China Literature Limited (772) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Welcome to China Literature's 2023 Interim Results Conference Call. A copy of the interim results announcement can be found and downloaded from the Investor Relations website, https://ir.yuewen.com/. [Operator Instructions] I now would like to turn the conference over to your host today Ms. Maggie Zhou, Head of Capital Markets And Investor Relations at China Literature. Maggie, please go ahead.

Thank you, operator. Ladies and gentlemen, welcome to our 2023 interim results conference call. Our speakers today are Mr. Monkey Hou, our CEO and President; and Mr. William Sun, our VP of Finance. Post this call, Monkey will discuss the company's strategy and business highlights, and William will go through the financials. We'll then open the call for questions. Before we begin, I'd also like to remind you the management comments during the call will include forward-looking statements that are based on our current expectations. All statements other than statements of historical facts during the conference call are forward-looking statements, which has subject to a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of the company. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to another substitute for measures of the company's financial performance prepared in accordance with IFRS. So please do take a minute to read the risk factors and non-IFRS measures discussion in China Literature's 2023 interim results earnings release. I will now turn the call over to CEO and President, Monkey.

Thank you, Maggie. Hello, everyone. Thank you for joining me on our earnings call today. Before we begin the discussion on the results, I would like to share with you some of my thoughts on company's strategy and business operations. Through the economic ups and downs of the past 2, 3 years, we have formulated and implemented innovative programs to defend our leadership in the turbulent market. Our key observations from this experience include: first, the paid reading sector remains a rich environment for incubating IP content. Improving the writer ecosystem and growing the online reading platform are key long-term tasks for us. Second, the Matthew Effect is more salient than ever in the IP and content domains. As Blockbusters play an increasingly crucial role in the gaming, animation, film and television industries, the demand for top-tier IP is growing rapidly. Third, the integrated development of IP is becoming increasingly important. By quickly and systematically developing audio, visual, and merchandise derivatives soon after the incubation of text-based IP, we will be able to shorten development cycles, reduce development costs, and increase our odds of creating blockbuster IPs. [Technical Difficulty] in generative AI will create new opportunities to make this process even faster and more efficient. Amidst these shifts in the market, we developed what we call an IP metamorphosis strategy, which lays out our development system for the entire IP lifecycle across various content formats. We have re-conceived the company's vision and mission, which is to create good stories that will live forever. In addition, we took initiatives to optimize costs, improve efficiency, and prioritize quality over quantity, as well as sharpened our focus on creating enduring and high-quality IP. Through all these upgrades, China Literature has continuously reached new milestones over the past 3 years, with the release of a series of blockbuster titles such as Joy of Life [Foreign Language], My Heroic Husband [Foreign Language] and A Lifelong Journey [Foreign Language]. Now we are embarking on another significant transformation. This year's critical breakthroughs in AI technology are a major turning point in our industry. We believe AI represents a once-in-a-generation opportunity, and opens up entirely new and exciting possibilities for China Literature. Here are a few of our key takeaways on AI. First, AI can super-charge content production, create multi-format user experience and generally it help us achieve the kind of integrated IP operations mentioned earlier. AI can facilitate the generation of content such as text, audio, comics and animation, which can complement and be integrated with the China Literature's existing user operation system, helping China Literature reach a broader audience in a wider variety of formats with enhanced user stickiness. Second, AI can play an integral role in IP incubation. Its ability to quickly convert text into visuals will allow us to front-load IP developmental work, increasing our success rate and creating blockbuster IP. Third, AI can be a highly efficient means of translating online literature into multiple languages, and therefore, achieving IP globalization and creating significant additional value. Last but not least, AI opens up a vast new imaginative space and can be fully integrated into the IP ecosystem as a foundational capability that empowers upstream and downstream partners alike. In short, AI, especially generative AI, will empower us to build a content platform across multiple genres and in major formats, and to build a new integrated upstream and downstream IP ecosystem. This is a key part of China Literature's new medium to long-term business footprint, blueprint, using generative AI as a new engine to improve efficiency and quality in the IP ecosystem. Recently, better seize the once-in-a-generation opportunity brought by AI technology, strengthen the linkage between content and platforms and continuously improve our success rate in creating film and television blockbusters, we have upgraded the company's organizational structure and established 4 major business units, namely, the Content Ecosystem Platform unit -- Platform Business unit, which is mainly responsible for driving the integration between original content creation and the various platforms. The Film and TV Drama Business unit, which is responsible for further integrating New Classics Media and China Literature to develop serialized IP dramas and films across various categories and to create a steady stream of blockbusters. The Intelligence and Platform R&D Business unit responsible for driving breakthroughs in AI Large Language Model