iDreamSky Technology (1119) H1 2024 earnings summary

Executive summary

• Revenue for the six months ended 30 June 2024 declined 23.8% year-over-year to RMB845.2 million, mainly due to a shift in revenue structure and reduced operation of non-core games.

• Loss for the period was RMB109.3 million, compared to a profit of RMB40.6 million in the prior year period.

• Adjusted profit for the period, excluding non-recurring items, was RMB3.3 million, down from RMB199.2 million year-over-year.

• EBITDA dropped to RMB11.7 million from RMB150.6 million, and adjusted EBITDA fell to RMB100.1 million from RMB268.4 million.

• The company focused on core gaming business, launching new versions of key titles and leveraging AI to enhance development and user engagement.

Financial highlights

• Gross profit decreased to RMB291.8 million from RMB502.1 million, with gross margin falling due to changes in product mix.

• Cost of revenues decreased by 8.9% to RMB553.4 million, but as a percentage of revenue, increased to 65.5%.

• Selling and marketing expenses fell 23.4% to RMB77.8 million, while R&D expenses rose 8.7% to RMB153.3 million.

• Net finance costs decreased 54.8% to RMB49.7 million, mainly due to reduced liabilities and lower interest expenses.

• Net impairment losses on financial assets increased to RMB82.2 million from RMB68.5 million.

Outlook and guidance

• The company plans to globally launch the PC version of Strinova in Q4 2024, with mobile and console versions expected in 2025.

• Delta Force, a cross-platform tactical shooting game co-developed with Tencent, is scheduled for launch in September 2024, with over 30 million wishlists.

• Proceeds from a July 2024 share placement will fund R&D and overseas launches of key products.