China Literature Stock

Good evening, ladies and gentlemen. Welcome to China Literature's 2026 Interim Results Conference Call. A copy of the interim results announcement can be found and downloaded from its Investor Relations website, ir.yuewen.com. [Operator Instructions]

I would now like to hand 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 2026 interim results conference call.

Joining us today on the call are Mr. Xiaonan Hou, our CEO; and Mr. Jackie Xu, our VP of Finance. For today's call, Mr. Hou will discuss the company's strategies and business highlights, and Mr. Xu will go through the financials. We will then open the call for questions.

Before we begin, I would also like to remind you that management's 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 are 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, but not as a substitute for the 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 financial discussion in China Literature's 2026 interim results earnings release.

I'll now turn the call over to our Chief Executive Officer, Mr. Xiaonan Hou.

Thank you for joining us on today's earnings conference call. Before we go over our financial results, let me share a few thoughts on the industry landscape and our strategic priorities.

Over the past year, we have had multiple in-depth discussions about where the content industry is headed. In particular, 2 structural shifts stand out. One is the continued rise of fragmented content consumption. The other is the revolutionary reshaping of the entire content ecosystem by AI.

In response to these trends, we turned our insights into action and made decisive strategic moves. We started with live action short dramas, kept up with the technology wave, and finally incubated a brand new content format, the AI animated drama by integrating AI deeply into the creative process.

In the first half of this year, our short drama and AI animated drama businesses delivered exceptional growth with combined revenues exceeding RMB 430 million, over 3x that of the same period last year, accounting for 27% of our IP operation revenues and serving as a key contributor to the 42% year-on-year increase in IP operation revenues.

More specifically, our short drama business delivered a steady stream of hit titles in the first half of 2026, achieving a blockbuster rate 4x the market average, while maintaining a balance of male and female-oriented genres across our content portfolio.

We also built a scalable approach to developing blockbuster IP into serialized short dramas, validating the potential of serialized IP operations in the short drama sector. Meanwhile, leveraging the AI technology, we adapted over 1,000 online literature titles into AI animated dramas, among which 46 titles surpassed 100 million views each. 367 titles exceeded 10 million views each, and the proportion of titles reaching 1 million views was 5x the industry average.

In our view, this high hit rate reflects not only our ability to anticipate industry trends, but also the strength of our premium IP library and the deep creative ecosystem we have built across the IP value chain over the years.

AI tools are undoubtedly pushing content supply into a new era defined by greater scale and speed, but this doesn't diminish the value of content. On the contrary, it reinforces the scarcity and value of premium IP. Visual content has become easier to produce, but only stories with cross-generational appeal that truly touch people's hearts will remain the foundation for sustainable monetization.

Powered by our IP plus AI engine, we harness the synergy between technology and creativity to accelerate the high-quality transformation of stories from text to visuals, opening up the next decade of IP value creation. That mission guides us as we look into the future.

With that, let me now walk you through our operating highlights for the first half of 2026. First, in IP incubation, our online reading ecosystem continues to serve as a super reservoir of premium content.

In the first half of 2026, our platform attracted 240,000 new writers, generated over 460,000 online literature works and added more than 30 billion characters, securing a strong source of content supply.

Emerging generation writers are gaining momentum. Among newly signed writers who generated more than RMB 1 million in revenue during the first half, those under 30 accounted for 57%, representing a 49% increase year-over-year. Promising works continue to emerge.

On Qidian, the number of titles receiving user collections rose 37% year-over-year, while the number of titles receiving monthly tickets grew 26% year-over-year. With the return of a series of top-tier platinum and phenomenal writers, 2 new titles attracted more than 200,000 readers each on their first day of launch, setting new records for debut performance on the platform.

Meanwhile, we have accelerated the transformation from text to visuals. In the first half of 2026, while solidifying our traditional strength in film, drama series and animation, we also stepped up our efforts in emerging segments such as short dramas and AI animated drama, resulting in exceptional growth.

