CMGE: Both Revenue and Net Profit Attributable to the Parent Increased, Overseas Business Increased by 60 Times, Exceeding Expectations

ETC

HONG KONG, Aug. 24, 2021 /PRNewswire/ — Aug 23rd, CMGE Technology Group Limited (Stock code: 0302.HK) is pleased to announce the interim results of the Group for the six months ended 30 June 2021. For the six months ended 30 June 2021, the Group’s revenue reached RMB2,180.1 million, representing a period-on-period increase of approximately 27.2%; gross profit reached RMB839.6 million, representing a period-on-period increase of 58.0%; our profit margin increased from 31.0% to 38.5%; profit for the period attributable to owners of the parent amounted to RMB 393.5 million, representing a period-on- period increase of 36.8%; and adjusted net profit amounted to RMB401.8 million, representing a period-on-period increase of approximately 17.6%.

Leveraging the Group’s highly competitive intellectual property ("IP") based game ecosystem, the Group has achieved impressive results in terms of global publishing and self-development of IP-based games in the first half of 2021. During the six months ended 30 June 2021, the Group’s revenue from its game development business amounted to RMB567.0 million, representing a period-on- period increase of approximately 156.8%; the Group’s revenue from overseas regions amounted to RMB219.7 million, representing a period-on-period increase of approximately 6,250.4%. Gross profit margin increased from 31.0% in the same period to 38.5%.

With the development of the IP based game ecosystem, the key data of CMGE users has also increased significantly. For the six months ended 30 June 2021, the average monthly active users ("MAU") amounted to 19,084 thousands, representing a period-on-period increase of approximately 26.78%; the average monthly paying users ("MPU") amounted to 1,442 thousands,representing a period-on-period increase of approximately 27.05%. In the first half of 2021, players under 18 accounted for approximately 0.026% of the Group’s game revenue in the PRC.

New product games performed well, and overseas and R&D revenue increased period-on-period

In the first half of the year, CMGE performed well in many business sectors.During the six months ended 30 June 2021, the Group’s revenue from its publishing business amounted to RMB1,525.3 million, representing a period- on-period increase of approximately 2.4%. Unlike the steady growth of the publishing business, the R&D business has shown full growth potential in the first half of this year, the Group’s revenue from its game development business amounted to RMB567.0 million, representing a period-on- period increase of approximately 156.8%. An increase in the Group’s IP licensing revenue by approximately 2,012.6% of RMB87.8 million for the six months ended 30 June 2021. It is worth mentioning that during the six months ended 30 June 2021, the Group’s revenue from overseas regions amounted to RMB219.7 million, representing a period-on-period increase of approximately 6,250.4%.

The outstanding performance on the financial side benefited from the brilliant performance of the mobile game on the product side. In the first half of this year, CMGE launched a number of key new games through independent publishing, research and development, and joint publishing with major platforms, many of which are blockbuster games.

In particular, One Piece: The Voyage was jointly produced by the Group and Beijing Nuverse Information Technology Co., Ltd. ("Nuverse") under ByteDance Ltd ("ByteDance"). The game was launched on 22 April 2021 and topped the Top Free Games List of Apple’s App Store in Mainland China, and ranked third on the Best Selling Games List of Apple’s App Store in the first month of its launch. After the launch of Soul Land: God of Battle Arise on 28 April 2021, the game ranked first on the Top Free Games List of Apple’s App Store in Mainland China, and was recommended by Apple’s App Store Today as a special featured recommendation and current best-selling recommendation several times. The Group’s self-developed mobile game Legend of Sword and Fairy – the Magnificence  and web game Blood Legend achieved outstanding performance upon their launch in the first half of 2021.

Capitalising on its game operation experience accumulated over the years, through continuous and iterative upgrades of game versions, game characters and in-game activities, the Group maintained stable income and revenue contributions from the operation of its self-developed games The World of Legend–Thunder Empire, Legend of Dragon City, its card and board games, its self-published games The New Legend Of The Condor Heroes: Iron Blood and Loyal Heart, as well as other games already launched and under operation before 2020.

In the first half of 2021, the Group’s overseas publishing business achieved significant breakthroughs. The New Legend Of The Condor Heroes: Iron Blood and Loyal Heart ranked first on the Top Free Games List of Apple’s App Store on the first day of its launch in January 2021 in Hong Kong, Macau and Taiwan. The game ranked first on the Best Selling Games List of both Apple’s App Store and Google Play Store in the first month of its launch in Hong Kong, Macau and Taiwan. Subsequently, The New Legend Of The Condor Heroes: Iron Blood and Loyal Heart was introduced to Singapore and Malaysia in June 2021, and ranked first on the Top Free Games List of Apple’s App Store and Google Play Store in the first month of its launch in Singapore and Malaysia. The mobile game Reborn! was launched in Southeast Asian regions in June 2021, and this game ranked third on the Top Free Games List of both Apple’s App Store and Google Play Store in the first month of its launch in Southeast Asian regions. Games launched overseas in 2020 also obtained outstanding performance in the first half of 2021.

