China Literature (SEHK:00772) H2 2025 Earnings call March 17, 2026 08:00 AM ET Company ParticipantsCao Huayi - Non-executive DirectorHou Xiaonan - CEOHuang Yan - SVP and Executive DirectorJacky Xu - VP of FinanceMaggie Zhou - Head of Capital Markets and Investor RelationsNone - TranslatorConference Call ParticipantsGigi Zhou - Research AnalystJenny Yuan - Research AnalystMaggie Ye - Research AnalystXu Zhengzheng - VP and Equity AnalystOperatorGood evening, ladies and gentlemen. Welcome to China Literature's ...

Core Insights - MDJM LTD is advancing its animated short film project in collaboration with H5, entering an intensive script refinement phase, which signifies a major step in artistic development [1][10] - The project aims to create original animation works through partnerships with leading international creative studios, emphasizing high artistic ambition and philosophical depth [2][10] Development Process - Recent discussions between MDJM and H5 have focused on enhancing the narrative structure, emotional resonance, and symbolic language of the film, aiming for an auteur-driven cinematic work that addresses complex human questions [3][4] - The development process includes extensive exchanges on how animation can convey philosophical themes through sensory experiences, balancing narrative clarity with poetic ambiguity [4][6] Narrative Approach - The film's narrative emphasizes atmosphere, discovery, and symbolic gestures rather than conventional conflict or dystopian themes, allowing philosophical questions to emerge naturally [5][6] - The creative team draws inspiration from both Eastern and Western cinematic traditions, referencing works by notable filmmakers such as Hayao Miyazaki and Makoto Shinkai [7] Aesthetic Direction - Creative workshops have explored the role of visual contrast in shaping the film's narrative arc, juxtaposing technologically refined environments with spaces marked by material history [8] - The proposed aesthetic direction allows the visual world to participate in storytelling, enhancing the overall narrative experience [8] Collaborative Nature - The script development phase highlights the collaborative nature of the project, showcasing a shared dedication to rigorous creative exploration among MDJM and H5 [9] - The project represents a significant step in MDJM's strategy to develop original animation intellectual properties through partnerships with internationally recognized creative studios [10] Company Overview - MDJM LTD is focused on cultural IP development, animation production, international licensing, and cultural venue operations, with ongoing projects in the UK [11][12] - The company aims to integrate Eastern philosophy with international artistic practices, creating a global cultural ecosystem centered on storytelling and immersive experiences [12]

Core Insights - The animated film "KPop Demon Hunters" has become a cultural phenomenon, significantly impacting travel trends to South Korea, with over 500 million views since its release in June 2025 [2][3][5] Travel Impact - Global flight bookings to South Korea increased by 25% in the three months following the film's release compared to the previous year, indicating a strong correlation between the film's popularity and travel interest [3] - In July 2025, Seoul welcomed 1.36 million international travelers, a 23.1% increase year-over-year, attributed to the KPop Demon Hunters craze [5] - South Korea achieved a record-breaking 18.9 million foreign tourists in 2025, reflecting sustained interest beyond the film's initial success [6] Cultural Influence - The film has contributed to the ongoing hallyu phenomenon, which has been bolstered by other cultural exports like BTS, "Parasite," and "Squid Game," enhancing the global appeal of Korean culture [4] - The film's success has led to increased interest in traditional Korean experiences, with bookings for jimjilbangs rising by 115% in the summer months following its release [11] Tourism Trends - Tour bookings for locations featured in the film, such as Gyeongbokgung Palace and Bukchon Hanok Village, have surged by over 350% in 2025 compared to the previous year [13] - The film has inspired a variety of tourism experiences, including pop-up cafes and character meet-and-greets, enhancing engagement with Korean culture [14][15] Sustainable Tourism - Unlike other film-inspired tourism trends that lead to overcrowding, KPop Demon Hunters fans are exploring a diverse range of sites, promoting sustainable tourism practices [17] - The film serves as a showcase of Korean daily life, allowing tourists to engage with various cultural elements directly [16]

For decades, the animators behind “Chicken Run” and “Wallace & Gromit” have used a very specific type of clay. It’s pliable enough to reshape for months, but firm enough not to melt or crack under studio lights. Then one day, Aardman Animations got word that its clay manufacturers were retiring. News that the studio's clay supply was in jeopardy spread quickly from newspapers to Reddit fan forums. The Journal’s video goes inside the legendary film studio to show how it raced to save its beloved clay. Chapte ...

