Tentative) | Game Type | Self-developed/Agency | | :--- | :--- | :--- | | Zhetian | MMORPG Mobile Game | Self-developed | | Kerrylia - Dark Tide | MMORPG Mobile Game | Self-developed | | Phoenix Power | MMORPG Mobile Game | Self-developed | | Great Voyage | MMORPG Mobile Game | Agency | | Final Fantasy | RPG Console Game | Agency | - The film and television entertainment business plans to invest in major productions in 2018, including the movie 'Jiangye' and the web series 'Zhi Ran Cheng Hun'[101] (III) Future Challenges and Countermeasures The company faces challenges including policy shifts, overseas operational uncertainties, market competition, R&D risks, talent retention, and management complexities, addressed through strategic measures - Key risks include: policy risks (e.g., new game license regulations), overseas market operational risks, intensified market competition, game R&D risks, core personnel turnover risks, management risks due to scale expansion, and intellectual property risks[104][105][106] - Countermeasures include: closely monitoring regulations, strengthening overseas localization, increasing R&D investment and IP reserves, improving talent incentive mechanisms (e.g., equity incentives), and optimizing corporate governance structure[104][105][106] Significant Matters This section details the company's profit distribution, fulfillment of commitments, major asset disposals, subsidiary performance, and significant related party transactions Profit Distribution and Capital Reserve to Share Capital Conversion of Ordinary Shares The company's 2017 profit distribution proposes a cash dividend of 0.20 CNY per 10 shares, continuing its consistent cash dividend policy over the past three years Ordinary Share Dividend Distribution and Conversion Plans for the Last Three Years | Year | Cash Dividend per 10 Shares (CNY, tax incl.) | Shares Converted per 10 Shares | | :--- | :--- | :--- | | 2017 (Proposed) | 0.2 | 0 | | 2016 | 4.1226 | 18 | | 2015 | 2.48 | 0 | Cash Dividend Payouts for the Last Three Years | Dividend Year | Cash Dividend Amount (CNY, tax incl.) | % of Net Profit Attributable to Parent | | :--- | :--- | :--- | | 2017 | 18,736,938.00 | 1.84% | | 2016 | 132,605,992.02 | 24.25% | | 2015 | 72,437,454.73 | 20.00% | Fulfillment of Commitments Performance commitments related to major asset restructurings showed mixed results in 2017, with some entities meeting targets while others fell short 2017 Key Performance Commitment Fulfillment (Unit: Million CNY) | Committed Entity | 2017 Committed Performance | 2017 Actual Performance | Met Target | | :--- | :--- | :--- | :--- | | Leishang Technology | 98.44 | 85.25 | No (but cumulative for 3 years met) | | Avazu Inc. | 233.16 | 268.21 | Yes | | Shanghai Maicheng | 1.10 | 0.68 | No | | Huanxiang Yueyou | 325.00 | 331.63 | Yes | | Herun Media | 68.75 | 69.84 | Yes | Significant Asset and Equity Disposals In 2017, the company disposed of its 100% equity in Avazu Inc., valued at 2.215 billion CNY, to DotC United Inc. to optimize strategic focus and resource allocation - The company contributed its 100% equity in Avazu Inc. (valued at 2.215 billion CNY) to DotC United Inc., which was a related party transaction[90] - This transaction aims to achieve the company's strategic focus and optimize resource allocation, acquiring excellent mobile overseas platforms and high-quality overseas users[90][93] Analysis of Major Holding and Participating Companies The company's profitability is largely driven by key subsidiaries like Beijing Tianshen Interactive, Beijing Huanxiang Yueyou, and Jiaxing Lewan, which bolster its game, overseas publishing, and marketing capabilities 2017 Operating Performance of Major Subsidiaries (Unit: CNY) | Company Name | Main Business | Operating Revenue | Net Profit | | :--- | :--- | :--- | :--- | | Beijing Tianshen Interactive Technology Co., Ltd. | Game R&D and Publishing | 718,454,449.91 | 342,167,874.20 | | Beijing Huanxiang Yueyou Network Technology Co., Ltd. | Game Publishing and Advertising | 833,617,180.28 | 298,102,039.45 | | Leishang (Beijing) Technology Co., Ltd. | Game R&D and Publishing | 157,139,234.85 | 88,195,099.16 | | Beijing Herun Detang Culture Media Co., Ltd. | Brand Content Marketing | 267,311,690.70 | 64,065,587.39 | | Jiaxing Lewan Network Technology Co., Ltd. | Game R&D and Publishing | 520,251,624.49 | 272,121,726.50 | Significant Related Party Transactions The company