KUKE - Earnings call transcript Q1 2022 | Kuke Music Holding Limited

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Operator

Good morning and good evening, ladies and gentlemen. Welcome to Kuke Music Holding Limited First Quarter 2022 Earning Conference Call. At this time, all participants are in a listen-only mode.

We will be hosting a question-and-answer session after management's prepared remarks. I will now turn the call over to the first speaker today, Ms. Director Music Relations Limited. Investor Zuo, of Holding Kuke Jane Please ma'am. go ahead,

Jane Zuo

to Hello, quarter operator. you, our everyone. Thank Welcome first call. XXXX earnings

financial On will CFO Ms. then audience. operations on of the are take Sun today Mr. Yu and will Sun, with model discuss will our Yu, then details. Kuke. and questions and call views share President; Chan, Chairman, Afterwards, Patricia CEO; business and Mr. Tony review the Mr. business our our will Founder, we Tony Ms. the He me from strategic focus.

Before unknown control, from forward-looking forward-looking statement Litigation any in or results, These or statements their factors included expressly filing and company to SEC. we update the forward-looking start, company by please or no the statements. Reform Harbor of note based the conference Securities the are not under that may performance risks, by XXXX. which risk be this cautionary expectations the those qualified entirety statements of the in All forward-looking and factors company's duty date or on performance, statements call different current revise are known uncertainties, and materially selected management's statements other may with pursuant undertakes provisions or contain Act company's events of the circumstances expectations to Private after The this actual the observations cause forward-looking made for the implied Safe call. results, that achievements and involve to

conference this being As call recorded. is a reminder,

available on at Relations archived webcast of addition, conference ir.kuke.com. and will website the In Investor a be call Kuke live

website to CEO release It He earnings Founder, introduce as well. pleasure and now You can is check out full Kuke. Chairman on Yu, Mr. my of our our IR

He Yu

for you, Good morning, XXXX first our and quarter Jane. Thanks us earnings everyone. call. evening welcome joining and to good Thank

highlights, of fundamentals QX our I'd talk to our sharing strategy. financial Before like about the

classic events, music focus Firstly service. on is our

expand to music vision, throughout As community. China we and global demonstrated the aim the in classic influence by Kuke's of

learning Our business as music segments are include event service, the classic licensing NFT music of new built business upon such foundation and and technologies. service. These music segments services, solutions, live smart strong the our subscription initiatives

the streaming RPI Chinese music to in in market XXXX, China, of according terms which puts embracing reports. by is revenues. above global XX.X%. of growth growing The XX.X% number XXXX grew China And six recorded growth one largest three This the the Second to markets Of expansion the total is being in such music the music average growth of number unlock recorded the great fastest of China. of markets, terms Naxos the as due classic share for lovers music. of Naxos classic of music in to has we music and with its Kuke's Through will partner the respectively, of continue expertise, revenues. population and global the business China, Chinese large believe charm to base potentials potential we market all in

global our presence. expanding is Third

On with the evermore to and are artists the hand, closely Naxos one performers around with relationship enhance we world. working our

initiatives multiple industry. technology. NFT recent development to our our to innovations embrace a is thrives then classic in We technology. intersection investment is metaverse. other cultivating grow the for Kuke the music we an the developed and that by could art in hand, presence. the at also of the of advance global demonstrated platform entire be On have Fourth company This KOLO,

turn President, each business me let the to details our with Patricia, to Now, more segment. call you share on over