The R&D layout continues to develop, the IP based game ecosystem is further deepened

In terms of the Group’s investment in quality game developers, the Group completed its investment in Shenzhen Heyao Network Technology Co., Ltd. ("Shenzhen Heyao"), Beijing Xinrui Mutual Entertainment Technology Co., Ltd.("Xinrui Mutual Entertainment"), and Fuzhou Tornado Network Technology Co., Ltd. ("Tornado Network") in the first half of 2021 and became their minority shareholders. Leveraging these investments, the Group has formulated a detailed cooperation plan with these three game developers. Pursuant to the cooperation plan, the Group will exclusively publish a MMORPG mobile game with an oriental fantasy world background Code: Mountainous and Seas developed by Shenzhen Heyao. Also, the Group will exclusively publish a role-playing game (RPG) card game adapted from a popular novel IP, Cultivation Chat Group licensed by China Literature Limited and developed by Xinrui Mutual Entertainment; the Group and Tornado Network jointly commenced testing a European-American themed simulation development + SLG mobile game developed by them in multiple overseas countries. The Group also jointly developed a tactical mobile game with Shanghai Bantu Network Technology Co., Ltd. ("Bantu Network"), a company invested by us in the second half of 2020.

At the same time, CMGE formally established R&D studios Man Tian Xing Workshop, Ling Dian Workshop and Da Yu Workshop in the first half of the year. A new mobile game developed by the original team which developed The New Legend Of The Condor Heroes: Iron Blood and Loyal Heart, and Code: World, an open world RPG cross- platform game jointly developed by the self-owned Man Tian Xing Workshop under the Group and Softstar Technology, which will be launched in the second half of 2021 and 2023 respectively.

Ling Dian Workshop is currently developing a 3D asymmetrical and competitive mini-games Code: EM, which is expected to launch officially in 2022. Da Yu Workshop which mainly focuses on the development of casual and mobile card games, its project Code: DF, which is under development currently, is expected to launch officially in the second half of 2021.

The active layout of CMGE on the R&D side also continued into the second half of the year. On 5 August 2021, the Group conditionally agreed to acquire from Softstar Entertainment Inc. its 49% indirect equity interest in Beijing Softstar and all IP rights relating to Legend of Sword and Fairy  registered, licensed or used in China at a total consideration of HK$641.8 million. Upon completion, the Group will become the sole owner of the IP Legend of Sword and Fairy’s registration, license and right-to-use in Mainland China.

This acquisition will strengthen the Group’s competitiveness in the IP game ecosystem, supporting and securing the stable advancement of the Group’s IP game strategy in the long term.

In terms of IP operation, the Group continued to increase the influence of its proprietary IPs, with a continued focus on enriching its IP universes and developing the merchandise of its IPs. In the first half of 2021, IP Legend of Sword and Fairy of the Group participated in the Nanjing, Wuhan, Nanning, Chongqing, Beijing offline animation festivals respectively, with over a hundred thousand guests participated in the festivals.

In terms of IP monetization, figure and toy products are becoming an important way to monetize IP in CMGE. The Group and Beijing Pop Mart Cultural & Creative Corp., Ltd. commenced a series of cooperations regarding the IP Legend of Sword and Fairy, for the joint development of blind box series products.

Meanwhile, the Group cooperated with various outstanding partners to develop different figure and toy products, including a variety of high-quality Chinese-trend figures and toys, such as blind boxes of Super Kami, female character weapons from Legend of Sword and Fairy, statues of Xiao Ya Ji Lin Yueru, and handicrafts of Tang Xuejian. Through various channels, the Group will be able to penetrate the young consumer base to enhance the influence of Legend of Sword and Fairy among the young generation. In the first half of 2021, the Group established a strategic cooperation with Riot Games Merchandise, Inc. regarding the world leading game IP League of Legends. The Group was granted the license to develop including 11 categories of almost a hundred of League of Legends related cultural and creative products, creating a new trend of culture and entertainment consumer products.

From the current point of view, the exploration of IP peripheral products in CMGE has achieved good results. For the six months ended 30 June 2021, the Group’s Legend of Sword and Fairy Tmall shop had five major categories of products, including cultural and creative items and handicrafts, the sales of which exceeded RMB8.0 million as at 30 June 2021.

With the continuous extension of the IP boundary, IP derivative income is expected to become the company’s new growth point.

