EX-99.1 2 ea164703ex99-1_kukemusic.htm PRESS RELEASE

Exhibit 99.1

 

Kuke Reports Second Quarter 2022 Unaudited Financial Results

 

BEIJING, August 19, 2022 /PRNewswire/ -- Kuke Music Holding Limited (“Kuke” or the “Company”) (NYSE: KUKE), a leading classical music service platform, today announced its unaudited financial results for the second quarter ended June 30, 2022.

 

Second Quarter 2022 Financial Highlights

 

●Total revenue was RMB54.4 million (US$8.1 million), compared to RMB84.1 million in the same period of 2021.

 

●Total gross profit was RMB28.9 million (US$4.3 million), compared to RMB49.7 million in the same period of 2021.

 

●Net profit was RMB3.4 million (US$0.5 million), compared to net loss of RMB11.4 million in the same period of 2021.

 

●Non-IFRS net profit [1] was RMB16.9 million (US$2.5 million), compared to a Non-IFRS net profit of RMB18.3 million in the same period of 2021.

 

Second Quarter 2022 Business Developments

 

●During the second quarter of 2022, the Company added nearly 4,000 tracks of traditional classical music. The Company’s copyrighted classical music content included over 2.9 million music tracks as of June 30, 2022. This is comprised of more than 2 million tracks of traditional classical music, more than 360 thousand tracks of jazz, world, folk and other genres of music, as well as over 1000 video titles, more than 470 thousand spoken content tracks and more than 5000 volumes of sheet music. These contents span across more than 95 thousand musicians, more than 2 thousand musical instruments and more than 200 countries and regions.

 

●In addition, the company has added more long-form videos including opera, live concert, ballet, documentary, master class, international competition, live streaming to further enrich its classical music library and capture the growth opportunities in the market.

 

●With regard to the subscription business segment, the aggregated institutional subscribers increased to 812 from 809 across China.

 

●The 25th Beijing Music Festival (“BMF”) will commence in the month of September, 2022

 

Mr. He Yu, Chief Executive Officer of Kuke, commented, “Despite, firstly, the negative impact of local COVID-19 resurgence and subsequent lockdowns in certain cities in China, including where our clients are based, secondly, the smart music learning business is in the process of transiting from private kindergarten subscription model to public school model, which has impacted our revenues and revenue mix, we still recorded a total of revenues of RMB54.4 million during the second quarter of 2022, and achieved IFRS-based positive net income of RMB3.4 million.

 

Going forward, in view of the challenges presented by macroeconomic environment during the second quarter, we will continue to focus on strengthening our existing product and service portfolio, and executing cost saving initiatives to help us achieve a more optimized cost structure going forward. “

 

 

 

[1] Non-IFRS profit/loss of the Company was arrived at after excluding the combined effect of amortization and depreciation, share-based compensation, impairment losses on financial assets, net, and the corresponding income tax effects of these non-IFRS adjustments.

 

 

 

 

Second Quarter 2022 Financial Results

 

Total Revenue

 

Total revenue decreased by 35.2% to RMB54.4 million (US$8.1 million) from RMB 84.1 million in the same period of 2021.

 

●Total licensing and subscription segment revenue decreased by 14.2% to RMB33.9 million (US$5 million) from RMB39.6 million in the same period of 2021. Specifically, licensing revenue decreased by 15% to RMB29.0 million (US$4.3 million) from RMB34.2 million in the same period of 2021, due to the adverse impact from the COVID-19. Subscription revenue decreased to RMB4.9 million (US$0.7 million) from RMB5.4 million in the same period of 2021, mainly due to the decrease in sales of hardware products.

 

●Total smart music learning solutions segment revenue decreased by 59% to RMB8.5 million (US$1.3 million) from RMB20.7 million in the same period of 2021. Specifically, smart music learning solutions sales revenue from public schools and commercial clients decreased by 71.5% to RMB4.1 million (US$0.6 million) from RMB14.4 million in the same period of 2021, mainly due to the decreased sales to commercial clients. Smart music learning solutions subscription revenue from kindergarten students decreased by 30.1% to RMB4.4 million (US$0.7 million) from RMB6.2 million in the same period of 2021, due to the strategic contraction of our private kindergarten business starting from 2022.

 

●Total live music events segment revenue decreased to RMB11.9 million (US$1.8 million) from RMB23.8 million in the same period of 2021, due to the decreased revenues of live music events service due to the adverse impact by COVID-19.

 

●Total one-time disposal of obsolete inventory revenue was RMB0.1 million, as a result of the strategic contraction of our private kindergarten business.

