Kuke Music Holding Limited Reports First Quarter 2021 Unaudited Financial Results

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BEIJING, May 21, 2021 /PRNewswire / — Kuke Music Holding Limited (“Kuke” or the “Company”)(NYSE: KUKE), a leading provider of classical music licensing, subscription, and education services in China, today announced its unaudited financial results for the first quarter ended March 31, 2021.

First Quarter 2021 Highlights

  • Total revenue increased by 85.0% to RMB11.4 million (US$1.7 million) from RMB6.2 million in the same period of 2020.
  • Smart music education revenue increased by 786.9% to RMB6.8 million (US$1.0 million) from RMB0.8 million in the same period of 2020. Licensing and subscription revenue decreased by 14.5% to RMB4.6 million (US$0.7 million) from RMB5.4 million in the same period of 2020.
  • Loss was RMB37.0 million (US$5.5 million), compared to RMB37.4 million in the same period of 2020. Non-IFRS loss[1] was RMB15.6 million (US$2.4 million), compared to RMB15.9 in the same period of 2020.
  • As of March 31, 2021, the Company had established collaborations with over 2,500 kindergartens, and over 38,000 paying students were enrolled in the Company’s Kukey courses. The number of Kuke smart pianos that the Company had placed in collaborating kindergartens was more than 11,000.
  • Full year 2021 revenue is expected to be no less than RMB400 million (US$61.05 million).

Mr. He Yu, Chief Executive Officer of Kuke, commented, “We achieved strong revenue growth for the first quarter, as revenue increased by 85.0% year over year to RMB11.4 million. Growth was mainly driven by our smart music education business which grew 7.9 times from the same period of last year. This was largely due to our ability to adapt quickly to the reopening of schools and new government policy emphasizing more arts education for primary and secondary schools. We expect these trends to continue driving growth in demand for our music education services going forward.”

Mr. Tony Chan, Chief Financial Officer of Kuke, commented, “Our gross profit for the first quarter increased by 125.8% year over year to 3.2 million, while gross margin was improved to 28.2% from 23.1% in the same period of last year. This was due to our enhanced bargaining power to secure better terms with upstream content providers. Given the favorable market conditions for our music education services, we will continue to expand the segment while leveraging our leading content library, differentiated technology and effective partnerships to continue improving our efficiency and support sustainable growth over the long term.”

First Quarter 2021 Financial Results

Total Revenue

Total revenue in the first quarter of 2021 increased by 85.0% to RMB11.4 million (US$1.7 million) from RMB6.2 million in the same period of 2020, mainly driven by the increase in smart music education revenue.

  • Smart music education revenue in the first quarter of 2021 increased by 786.9% to RMB6.8 million (US$1.0 million) from RMB0.8 million in the same period of 2020, mainly attributable to a significant increase in student enrollment and sales.
  • Licensing and subscription revenue in the first quarter of 2021 decreased by 14.5% to RMB4.6 million (US$0.7 million) from RMB5.4 million in the same period of 2020, mainly due to the impact of COVID-19 pandemic during 2020

Cost of Sales

Total cost of sales in the first quarter of 2021 increased by 72.8% to RMB8.2 million (US$1.2 million) from RMB4.7 million in the same period of 2020, mostly in line with revenue growth.

Gross Profit

Gross profit in the first quarter of 2021 increased by 125.8% to RMB3.2 million (US$0.5 million) from RMB1.5 million in the same period of 2020. Gross margin improved to 28.2% from 23.1% in the same period of 2020, mostly due to the Company’s increased bargaining power with its content providers.

Operating Expenses

Total operating expenses in the first quarter of 2021 increased by 15.7% to RMB49.3 million (US$7.5 million) from RMB42.6 million in the same period of 2020.

  • Selling and distribution expenses in the first quarter of 2021 increased by 126.1% to RMB7.3 million (US$1.1 million) from RMB3.2 million in the same period of 2020, mainly due to expanded marketing initiatives for the Company’s kindergarten education services.
  • Administrative expenses in the first quarter of 2021 increased by 105.4% to RMB40.4 million (US$6.2 million) from RMB19.7 million in the same period of 2020, mainly due to increased stock-based compensation expenses as a result of the adoption of an equity incentive plan.