and transforming them into cutting edge generative AI applications. And the Corporate Development Business unit, which will oversee decision-making processes related to our core business and coordinate integrated IP development and operations. We believe this new organizational structure will empower China Literature to leverage generative AI to reshape our products and the business processes. By improving IP mining and production efficiency, shortening IP development cycles and improving our success rate in creating blockbuster IP, we will ultimately help the entire industry chain benefit from this historical wave of innovation. Last month, we released our Smart Pen, a AI Large Language Model, the first LLM designed specifically for the online literature industry. We also launched the new Smart Pen edition of our Author Assistant app, which is based on our proprietary Large Language Model and it will support writers in various aspects of content creation. This is merely our first step in embracing generative AI. We will continue to upgrade our Large Language Model, leveraging AI technology to empower content creation and IP ecosystem. We believe that China Literature's embrace of AI innovation will have far-reaching effects well beyond our more conventional past corporate upgrades. However, it will require a period of investment for these innovations to gradually permeate every aspect of our business operations before we reach a turning point and transform our business development momentum into quantifiable financial returns. We are creating a brand new China Literature to seize this once-in-a-generation opportunity, and we are confident in our long term prospects. Next, let me share with you our specific business progress during the first half of this year. First, in terms of IP creation, we continue to strengthen the content ecosystem of our online reading business. In the first half of this year, our online reading platform added approximately 200,000 writers, 350,000 literary works, and over 19.5 billion Chinese characters. Our high-quality content grew significantly as we focused on investing in premium content offers, effective anti-piracy measures and improve user community. For example, in the first half of this year, the number of online literary works that nearly reached 10,000 average subscribers per chapter increased more than 120% year-over-year, and the number of literary works with more than 10,000 monthly votes from users increased more than 50% year-over-year. Our MPUs also achieved considerable growth, increasing 8.6% year-over-year and 12.8% sequentially to 8.8 million. We continue to make advances in IP visualization and monetization, presenting our users with a series of quality work during the first half of 2023. In the TV and Film segment, we launched a TV series, Road to Ordinary [Foreign Language], and In Spite of Strong Wind [Foreign Language], both of which were highly popular during their broadcast run. The Road to Ordinary [Foreign Language] ranked first in Tencent Video drama hit list for 16 consecutive days, and the first in the popularity list of various third-party professional TV and movie data platforms, such as Maoyan, Dengta, and DataWin. In Spite of Strong Wind [Foreign Language] ranked in the top 2 for local TV prime time drama series ratings nation-wide during its broadcast run on Beijing TV and Jiangsu TV. In the animation segment, we released new seasons in the first half of the year. For our classic IP franchises, Stellar Transformations [Foreign Language] and Almighty Maze [Foreign Language], both of which continue to prove popular with the viewers. In July 2023, following the end of the first 52-week season of Battle Through the Heavens [Foreign Language], we immediately launched a second 52-week season of the series, maintaining the title as one of the top 3 most popular animation series on Tencent Video through continuous content updates. In the comics segment, while increasing the number of comics adapted from our online literature works, we are focusing on enhancing our high-quality content offerings, among which, works such as Dafeng Guardian [Foreign Language], Since the Red Moon Appeared [Foreign Language], and Astral Pet Store [Foreign Language] attained significant popularity. In the IP merchandise segment, we analyzed our IPs with respect to their genres, user demographics and synergies among various media formats such as novels, animation, comics and merchandise, in order to improve our decision-making mechanism for IP screening and merchandise category selection. We are also exploring the possibility of front-loading the development of IP merchandise, that is initiating the development of merchandise at an early stage of online novel creation so that the IP content is better received and recognized by users. We launched a number of key products during the first half of 2023, such as our self-developed blind boxes for Lord of the Mysteries [Foreign Language] and Battle Through the Heavens [Foreign Language]. In the game segment, we continue to promote the adaptation of our quality IP into games through 2 business models: licensing and in-house game development. In terms of licensing, A Record of a Mortal's Journey to Immortality [Foreign Language] and Swallowed Star [Foreign Language] were successfully launched during the first half of this year. In addition, we licensed popular IPs such as Battle Through the Heavens [Foreign Language] and Stellar Transformations [Foreign Language] to game developers for adaptation, and we look forward to the release of these adaption games in the next few years. In terms of in-house game operation, we launched expansion packs for our classic IP game, New Soul Land [Foreign Language] with new gameplays and upgraded artwork, successfully prolonging the lifecycle of the game. Now, let's turn to our overseas business. As of June 30, 2023, WebNovel, our foreign language online reading platform, offered approximately 3,200 works translated from Chinese and about 560,000 original works created locally. We will continue to explore international markets and promote cultural exchange. I will now conclude my remarks and hand over to my colleague, William, who will discuss the company's financial performance. Thank you.