Li Sun

everyone. evening, good and morning Good Yu. Mr. you, Thank

our XXX,XXX the pieces tracks cover world, number our partner, by support tracks music approximately of and included total of X instruments musicians which of performance folk These million, content in long-term other of XX,XXX genre segments. and Now X.X brings With types over nearly of of XXX to tracks musical different international music. music from aggregate classical our regions. classical regard jazz, music the X,XXX segment, our we added and million played to traditional contents of business countries to licensing Naxos. subscription of through strategic turning and This X,XXX

from addition, our X,XXX library a specialty medieval volumes first tracks of increased library XXX,XXX to In with our and world, word, over classical classical China. sheet folk, ever-growing X,XXX content Naxos, In video also the of Chinese titles, the XXX that recordings and classical, of jazz, provider in over standard largest quarter, to the independent Kuke's range content, institutional wide repertoires across and provides contains with and content strong spoken traditional music. content music subscribers as contemporary. music content our span music

screen In contract value. the and large display subscribers, scenarios with strong in has demand resulted long increasing which along addition form at of to various usually videos, higher commercial larger home for of comes adoption in number

form working videos. as people of home streaming addition, for from demand also In a boosted result pandemic long of the

opera, investing form the the And performance concert, classical our music ballet, future. master including the now competition, subscription trends believe capture in are international to we purchasing market live this in dynamics of the and streaming and more drive long opportunities further live and videos, licensing We class market. and segment growth documentary, should

Violin In competition. sponsor you updates Next, our to Kreisler also important the Competition, I announced joint XXth Naxos to Austria's would violin International Kuke Fritz and associated Naxos. like most April, business with share with

As language most of the brand Kuke classical expand to and classical across known the some to world, in events it's of the music sponsoring renowned promote is the community of music influence Kuke continues music internationally. mankind. all, universal global Through to the

increasingly promote sponsor, will more international Kuke forward, competition. monetize and Going

music through underserved learning to art enhance year, the smart providing fourth to quarter last music the schools streams China. of for of establishing environment collaboration high rooted with we business, solutions deep headwinds our education segment, and In in with terms have challenging despite an the since public a prioritized quality aim music learning our learning solutions in of market kindergartens smart revenue and further

in learning segment. school the main growth quarter, from For contributor smart music public revenues first revenue the became our

our planning for services revenue segment, I music call who first the live reached from details for in pass driven RMB CFO, music in to the events XX.X events that, execution mainly first financial quarter our Tony, quarter. and walk will will million, For China. the over you the With by income through live our marketing,

Hoi Tung Chan

Thank you, And Patricia. hello, everyone.

Before we start our that measures note we'll financial detailed non-IFRS discussion, presenting be please today.

RMB tables which for today can the Please unless Our year-over-year results all expenses, press expenses certain a stated, non-IFRS note our first the on non-cash for release. that, in All on quarter are comparisons of exclude these unless our basis operations. found of are we not Details are stated. reconciliation present be in otherwise numbers financial terms. otherwise part XXXX

quarter from prior XX.X in During the which by of period, XX.X first period RMB smart million million Subscription XXXX. increased revenue same decreased the period X.X in segment revenue in to the XXXX, increased to of the from the of XXX.X% RMB million larger music XXXX, period licensing our RMB RMB RMB the to client increased from million from of million XXX.X% by of million products. and XXXX million year due by decrease to the to our mainly X RMB revenue X.X slightly learning sales RMB same million base. in RMB X.X X.X due to same X.X Revenue from solution X.X% hardware in of

million to XXXX, of increased decreased first from million X.X RMB from revenue solutions public revenue by increased RMB to substantial revenue the Smart sales XXXX. students increase revenues learning XXX.X% contraction music million live the learning the kindergarten music the from events sales XXXX products Most X.X% X.X the by in of music same in to million, of due to mainly in million by the in in RMB to schools subscription of XX.X music RMB live XXXX. importantly, events X.X period smart Specifically, kindergarten total same private businesses of period due smart quarter. increased quarter RMB learning music services in solution to X.X driven segment

XX.X% addition, million gross total X.X compared first the from a disposal of of In revenue the In margin same segment, private was of a the and revenue to subscription our million By year. RMB RMB margin kindergarten in compared decreased same of period X.X of of licensing obsolete last the compared was result to of million same positive XXXX, XX.X% one-time In in X.X% profit of business. was music quarter – contraction as gross the XX.X% RMB the X.X the XXXX. classical inventory minus period was period Gross XXXX.