In the premium drama series and film segment, several drama series adapted from China Literature's IPs premiered this year, including top-tier titles such as Blossoms of Power, [Foreign Language], The Heir, [Foreign Language] and Ashes to Crown, [Foreign Language]. They all ranked among the top titles on platform popularity charts during their respective broadcasting periods.

Meanwhile, we also released our self-produced drama series, No Pain, No Gain, [Foreign Language], The Devil Between Us, [Foreign Language] and Lady Liberty, [Foreign Language]. These titles broke new ground across genres such as urban and crime dramas winning both critical acclaim and strong audience traction.

In the animation segment, we released sequels of classic animated titles, including Battle Through the Heavens, [Foreign Language], The Outcast, [Foreign Language], Almighty Mage, [Foreign Language] and Stellar Transformations, [Foreign Language]. All these titles ranked among the top titles on platform popularity charts during their respective broadcasting period.

Among them, The Outcast, [Foreign Language] achieved a popularity index of over 21,800 on Tencent Video, making it the most popular 2D animated series on the platform in the past 3 years.

According to Enlightent, since the start of this year, 8 out of the top 10 animation series cumulative uses across all platforms were adopted from China literature IP, further demonstrating our market influence in animation content.

In the short drama and AI animated drama segment, as mentioned earlier, we achieved major breakthroughs. In the first half of 2026, we launched over 90 short dramas with many breakout hits.

In male-oriented genres, The Invisible Bodyguard, [Foreign Language] was a blockbuster with a popularity index exceeding 100 million and total views across all platforms surpassing 5 billion.

In female-oriented genres, sequels of our original Sweet Wife, [Foreign Language] IP performed strongly, and setting a benchmark for commercialization. In the AI animated drama segment, our top-tier title, Three Thousand Shelters, [Foreign Language] surpassed 3 billion views across all platforms, driving the original novel into the top 10 of the best seller ranking on Qidian.

We also explored opportunities to develop premium AI animated drama platforms, launching Qidian Theater, Qidian Xu Chang, and ToonScroll in China and overseas, respectively. All these achievements were driven by China Literature's extensive IP library, strong creator ecosystem and robust capabilities in IP development across the industry chain.

Next, let me turn to IP commercialization. In the first half of 2026, our IP merchandise business continued to maintain rapid growth with GMV reaching RMB 780 million, representing a year-over-year growth of more than 60%. This growth was driven by our continued enhancement across all core areas: product, channel, operation and ecosystem.

On the product front, we strengthened our presence in the light and soft merchandise category characterized by high frequency purchases and strong repeat purchase rates, while expanding into new categories such as plush toys, lifestyle products and precious metals.

Our design excellence and supply chain efficiency enabled us to deliver a steady stream of high-quality products, positioning "Yuewen Goods" as one of the leading brands in China's anime merchandise market.

On the channel front, we strengthened our self-operated online sales network, including mini programs, live streaming rooms and flagship e-commerce stores. We also optimized our offline store network and deepened collaboration with our channel partners. These efforts led to improvements in both channel profitability and brand control. We also continued to strengthen our sales velocity and supply chain management, improving inventory turnover efficiency and turning sales growth into solid profit contribution.

On the operational front, we launched campaigns around iconic IP characters, driving deeper fan engagement and stronger consumer conversion. During the first half, we organized the Glory Pilgrimage [Foreign Language] pop-up event in 4 cities to celebrate the birthday of Ye Xiu, the leading character of The King's Avatar, [Foreign Language]. We also launched The Outcast Boy Group, [Foreign Language] bringing the IP to a broader audience through idle style marketing and deepening the emotional connection between the IP and users.

On the ecosystem front, we accelerated the expansion of our overseas channels. Together with our partners, we opened our first global collectible toy concept store in Singapore, while selected products on the overseas online store for Lord of the Mysteries [Foreign Language] sold out shortly after launch. The popularity of our hit merchandise further amplified the appeal of our IPs, driving users back to our content ecosystem, spanning online reading, animation and drama series.