Thank you, Monkey. Hello, everyone. In the first half of 2023, our total revenues were RMB 3.3 billion compared with RMB 4.1 billion in the first half of 2022. Let's start by taking a look at our online business. Online business revenues were RMB 2 billion compared with RMB 2.3 billion in the first half of 2022. This year-over-year decrease was primarily due to the initiatives we rolled out last year to strategically decrease marketing spending on our user acquisition with low ROI and optimized content and distribution channels. When compared to the same period last year, these initiatives resulted in a decrease in online business revenue during the first half of 2023, but at the same time, an improvement in our financial structure and margins. To put this into context, on a sequential basis, online business revenues during the first half of 2023 were effectively stable. Breaking down our online business further, revenues from self-owned platform products increased slightly on a year-over-year basis to RMB 1.8 billion. Revenues from certain online products were negatively impacted by the initiatives I just mentioned. But this impact was more than offset by revenue growth from our core products, driven by our premium content offers, effective anti-piracy measures and enhanced product operations. Revenues from our self-operated channels on Tencent products were RMB 177 million compared with RMB 347 million in the same period last year, mainly due to the high base effect created during the first half of 2022 before the impact of initiatives to optimize distribution channels to quote, and a decline in advertising revenues as more of our content was monetized through pay-to-read products with higher ROI. We also recorded a decrease in revenues from third-party platforms from RMB 196 million to RMB 98 million, mainly due to the suspension of our collaboration with certain third-party distribution partners in order to more effectively address piracy issues. In terms of operating metrics, total MAUs for our online reading business were RMB 212 million compared to RMB 265 million in the first half of 2022, reflecting our efforts to prioritize high-quality users rather than quantity. MPUs for our paid content were RMB 8.8 million, up 8.6% year-over-year, mainly due to our effective anti-piracy measures, improved product operations and continued investment in high-quality content offers. Monthly ARPU for paid reading content was RMB 33.3 compared to RMB 38.8 in the first half of 2022, mainly due to changes in revenue mix from different product offers as well as lower user spend from newly converted paying users in the early stage of the payment cycle. Turning to the IP operations and other business, in the first half of 2023, revenues from IP operations and others were RMB 1.24 billion compared to RMB 1.78 billion in the first half of 2022. Within this revenues from IP operations decreased from RMB 1.73 billion to RMB 1.19 billion, mainly due to an uneven release schedule for TV dramas, films and animated series in 2023 as fewer projects were released during the first half of the year, while revenues from the others category, consisting mainly of sales of physical books increased 10.7% year-over-year to RMB 54 million. Now let's look at costs and expenses. In the first half of 2023, our cost of revenues amounted to RMB 1.7 billion, down 13.5% year-over-year due to lower production costs for TV series, films and animated series, which was in line with the decrease in revenue and lower platform distribution costs for online business. Our gross profit was RMB 1.6 billion compared to RMB 2.1 billion in the same period last year. Gross margin was 48.9% in the first half of 2023 compared to 52% -- 52.5% in the same period last year. Our selling and marketing expenses decreased 26% year-over-year to RMB 822 million in the first half of 2023. The decrease was mainly due to lower promotion and advertising expenses related to our online business as a part of our cost control and efficiency improvement initiatives, as well as a decrease in marketing expenses associated with our films and drama series as fewer titles were released in the first half of 2023. As a percentage of revenues, our selling and marketing expenses decreased to 25% from 27.2% last year. Our G&A expenses decreased by 4.1% year-over-year to RMB 535 million in the first half of 2023, mainly due to lower employee benefit expenses. As a percentage of revenues, our G&A expenses were 16.3% in the first half of 2023 compared to 13.6% in the first half of 2022. As a result of the above factors, our operating profit increased 23.8% year-over-year to RMB 311 million. Our profit attributable to equity holders of the company increased 64.8% to RMB 377 million. Non-IFRS profit attributable to equity holders of the company was RMB 603 million compared with RMB 666 million in the first half of 2022. Non-IFRS net profit margin increased from 16.3% to 18.4%. That concludes the financial part. Let's move on to the Q&A session.