engaged in significant related party transactions in 2017, including advertising services and a major equity contribution of Avazu Inc. to DotC United Inc., resulting in an investment loss - Among ordinary related party transactions, sales of advertising promotion services to related party DotC United Inc. were the largest, totaling 112 million CNY[193] Significant Asset Acquisition Related Party Transaction | Related Party | Related Transaction Content | Transfer Price (Million CNY) | Transaction Gain/Loss (Million CNY) | | :--- | :--- | :--- | :--- | | DotC United Inc | Equity swap of Avazu Inc. for DotC equity | 2,215.00 | -81.47 | Share Changes and Shareholder Information This section details the company's share capital evolution and provides an overview of its shareholder structure and controlling parties Share Changes The company's total share capital significantly increased in 2017, driven by new share issuances, capital reserve conversions, and partial share repurchases Total Share Capital Changes | Item | Beginning of Period (shares) | Current Period Change (shares) | End of Period (shares) | | :--- | :--- | :--- | :--- | | Total Shares | 292,086,511 | +644,760,389 | 936,846,900 | - The main reasons for share increase were new share issuance for asset acquisition (29.57 million shares), raising supporting funds (44.98 million shares), and capital reserve to share capital conversion (579 million shares)[226][228][229] - Share decrease was primarily due to repurchase and cancellation of compensation shares for unfulfilled performance commitments (2.11 million shares) and certain ineligible restricted shares (6.66 million shares)[228][229] Shareholders and Actual Controllers As of 2017 year-end, the company had 38,702 shareholders, with Zhu Ye and Shi Botao as controlling shareholders, holding a combined 23.06% Period-end Top Five Shareholders' Holdings | Shareholder Name | Holding Percentage | Number of Shares | | :--- | :--- | :--- | | Zhu Ye | 13.94% | 130,603,964 | | Shi Botao | 9.12% | 85,470,428 | | Weixin Co., Ltd. | 7.16% | 67,069,178 | | Shanghai Jiguan Investment Center (Limited Partnership) | 5.04% | 47,220,944 | | Yihe Yinfeng (Tianjin) Investment Management Co., Ltd. | 4.80% | 44,980,611 | - The company's controlling shareholders and actual controllers are Zhu Ye and Shi Botao, who are parties acting in concert[245][246] Preferred Shares Information This section confirms the absence of preferred shares during the reporting period Preferred Shares Information During the reporting period, the company had no preferred shares - The company had no preferred shares during the reporting period[249] Directors, Supervisors, Senior Management and Employees This section details changes in shareholdings of directors, supervisors, and senior management, as well as the company's overall employee structure Changes in Holdings of Directors, Supervisors and Senior Management Holdings of the company's directors, supervisors, and senior management generally increased due to capital reserve conversion, alongside significant personnel changes in the Board and Supervisory Board Key Executive Shareholding Changes (Unit: shares) | Name | Position | Shares at Beginning of Period | Shares at End of Period | | :--- | :--- | :--- | :--- | | Zhu Ye | Chairman, General Manager | 46,644,273 | 130,603,964 | | Shi Botao | Director, Deputy General Manager | 30,525,153 | 85,470,428 | - During the reporting period, directors Li Xiaoping, Meng Xiangdong, Zhang Zhijiao, supervisor Feng Doule, and CFO Sun Jun departed due to term expiration, and a new Board of Directors and Supervisory Board were elected[254] Company Employee Information As of 2017 year-end, the company employed 1,782 people, with a significant majority in technical roles and over 58% holding bachelor's degrees or higher Employee Professional Composition | Professional Category | Number of People | | :--- | :--- | | Technical Personnel | 809 | | Sales Personnel | 380 | | Administrative Personnel | 110 | | Financial Personnel | 46 | | Production Personnel | 32 | | Other Personnel | 405 | | Total | 1,782 | Corporate Governance This section outlines the company's adherence to corporate governance standards and the effectiveness of its internal control systems Basic Status of Corporate Governance The company's corporate governance structure aligns with regulatory requirements, maintaining independence from its controlling shareholder