of was due to classical gross Specifically, of XXX.X% revenue music licensing of margin growth payments. of year-over-year classical minus amortization The XX.X% gross XXXX, due to quarter. from from the XX.X% smart in XXXX. the in learning the the subscription revenue of The in mainly % solutions XXX.X% the decreased to same music same minus segment same of period to of to in costs compared the and negative margin XXXX, margin the gross music royalty period improved positive XX.X% period X.X higher decreased

in Specifically, the XX.X% same to private rose from The XX.X business. subscriptions due the increased subscription of gross margin XX.X% period margin in due smart of higher solution music kindergarten of segment of smart gross music contraction was the students learning learning the the the live to from compared of mainly kindergarten music period the events as of music increased margin XX.X% the due solution XX%, a events strategic quarter. from same to gross services depreciation in to revenue The % XXXX positive sales the live XXXX costs minus the business. result private revenue of was from to

RMB employees of due the million XX.X the first in period from total Operating higher in by XX.X% quarter period which: to The to of XXXX, increased was of and in to expenses RMB increased same compensation of quarter compared period of the RMB This the stock-based in the quarter accounts decreased the [XXXX] period operating from of quarter XX.X% was quarter losses million Moving to therefore, The the the in to XXXX. XX.X XXXX. same million expenses in XXXX. RMB on to from due XXXX of losses operating distribution same was first by to XX.X first of quarter XX.X% and XXXX that million RMB to the from financial X.X first receivable. million in in loss loss XX.X listing of X.X costs impairment same (sic) same and assets of mainly of million in XXXX the one-time RMB the expenses first the on of million RMB and XXXX, number XXXX on million operating first period RMB due Administrative X.X in XX XXXX. increased expenses. million to in incurred and, the in XX.X mainly Selling the X.X of XXXX of by increase RMB the decreased expenses wages. increase RMB salary million Impairment the

Our million non-IFRS the million same the both non-IFRS XXXX, of was loss XX net same period to net of RMB X.XX. XXXX. XX compared RMB in compared and million per RMB net loss Basic in XXXX. first diluted RMB were loss to RMB our basic XX.X loss million non-IFRS of and And loss RMB per of XX.X the ADS period both X.XX. ADS diluted were In was quarter

liquidity. on Moving to and our balance sheet

XXXX, we're accelerating remarks RMB take a confident path today. cash on we now March we improvement our cash concludes by that in XX.X position million XX, Operator, to and for of As we cash ready growth. solid in right financial questions. are prepared equivalents. of total results, This and the With the had remain

Operator

Instructions]. [Operator

Brian from Our AMTD comes first from question Li Group.

Brian Li

I two here. have questions

first one is, noticed first declined in your quarter. that The gross margin we

rapid us you gross And basis. your this then, segment what's revenue the please could margin and of in is, on more from year-on-year second a learning So a sales color growth And year? there's one of this? music smart the on give for guidance solutions

from So, sustainable rose what's to behind? in also key the revenue quarters? driver that following we And expect significantly growth and can licensing the be the

Hoi Tung Chan

two I'll take questions. these

and decreased The same So was for of one-time XXXX. of decline inventory disposal the increased first to RMB the period question, obsolete the X.X X.X the in payments. in to of attributable first royalty RMB from the margin quarter gross amortization of million XXXX million

be year. We full normalized the the to for margin gross expect

a And million So, smart learning the products is believe larger learning XXXX. music schools due in to period growing music we X.X demand the period first solutions increased quarter X.X by sustainable for million and public of spurred about XXXX. music This RMB public smart million result the cases. in for Revenue RMB use the from licensing of sales of revenue as to second new same increased the from rapid client will China be growth, is This X.X sales schools. mainly the in RMB by million growth in to question of increased the a stable the see XXXX. by from from X to from XXX% base of XXX.X% same we RMB as classical demand