[Operator Instructions] And the first question comes from Xueqing Zhang with CICC.

Thanks management for taking my questions. In July, your released Smart Pen for also assistant application. Could management share more insight into the company's exploration of AI application in other domains? Specifically, regarding the multi-model adaptation of IP, how can AIGC applications offer assistance at this time?

Thank you for your question. So yes, AIGC is a big opportunity that technology has never seen before. We plan to integrate AI into different parts of our business such as assisting our writers in their novel creation process, enriching user interactive experience, expanding our business into the overseas markets through AI translation and driving our IP development progress. Firstly, as you mentioned, in terms of assisting our writers in their content creation. China Literature released our Smart Pen AI Large Language Model, the first LLM designed specifically for the online literature industry, which is also the model that best understands the online literature in the mid of July. We also launched the new Smart Pen addition of our Author Assistant Application, which is the first product based on our proprietary LLM, aiming at helping writers improve the efficiency of content creation with AI technology. Currently, this product is capable of supporting writers in various aspects of content creation such as collecting historical information and professional knowledge, providing writers with inspirations like how to describe a certain scene or character or name some of the characters. These functions help reduce part of the redundant and the boring work and enable writers to focus on the creativity and the core idea of their stories and, therefore, to enhance the quality and efficiency of their creative process. So in terms of enriching user interactions, we also designed AI virtual characters, which are now undergoing beta testing. Users can communicate with the characters in their stories and gives life to them. In addition, users could even create their own characters according to their preference and enrich the characters through chatting with them. Moreover, users to even conduct group chatting with multiple characters. We expect to improve user interaction and enhance user engagement through these AI-enabled functions. In terms of overseas expansion, we are now training our AI translation model with the professional terminology and the vocabulary in our online literature content library and reinforcing the model for better output in order to greatly enhance the speed and efficiency of translation as well as reducing the cost of translation. Also, we intend to extend AI translation to more languages in addition to English and Spanish. The substantial enhancement and the speed of translation powered by AI will accelerate the growth in content supply to the overseas reading markets, and therefore, we will continue to optimize our AI model to drive the overseas expansion. In terms of IP development, we are exploring the possibilities of applying AI to IP development procedures across the board, including the production of audiobooks, comic books, animation, merchandise and so on in order to improve the efficiency and the speed of IP development in a variety of content formats and enable more quality literature works to be adapted into IP products. In the near future, we expect to accelerate the visualization process by initiating the development of visual characters, comics or either merchandise at an early stage of the online novel creation, and the visualized images could also lay the foundation for further adaptation into animation and games. So far, we have made some progress in this aspect, including, first of all, in terms of comics in the past, it took us over 2 hours to color one panel, but now it can be shortened to less than 1 hour with AI technology. Secondly, in terms of merchandise, the improved efficiency of image creation with the help of AI technology lays a foundation for merchandise development. And therefore, the merchandise production can be initiated at an early stage without having to wait for the completion of the novel or anime. In this way, we can develop the IP into various media formats at the same time. Currently, we are exploring to develop merchandise for some top-tier novels that are still being updated. And in terms of audiobooks, we are utilizing the AI technology to improve the sound quality of text-to-speech or the TTS audio. In the future, we plan to further improve the TTS quality in sentence segmentation and the tone in the humanoid voice with the help of AI technology and also seek possibility to interact with IP dramas series and film. In summary, we think generative AI or AIGC is a very substantial technological reform that will produce profound impact on content creation, and especially for China Literature that has got not only business scenarios for content creation as well as scenarios for user interaction. So our team is paying close attention to the development of generative AI and drive the application of the technology to the production of text, images, audios and other various IT products so as to empower our IT ecosystem as a whole.

And the next question comes from Guanran Wang with Citic Securities.

Well, first question is about the drama business and how is the pipeline of the drama in the latter half year. And we does see that the short drama is very power in the TikTok platform. Is there any strategy on short drama [indiscernible]? And the second question is about AIGC. Well, how the AIGC to make the IP vitalization more efficiency and how is the -- where is the difficulties in the process of the AIGC using on the IP visualization?

