China Literature (772) H2 2024 earnings summary

Executive summary

• Revenues grew 15.8% year-over-year to RMB8,121.1 million, driven by blockbuster IP releases, strong IP operations, and rapid expansion in IP commercialization and merchandise.

• Gross profit increased 16.3% to RMB3,921.9 million, with gross margin stable at 48.3%.

• Net loss attributable to shareholders was RMB209.2 million, mainly due to a RMB1.1 billion non-cash goodwill impairment in the TV and film business.

• Non-IFRS net profit to shareholders was RMB1,141.7 million, up 1.0% year-over-year.

• Accelerated adoption of AI across content creation, translation, and user experience, with significant increases in AI-driven productivity and overseas reach.

Financial highlights

• Online business revenue rose 2.1% to RMB4,030.6 million, with self-owned platform products up 3.4% and third-party platforms up 32%.

• IP operations and other revenues surged 33.5% to RMB4,090.5 million, led by drama, film, short drama, and merchandise growth.

• Adjusted EBITDA was RMB923.1 million, with an adjusted EBITDA margin of 11.4%.

• Selling and marketing expenses rose 31.5% to RMB2,261 million (27.8% of revenue); G&A expenses decreased to 14.1% of revenue.

• Net cash increased to RMB9,935.7 million, and free cash flow was RMB2,333.2 million.

Outlook and guidance

• Plans to expand IP merchandise categories, deepen omnichannel distribution, and open channels to third-party IP studios.

• Focus on growing GMV and profit in merchandise, leveraging both self-development and licensing strategies.

• Rich pipeline for New Classic Media with over 10 drama series and multiple films planned for 2025 and beyond.

• Continued investment in AI to drive content quality, efficiency, and overseas expansion.

• Anticipates continued growth in IP operations, short dramas, and merchandise, with AI integration expected to drive efficiency and user engagement.