China Literature Announces 2024 Annual Results

• Total revenues increased by 15.8% year-over-year to RMB8,121.1 million (USD1,129.7 million).

  - Revenues from online business increased by 2.1% year-over-year to RMB4,030.6 million (USD560.7 million), mainly due to consistent improvement made to core product operations and production of high-quality content.

  - Revenues from intellectual property operations and others increased by 33.5% year-over-year to RMB4,090.5 million (USD569.0 million), mainly due to solid growth across our IP operations businesses.

• On a non-IFRS ⁽²⁾ basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:

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  - Operating profit was RMB985.4 million (USD137.1 million), compared with RMB1,049.8 million in 2023.

  - Profit attributable to equity holders of the Company was RMB1,141.7 million (USD158.8 million), compared with RMB1,130.4 million in 2023.

  - Basic earnings per share was RMB1.13. Diluted earnings per share was RMB1.12.

• On an IFRS basis:

  - Operating loss was RMB336.1 million (USD46.8 million), mainly due to an impairment loss of goodwill attributable to New Classics Media ("NCM"). Operating profit was RMB709.3 million in 2023.

  - Loss attributable to equity holders of the Company was RMB209.2 million (USD29.1 million), compared with RMB804.9 million profit attributable to equity holders of the Company in 2023.

  - Basic loss per share was RMB0.21. Diluted loss per share was RMB0.21.

Mr. Hou Xiaonan, Chief Executive Officer of China Literature, commented, "Guided by our core strategy of 'focusing on quality content and creating long-lasting IPs,' we successfully released a series of blockbuster titles in 2024 including the film 'YOLO (热辣滚烫)', drama series such as 'The Legend of Shen Li (与凤行)', 'Joy of Life 2 (庆余年2)', 'The Tale of Rose (玫瑰的故事)' and 'Guardians of the Dafeng (大奉打更人)', as well as the updated animation series 'Battle Through the Heavens (斗破苍穹)', further reinforcing our leading position in the industry. To capitalize on the widespread influence of our popular content, we accelerated IP commercialization which drove the rapid growth of our merchandising business in 2024 with annual GMV surpassing RMB500 million.

At the same time, we continue to explore the application of cutting-edge technologies to empower our content business. In February 2025, our 'Writer Assistant (作家助手)' creation tool became the first in the industry to integrate the DeepSeek-R1 model, providing writers with even more intelligent assistance. Going forward, we will continue to execute our high-quality content strategy to create IP with enduring vitality while leveraging the latest cutting-edge technologies to further enhance its value."

Financial Review ⁽³⁾

Revenues increased by 15.8% year-over-year to RMB8,121.1 million (USD1,129.7 million).

Revenues from online business increased by 2.1% year-over-year to RMB4,030.6 million (USD560.7 million). A further breakdown of this category is as follows:

i) Online business revenues from our self-owned platform products increased by 3.4% year-over-year to RMB3,531.0 million (USD491.2 million), mainly due to consistent improvement made to core product operations and production of high-quality content;

ii) Online business revenues from our channels on Tencent products decreased by 28.2% year-over-year to RMB245.3 million (USD34.1 million), mainly due to a decrease in advertising revenues associated with the refinement of our content distribution practices and prioritization of distribution through core pay-to-read products; and

iii) Online business revenues from third-party platforms increased by 32.0% year-over-year to RMB254.2 million (USD35.4 million), primarily due to expanded collaboration with third-party distribution partners.

Revenues from IP operations and others increased by 33.5% year-over-year to RMB4,090.5 million (USD569.0 million).

i) Revenues from IP operations increased by 34.2% year-over-year to RMB3,991.2 million (USD555.2 million). The increase was driven by solid growth across our IP operations businesses primarily from the release of more blockbuster drama series, films, and animated series, along with the expanded licensing of our IP for adaptation to business partners. Additionally, new initiatives such as short dramas and IP merchandise products grew significantly during the period; and

ii) Revenues from the "others" category, mainly generated by sales of physical books, increased by 10.5% year-over-year to RMB99.3 million (USD13.8 million).

Cost of revenues increased by 15.4% year-over-year to RMB4,199.1 million (USD584.2 million), in line with the increase in revenues, mainly due to higher production costs associated with an increase in the number of films and blockbuster drama series released during the year.

Gross profit increased by 16.3% year-over-year to RMB3,921.9 million (USD545.6 million). Gross margin was 48.3%, compared with 48.1% in 2023.