Regarding your question about the release schedule of drama series in the second half, we expect about 4 projects to be released. Besides, The Infiltrator [Foreign Language] that was released in July, we further expect to release more drama series, including Battle Through the Heavens, season 2 [Foreign Language]. Sunshine with Me [Foreign Language] and the Legend of Shen Li [Foreign Language]. Regarding your question about the short drama, we actually have come to notice that the short drama market is actually growing very fast, and this is a new consumption model of the video format. And actually, some of the IP copyrights of China Literature content library is actually suitable to be adapted into short dramas. So for us, we will actively and pay much attention to the evolvement of the short drama market, and we will select those proper IPs that are suitable to be adapted into short drama from our content library and work closely with our business partners to create short dramas, especially those high-quality short dramas that could be blockbusters in the market. So regarding your questions about how AIGC could improve the efficiency of IP visualization as well as the challenges we have seen now. I think we believe the breakthroughs in the development of AIGC, the generative AI, we'll be able to greatly reduce the repetitive labor in the visualization process in the future and enable us to focus our resources and energies on high value-added parts such as creativity, imagination and artistry and further expand the industry capacity. The IP visualization process has always been constrained by our production capacity, while AI power tools can help us convert text into audio images, videos, et cetera, more quickly, thereby improving content production efficiency, reducing costs and opening up space for content creation. And currently, we have identified several challenges when we use the generative AI tools in our visualization process, including, first of all, the content generated by AI lacks consistency or continuity, and it's not possible to directly convert text to fluent and lengthy visualized content via single steps, as the visualization process involves sophisticated workflows and some steps are very demanding regarding creativity and quality, which cannot be fulfilled by AI at its current stage. Secondly, currently, the number of talents who can understand AI logic and give precise instructions to AI and at the same time, are also good at content creation and can create good stories are very little. And as a result, the generative AI technology hasn't yet been widely used in the anime and the media production industries. So far, we have seen that some workflows that require a large amount of repetitive work can be made much more efficient with the help of generative AI. For example, we are testing the technology in some steps during the comic creation process, including sketching, line drawings and coloring. More specifically, it used to take us 2 hours to color one panel, while now it can be shortened to less than 1 hour. So the AI innovation is progressing very quickly, and we believe that the technology will continue to make breakthrough. China Literature as the leading player in China's culture creative industry is well positioned to utilize the AI technology to drive the growth of different segments of our business and constantly train the AI model by giving frequent feedbacks while using it. And therefore, we have the largest potential to tackle the challenges and empower our business with AI technology application.

And the next question comes from Felix Liu with UBS.

Let me translate myself. My question is on the online business. I noticed that we had a little bit of a revenue decline for the business because of the channel optimization, but our self-owned platform remained healthy with good paying ratio increase. So may I just check your outlook for the online business for second half on a year-on-year and half-on-half perspective? And may I also have your outlook on the paying ratio for the second half and see if there is any room for further improvement in paying ratio?

So regarding your question about the outlook on the online business, I think I will discuss the outlook of our self-owned platform products and testing channels as well as the third-party channels, respectively. So first of all, in terms of our self-owned platform products, revenues from our self-owned platform products started to resume positive growth in the first half of this year after more than a year of efforts to reduce costs and increase efficiency, combat piracy and develop a high-quality content ecosystem. We will continue to strengthen the ecosystem of our self-owned platform products, focused on the incubation of high-quality content and diversification of content genres and the cultivation of new generations of writers and fight against piracy issues actively and effectively. Also, we will continue to optimize the efficiency of our community operations to enhance user engagement and stickiness. Our online reading business is strategically positioned as a platform to constantly integrate quality content at scale, which lays the foundation of content and users for our IP operations business. This also represents our competitive advantages. Secondly, in terms of Tencent channel, Tencent channels mainly focus on the free-to-read model. Currently, more of our content is monetized through pay-to-read products as the pay-to-read model bears a higher ROI and remains a rich environment for IP incubation. As now, we have sharpened our focus on the pay-to-read model for premium content, which leads to a decrease in the content supply to the free-to-read model, the advertising revenues from Tencent channels could be impacted. Lastly, in terms of the third-party channels, the revenues from third-party channels are relatively stable now. We will continue to explore opportunities with new distribution partners to expand the user reach of our high-quality content and enlarge their influence among users. On the other hand, unlike our self-owned platforms and channels, we don't directly engage in the operations of third-party channels, while the performance of third-party channels mainly depend on the capabilities of our partners. So the revenues from third-party channels contain some uncertainties. Our focus will still be centered on the dedicated operations of our self-owned platform products. So in the second half of this year, we will continue to implement those measures that turn out to be very effective in improving the high-quality growth of our business, including our anti-piracy measures and our focus on the incubation of high-quality content as well as the enhancement in the product operations. Through these efforts, we believe we will be able to attract more paying users to our platform.