Now, let me share an update on our progress in AI. At China Literature, AI is not confined to a single application. We have deeply integrated it into every stage of the content creation journey from the spark of inspiration to user reach around the world. Recently, we launched the Buddy series of AI agents purposely built for the creative content industry and upgraded 3 core products: NovelBuddy, [Foreign Language] DramaBuddy, [Foreign Language] and IPBuddy [Foreign Language] to provide content creators and operators with a comprehensive suite of AI-powered tools.

NovelBuddy is designed for online literature creators. In addition to AI-assisted writing support, it also provides copyright production and antiplagiarism services, helping safeguard creators right.

DramaBuddy focuses on AI animated drama production, covering the entire process, including creative ideation, content production and project management enabling the scalable production of premium AI-animated dramas.

IPBuddy serves as the all-seeing eye of our in-house copyright team, enabling the value assessment of a title within minutes and greatly improving the efficiency of selecting IP for adaptation and commercialization.

Meanwhile, AI has accelerated our global expansion. As of the first half of 2026, more than 30,000 AI-translated works were available on our WebNovel platform, contributing 40% of the platform's novel revenue during the first half of the year, and enabling Chinese stories to reach global multilingual audiences more efficiently. We remain firmly convinced of the transformative power of IP and AI.

Over the past 2 decades, the Internet lowered the barriers to literary creation and paved the way for China Literature's growth into the company it is today. We believe that over the next 2 decades AI will raise the ceiling for creators and drive a substantial value enhancement of the entire content ecosystem.

Deeply integrating AI into the creative process to drive growth is a key strategic priority for our future. We see AI as an amplifier of IP values with the power to make great stories reach their true, full potential.

We also recognize that the more capable AI becomes, the scarcer and more valuable original human creativity will be. That is why China Literature will continue to strengthen its support for original creators, ensuring that technology empowers creativity and that great stories thrive for generations to come. This concludes my remarks.

Now, I'd like to invite Mr. Xu to present our financial performance. Thank you.

Thank you, Mr. Hou. Hello, everyone. In the first half of 2026, our total revenues increased by 10.7% year-over-year to RMB 3.53 billion.

Let's start with our online business. Online business revenues were RMB 1.84 billion compared with RMB 1.99 billion in the first half of 2025, mainly due to competitive pressure, which led to increased proportion of free-to-read content and shifted content distribution from online reading for short dramas and AI animated dramas on our self-operated products within the Weixin ecosystem.

In terms of operating metrics, our total average MAUs were 134.1 million compared with 141.3 million in the first half of 2025. The decline was mainly due to our ongoing shift of core content distribution to our own platform products, leading to continuous drop in MAUs on certain channels as user activity fell.

Average MPUs were 8.2 million compared with 9.2 million in the first half of 2025, mainly because we distributed more free content on our self-owned platform products. Monthly ARPU increased 4.5% to RMB 32.7, reflecting a mix effect as lower ARPU users shifted to free content during the first half of 2026.

Now turning to IP operations and other businesses. In the first half of 2026, revenues from IP operations and others increased by 40.3% year-over-year to RMB 1.69 billion. Within this segment, revenues from IP operations increased by 41.9% year-over-year to RMB 1.61 billion primarily driven by rapid growth across multiple business lines, including short dramas, AI-animated dramas, TV and web series and IP merchandise products.

In particular, revenues from short dramas and AI-related dramas exceeded RMB 430 million, up 2.3x year-over-year. This accounted for approximately 27% of IP operations revenues and has become a new growth engine for our IP businesses.

Our IP merchandise business also maintained strong growth momentum, with GMV increasing over 60% year-over-year to RMB 780 million. Revenues from the others category, mainly generated by sales of physical books, increased by 14.4% year-over-year to RMB 77 million.

Now let's look at costs and expenses. In the first half of 2026, our cost of revenues increased by 10.2% year-over-year to RMB 1.74 billion, primarily driven by higher production costs for short dramas, AI-animated dramas and TV and web series, which was in line with revenue growth as more content was released during the period.