Operating Loss

Operating loss in the first quarter of 2021 was RMB37.1 million (US$5.6 million), compared to RMB39.7 million in the same period of 2020.

Loss and Non-IFRS Loss for the Period

Loss for the first quarter of 2021 was RMB37.0 million (US$5.5 million), compared to RMB37.4 million in the same period of 2020. Non-IFRS loss was RMB15.6 million (US$2.4 million), compared to RMB15.9 million in the same period of 2020.

Loss per ADS and Non-IFRS Loss per ADS

Basic and diluted loss per American Depositary Share (“ADS”) were both RMB1.29 (US$0.20) in the first quarter of 2021, compared to RMB1.82 in the same period of 2020. Basic and diluted non-IFRS loss per ADS were both RMB0.54 (US$0.08) in the first quarter of 2021, compared to RMB0.78 in the same period of 2020. Each ADS represents one Class A ordinary share of the Company.

Balance Sheet

As of March 31, 2021, the Company had cash and cash equivalents of RMB 232.1 million (US$35.4 million). 

Conference Call Information

The Company will hold a conference call on Thursday, May 20, 2021 at 8:00 P.M. Eastern Time (Friday, May 21, 2021 at 8:00 A.M. Beijing/Hong Kong Time) to discuss the financial results. Listeners may access the call by dialing the following numbers:

International:   

1-412-902-4272

United States Toll Free:  

1-888-346-8982

Mainland China Toll Free:   

4001-201203

China Hong Kong Toll Free: 

800-905945

Conference ID:  

Kuke Music Holding Limited

A replay of the conference call will remain accessible for one week after the live event by dialing the following numbers:

International:  

1-412-317-0088

United States Toll Free:       

1-877-344-7529

Access Code:  

10156592

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 Music Holding Limited (NYSE: KUKE) is the leading provider of classical music licensing, subscription, and education services in China. Kuke had the largest library of classical music content and was the largest classical music licensing service provider and the second largest online classical music subscription service provider in China in 2019, according to Frost & Sullivan. Kuke leverages its rich and diverse content offerings and deep expertise in music education to offer innovative and efficient smart music education solutions, which primarily consist of its proprietary Kuke smart pianos, Kuke smart teaching systems and Kukey courses. Kuke is also the organizer of several live classical musical events in China, including the Beijing Music Festival, which is one of the most renowned musical events in the world. Through these three highly synergistic business lines, Kuke has formed a thriving content-centric ecosystem, positioning it well to continuously provide its customers with differentiated value propositions.

Exchange Rate Information

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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 RMB6.552 to US$1.00, the noon buying rate in effect on March 31, 2021, in the H.10 statistical release of the Federal Reserve Board.  The Company makes no representation that the RMB or US$ 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. 

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. Among other things, the business outlook and quotations from management in this announcement contain forward-looking statements. Kuke may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. 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 and in the attachments 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 depreciations, share-based compensation expenses, impairment losses on financial assets, and the corresponding income tax effects of these non-IFRS adjustments.

Investor Relations Contact:

Kuke Music Holding Limited
Email: kuke@icrinc.com
Phone: +1 (212) 321-0602

KUKE MUSIC HOLDING LIMITED

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In thousands of RMB and US$)

December 31,
2020

March 31,
2021

March 31,
2021

RMB

RMB

US$

NON–CURRENT ASSETS

Property, plant and equipment……………………………..

18,135

23,350

3,564

Intangible assets…………………………………………………

263,101

270,381

41,268

Right–of–use assets…………………………………………….

14,918

14,067

2,147

Goodwill…………………………………………………………….

237,225

237,225

36,208

Investment in a joint venture………………………………..

491

304

46

Prepayments, other receivables and other assets…..

95,376

146,164

22,309

Net investments in subleases……………………………….

202

68

10

Deferred tax assets……………………………………………..

8,917

11,501

1,755

Total non–current assets……………………………………

638,365

703,060

107,307

CURRENT ASSETS

Inventories………………………………………………………….

950

3,667

560

Trade receivables………………………………………………..