Interest income increased by 7.2% year-over-year to RMB178.3 million (USD24.8 million), reflecting greater interest income from bank deposits.

Net other losses were RMB973.9 million (USD135.5 million) in 2024, compared with net other gains of RMB11.5 million in 2023. The year-over-year difference was mainly due to an impairment loss of goodwill of RMB1,104.6 million (USD153.7 million) attributable to New Classics Media.

Selling and marketing expenses increased by 31.5% year-over-year to RMB2,261.0 million (USD314.5 million), as a result of an increase in promotional and advertising expenses associated with films and drama series released in 2024. As a percentage of revenues, our selling and marketing expenses increased to 27.8% in 2024 from 24.5% in 2023.

General and administrative expenses decreased by 1.5% year-over-year to RMB1,143.5 million (USD159.1 million). As a percentage of revenues, general and administrative expenses decreased to 14.1% in 2024 compared with 16.6% in 2023.

Net provision for impairment losses on financial assets was RMB58.0 million (USD8.1 million) in 2024, primarily reflecting the provision for doubtful receivables associated with IP operation businesses.

Operating loss was RMB336.1 million (USD46.8 million) in 2024, compared with RMB709.3 million operating profit in 2023. On a non-IFRS basis, operating profit was RMB985.4 million (USD137.1 million), compared with RMB1,049.8 million in 2023.

Income tax expense was RMB110.7 million (USD15.4 million), compared with RMB97.9 million for 2023, primarily due to an increase in taxable income.

Loss attributable to equity holders of the Company was RMB209.2 million (USD29.1 million) in 2024, compared with RMB804.9 million profit attributable to equity holders of the Company in 2023. On a non-IFRS basis, profit attributable to equity holders of the Company was RMB1,141.7 million (USD158.8 million), compared with RMB1,130.4 million in 2023.

Key Operating Information

Average MAUs on our self-owned platform products and self-operated channels were 166.6 million in 2024, a decrease of 19.0% year-over-year from 205.6 million in 2023. A further breakdown of MAUs is as follows:

i) MAUs on our self-owned platform products remained largely stable on a year-over-year basis at 103.8 million, compared with 104.8 million in 2023; and

ii) MAUs on our self-operated channels on Tencent products decreased by 37.7% year-over-year from 100.8 million to 62.8 million, primarily due to continuous optimization of operational efficiency, which involved distributing more content through core pay-to-read products, resulting in a decrease of MAUs on free-to-read channels.

Average MPUs on our self-owned platform products and self-operated channels increased by 4.6% year-over-year from 8.7 million to 9.1 million in 2024, mainly due to growth in membership users following the launch of additional membership content in 2024.

Monthly ARPU for our pay-to-read business was RMB32.0, decreasing by 1.5% year-over-year from RMB32.5 in 2023, due to a mix effect from lower ARPU contributions by newly acquired membership users.

Other Key Information

- EBITDA was RMB729.3 million (USD101.5 million), compared with RMB829.5 million in 2023. Adjusted EBITDA was RMB923.1 million (USD128.4 million), compared with RMB1,017.9 million in 2023.

- As of December 31, 2024, the Company's net cash position was RMB9,935.7 million (USD1,382.2 million).

- Free cash flow* was RMB2,333.2 million (USD324.6 million), compared to RMB872.8 million in 2023.

- New Classics Media, on a standalone basis, recorded RMB1,638.9 million (USD228.0 million) in revenues and RMB340.7 million (USD47.4 million) in profit attributable to equity holders of the company in 2024.

* Free cash flow: operating cash flow deducts payments for lease liabilities and payments for capital expenditures.

Business Review and Outlook

IP Creation

We continued to strengthen the content ecosystem of our online reading business. In 2024, our reading platform added approximately 330,000 writers and 650,000 literary works, collectively contributing over 42 billion Chinese characters. High-quality works increased significantly, with the number of newly signed literary works with over 50,000 average subscribers per chapter up 50% year-over-year. Additionally, the number of new writers with annual income exceeding RMB500,000 grew over 70% year-over-year. Our community has become more robust, with the number of users casting over 1,000 monthly tickets in 2024 increasing more than 60% year-over-year.

As a result of these initiatives, our MPUs grew 4.6% year-over-year to 9.1 million in 2024.