As a result of the foregoing, our gross profit increased by 11.1% year-over-year to RMB 1.79 billion. Gross margin was up from 50.5% to 50.7% year-over-year. Our selling and marketing expenses increased by 9.6% year-over-year to RMB 1.01 billion, mainly driven by higher marketing and promotional spending to support the expansion of our IP businesses.

As a percentage of revenues, our selling and marketing expenses decreased from 28.9% to 28.6% year-over-year. Our G&A expenses increased by 15.5% year-over-year to RMB 560 million, reflecting higher personnel and administrative expenses related to scaling our IP businesses. As a percentage of revenues, our G&A expenses increased from 15.2% to 15.9% year-over-year.

Our net other losses were RMB 25 million compared with net other gains of RMB 583 million in the prior year period. The change was mainly due to RMB 134 million in late payment tax surcharge incurred by a subsidiary of the company during the first half of 2026, compared with RMB 598 million of net gains on the deemed disposal of an investee in the first half of 2025.

As a result of the above factors, our operating profit was RMB 271 million compared with RMB 826 million in the first half of 2025.

On a non-IFRS basis, operating profit was RMB 367.2 million compared with RMB 449 million in the first half of 2025. Our income tax expense increased from RMB 150 million to RMB 225 million, mainly due to RMB 166 million in supplementary income tax payments by a subsidiary of the company, together with a late payment tax surcharge of RMB 134 million, which was recorded in our losses. These tax-related items reduced our profit by RMB 300 million.

Our net profit to shareholders was RMB 135 million, compared with RMB 850 million in the first half of 2025. On a non-IFRS basis, our net profit to shareholders was RMB 259 million compared with RMB 508 million in the first half of 2025, largely due to the RMB 300 million tax-related impact discussed above. That concludes our financial review part.

Let's move on to Q&A session.

[Operator Instructions] Your first question comes from Maggie Ye with CLSA.

[Foreign Language] [Interpreted] We have witnessed the rapid growth of short drama and AI-powered animated drama in China. So wondering, what is management's latest view on the industry's long-term growth trend and your outlook for China Literature's revenue opportunity in this segment? Additionally, as AI-generated content scales on China Literature's platform, how do management expect the substitution effect on the traditional reading consumption to persist?

[Foreign Language] [Interpreted] This is CEO of China Literature. So thanks for your question. I will take your question regarding the short dramas and AI-animated dramas. So we believe the mass production and traffic-driven growth model for short dramas and AI-animated dramas is rapidly fading, and the trend is shifting from quantity to quality and competition our focus is on story telling quality and hit making consistency. It represents a structural advantage for top-tier players like China Literature, with rich IP reserves and premium content production capabilities.

And China Literature has the largest original literature IP library in China, addressing the industry core problem source, which is the shortage of compelling stories. Our proven methodology for hit making is already delivering results. In the first half of the year, the hit rate of our short drama was 4x the market average.

And for AI-animated dramas, the rate of titles exceeding 1 million views was 5x the industry average, and 46 titles each exceeded 100 million views. On the ecosystem front, we launched Project Spark Craft [Foreign Language] especially for AI-animated drama business. The project plans to invest over RMB 100 million in building up the industry ecosystem across 4 dimensions: IP cooperation, platform support, systematic training and funding. Our in-house developed AI agent DramaBuddy, purpose-built for AI-animated dramas has also served over 200 studios, providing technical support for ecosystem.

In response to this trend, China Literature's strategy is very clear, that is we leverage our rich IP reserves to embrace the entire ecosystem. We are proactively strengthening our capabilities in 2 critical procedures, including the development of script and IP, as well as user acquisition and commercialization, while outsourcing the visual production to external studios.

This asset-light model of controlling both upstream and downstream, while outsourcing the midstream allows us to rapidly scale production capacity by leveraging the industry ecosystem, an approach that is suitable to China Literature at this stage.