181,722

142,726

21,785

Prepayments, other receivables and other assets……

28,523

25,514

3,895

Net investments in subleases……………………………….

211

350

53

Due from related parties………………………………………

1,763

2,306

352

Due from shareholders………………………………………..

100

100

15

Cash and cash equivalents…………………………………..

25,719

232,146

35,432

Total current assets…………………………………………..

238,988

406,809

62,092

Total assets………………………………………………………

877,353

1,109,869

169,399

EQUITY

Issued capital……………………………………………………..

162

195

30

Reserves……………………………………………………………

655,939

923,828

141,003

Equity attributable to equity holders of the parent

656,101

924,023

141,033

Non–controlling interests………………………………………

5,068

4,964

758

Total equity……………………………………………………….

661,169

928,987

141,791

NON–CURRENT LIABILITIES

Other payable…………………………………………………….

Contract liabilities……………………………………………….

587

Deferred tax liabilities………………………………………….

1,447

1,440

220

Lease liabilities…………………………………………………..

9,830

10,264

1,567

Total non–current liabilities………………………………

11,864

11,704

1,787

CURRENT LIABILITIES

Trade payables…………………………………………………..

27,310

27,717

4,230

Other payables and accruals………………………………..

67,121

49,276

7,520

Contract liabilities………………………………………………..

24,314

21,244

3,242

Due to a shareholder

325

325

50

Due to a related party…………………………………………..

7,177

Interest–bearing loans and borrowings…………………..

60,000

60,000

9,158

Lease liabilities……………………………………………………

7,660

7,617

1,163

Income tax payable……………………………………………..

10,413

2,999

458

Total current liabilities………………………………………

204,320

169,178

25,821

Total liabilities………………………………………………….

216,184

180,882

27,608

Total equity and liabilities…………………………………

877,353

1,109,869

169,399

                         

KUKE MUSIC HOLDING LIMITED

UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND

UNAUDITED OTHER COMPREHENSIVE INCOME

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

For the three months ended March 31,

2020

2021

2021

RMB

RMB

US$

Revenue………………………………………………………………………….

6,159

11,396

1,739

Cost of sales……………………………………………………………………

(4,738)

(8,187)

(1,250)

Gross profit……………………………………………………………………

1,421

3,209

489

Other income, net…………………………………………………………….

1,444

9,034

1,379

Selling and distribution expenses……………………………………….

(3,222)

(7,285)

(1,112)

Administrative expenses…………………………………………………..

(19,673)

(40,407)

(6,167)

Impairment losses on financial assets, net………………………….

(19,729)

(1,620)

(247)

Other operating expenses…………………………………………………

(29)

(4)

Operating loss……………………………………………………………….

(39,759)

(37,098)

(5,662)

Share of losses of a joint venture….

(187)

(29)

Finance costs………………………………………………………………….

(2,577)

(2,281)

(348)

Finance income……………………………………………………………….

520

16

2

Loss before tax………………………………………………………………

(41,816)

(39,550)

(6,037)

Income tax expense…………………………………………………………

4,353

2,591

395

Loss for the period and total comprehensive loss
for the period
………………………

(37,463)

(36,959)

(5,642)

Attributable to:

Equity holders of the parent……………………………………………..

(37,160)

(36,857)

(5,626)

Non–controlling interests…………………………………………………

(303)

(102)

(16)

Basic……………………………………………………………………………

(1.82)

(1.29)

(0.20)

Diluted…………………………………………………………………………

(1.82)

(1.29)

(0.20)

KUKE MUSIC HOLDING LIMITED

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

(In thousands of RMB and US$)

For the three months ended March 31,

2020

2021

2021

RMB

RMB

US$

Loss for the period and total comprehensive loss

for the period………………………………………

(37,463)

(36,959)

(5,642)

Adjustments:

Amortsation and Depreciation

2,223

4,001

611

Share-based compensation

16,363

2,497

Impairment losses on financial assets, net

19,729

1,620

247

Income tax effects

(350)

(657)

(100)

Non-IFRS Profit…………………………………………………..

(15,861)

(15,632)

(2,387)

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

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