 

Gross Profit and Gross Margin

 

Gross profit in the second quarter of 2022 decreased to RMB28.9 million (US$4.3 million) from RMB49.7 million in the same period of 2021, which was largely attributable to the decreased revenues. Gross margin was 53.1%, compared to 59.1% in the same period of 2021.

 

●The gross margin of classical music licensing and subscription segment was 81.7%, compared to 86% in the same period of 2021. Specifically, the gross margin of classical music licensing slightly improved to 89.1% from 87.4% in the same period of 2021. The gross margin of classical music subscription decreased to 37.6% from 77.4% in the same period of 2021, due to the higher linear amortization costs of royalty payments.

 

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●The gross margin of smart music learning solutions segment was (5.0)%, compared to 63.8% in the same period of 2021. Specifically, the gross margin of smart music learning solution sales decreased to 43.0% from 89.0% in the same period of 2021, due to lower-margin business representing a larger percentage of our revenue mix compared to the prior quarter. The gross margin of smart music learning solution subscriptions from private kindergarten students was (50.3)%, compared to 5.5% in the same period of 2021 due to higher depreciation costs as a result of the strategic contraction of the private kindergarten subscription business.

 

●The gross margin of live music events segment increased to 15.9% compared to 10.4% in the same period of 2021.

 

●The gross margin of one-time disposal of obsolete inventory was (287.7)%, due to the strategic contraction of the private kindergarten business.

 

Operating Expenses

 

Total operating expenses in the second quarter of 2022 decreased by 53.2% to RMB27.8 million (US$4.2 million) from RMB59.5 million in the same period of 2021.  

 

●Selling and distribution expenses in the second quarter of 2022 decreased by 53.9% to RMB6.0 million (US$0.9 million) from RMB13.0 million in the same period of 2021. The decrease was mainly due to decreased expenses in relation to kindergarten business.

 

●Administrative expenses in the second quarter of 2022 decreased by 48.5% to RMB19.3 million (US$2.9 million) from RMB37.5 million in the same period of 2021, due to the deceased stock-based compensation costs that incurred in the second quarter of 2021.

 

●Impairment losses on financial assets in the second quarter of 2022 decreased by 75.5% to RMB2.2 million from RMB9million in the same period of 2021. This was mainly due to increased impairment losses on accounts receivable.

 

Operating Profit

 

Operating profit in the second quarter of 2022 was RMB4.4 million (US$0.65 million), compared to operating loss of RMB8.4 million in the same period of 2021.

 

Net Profit for the Period

 

Net profit was RMB3.4 million (US$0.5 million), compared to net loss of RMB11.4 million in the same period of 2021.

 

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Non-IFRS Net Profit for the Period

 

Non-IFRS net profit was RMB16.9 million (US$2.5 million), compared to non-IFRS net profit of RMB18.3 million in the same period of 2021.

 

Net Profit per ADS and Non-IFRS Net Profit per ADS

 

Basic and diluted net profit per American Depositary Share (“ADS”) were both RMB0.13 (US$0.02) in the second quarter of 2022, compared to basic and diluted net loss per ADS of RMB0.42 in the same period of 2021. Basic and diluted non-IFRS net profit per ADS were both RMB0.57 (US$0.09) in the second quarter of 2022, compared to basic and diluted non-IFRS net profit per ADS of RMB0.62 in the same period of 2021. Each ADS represents one Class A ordinary share of the Company.

 

Balance Sheet

 

As of June 30, 2022, cash and cash equivalents were RMB18.8 million (US$2.8 million). 

 

About Kuke Music Holding Limited

 

Kuke is a leading classical music service platform in China encompassing the entire value chain from content provision to music learning services. By collaborating with its strategic global business partner Naxos, the largest independent classical music content provider in the world, the foundation of Kuke’s extensive classical music content library is its unparalleled access to more than 900 top-tier labels and record companies. Leveraging its market leadership in international copyrighted classical music content, Kuke provides highly scalable classical music licensing services to various online music platforms and classical music subscription services to over 800 universities, libraries and other institutions across China. In addition, it has hosted the Beijing Music Festival (“BMF”), the most renowned classical music festival in China, for 24 consecutive years. Through KUKEY, the Company’s proprietary AI music learning system, Kuke aims to democratize music learning via technological innovation, bring fascinating music content and professional music techniques to more students, and continuously improve the efficiency and penetration of music learning in China.

 

For more information about Kuke, please visit https://ir.kuke.com/

 

Exchange Rate Information

 

This announcement contains translations of certain RMB amounts into U.S. dollars (“US$”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.6981 to US$1.00, the noon buying rate in effect on June 30, 2022, in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.

