IDREAMSKY(01119)2023-04-27 14:53Financial Performance - Revenue for 2022 was RMB 2,734,124 thousand, showing a slight increase from RMB 2,637,637 thousand in 2021[10] - Gross profit for 2022 significantly decreased to RMB 421,200 thousand from RMB 1,103,341 thousand in 2021[10] - The company reported a net loss of RMB 2,589,917 thousand in 2022, compared to a net loss of RMB 155,930 thousand in 2021[10] - Total assets decreased to RMB 4,323,718 thousand in 2022 from RMB 6,610,940 thousand in 2021[11] - Total liabilities increased to RMB 2,529,176 thousand in 2022 from RMB 2,401,698 thousand in 2021[11] - Total equity dropped to RMB 1,794,542 thousand in 2022 from RMB 4,209,242 thousand in 2021[11] - Revenue for 2022 increased by 3.7% to approximately RMB 2,734.1 million compared to RMB 2,637.6 million in 2021[24] - Gross profit for 2022 was RMB 421.2 million, a significant decrease from RMB 1,103.3 million in 2021[23] - Operating loss for 2022 was RMB 2,391.96 million, compared to a loss of RMB 16.58 million in 2021[23] - The group recorded a net operating cash flow of approximately RMB 94 million for the year ended December 31, 2022[18] - Monthly net operating cash flow has been positive since October 2022, indicating improved financial health[18] - The company recorded a net loss of approximately RMB 2.59 billion for the year ended December 31, 2022[190] - As of December 31, 2022, the company's current liabilities exceeded its current assets by approximately RMB 330 million[190] - The total borrowings of the company amounted to RMB 1.011 billion, with cash and cash equivalents of approximately RMB 91 million as of December 31, 2022[190] - The company failed to comply with certain financial covenants related to a bank loan of EUR 59.8 million, potentially triggering immediate repayment or acceleration of other borrowings and convertible bonds[190] - The company's convertible bond holders have the right to require the company to redeem all or part of the bonds on October 16, 2023[190] - Annual net loss increased from RMB 155.9 million in 2021 to RMB 2,589.9 million in 2022, with an adjusted annual loss of RMB 642.9 million in 2022 compared to an adjusted annual profit of RMB 110.8 million in 2021[39] - Adjusted EBITDA decreased from RMB 390.6 million in 2021 to a loss of RMB 314.6 million in 2022[40][43] - Cash and cash equivalents decreased by 87.3% from RMB 714.8 million in 2021 to RMB 90.5 million in 2022[44] - Total borrowings decreased from RMB 1,350.4 million in 2021 to RMB 1,011.2 million in 2022, with secured bank loans accounting for RMB 991.2 million of the total in 2022[44][45] - The company reported a significant increase in impairment losses, including RMB 752.3 million for intangible assets and RMB 360.9 million for financial assets in 2022[43] - Depreciation and amortization expenses increased from RMB 233.3 million in 2021 to RMB 250.8 million in 2022[43] - The company's financial performance was significantly impacted by fair value losses on financial assets, totaling RMB 83.2 million in 2022[43] - The company's adjusted annual loss excludes various non-operational items, including share-based compensation, fair value changes, impairment provisions, and foreign exchange gains/losses[40][43] - Total revenue for 2022 was RMB 1,011,241 thousand, a decrease from RMB 1,350,430 thousand in 2021[46] - The company's current ratio decreased to 0.87 in 2022 from 2.42 in 2021[46] - Debt-to-asset ratio increased to 58.5% in 2022 from 36.3% in 2021[47] - Capital expenditure for 2022 was RMB 221.9 million, down from RMB 266.4 million in 2021[49] - Total borrowing secured by collateral was RMB 751.2 million, accounting for 74.3% of total borrowing in 2022[48] - Proceeds from share placement totaled RMB 349.23 million, fully utilized for game development and offline store expansion[52][53] - Proceeds from share subscription amounted to RMB 159.06 million, fully allocated to game R&D and offline store expansion[56][57] - The company's capital-to-debt ratio increased significantly to 80.5% in 2022 from 26.3% in 2021[47] - No major acquisitions, disposals, or investments occurred in 2022[50] - The company did not hedge any foreign exchange fluctuations in 2022[50] - The company acquired 70% of the issued shares of Tianjin Huohun Network Technology Co., Ltd. for a total consideration of RMB 1.05 billion, with goodwill recognized at RMB 989.23 million[59] - Tianjin Huohun's net profit during the performance assessment period was RMB 210 million, falling short of the target of RMB 300 million, leading to a compensation mechanism under the agreement[59] - The company received a cash compensation of RMB 315 million from the seller instead of acquiring the remaining 30% equity, resulting in an other income recognition of RMB 294.91 million[59] - Goodwill impairment losses for Tianjin Huohun were RMB 422.33 million, RMB 493.68 million, and zero for the years ending December 31, 2019, 2020, and 2021, respectively[59] - An additional goodwill impairment loss of RMB 73.22 million was recognized for the year ending December 31, 2022, due to underperformance of existing games and no new game development[60] - Revenue from the top five customers accounted for 8.7% of the company's total revenue for the year ending December 31, 2022, with the largest single customer contributing 3.5%[68] - The top five suppliers accounted for 28.8% of the company's total purchases for the year ending December 31, 2022, with the largest single supplier contributing 9.4%[69] - The company employed 