Various business lines are ready to go, the future performance of CMGE can be expected

Looking forward to the second half of the year, the various business lines of the CMGE can be described as many highlights.

The Group will continue to increase its investment in its game development business, expand its research and development team, and will continue its strategic deployments in various game genres, covering mobile games, web games, personal computer (PC) games and other terminals to build a strong research and development team.

In terms of self-developed new games, the PC game Sword and Fairy 7, self-developed by Softstar Technology (Beijing) Co., Ltd. ("Beijing Softstar"), a subsidiary of the Group, started pre-orders in July 2021 and will be officially launched on October 2021 with its cloud version being launched soon after that. Beijing Wenmai Hudong Technology Company Limited ("Wenmai Hudong"), a wholly-owned subsidiary of the Group, will also launch a self-developed card+SLG mobile game, Code: World of Castellan, the third-generation mobile game The World of Legend – Thunder Empire, and several H5 games and web games in the second half of 2021.

In terms of its publishing business, in the second half of 2021, the Group will launch several major games in the Mainland China market. Among which, Dynasty Warriors: Hegemony, developed by Shenzhen EZfun Interactive Technology Co., Ltd., a developer invested by the Group, and exclusively published by Tencent Games, was officially launched on 10 August 2021 as an action role-playing game (ARPG) game. In the first month of its launch, the game topped the Top Free Games List of Apple’s App Store in Mainland China. The new mobile game Sword and Fairy: Wen Qing, which was developed by the original research and development team of The New Legend Of The Condor Heroes: Iron Blood and Loyal Heart with huge success in 2020, is expected to be launched in the second half of 2021.

Cultivation Fantasy, developed by Love Games (Shanghai) Internet Technology Co., Ltd., which is invested by the Group, together with many other massive or popular IPs adapted mobile games, including Drawing Swords: My Individual Team and Rakshasa Street: Chosen One, have entered the final testing stage, and are expected to launch in the second half of 2021.

While new products in the domestic market are frequently coming out, CMGE will continue its strong momentum in the first half of this year in overseas markets.

In the second half of 2021, The New Legend Of The Condor Heroes: Iron Blood and Loyal Heart will be launched in Vietnam, South Korea and Thailand, and Reborn! will also be launched in South Korea. In the second half of 2021, the Group will launch various new games in Hong Kong, Macau, and Taiwan regions and Southeast Asia, Europe and the United States of America, including, among others, Soul Land: God of Battle Arise, Runaway of the Hominids, Code: DF, Code: World of Castellan, Legend of Sword and Fairy – the Magnificence, Doomsday Chariots, Valonia & Puzzles and Hua Jiang Hu: Bei Mo Ting. Self-developed PC game Sword and Fairy 7 will also be launched in overseas markets simultaneously with its launch in Mainland China.

In addition, Dynasty Warriors: Hegemony will be launched in Hong Kong, Macau and Taiwan regions in the first half of 2022 and in Japan and South Korea subsequently. The King of Fighters: All Stars, another large- scale IP adaptation mobile game jointly developed by the Group and Nuverse under ByteDance, will also be launched in overseas regions in the first half of 2022. Other games, such as Drawing Swords: My Individual Team, Bao Qingtian, Doomsday Chariots, will also be launched in overseas market in 2022.

In addition to the game business, the IP operation business of CMGE will also have a breakthrough in the second half of the year.

Focusing on the future, the Group will create more high quality content and further enrich the user’s interactive experience. In the second half of 2021, the Group will jointly produce TV dramas and animations of Legend of Sword and Fairy 1 with Tencent Penguin Pictures, jointly produce TV dramas such as Legend of Sword and Fairy 4 and Legend of Sword and Fairy 5 Prequel with iQiyi, and launch several movies, animation, movies internet films, internet short dramas, and etc., based on Legend of Sword and Fairy, among others with Tencent Video, Wanda Media, Boxing Culture. The literary products based on Legend of Sword and Fairy 1, Legend of Sword and Fairy 2, Legend of Sword and Fairy 4, Xian Xia Zhuan, Yao Tai Xue, and Qiong Hua Hou Zhuan are in progress, and are expected to be launched in 2021.

On the premise of traditional cultural heritage, the Group will dig deeper into the excellent cultural value of the Group’s IP, and convey positive values to the outside world, building Legend of Sword and Fairy into the world’s top influential Chinese game brand, and creating a new high for the influence of IP Legend of Sword and Fairy, so that the Chinese story and Chinese culture will go further and deeper into people’s hearts.

It is foreseeable that with the release of more and more new games and the continuous release of the IP based game ecosystem, the performance of CMGE in the second half of the year is worth looking forward to.

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