 

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Forward-looking Statements

 

This announcement contains forward looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident,” “potential,” “continue” or other similar expressions. Statements that are not historical facts, including but not limited to statements about Kuke’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including those in Kuke’s registration statement filed with the Securities and Exchange Commission. Further information regarding these and other risks is included in Kuke’s filings with the SEC. All information provided in this press release is as of the date of this press release, and Kuke undertakes no obligation to update any forward-looking statement, except as required under applicable law.

 

Use of Non-IFRS Financial Measures

 

The Company uses non-IFRS profit for the period, which is a non-IFRS financial measure, in evaluating its operating results and for financial and operational decision-making purposes. The Company believes that non-IFRS profit helps management to analyze trends in the Company’s business that could otherwise be distorted by the effect of certain expenses that the Company includes in its profit or loss for the period.

 

Non-IFRS profit for the period should not be considered in isolation or construed as an alternative to net profit for the period or any other measure of performance or as an indicator of its operating performance. Investors are encouraged to review non-IFRS profit for the period and the corresponding footnote explaining the calculation of such measure together. Non-IFRS profit for the period presented here may be different to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, and should not be compared to the measure adopted by the Company’s data. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure.

 

Non-IFRS profit for the period represents profit or loss for the year excluding the combined effect of amortization and depreciation, share-based compensation, impairment losses on financial assets, net, and the corresponding income tax effects of these non-IFRS adjustments.

 

Investor and Media Contact:

 

Kuke Music Holding Limited

 

Email: jane.zuo@kuke.com

 

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KUKE MUSIC HOLDING LIMITED

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In thousands of RMB and USD)

 

  

As of
December 31,

2021

  

As of
June 30,

2022

  

As of
June 30,

2022

 
   RMB   RMB   USD 
NON-CURRENT ASSETS            
Property, plant and equipment   60,443    52,043    7,770 
Intangible assets   492,300    484,287    72,302 
Right-of-use assets   3,060    9,786    1461 
Goodwill   237,225    237,225    35,417 
Prepayments, other receivables and other assets   95,217    112,081    16,733 
Deferred tax assets   7,736    10,789    1,611 
Equity investment at fair value through profit or loss   1,000    1,000    149 
Total non-current assets   896,981    907,211    135,443 
CURRENT ASSETS               
Inventories   7,307    9,023    1,347 
Trade receivables   111,104    144,179    21,525 
Prepayments, other receivables and other assets   34,101    40,009    5,973 
Net investments in subleases   355    -    - 
Due from related parties   306    2,319    346 
Due from shareholders   100    100    15 
Cash and cash equivalents   59,045    18,830    2,811 
Total current assets   212,318    214,460    32,017 
Total assets   1,109,299    1,121,671    167,460 
EQUITY               
Issued capital   194    194    29 
Reserves   936,444    912,686    136,258 
Equity attributable to equity holders of the parent   936,638    912,880    136,287 
Non-controlling interests   5,021    4,430    662 
Total equity   941,659    917,310    136,949 
NON-CURRENT LIABILITIES               
Interest-bearing loans and borrowings   6,046    1,734    259 
Contract liabilities   366    250    37 
Deferred tax liabilities   1,417    1,402    209 
Lease liabilities   793    6129    915 
Total non-current liabilities   8,622    9,515    1,420 
CURRENT LIABILITIES               
Trade payables   30,514    51,607    7,705 
Other payables and accruals   58,178    59,244    8,845 
Contract liabilities   23,506    14,433    2,155 
Due to a shareholder   325    325    49 
Interest-bearing loans and borrowings   41,493    63,556    9,489 
Leased liabilities   2,486    3,718    555 
Income tax payable   2,516    1,963    293 
Total current liabilities   159,018    194,846    29,091 
Total liabilities   167,640    204,361    30,511 
Total equity and liabilities   1,109,299    1,121,671    167,460 

 

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KUKE MUSIC HOLDING LIMITED

UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND

UNAUDITED OTHER COMPREHENSIVE INCOME

(In thousands of RMB and USD, except for per share data)

 