1,048 employees as of December 31, 2022, with total compensation expenses (excluding share-based compensation) increasing by 32.3% to RMB 399.3 million[71] - The company did not recommend the payment of a final dividend for the year ending December 31, 2022[67] - The company's total goodwill impairment losses for Tianjin Huohun over the years 2019-2022 amounted to RMB 989.23 million, reflecting the challenges in achieving expected performance[59][60] Game Development and Performance - The company aims to achieve profitability in the 2023 fiscal year by focusing on cost reduction and efficiency improvement[12] - Key games such as "Dream Garden," "Dream Home," "Subway Surfers," and "Temple Run" continue to maintain millions of daily active users and stable revenue[12] - The company is enhancing its digital tools to improve game development granularity and pre-testing verification to enhance product certainty and player experience[12] - Despite challenges in 2022, the company has made significant progress in its long-term strategy of focusing on game development and innovation[12] - Subway Surfers achieved a peak daily active user count of over 10 million during the 2023 Spring Festival, with monthly active users exceeding 100 million[13] - In January 2023, over 30% of Subway Surfers users engaged in in-game chats and emojis, with total interactions surpassing 870 million and battle counts exceeding 1.25 billion[13] - Glory All-Star, a self-developed game, generated over RMB 1 billion in revenue in 2022, ranking first in its category[14] - The company plans to launch two self-developed games, "Karabiu" and "Ni no Kuni: Cross Worlds," in 2023, with "Ni no Kuni: Cross Worlds" expected to enter testing in Q2 2023[19] - The company obtained licenses for two self-developed games and plans to launch them in the second half of 2023[20] - Revenue from the gaming and information services business accounted for 94.9% of total revenue in 2022, while IP derivative business contributed 5.1%[24] - The company has integrated AI technologies like ChatGPT and Stable Diffusion into various aspects of game development and operations to improve efficiency[19] - Fanbook has established a user research community for "Karabiu," which has consistently ranked 1 on Bilibili's new game reservation chart[19] - Game revenue increased by 10.2% to RMB 2,531.3 million in 2022, accounting for 97.6% of total game and information services revenue[25] - Information services revenue decreased significantly to RMB 49.0 million in 2022, down from RMB 290.4 million in 2021[25][27] - Average monthly active users decreased to 124.0 million in 2022 from 128.0 million in 2021[26] - Average monthly paying users increased to 5.9 million in 2022 from 5.5 million in 2021[26] - Average revenue per paying user rose to RMB 36.4 in 2022 from RMB 34.2 in 2021[26][27] - IP derivative business revenue surged 281.4% to RMB 139.6 million in 2022[28] - Cost of revenue increased by 50.7% to RMB 2,312.9 million in 2022, representing 84.6% of total revenue[29] - Sales and marketing expenses rose 123.4% to RMB 1,138.7 million in 2022, accounting for 41.6% of revenue[30] - Intangible asset impairment losses increased significantly to RMB 752.3 million in 2022 from RMB 49.7 million in 2021[33] - Financial asset impairment losses increased to RMB 360.9 million in 2022 from RMB 20.6 million in 2021[34] - Net financial costs increased from RMB 70.0 million in 2021 to RMB 176.5 million in 2022, primarily due to a foreign exchange loss of RMB 52.4 million in 2022 compared to a foreign exchange gain of RMB 59.1 million in 2021[37] - The company recorded a tax expense of RMB 12.9 million in 2022, compared to a tax credit of RMB 25.3 million in 2021[38] - The company's core game business continues to grow steadily, with new game products set to launch, enhancing profitability and cash flow generation[18] - The company sold 27% equity of a subsidiary engaged in IP derivative business in February 2023, resulting in loss of control[151] - The company received RMB 150,000,000 in prepayments for game revenue sharing agreements, with RMB 139,000,000 already received as of March 2023[151] Corporate Governance and Leadership - The company's executive directors, including Chairman and CEO Chen Xiangyu, have service contracts with a term of three years, subject to re-election under the Articles of Association[77] - Chen Xiangyu, the founder and largest shareholder, holds approximately 18.39% of the company's total issued share capital as of the report date[81] - The company's senior management compensation for 2022 ranged between HKD 0 and HKD 10,000,000, with 5 individuals falling within this range[79] - Chen Xiangyu holds 26,720,800 shares directly, representing 1.89% of the company's equity, and 232,643,922 shares through controlled entities, representing 16.48% of the company's equity[84] - Guan Song, an executive director, holds 14,876,000 shares directly (1.05%) and 18,361,220 shares through controlled entities (1.30%)[84] - Gao Liandun, an executive director, holds 13,965,000 shares through controlled entities, representing 0.99% of the company's equity[84] - The company has not entered into any management contracts for the administration of its business during the fiscal year 2022[82] - No directors had any material interests in significant transactions, arrangements, or contracts involving the company or its subsidiaries during the reporting period[80] - The company's independent non-executive directors have confirmed their independence in