Core Insights - The sequel to the animated film "KPop Demon Hunter" has been officially confirmed, following the original's massive global success and awards [3][4] - The sequel will be produced by Sony Pictures Animation in partnership with Netflix, continuing the story of the fictional K-pop trio Huntrix [3][4] - The original film became one of the most watched movies on Netflix, thanks to its unique blend of music, action, and fantasy, which helped build a large global fanbase [3][4] Production and Release Details - The sequel is still in early development, and no official release date has been announced for India or globally [2][4] - The sequel will also be released directly on Netflix, similar to the original film [4] - Animated projects of this scale typically require significant time to complete, indicating that fans may need to wait for further updates [4] Creative Direction - The creators, Maggie Kang and Chris Appelhans, have expressed excitement about exploring the characters and their world in greater depth in the sequel [3][4] - Chris Appelhans mentioned a strong connection with the characters and the intention to challenge them and push the boundaries of music, animation, and storytelling [3][4] - Maggie Kang highlighted the audience's connection with the Korean-inspired story and expressed enthusiasm for revealing more about the world they have built [3][4] Music and Popularity - The soundtrack played a significant role in the original film's popularity, with real-life artists voicing and singing for the animated group Huntrix [4] - The song "Golden" became a fan favorite, contributing to the movie's success [2][4]

Core Insights - The animation and creative industries in the UK and Europe are experiencing strong policy support and economic significance, becoming a strategic component of national and regional economic development [1] - The UK's creative industries contributed over £124 billion in gross value added (GVA) to the economy in 2023, representing over 5% of total UK economic output and supporting approximately 2.4 million jobs [1] - The UK government has implemented structured policies, including a 39% expenditure credit for animated productions, to attract global production and strengthen the domestic creative ecosystem [1] UK Policy Support - The UK maintains a structured policy environment for screen production and animation development, with the Audio-Visual Expenditure Credit (AVEC) system offering a 39% credit on qualifying production costs [1] - Enhanced incentives for visual-effects production will begin in 2025, with qualifying UK VFX expenditure receiving a 39% credit and previous limits on eligible spending removed [1] - These policies position the UK as a competitive location for animation production and audiovisual development [1] Scotland's Creative Economy - Scotland has positioned the creative industries as a central pillar of its cultural and economic development strategy, contributing billions to the national economy and supporting tens of thousands of jobs [1] - Public agencies like Screen Scotland and Creative Scotland are focused on building production capacity and supporting creative talent [1] - Regional cultural infrastructure is recognized for its role in attracting international projects and supporting long-term industry growth [1] European Policy Environment - The animation and audiovisual industries in Europe operate within a robust policy framework that supports cultural production and international collaboration [1] - The Creative Europe program facilitates cross-border collaboration among European studios and promotes the international circulation of European creative works [1] - National incentive programs and co-production treaties have emerged to support animation and audiovisual production across Europe [1] Animation as a Strategic Industry - Animation is increasingly recognized within policy frameworks as a high-value creative industry and cultural medium [1] - The demand for high-quality narrative content is expanding, prompting governments and industry bodies to emphasize support for animation [1] - The strengthening policy environment in the UK and Europe is expected to foster the development of animation projects and cross-border collaboration [1] Company Initiatives - MDJM LTD is focused on cultural IP development, animation production, and international licensing, expanding operations in the UK with projects like Fernie Castle and Robin Hill Property [2] - The company is collaborating with European animation studios to develop animated short films that blend Eastern themes with Western artistry [2] - This initiative reflects the company's commitment to enhancing its cultural business footprint and global market expansion [2]