IP Visualization

We made significant progress in IP visualization, releasing a series of top-tier content in the field of film, drama series, animation and comics. According to the Creative Industries Technology Research Institute of Renmin University of China, China Literature had 3 out of the top 5 most valuable cultural IPs in 2024. Based on Enlightent data, among the top 30 most popular drama series in 2024, 16 were adapted from China Literature's IPs. Additionally, according to Guduo data, 14 of the top 20 most popular domestic animation works in 2024 were adapted from China Literature's IPs.

In the live action TV and film segment, we launched several phenomenal blockbuster hits throughout the year. We have one box office champion film "YOLO (热辣滚烫)", which grossed RMB3.5 billion in box office revenue, and four drama series including "The Legend of Shen Li (与凤行)", "Joy of Life 2 (庆余年2)", "The Tale of Rose (玫瑰的故事)" and "Guardians of the Dafeng (大奉打更人)", dominating the online viewership rankings of domestic drama series. These achievements demonstrate our consistent ability to create and replicate blockbuster IPs, reflecting our strong capabilities in content creation and IP development.

In the animation segment, we released new series including "World's Best Martial Artist (全球高武)" and "The Richest Man in Game (亏成首富从游戏开始)", as well as sequels to "Battle Through the Heavens (斗破苍穹)", "Start a Mountain (开局一座山)" and "The Fox Spirit Matchmaker (狐妖小红娘)", which topped popularity rankings on video streaming platforms during their release windows. Among them, the annual series "Battle Through the Heavens (斗破苍穹)" topped Tencent Video's annual best-selling list and won the title of "2024 Tencent Video VIP Member's Favourite Animation".

In the comics segment, we completed the acquisition of Tencent Animation and Comics in 2024. Domestic comic IPs such as "The Outcast (一人之下)" and "The Fox Spirit Matchmaker (狐妖小红娘)" further enriched our leading IP offerings and continued to perform strongly. On the Tencent Animation and Comics platform, "The Outcast (一人之下)" ranked first in terms of revenue among domestic comics, while "The Fox Spirit Matchmaker (狐妖小红娘)" also ranked first in terms of annual revenue growth. The synergies being created between China Literature and Tencent Animation and Comics continue to deepen. This deep integration of our respective strengths in content, production capacity, and IP industry value chain will further unlock the potential and enhance the value of our top-tier IPs.

In the short drama segment, we launched over 100 titles in 2024. Leveraging our content creator resources, we collaborated with outstanding writers and screenwriters to produce a number of high-quality short dramas, with the most popular title generating close to RMB40 million in gross revenue. In addition, one of our new releases at the beginning of 2025 has already achieved over RMB50 million in gross revenue within 7 days, underscoring the trend towards higher quality for short dramas. As the short drama market is growing rapidly, we will continue to capitalize on our high-quality production capacity and capabilities to seize the enormous opportunities the market presents.

IP Commercialization and Monetization

Leveraging the strong influence and user traffic generated by our high-quality content, as well as our improved innovative capabilities and deep market insights, we made significant progress in our IP merchandise business.

In 2024, the total GMV for IP merchandise surpassed RMB500 million, of which the collectible cards accounted for over RMB200 million. The main IPs including "The King's Avatar (全职高手)", "Joy of Life (庆余年)", "Lord of the Mysteries (诡秘之主)", "The Outcast (一人之下)", and "The Fox Spirit Matchmaker (狐妖小红娘)" have all set new historical revenue records, showing widespread market influence. In addition, we have collaborated with over 150 authorized partners to develop merchandise products covering multiple verticals such as toys, 3C digital, and food and beverages etc.

To expand our distribution channels, we set up over 10 self-operated livestream channels, as well as official online stores on Taobao and Tmall. We also opened 8 offline stores, covering leading ACG (Anime, Comics, and Games) shopping districts in key cities such as Beijing, Shanghai, and Hangzhou. In addition, through the distribution model, we have covered over 6,000 offline and over 3,000 online sales outlets, forming a comprehensive omni-channel sales network and laying a solid foundation for future business growth.

The global IP merchandise market is enormous at over USD300 billion. While we are just beginning to commercialize our IP, we are confident that this will offer us significant growth prospects both online and offline. Our advantage lies in our ability to leverage IP to deliver emotions and unique experiences through our products, and to reshape the cultural consumption preferences of younger generations.

Exploration in New Technologies

We are aware of the enormous opportunities that AI brings to the content industry, and are actively embracing this transformation. We have taken a leading position in the development of the IP industry value chain, and are leveraging AI to enhance this competitive advantage across various business scenarios.