accordance with Listing Rule 3.13[76] - The company's Remuneration and Assessment Committee reviews directors' compensation policies based on company performance, individual performance, and market practices[78] - Brilliant Seed holds 232,643,922 shares, representing 16.48% of the company's equity[90] - Tencent Mobility holds 249,141,192 shares, representing 17.65% of the company's equity[90] - Bank of America Corporation holds 196,960,947 shares, representing 13.96% of the company's equity[90] - iDreamSky Technology Limited holds 127,839,505 shares, representing 9.06% of the company's equity[90] - Yong Rong (Hong Kong) Asset Management holds 105,564,400 shares, representing 7.48% of the company's equity[90] - The restricted share unit plan allows for the issuance of up to 86,270,450 shares, representing 6.12% of the company's issued shares[96] - The restricted share unit plan has a duration of 10 years from the adoption date, with over 5 years remaining as of the report date[95] - The restricted share unit plan does not specify a vesting period, with actual vesting periods ranging from 12 to 48 months[97] - The company has not established any share option plans since its listing date[93] - No directors or senior executives have any rights to purchase shares or debentures of the company or any other corporate body[88] - The company repurchased a total of 9,932,000 shares on the Hong Kong Stock Exchange during the reporting period, with a total cost (before expenses) of HKD 38,895,987.51[104] - The highest purchase price per share was HKD 5.01 in June 2022, and the lowest was HKD 2.71 in April 2022[105] - The company granted 16,283,801 restricted share units to employees during the year, with 7,598,961 units vested and 1,582,769 units forfeited[101] - The weighted average closing price of shares immediately before the vesting of restricted share units was HKD 4.623 per share[102] - The company completed the issuance of 32,854,730 new shares on February 28, 2022, as part of a subscription agreement with related parties[107] - The company did not grant or vest any restricted share units to directors during the year[100] - The company's share repurchase plan reflects the board's confidence in the company's long-term business prospects and growth potential[104] - The company has no other non-exempt connected transactions under Chapter 14A of the Listing Rules during the reporting period[108] - The company has multiple ongoing connected transaction agreements with Tencent, a major shareholder[108] - The company's highest-paid individuals held 521,296 restricted share units as of December 31, 2022, with a vesting period of 0 to 4 years[101] - Shenzhen Dreamscape signed a three-year promotion cooperation framework agreement with Tencent Computer, effective from January 1, 2021, with annual caps for promotion service fees until December 31, 2023[110] - The promotion cooperation framework agreement aims to leverage Tencent's competitive advantages to enhance Dreamscape's promotion service business[111] - Dreamscape signed a three-year payment service framework agreement with Tencent Computer, effective from January 1, 2021, with annual caps for payment service fees until December 31, 2023[112] - The payment service framework agreement allows Dreamscape to provide Tencent's payment channels to its users, improving user satisfaction[114] - Dreamscape signed a three-year product and service purchase framework agreement with Tencent Computer, effective from January 1, 2021, with annual caps for procurement fees until December 31, 2023[116] - The product and service purchase framework agreement enables Dreamscape to access Tencent's cloud services and other technical products, reducing unnecessary expenses[117] - Dreamscape signed a one-year intellectual property cooperation framework agreement with Tencent Computer, effective from January 1, 2021, later revised on September 20, 2021, with adjusted annual caps for related fees until December 31, 2023[120] - The intellectual property cooperation framework agreement enhances Dreamscape's IP-related product development and operational capabilities, increasing market visibility and share[121] - The revised 2021 Intellectual Property Cooperation Framework Agreement constitutes a continuing connected transaction with an annual percentage ratio exceeding 0.1% but below 5% for the three years ending December 31, 2023[122] - The 2021 Game Cooperation Framework Agreement with Tencent Computer includes mutual payment of distribution and/or licensing fees, with revised annual caps for the three years ending December 31, 2023[123] - The QQfamily Cooperation Agreement with Tencent Tech allows the company to open 150 QQfamily-themed offline stores in China, including 7 flagship stores and standard stores, over the first three years[126] - The company is required to pay Tencent Tech a total of RMB 10.0 million over the first three years of the QQfamily Cooperation Agreement, with an additional deposit of RMB 0.3 million[127] - The QQfamily Cooperation Agreement is a continuing connected transaction with an annual percentage ratio exceeding 0.1% but below 5% for the five years ending December 31, 2026[129] - Tencent Group's payment to the company for promotion services was RMB 11,397 thousand, compared to the suggested annual cap of RMB 46,800 thousand[131] - The company's payment to Tencent Group for payment services was RMB 3,403 thousand, compared to the suggested annual cap of RMB 5,184 thousand[131] - The company's payment to Tencent Group