Core Viewpoint - The development of a digital animation museum is highlighted as a potential growth initiative and cultural development focus for MDJM LTD, supported by recently secured financing [1] Group 1: Digital Animation Museum Initiative - The digital animation museum is positioned as an immersive cultural platform that emphasizes animation as a narrative and philosophical form of expression [1] - The museum aims to transform animation viewing into a participatory cultural experience through curated digital exhibitions and interactive programming [1] - This initiative is expected to broaden audience access to animation culture and generate revenue through digital exhibitions, content licensing, and related creative products [1] Group 2: Financing and Strategic Focus - The deployment of financing towards the digital animation museum is part of MDJM's broader efforts to support cultural innovation and pursue sustainable growth in the animation sector [1] - The company is focusing on developing and positioning its animation content for potential global reach while exploring new avenues for cultural engagement [1] - The digital animation museum will serve as a dedicated venue for MDJM's future original animation intellectual properties, contributing to the company's long-term creative asset portfolio [1]

Financial Data and Key Metrics Changes - For Q4 2025, the company reported revenue of $330.7 million, down 4.1% on a constant currency basis and 6.3% on a reported basis, primarily due to declines in advertising and IP adaptations [10][11] - Full year 2025 revenue was $1.4 billion, growing 3.9% on a constant currency basis and 2.5% on a reported basis [10] - Adjusted EBITDA for Q4 was $0.6 million, exceeding guidance, compared to a negative adjusted EBITDA of $3.5 million in Q4 2024 [12] - The net loss for Q4 was $336.5 million, compared to a loss of $102.6 million in the prior year, driven by goodwill impairments [11][25] - Full year adjusted EBITDA was $19.4 million, down from $68 million in the prior year [12][23] Business Line Data and Key Metrics Changes - Paid content revenue grew 0.4% on a constant currency basis in Q4, while full year growth was 1.5% [14][15] - Advertising revenue declined 10.3% in Q4 on a constant currency basis, but grew 0.4% for the full year [16] - IP adaptation revenue saw a significant decline of 29.7% in Q4 on a constant currency basis, but grew 35.5% for the full year [16][17] Market Data and Key Metrics Changes - In Korea, Q4 revenue declined 9.1% on a constant currency basis, while full year revenue grew 5.9% [17] - Japan's Q4 revenue declined 1.0% on a constant currency basis, with full year growth of 3.9% [19] - The rest of the world saw Q4 revenue growth of 0.8% on a constant currency basis, but a full year decline of 2.1% [21] Company Strategy and Development Direction - The company is focusing on enhancing its personalization tools and AI-driven content recommendations to improve user engagement [5][6] - A strategic agreement with Disney was completed, targeting a 2026 launch for a new digital comics platform [6][7] - The company aims to deepen engagement across its platform and accelerate its growth potential [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to double-digit year-over-year growth by the end of 2026, driven by improvements in paid content and advertising [27][36] - The company acknowledged challenges in the advertising sector but remains optimistic about its long-term strategy and market position [27][36] Other Important Information - The company reported a cash balance of $582 million at year-end, indicating strong financial health [26] - The company is investing in infrastructure and product development to support future growth [20][61] Q&A Session Summary Question: Details on the Disney platform launch - Management confirmed that Disney's investment was completed, and 12 reformatted titles have been launched, with a commitment to original stories in 2026 [31][33] Question: Factors for double-digit growth - Management highlighted that growth will come from paid content recovery, advertising improvements, and crossover IP opportunities [36][62] Question: Key learnings from recommendation algorithms in Korea - The company noted strong performance metrics in Korea and plans to apply successful strategies to other markets [41][42] Question: Competitive dynamics for attracting creators - Management emphasized the importance of a healthy base of paying users to attract and retain creators, with ongoing investments in content development [43][44] Question: Economics of the new Disney platform - Management stated that WEBTOON will recognize all revenue and costs for the new platform, with a structure consistent with existing business models [52] Question: Advertising ecosystem shifts - Management acknowledged the need to build a tailored advertising infrastructure for the North American market while maintaining a focus on long-term growth [72]