   For the three months ended June 30 
   2021   2022   2022 
   RMB   RMB   USD 
Revenue   84,052    54,441    8,128 
Subscription and licensing   39,545    33,943    5,068 
Licensing   34,192    29,070    4,340 
Subscription   5,353    4,873    728 
Smart music learning solutions   20,671    8,471    1,264 
Smart music learning solutions sales   14,439    4,115    614 
Smart music learning solutions subscription   6,232    4,356    650 
Live music events   23,836    11,921    1,780 
One-time disposal of obsolete inventory   -    106    16 
Cost of Goods Sold   (34,363)   (25,540)   (3,813)
Gross profit   49,689    28,901    4,315 
Other income, net   1,412    3,315    495 
Selling and distribution expenses   (12,999)   (5,988)   (894)
Administrative expenses   (37,529)   (19,346)   (2,888)
Impairment losses on financial assets, net   (9,000)   (2,203)   (329)
Other operating expenses   (13)   (300)   (45)
Operating (loss)/profit   (8,440)   4379    654 
Share of losses of a joint venture   (239)   -    - 
Finance costs   (2,149)   (1,216)   (182)
Finance income   25    8    1 
(Loss)/profit before tax   (10,803)   3,171    473 
Income tax expense   (634)   195    29 
(Loss)/profit for the period/year and total comprehensive (loss)/income for the period/year   (11,437)   3,366    502 
Attributable to:               
Equity holders of the parent   (12,289)   3,757    560 
Non-controlling interests   852    (391)   (58)
(Loss)Earnings per share for class A and class B ordinary shares attributable to ordinary equity holders of the parent               
Basic   (0.42)   0.13    0.02 
Diluted   (0.42)   0.13    0.02 

 

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KUKE MUSIC HOLDING LIMITED

RECONCILIATIONS OF NON-IFRS MEASURES TO THE MOST COMPARABLE IFRS MEASURES

(In thousands of RMB and USD)

 

   For the three months ended June 30, 
   2021   2022   2022 
   RMB   RMB   USD 
(Loss)/profit for the period/year and total comprehensive (loss)/income for the period/year   (11,437)   3,366    502 
Adjustments:               
Amortization and Depreciation   4,951    9,058    1,352 
Share-based compensation   16,545    3,652    545 
Impairment losses on financial assets, net   9,000    2,203    329 
Income tax effects   (796)   (1,412)   (211)
Non-IFRS Profit/(loss)   18,263    16,867    2,517 

 

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KUKE MUSIC HOLDING LIMITED

UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND

UNAUDITED OTHER COMPREHENSIVE INCOME

(In thousands of RMB and USD, except for per share data)

 

   For the six months ended June 30 
   2021   2022   2022 
   RMB   RMB   USD 
Revenue   95,448    80,514    12,020 
Subscription and licensing   44,147    38,394    5,732 
Licensing   34,469    30,111    4,495 
Subscription   9,678    8,283    1,237 
Smart music learning solutions   27,465    15,903    2,374 
Smart music learning solutions sales   14,842    5,256    784 
Smart music learning solutions subscription   12,623    10,647    1,590 
Live music events   23,836    25,709    3,838 
One-time disposal of obsolete inventory   -    508    76 
Cost of goods sold   (42,550)   (51,418)   (7,677)
Gross profit   52,898    29,096    4,343 
Other income, net   10,446    6,537    976 
Selling and distribution expenses   (20,284)   (14,325)   (2,139)
Administrative expenses   (77,936)   (44,029)   (6,573)
Impairment losses on financial assets, net   (10,620)   (8,836)   (1,319)
Other operating expenses   (42)   (679)   (101)
Operating (loss)/profit   (45,538)   (32,236)   (4,813)
Share of losses of a joint venture   (426)   -    - 
Finance costs   (4,430)   (2,295)   (343)
Finance income   41    20    3 
(Loss)/profit before tax   (50,353)   (34,511)   (5,153)
Income tax expense   1,957    2,899    433 
(Loss)/profit for the period/year and total comprehensive (loss)/income for the period/year   (48,396)   (31,612)   (4,720)
Attributable to:               
Equity holders of the parent   (49,146)   (31,021)   (4,632)
Non-controlling interests   750    (591)   (88)
(Loss)Earnings per share for class A and class B ordinary shares attributable to ordinary equity holders of the parent               
Basic   (1.69)   (1.05)   (0.16)
Diluted   (1.69)   (1.05)   (0.16)

 

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KUKE MUSIC HOLDING LIMITED

RECONCILIATIONS OF NON-IFRS MEASURES TO THE MOST COMPARABLE IFRS MEASURES

(In thousands of RMB and USD)

 

   For the six months ended June 30, 
   2021   2022   2022 
   RMB   RMB   USD 
(Loss)/profit for the period/year and total comprehensive (loss)/income for the period/year   (48,396)   (31,612)   (4,720)
Adjustments:               
Amortization and Depreciation   8,952    18,101    2,702 
Share-based compensation   32,908    7,265    1,085 
Impairment losses on financial assets, net   10,620    8,836    1,319 
Income tax effects   (1,453)   (2,828)   (422)
Non-IFRS Profit/(loss)   2,631    (238)   (36)

 

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