Cloud Music Inc. Reports First Half 2024 Financial Results
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HANGZHOU, China, Aug. 22, 2024 /PRNewswire/ -- Cloud Music Inc. (HKEX: 9899, "NetEase Cloud Music" or the "Company"), a leading interactive music streaming service provider in China, today announced its financial results for the first half of 2024 ended June 30, 2024.
Summary of Key Financial Metrics
(RMB in thousands, unless otherwise stated)
Six months ended 30 June | ||||
2024 | 2023 | |||
(Unaudited) | (Unaudited) | |||
Revenue | 4,070,493 | 3,908,380 | ||
Gross profit | 1,425,731 | 965,147 | ||
Profit before income tax | 813,578 | 311,961 | ||
Profit for the period | 809,949 | 293,750 | ||
Non-IFRS measure: | ||||
Adjusted net profit (1) | 880,749 | 331,893 |
First Half 2024 Key Financial Highlights
Note:
(1) Adjusted net profit is defined as profit for the period attributable to the equity holders of the Company adjusted by adding back equity-settled share-based payments as appropriate.
Business Overview
Coming into 2024, we remained steadfast in prioritizing development in our core music business and fostering a long-lived, thriving community. We continued to propel quality development across our music-centric ecosystem, strengthening our music-centric monetisation, resulting in improved profitability. Our appeal to users was enhanced due to our premium offering enhancements, such as improving our content ecosystem and personalized distribution, adding innovative features, and strengthening community attributes. These successful efforts, including a recent comprehensive upgrade of the "NetEase Cloud Music" app, helped us further augment our unique community and deepen user engagement. Combined with advanced membership privileges offered, we delivered solid growth in our subscription-based memberships, driving monetisation momentum from our core online music business.
During the first half of 2024, we continued to engage users across our leading music-inspired community. Our total user base remained largely stable, with a DAU/MAU ratio (daily active user/monthly active user ratio) consistently staying above 30%. Our growing online music subscriber group is particularly well-engaged on our platform. Along with our unique music- inspired community, personalised recommendation is one of our key focuses and the primary goal of our recent product upgrade is to reinforce these long-term differentiations. In our app's new version, we further improved users' music discovery and consumption via enhanced personalised recommendations and innovative features for a premium listening experience. Additionally, we continued to cultivate our music-centric community centred around our iconic Comments section, leading to increased community content generation and consumption, as well as more user interactions amid a revitalized community atmosphere. These efforts have resulted in improved user engagement, i.e., average time spent listening to music within our mobile app.
In the first half of 2024, we continually broadened our content offerings for our diverse audience. With the addition of major Korean music labels like JYP Entertainment and Kakao Entertainment, we continued rounding out our copyrighted content library. Combined with our strong support for independent artists and enhancements to our in-house music offering, we have created a differentiated content ecosystem. In addition to top-tier music content, we are fuelling growth in our signature music genres, such as hip-hop, through initiatives across copyrighted content collaboration, independent music cultivation, and in-house music production.
We worked diligently to strengthen our music-centric monetisation capabilities during the first half of 2024, achieving solid growth momentum year-over-year. Our revenue from subscription- based memberships continued its healthy upward trend with a 25.5% year-over-year growth, driven by an increase in the number of subscribers. We successfully introduced premium offerings, such as expanded content and innovative features, broadened membership privileges (including various IP-themed music players and a new interpersonal feature, etc.) and joint programs with external partners, as well as innovative promotional campaigns. Notably, membership retention rates, time spent and activity ratios were all improved across our expanding, high-quality subscriber base. In addition to subscriptions, we strengthened our advertising commercialisation capabilities during the period, supported by enhanced operational efficiency and optimized algorithms for performance- based ads, as well as more diverse advertisement formats and initiatives. Our exploration of ad- supported models also began contributing to our ad revenue growth.
We further improved our profitability during the first half of 2024, primarily driven by the benefits of economies of scale. Our gross margin increased to 35.0% for the first half of 2024, considerably improved from 24.7% for the same period of 2023, owing to our increased business scale, strong monetisation of our core online music business that led to ongoing improvement of operating leverage, as well as a one-off adjustment of certain copyright costs that boosted the gross profit margin by approximately 2.6 percentage points for the first half of 2024. Consequently, we achieved a net profit of RMB809.9 million for the first half of 2024, compared with a net profit of RMB293.8 million for the same period of 2023. Excluding the impact of equity-settled share- based payments, we achieved an adjusted net profit of RMB880.7 million for the first half of 2024, compared with an adjusted net profit of RMB331.9 million for the same period of 2023.
Going forward, we will remain committed to bringing more high-quality music to our users, cultivating our community, enhancing user experience, and strengthening our operating capabilities. Our strategic blueprint calls for the following actions:
Comprehensive and differentiated content ecosystem
We are further enriching our content library, including both licensed music and original music. We continually update our diverse music selection to meet the evolving needs of our users, particularly younger users who have varied tastes and a desire to discover new music. In addition to top-tier music works, we especially focus on promoting our signature music genres, particularly hip-hop.