Financial Data and Key Metrics Changes - The company reported Q4 2025 revenue of $330.7 million, down 4.1% on a constant currency basis and 6.3% on a reported basis, with full year revenue of $1.4 billion, growing 3.9% on a constant currency basis [9][10] - Adjusted EBITDA for Q4 was $0.6 million, exceeding guidance, compared to a negative adjusted EBITDA of $3.5 million in Q4 2024, while full year adjusted EBITDA was $19.4 million, down from $68 million in the prior year [11][22] - The net loss for Q4 was $336.5 million, compared to a loss of $102.6 million in the prior year, driven primarily by goodwill impairments, with a full year net loss of $373.4 million compared to $152.9 million last year [10][24] Business Line Data and Key Metrics Changes - Paid content revenue grew 0.4% in Q4 on a constant currency basis, while full year growth was 1.5% [12][14] - Advertising revenue declined 10.3% in Q4 on a constant currency basis, but full year advertising revenue grew 0.4% [14] - IP adaptation revenue saw a significant decline of 29.7% in Q4 on a constant currency basis, but full year revenue was up 35.5% [14][15] Market Data and Key Metrics Changes - In Korea, Q4 revenue declined 9.1% year-over-year on a constant currency basis, while full year revenue grew 5.9% [16] - Japan's Q4 revenue declined 1.0% on a constant currency basis, with full year growth of 3.9% [18] - The rest of the world saw Q4 revenue growth of 0.8% year-over-year on a constant currency basis, but a full year decline of 2.1% [20] Company Strategy and Development Direction - The company is focusing on enhancing user engagement through AI-driven personalized content recommendations, particularly in Korea, and plans to apply these learnings to other regions [4][5] - A strategic agreement with The Walt Disney Company was completed, targeting a 2026 launch for a new digital comics platform [5][6] - The company aims to deepen engagement across its platform and accelerate growth potential through various initiatives, including IP adaptations and content diversification [8][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to double-digit year-over-year growth by the end of 2026, driven by improvements in paid content and advertising [26][60] - The company acknowledged challenges in the advertising segment but remains optimistic about recovery in key markets, particularly Korea and Japan [33][60] - Management highlighted the importance of ongoing investments in infrastructure and product innovation to support future growth [41][60] Other Important Information - The company reported a cash balance of $582 million at year-end, indicating strong financial health [25] - The first quarter of 2026 is expected to deliver revenue growth in the range of -1.5% to +1.5% on a constant currency basis [26] Q&A Session Summary Question: Details on the Disney platform launch - Management confirmed that Disney's investment was completed on January 8, 2026, and highlighted the launch of 12 reformatted titles as part of the collaboration [30][31] Question: Factors for double-digit growth - Management indicated that growth would come from a return to strong paid content growth, improvements in advertising, and crossover IP opportunities [32][34] Question: Key learnings from Korea's recommendation algorithm - Management noted that the AI-driven personalization engine has been effective in Korea and plans to implement similar strategies in other markets [38][40] Question: Competitive dynamics for attracting creators - The company emphasized the importance of a healthy base of paying users and ongoing investments in marketing and product innovation to attract creators [41][42] Question: Economics of the new Disney platform - Management stated that WEBTOON will recognize all revenue and costs for the new platform, with a structure consistent with existing business models [50] Question: Broader advertising opportunity - Management acknowledged the need for long-term investments in advertising infrastructure, particularly in the U.S. market [72]

Core Viewpoint - MDJM LTD has successfully completed two offerings totaling approximately USD 8.5 million to support its global animation production and cultural infrastructure initiatives [1][2]. Funding Details - The company raised approximately USD 6 million from an upsized public offering on February 11, 2026, and USD 2.5 million from a registered direct offering on March 2, 2026 [2]. - About 50% of the combined funding will be allocated to international animation collaborations and the development of a cultural project at Fernie Castle in Scotland [2]. Animation Co-Productions - A portion of the new capital will be used for co-producing two animated films with renowned studios H5 and Abano Producións, with completion targeted by the end of 2026 [3][4]. - MDJM aims to leverage innovative storytelling and high artistic standards through these collaborations, while establishing a long-term ecosystem of proprietary original IP assets [4]. Cultural Development at Fernie Castle - The funding will also support the design and planning of a cultural development project at Fernie Castle, integrating heritage architecture and animation-related programming [5][6]. - The project involves collaboration with Kengo Kuma & Associates and Simpson & Brown LLP, focusing on preserving architectural integrity while enhancing contemporary cultural functionality [5][6]. Global Cultural Strategy - MDJM is advancing a global cultural development framework that combines content creation, cultural space design, and global creative industry development [9]. - The company remains optimistic about the long-term growth of the global animation industry, believing that demand for high-quality storytelling will continue to expand [9][10].