Kuke Reports Third Quarter 2021 Unaudited Financial Results
BEIJING, Nov. 29, 2021 /PRNewswire/ -- Kuke Music Holding Limited ("Kuke" or the "Company") (NYSE: KUKE), a leading provider of classical music content, copyright licensing, subscription, and smart music learning solutions in China, today announced its unaudited financial results for the third quarter ended September 30, 2021.
Third Quarter 2021 Financial Highlights
Third Quarter 2021 Operational Highlights
Recent Business Development
Mr. He Yu, Chief Executive Officer of Kuke, commented, "Our third quarter results highlight the resilience we've embedded in our business model and core competencies, as we delivered growth across all of our business segments despite headwinds presented by the resurgence of COVID and regulatory shifts in certain industries. As a first mover in the classical music industry in China, we continue to build on our leadership position by leveraging our ever-expanding copyrighted content library as our core assets, strengthening our strategic partnerships with our global strategic business partner Naxos, and exploring innovative ways to utilize technology to further diversify our monetization method. We believe these efforts will enable us to continue expanding our customer portfolio and strengthen our resilience in any market environment so that we can continue to amplify the impact of classical music in China and serve various needs across the entire classical music industry chain."
Mr. Tony Chan, Chief Financial Officer of Kuke, commented, "We achieved notable revenue growth during the third quarter, increasing our revenue by 343.6% year over year to RMB82.7 million, driven by growth across all our business segments. We achieved year-over-year increases in our licensing and subscription revenue, smart music learning solutions revenue, and live music event revenue of 162.8%, 8.4 times, and 134 times, respectively. In light of rising hardware costs due to the global chip shortage, we are taking preemptive action to decrease our risk exposure, balance our business growth, and improve cost control by slowing the pace of our new kindergarten deployment for our smart music learning business. We have also begun exploring opportunities to engage public schooling to enhance our revenue streams and further diversify our customer base to enhance our resilience given the volatile regulatory and macroeconomic environment. We are confident that these measures will enhance our competitiveness and bolster our financial resilience in the coming quarters."
 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.
Third Quarter 2021 Financial Results
Total revenue increased by 343.6% to RMB82.7 million (US$12.8 million) from RMB18.6 million in the same period of 2020.
Cost of Sales
Total cost of sales in the third quarter of 2021 increased by 342.6% to RMB29.6 million (US$4.6 million) from RMB6.7 million in the same period of 2020. This increase was in line with the increase in the Company's business operations, which resulted in increased amortization for copyrighted music contents, costs of sales for smart music learning solutions, and depreciation of smart pianos placed in kindergartens.
Gross profit in the third quarter of 2021 increased by 344.1% to RMB53.1 million (US$8.2 million) from RMB12.0 million in the same period of 2020. Gross margin remained stable at 64.2%, compared to 64.2% in the same period of 2020.
Total operating expenses in the third quarter of 2021 increased by 263.5% to RMB72.4 million (US$11.2 million) from RMB19.9 million in the same period of 2020.
Operating loss in the third quarter of 2021 was RMB20.8 million (US$3.2 million), compared to RMB9.5 million in the same period of 2020.
Loss for the Period
Loss was RMB24.4 million (US$3.8 million), compared to RMB12.3 million in the same period of 2020, which was mostly due to the share-based compensation in the amount of RMB15.7 million and net impairment losses on financial assets of RMB24.0 million.
Non-IFRS Profit for the Period
Non-IFRS profit was RMB20.5 million (US$3.2 million), compared to non-IFRS loss of RMB8.9 million in the same period of 2020.
Loss per ADS and Non-IFRS Profit per ADS
Basic and diluted loss per American Depositary Share ("ADS") were both RMB0.83 (US$0.13) in the third quarter of 2021, compared to RMB0.49 in the same period of 2020. Basic and diluted non-IFRS profit per ADS were both RMB0.70 (US$0.11) in the third quarter of 2021, compared to non-IFRS loss of RMB0.36 in the same period of 2020. Each ADS represents one Class A ordinary share of the Company.
As of September 30, 2021, the Company had cash and cash equivalents of RMB105.3 million (US$16.3 million).
Business Strategy and Outlook
Classical music is an essential part of people's life, serving as the foundation of musical enjoyment across the globe and musical learning across nearly all genres.
The Company values its ever-growing classical music copyright library as one of its core assets, and considers its capabilities for acquiring high-quality and diversified classical music copyrights a core competency. Naxos, the Company's strategic business partner, is a world-leading classical music label as measured by the number of new recordings it releases and the depth and breadth of its catalogue.
The Company plans to continue to strengthen its relationship with Naxos to expand its content library, leverage its classical music ecosystem covering the entire industry value chain, and develop new, innovative monetization methods through technological innovation to strengthen its unique market position as a classical music leader in China.
Full year 2021 revenue is expected to be between RMB300 million and RMB350 million. After analyzing and taking into account the macro headwinds related to COVID and higher hardware costs due to the global chip shortage, the Company is taking preemptive action to slow down the pace of new kindergarten deployment to balance its business growth, decrease risk exposure, and improve cost control. Furthermore, the Company has also began exploring ways to engage public kindergartens and schools to enhance its revenue streams and further diversify its customer base in light of the changing regulatory and macro environment.
Conference Call Information
The Company will hold a conference call at 7:30 A.M. U.S. Eastern Time on Monday, November 29, 2021, (8:30 P.M. Beijing/Hong Kong Time on the same day) to discuss the financial results. Listeners may access the call by dialing the following numbers:
A replay of the conference call will remain accessible for one week after the live event by dialing the following numbers:
A live and archived webcast of the conference call will also be available at the Company's investor relations website at https://ir.kuke.com/.
About Kuke Music Holding Limited
Kuke is China's leading comprehensive music group encompassing the entire value chain from content provision to music learning services. By collaborating with its strategic global business partner Naxos, the world's 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 record companies. Leveraging its market leadership in copyrighted classical music content in China, Kuke provides highly scalable classical music licensing and subscription services to over 700 universities, libraries and online music platforms. In addition, it has hosted Beijing Music Festival ("BMF"), the most renowned music festival in China, for 23 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.
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 RMB6.443 to US$1.00, the noon buying rate in effect on September 30, 2021, in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ 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.
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.
SOURCE Kuke Music Holding Limited
Solutions Showcase Awards Ceremony
IT and OT: Are We at the Point of DÃ©tente?
IDEA Showcase - Startup Pitch & Networking Event