And the next question comes from Rebecca Xu with Morgan Stanley.

Now let me translate myself. The first question is related to online reading business. Can management share your view on how competition landscape on reading business will evolve going forward, especially post AI era? And what is the main driver for online reading business going forward? The second question is on the company organization restructuring. Could you please explain how the company plans to improve the synergies across different departments?

So regarding the first question, I think our understanding of AIGC is that it will increase the content supply. However, from the perspective of competitive advantage as well as user demand, we believe what readers really need is high-quality literature works. And at the same time, for the downstream IP adaptation market, the quality of novel is also very important. So for the content industry, quality is far more important than quantity. And China Literature has always been very devoted to incubating high-quality content. And the creation of high-quality content still highly depends on human's creativity, imagination, emotion and spirit, which cannot be completed by AI. High-quality content is always scarce and the core competitive advantages of China Literature lies in its ability to incubate top-notch premium content. Our original purpose of creating the Smart Pen Large Language Model is to use AI as a tool to help our writers, to help them handle some dirty work that is repetitive and time consuming during the content creation process. And therefore, they will be able to allocate more time and energy to the core parts of content creation. In this way, both efficiency and the quality of content creation can be improved. As the leading company in the content creation industry, China Literature's advantage lies in a great amount of experience and know-how accumulated in a creative process of online literature, comics, animation, drama series and films. And therefore, we have richer and higher-quality resources when we train the AI models. At the same time, our editors, producers and the creators for various content formats can interact with the AI model with high frequency and give a huge amount of feedback to the model, including the feedback generated from using the AI applications. The continuous supervised fine-tuning optimization and reinforcement learning will make the model more intelligent in fulfilling the tasks required by our specific business scenarios, which is a unique advantage of us as the leading platform in the industry. So on the 19th of June, we upgraded our organizational structure. And you mentioned 2 of our very important business units, which are respectively the Content Ecosystem Platform business unit as well as the TV Drama and Film business unit. So first of all, the Content Ecosystem Platform business unit is mainly responsible for driving deep integration between original content creation and the various platform. So under the previous organizational structure, literature content creation, leading product operation and different categories of IP adapted media products belong to different departments, which didn't allow real-time collaboration and specifically cost a lag for the visualization and commercialization of text IP. And for the most of the time, the selection of content for adaptation was only made from those well-known IPs. Under the new organizational structure, we will integrate the literature content creation and various reading platforms and apply the generative AI technology to IP development in multiple content formats covering anime, audio, merchandise and others to frontload the IP development with higher efficiency of IP mining and production. In this way, we will be able to build more unified IP images, aggregate broader IP users at the early stage of novel content creation and improve our success rate at creating blockbusters. For example, in terms of the merchandise business, we can utilize the generative AI technology to frontload the development of IP merchandise. That is initiating the development of merchandise at an early stage of online novel creation and selling the merchandise and licensing the relevant images when the novel gets popular so that the IP content is better received and recognized by users. So in terms of our media production business, under the new organizational structure, NCM and the China Literature Pictures constitute the Film and TV Drama business unit led by Mr. Zhou, indicating that New Classics Media and the China Literature will be further integrated to formulate an integrated media production model. I believe this adjustment will further expand NCM's premium production capability combined with China Literature's high-quality IPs to continuously develop serialized IP dramas and films across various categories, enhance the popularity and influence of China Literature's IP and replicate the success of blockbusters like Joy of Life and My Heroic Husband.

And this concludes the question-and-answer session. I would like to return the floor to Maggie Zhou for any closing comments.

As there are no further questions, we will now conclude today's call. On behalf of the entire China Literature management, I would like to thank you for your participation on today's conference call. If you have further questions about China Literature, please feel free to contact us. Thank you, and goodbye.

Thank you. And as mentioned, the conference has concluded. Thank you for attending today's presentation. You may now disconnect your lines. [Statements in English on this transcript were spoken by an interpreter present on the live call.]