and ensuring effective functioning of its specialized board committees - The company's corporate governance structure complies with the 'Company Law', 'Securities Law', and other regulations, operating in a standardized manner regarding shareholders, directors, supervisors, and information disclosure[280][281] - The company maintains independence in business, personnel, assets, organization, and finance, with no horizontal competition with its controlling shareholder[285][286] Internal Control Evaluation Report The Board of Directors affirmed the effectiveness of the company's internal controls over financial reporting as of December 31, 2017, with no material weaknesses identified - No material weaknesses or significant deficiencies were found in financial or non-financial reporting during the reporting period[301] - The accounting firm issued a standard unqualified audit opinion on the effectiveness of the company's internal controls over financial reporting as of December 31, 2017[302] Corporate Bonds Information This section provides details on the company's corporate bond issuance, its utilization of proceeds, and the impact on debt service indicators Basic Information on Corporate Bonds The company issued 1 billion CNY in '17 Tianshen 01' corporate bonds in 2017, with proceeds used for debt restructuring and working capital, though debt service indicators declined '17 Tianshen 01' Bond Basic Information | Bond Abbreviation | Bond Code | Issue Date | Maturity Date | Bond Balance (Million CNY) | Interest Rate | | :--- | :--- | :--- | :--- | :--- | :--- | | 17 Tianshen 01 | 112496 | 2017-01-17 | 2022-01-19 | 1,000.00 | 7.79% | - The raised funds have been fully utilized according to the prospectus's stated purposes, primarily for adjusting debt structure and supplementing working capital[306] - Due to the issuance of corporate bonds and increased short-term borrowings, debt service indicators such as EBITDA to total debt ratio and interest coverage ratio changed by over 30% year-on-year, showing a decline[315] Financial Report This section presents the company's audited financial statements, including the audit opinion and key financial performance indicators Audit Report Zhongshen Zhonghuan Certified Public Accountants issued an unqualified audit opinion on the 2017 financial statements, highlighting revenue recognition and goodwill as key audit matters - The audit opinion type is a standard unqualified opinion[324] - Key Audit Matter 1: Revenue Recognition, due to diverse game operating models and numerous, dispersed customers, presents risks regarding completeness and cut-off[326] - Key Audit Matters 2 & 3: Recognition, Measurement, and Impairment Testing of Goodwill, as goodwill increased by 3.884 billion CNY (26.97% of total assets) from business combinations, involving significant management judgment[327][328] Financial Statements The financial statements reveal significant growth in total assets and liabilities, with operating revenue increasing by 85.17% and net profit attributable to parent by 86.50% in 2017 Consolidated Balance Sheet Summary (Unit: CNY) | Item | Period-end Balance | Beginning of Period Balance | | :--- | :--- | :--- | | Total Assets | 14,400,438,534.80 | 7,390,260,222.32 | | Total Liabilities | 4,853,848,745.37 | 1,707,110,939.65 | | Total Equity Attributable to Parent Company Owners | 9,186,709,367.54 | 5,684,385,798.37 | Consolidated Income Statement Summary (Unit: CNY) | Item | Current Period Amount | Prior Period Amount | | :--- | :--- | :--- | | Total Operating Revenue | 3,101,374,995.27 | 1,674,860,621.67 | | Operating Profit | 1,357,928,875.70 | 561,684,524.08 | | Total Profit | 1,332,385,374.74 | 568,840,835.18 | | Net Profit Attributable to Parent Company Owners | 1,019,676,231.19 | 546,734,115.53 | Reference Documents Catalog This section provides a list of all official documents available for reference, ensuring transparency and accessibility of key report materials Reference Documents This section lists the available reference documents, including signed financial statements, original audit reports, and publicly disclosed materials, all kept at the company's securities department - Reference documents include: - Financial statements signed and sealed - Original audit report - Original copies of all disclosed documents and announcements during the reporting period - Original annual report text signed by the chairman[875][876]