China Literature's net profit attributable to shareholders in the first half of the year increased by 68.5% year-on-year, while IP operation revenue saw a significant decline of 46.4% | Financial Report Insights

In the first half of 2025, CHINA LIT achieved revenue of 3.19 billion yuan and a net profit attributable to shareholders of 850 million yuan, a year-on-year increase of 68.5%. Revenue from IP operations fell by 48.4% year-on-year to 1.1375 billion yuan. The company emphasized that this was mainly due to the natural development cycle and scheduling of film and television projects, as there were no new film and television dramas launched by New Classics Media in the first half of the year. On August 12, CHINA LIT announced its mid-year results for 2025: Revenue decreased by 23.9% to 3.19 billion yuan, mainly due to uneven scheduling of film projects by New Classics Media Operating profit surged by 92.7% to 876 million yuan, with significant improvement in profitability Net profit attributable to shareholders increased by 68.5% to 850 million yuan, but decreased by 27.7% after excluding non-recurring gains and losses Core Business Progress: Revenue from online reading business grew by 2.3% to 1.99 billion yuan, with MPU increasing by 4.5% to 9.2 million GMV of IP derivatives reached 480 million yuan, nearing last year's total, achieving leapfrog development The short drama business saw strong growth, with the highest revenue from a single project exceeding 80 million yuan CHINA LIT CEO and President Hou Xiaonan stated: “In the first half of 2025, our online reading content ecosystem continued to thrive, with online business revenue increasing by 2.3% year-on-year to 1.99 billion yuan. In terms of IP operations, CHINA LIT's IP has continued to demonstrate strong capabilities in high-quality film and television and animation fields, while new tracks such as short dramas and IP derivatives have also made breakthrough progress. The hit rate of short dramas has significantly increased, and the GMV of the IP derivatives business reached 480 million yuan, close to last year's level, achieving leapfrog development. Overall, 2025 is an important year for nurturing strong development momentum. The explosion of short dramas, the breaking of the circle in trendy toys, and the spread of 'Guzi' culture reveal a core rule: the underlying logic of phenomenal growth stems from the creative transformation and scenario-based deep cultivation of high-quality IP. In the face of this historic opportunity, we will rely on our vast systematic IP reserves as a foundation, leveraging the collaborative momentum built over many years across the entire industry chain, not only to deeply participate in this industrial reconstruction but also to strive to lead the direction of industry development, aiming to become the core engine and key shaper driving the leap of China's IP ecosystem.” Financial Quality is Stable, AI Technology Empowerment Shows Results Despite the decline in revenue, the company's profitability has actually improved. Gross margin increased from 49.7% to 50.5%, mainly due to optimization of the cost structure. Profit attributable to shareholders surged by 68.5% to 849.8 million yuan, but this was mainly driven by investment income, with core profits actually declining after excluding one-time items. Net cash of 9.573 billion yuan provides solid support for the company to cope with industry cycles and increase investment in new businesses The company's investment in AI technology applications has begun to show returns. AI translation revenue increased by 38% year-on-year, accounting for more than 35% of the total revenue from overseas platform WebNovel. More notably, the company's launched "Miao Bi Tong Jian" AI tool has significantly enhanced author activity, with the frequency of author interactions with AI increasing by 40%, and the daily active users of the "Writer Assistant" growing by over 40% year-on-year. The company is transforming its vast IP inventory into diversified revenue streams through new business forms such as IP derivatives and short dramas. Particularly, the IP derivatives business achieved a GMV of 480 million yuan in the first half of the year. If this growth momentum can be maintained in the second half, the annual GMV is expected to reach 1 billion yuan, which will open up a new growth curve for the company. Online business shows resilience, IP operation revenue declines Online business revenue was 1.9854 billion yuan, with a year-on-year growth of only 2.3%, showing a significant slowdown. It is worth noting that this growth was mainly driven by proprietary platform products, which saw a year-on-year revenue increase of 3.1% to 1.746 billion yuan. In contrast, revenue from Tencent product channels dropped sharply by 25.6% to 97.1 million yuan, which the company explained was due to "the continuous optimization of Tencent's content distribution mechanism." Monthly active users fell from 176 million to 141.3 million, a decrease of 19.7%, but monthly paying users grew against the trend by 4.5% to 9.2 million. The average revenue per paying user (ARPPU) slightly decreased by 1.3% to 31.3 yuan, mainly affected by the lower contribution from newly acquired member users. The company is working to expand its paying user base by lowering entry barriers. IP operation revenue fell by 48.4% year-on-year to 1.1375 billion yuan, the company emphasized that this was mainly due to the natural development cycle and scheduling of film and television projects, as there were no new film and television dramas launched by Xinli Media in the first half of the year. However, during the low period of traditional film and television business, emerging businesses have shown strong growth momentum. The GMV of the IP derivatives business reached 480 million yuan, nearing last year's total of 500 million yuan, reflecting the explosive growth of new consumption trends such as "Guzi" culture. The short drama business also performed impressively, with the highest revenue from a single project exceeding 80 million yuan, ranking second in the industry this year