As previously mentioned, our "Writer Assistant (作家助手)" creation tool integrates the DeepSeek-R1 model, allowing writers across the industry to experiment with it to develop best practices. Since its integration, daily active users of "Writer Assistant (作家助手)" have increased by over 30%, with the weekly usage rate of AI functions exceeding 50% and the average number of writers using the "Intelligent Q&A" function per day increasing tenfold. This will help online literary creation enter a more efficient and intelligent era.

AI is also accelerating the globalization of our IP. In 2024, our overseas online reading platform, WebNovel, added more than 3,200 AI-translated works, accounting for 47% of all Chinese-translated works and about 40% of the top 100 best-selling lists. AI has enabled WebNovel to cover a wider range of languages, including Spanish, Portuguese, German, French, Indonesian, Japanese and many others. In 2024, revenue from non-English works translated by AI increased by more than 350%. As of December 31, 2024, WebNovel offered overseas users with approximately 6,800 Chinese-translated works and approximately 700,000 locally created original works.

In addition, we are integrating AI into various formats such as audiobooks, radio dramas, animation, and videos to further accelerate the development of our IP. We are also applying AI to improve content recommendation and user interaction to enhance the user experience.

Outlook

We believe that the synergy of "IP+AI" will drive the content industry forward, creating a new ecosystem that stretches from content creation to user consumption. AI empowers IP, while IP provides scenarios for AI. The deep integration of the two will facilitate the transition towards multi-dimensional innovation and globalization, from which we are uniquely positioned to benefit. Looking ahead, we will embrace the latest technologies, continue the incubation of popular IPs, and build a leading IP industry value chain to engrain ourselves in the memories of the next generation.

About China Literature Limited

China Literature is dedicated to building a deep and immersive intellectual property ("IP") universe for the Mandarin-speaking world. It incubates original IPs from its online literature platform, which are subsequently adapted to a range of digital entertainment mediums, including comics, animation, film, TV series, web series and games. The virtual world created by these digital offerings becomes an inseparable part of a user's daily life. China Literature creates and promotes IPs mainly through Qidian Reading and QQ Reading, its leading online literature platforms, as well as New Classics Media, a renowned film and TV drama series production house in China. China Literature collaborates with Tencent, its shareholder and strategic partner, as well as other third-party partners to distribute and develop IP content and to enhance the value of its IP. Many of the Company's online literature works have been successfully adapted into animation, TV series, web series, films and games, including Joy of Life, Candle in the Tomb, Soul Land, The King's Avatar and My Heroic Husband. China Literature's rich and extensive content library as well as its unparalleled capability and resources to adapt IP into various entertainment formats is a significant competitive advantage that lies at the core of its business model. For more information, please visit http://ir.yuewen.com/.

Non-IFRS Financial Measures

To supplement the consolidated financial statements of the Company prepared in accordance with IFRS, certain non-IFRS financial measures, namely non-IFRS operating profit, non-IFRS operating margin, non-IFRS profit for the year, non-IFRS net margin, non-IFRS profit attributable to equity holders of the Company, non-IFRS basic EPS and non-IFRS diluted EPS as additional financial measures, have been presented in this press release for the convenience of readers. These unaudited non-IFRS financial measures should be considered in addition to, and not as a substitute for, measures of the Company's financial performance prepared in accordance with IFRS. These unaudited non-IFRS measures may be defined differently from similar terms used by other companies. In addition, non-IFRS adjustments include relevant non-IFRS adjustments for the Company's material associates based on available published financials of the relevant material associates, or estimates made by the Company's management based on available information, certain expectations, assumptions and premises.

Our management believes that the presentation of these non-IFRS financial measures, when shown in conjunction with the corresponding IFRS measures, provides useful information to investors and management regarding the financial and business trends relating to the Company's financial condition and results of operations. Our management also believes that the non-IFRS financial measures are useful in evaluating the Company's operating performances. From time to time, there may be other items that the Company may include or exclude in reviewing its financial results.

Forward-Looking Statements

This press release contains forward-looking statements relating to the industry and business outlook, forecast business plans and growth strategies of the Company. These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release. They are based on certain expectations, assumptions and premises, some of which are subjective or beyond our control. These forward-looking statements may prove to be incorrect and may not be realized in future. Underlying the forward-looking statements is a large number of risks and uncertainties. Further information regarding these risks and uncertainties is included in our other public disclosure documents on our corporate website.