Enhancing partnerships with copyright holders
Throughout the period, we have remained dedicated to broadening our collaboration with music copyright holders, rounding out our Korean music content library. We have consistently demonstrated our commitment to fostering strong partnerships with music labels, ultimately benefiting both copyright holders and music enthusiasts.
Strengthening our leading independent artists' ecosystem
We continuously enhance our support system for independent artists, offering them comprehensive assistance throughout their music industry journey. This includes support from creation to promotion and financial aid. As of June 2024, our platform had over 732,000 registered independent artists who contributed around 3.6 million music tracks to our library. We are dedicated to supporting emerging musicians, especially in our signature genres like hip-hop, to help them advance their music careers and ultimately enhance the original music ecosystem on our platform.
Developing and promoting differentiated in-house music
Drawing on our expertise in music, wide and varied user base, and in-depth user insights, our multiple in-house studios focused on creating unique music content to further enrich our content matrix, catering to the diverse needs of various audiences.
Diversified audio-based content offerings
In addition to music tracks, we have been actively expanding the long-form audio offerings on our platform. In the first half of 2024, the average listening time per user of long-form audio on our platform increased significantly by 49.4%, driven by our enhanced high-quality content that further engages long-form audio users and encourages more extensive consumption.
Community ecosystem and product innovation
Throughout the first half of 2024, we continued innovating products, enhancing features, and revitalising our differentiated community. During the period, we made significant progress in product innovation, particularly with the comprehensive upgrade of the "NetEase Cloud Music" app conducted from early 2024, which focused on several key areas: enhancing personalised content recommendations, improving traffic allocation across different content verticals, and actively fostering our music-centric community centred around music comments. Our efforts have helped to elevate the user experience, increase music's resonance with our user community and boost music interaction.
Optimising users' music discovery and listening experience
Fostering music-inspired community resonance and connections
During the first half of 2024, we actively nurtured our unique music-inspired community attributes, by amplifying the value of our iconic Comments section across various app scenarios, diversifying UGC content formats and categories, enhancing algorithms and operational activities, and much more. These efforts led to a better community experience for both users and UGC creators, which is crucial in maintaining and improving our strong user activity and stickiness.
Expanding music consumption and communicative scenarios
Conference Call
The Company's management will host an earnings conference call at 7:00 p.m. Beijing/Hong Kong Time on Thursday, August 22, 2024 (7:00 a.m. U.S. Eastern Time on the same day). Details for the conference call are as follows:
Event Title: Cloud Music Inc. First Half 2024 Earnings Conference Call
Registration Link: https://s1.c-conf.com/diamondpass/10040870-8sjfhy.html
All participants must use the link provided above to complete the online registration process in advance of the conference call. Upon registering, each participant will receive a set of dial-in numbers, an event passcode, and a personal access PIN, which will be used to join the conference call.
A replay of the call will be accessible by phone at the following numbers and entering PIN: 10040870. The replay will be available through August 29, 2024.
Chinese Mainland: | 400-120-9216 |
Hong Kong: | 800-930-639 |
United States: | 1-855-883-1031 |
Additionally, a live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.music.163.com.
About Cloud Music Inc.
Launched in 2013 by NetEase, Inc. (NASDAQ: NTES; HKEX: 9999), Cloud Music Inc. (HKEX: 9899) is a well-known online music platform featuring a vibrant content community. Dedicated to providing an elevated user experience, Cloud Music Inc. provides precise, personalised recommendations, promotes user interaction and creates a strong social community. Its focus on discovering and promoting emerging musicians has made Cloud Music Inc. a destination of choice for exploring new and independent music among music enthusiasts in China. The platform has been recognised as the most popular entertainment app among China's vibrant Generation Z community.
Please see http://ir.music.163.com/ for more information.
Forward Looking Statements
This press release contains forward-looking statements relating to the business outlook, estimates of financial performance, 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 realised in the future. Underlying these forward-looking statements are a lot of risks and uncertainties. In light of the risks and uncertainties, the inclusion of forward-looking statements in this press release should not be regarded as representations by the Board or the Company that the plans and objectives will be achieved, and investors should not place undue reliance on such statements.
Non-IFRS Measure
To supplement our consolidated results, which are prepared and presented in accordance with International Financial Reporting Standards ("IFRS"), our Company uses adjusted net loss as an additional financial measure, which is not required by, or presented in accordance with, IFRS. We believe that this measure facilitates comparisons of operating performance from period to period and company to company by eliminating the potential impact of items that our management does not consider to be indicative of our Group's operating performance, such as certain non-cash items. The use of this non-IFRS measure has limitations as an analytical tool, and shareholders and potential investors of our Company should not consider them in isolation from, as a substitute for, analysis of, or superior to, our Group's results of operations or financial condition as reported under IFRS. In addition, this non-IFRS financial measure may be defined differently from similar terms used by other companies, and may not be comparable to other similarly titled measures used by other companies. Our presentation of this non-IFRS measure should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.
Investor Enquiries:
Angela Xu
Cloud Music Inc.
music.ir@service.netease.com