For home example, commercial home long scenarios demand form investing international concert, opera, form videos. competition, opportunities screen live or has as We're of et and strong market. for people now documentary, in streaming videos, increasing in display long result resulted the in video. adoption more including And masterclass, the also a of the various of large pandemic from form these working live cetera, to for demand capture growth boosted long at ballet, streaming, purchasing

two reply questions. to my is that these So,

Operator

[ph]. The Dick next question comes Asset Management from [ph] from Kowhai Chang

Unidentified Participant

questions I today. have two

on public kindergartens please your first market? development schools? collaboration private one question. And being, strategy your please on first elaborate in second a what's the global question That's would latest is, strategies elaborate could my expanding with with The on kindergarten? working you of the and And the business of you

Li Sun

I is questions. Patricia. take the This will two

one working first is The and schools. kindergartens about strategies with public about

art encourages the private down year, subscription kindergarten scaling to we main business, public So, smart in have the China. became beginning contributor schools, focused the music since considering of the first headwinds for learning quarter, providing on music growth in in private which challenging the smart gradually with we is for Therefore, while that revenue solutions environment the have in business, policy line kindergartens more this the revenue subscription segment. school the public learning from the been education

So, second the business partner, classical business been about around strategic with closely expand artists will market, say, of regarding in relationship firstly, to global our and I reach Kuke strategy globe our enhance working the our and expanding of performers the has questions music. with to the global Naxos,

of due China, its unlock in will music. to and we great population partner classic share with the large potential that of As to and lovers all lower rates music Naxos' classical market in growth the The Chinese currently company potential base has business believe for penetration charm the continue music China.

the copyrighted by Regarding classical music strategy, expanding music to collaboration with continue hand, labels. one we content in international on content invest

growth full China concerts, and long music further across form doing the first live have also capture content, the quarter, competition, category we masterclasses, During streaming documentaries, added enrich to live and library videos ballet, including international opera, classical the opportunity our market.

online our streaming Chinese expanded for renowned self-production artists we distribution content hand, other new leading and the work. of On on their our platform

global of overseas example, our For been self-production, has ARC The Sound through and markets Nature, successfully the Naxos distributed label network. to

increase business. same grow committed global As such, we to expect presence. Kuke's gradually revenue from to global our time, we this in are At the

the renowned the the this be important expand and and XXth known is the world music before September Fritz universal in help is music to As events International Kuke April, mankind, Kreisler held language in announced mentioned most Competition, will the script, competition. as Naxos for sponsoring in jointly Classical sponsor will us which Violin in metaverse. an classical most company Austria's more the and going Kuke, year, will monetize to also which the promote violin across competition. internationally. new and And to investments also in we of classical in continue global Meanwhile, increasingly our sponsor forward, for global community opportunities. KOLO, and started music will music the influence NFT we its international also explore platform and promote the initiatives brand Recently, the business also

and the Kuke, of advance of that technology. a development firmly intersection will that And to believe at innovations the embrace company also We thrive industry. the entire is the we company, art

Operator

Wang Next from Brokers. Tong question Tiger comes from

Tong Wang

position second latest is, this plans question have recently? X.X assets RMB and first impairment one have detail? an million. of we could how financial any you losses on do explain my in I is the two And your you noticed cash And financing is And questions. please

Hoi Tung Chan

these take I'll two questions.

industry. the of of target, March For cash We there XXXX, opportunities plenty were the see XX.X M&A of position, classical and as RMB acquisition accordingly. in million. we cash finance be global music cash we alternative a XX, might believe desirable our when are thinking And equivalents

think it sufficient cash now. situation. So, pretty currently, the But, I really right on position, we're the for depends

the accounts the all second relation So, loss, impairment receivable in smart loss learning were solutions impairment to on for to question business. related the music the

Operator

more no everyone. Thank you, this Seeing the questions the you. call. Thank in queue, concludes

have inquiries you. future, Kuke Thank you ir@kuke.com. at any feel please free further If the contact in to

He Yu

Thank you.

Kuke Music Holding Limited (KUKE) 26 May 222022 Q1 Earnings call transcript