We believe that AI-animated dramas represent a natural extension of IP from text to video formats, complementing our premium literature business. Since the beginning of this year, various adaptations have been continuously feeding back positively into literature works. The adaptations of short dramas and AI-animated dramas, in particular, have demonstrated strong momentum.

For example, one of our blockbuster AI-animated dramas, Three Thousand Shelters, [Foreign Language] has surpassed 3 billion views across all platforms, directly driving the original novel back into the top 10 of the bestseller ranking on Qidian. Following the release of our short drama, I Really Didn't Want to Be Reborn, [Foreign Language]. The original novel exceeded a 100,000 average subscribers per chapter, validating that high-quality visual content can channel incremental users to our online reading business.

While some noncore readers may migrate to AI-animated dramas, the core value of AI-animated dramas lies in reaching more audience in addition to the original users and breaking through the boundaries of IP formats, unlocking the value of visualizing China Literature's best IP library and creative ecosystem, and this is our greatest opportunity. If we look at the entire IP library of China Literature, the proportion of IP that has been developed so far is less than 0.1%. As AI tools continue to lower the barriers to content production, there remains enormous room for growth in both the speed and scope of IP development going forward.

The next question comes from [Zhi Zhou] with Guangfa.

[Foreign Language] And I will translate the question myself. I want to ask about the competitive dynamic and mutual displacement between manga dramas and short dramas in terms of distribution channels. How are the distribution channels for the 2 formats distributed overall? For example, the share between Hongguo and self-developed apps and mini programs. What are the overseas strategies for your manga dramas and short drama going forward?

[Foreign Language] [Interpreted] China Literature CEO, Mr. Hou, will take this question. So our short dramas and AI-animated dramas are distributed on a full set of industry channels, including leading platforms such as Hongguo, Douyin, Kuaishou, Tencent Video Accounts and Bilibili as well as self-owned mini programs and apps. In addition, we are currently in discussions with long-form video platforms as well. Regarding potential partnerships, in the first half of the year, over half of our short-form dramas and AI-animated dramas were launched on Hongguo.

We do not rely on any single channel decisions on which platform a specific title is to be distributed on and whether to adopt a paid-for-free model are made by our operation team based on each title's content features and the marketing timing. As the landscape of the distribution channels, the video platform continues to evolve, we will remain agile in adjusting our channel strategy accordingly.

This year, we launched our overseas premium AI-animated drama platform ToonScroll and plan to release over 1,000 titles within the year. We are also exploring the development of AI-animated dramas based on overseas original IP. The rationale behind this strategy is clear.

First, as the global market for short dramas and AI-animated dramas is vast, and China has built up proven expertise in short-form content production that is readily exportable. Second, AI-animated dramas are predominantly centered around genres such as anime, isekai, fantasy and these categories inherently carry stronger cross-cultural appeal and face lower barriers to be accepted by international audience. Third, AI has significantly reduced content production costs, making large-scale overseas expansion economically viable. In general, our overseas short drama and AI-animated drama business remains in its early stage of exploration. We will provide timely updates to the market as we make meaningful progress going forward.

I mean, I would also like to note that the AI-animated drama industry is growing very rapidly, and the market potential is enormous. AI-animated drama represents one of the most direct use cases for AI-generated video technology, and AI empowers the entire workflow of video production, including pre-production where it assist in topic analysis, script generation, and scene design, filming where it enables virtual production and virtual set rendering and post production where it delivers intelligent editing and automated visual effect composition. Every stage is being redefined by AI.

We expect the boundary between human-created and AI-generated short dramas to become increasingly blurred over time, which will fundamentally reshape content creation. The future forms of short dramas and AI-animated dramas may probably extend far beyond what we can imagine today.

Your next question comes from Rebecca Xu with Morgan Stanley.

[Foreign Language] I will translate myself. My question is regarding the online reading business. Could management help us break down the key drivers behind the weakness in the first half, which factors are temporary and which are -- which may reflect more structural changes? And also, could management share the medium or long-term outlook for the online reading business? And what are the key drivers for that?

[Foreign Language] [Interpreted] Thank you for your question. Mr. Huang, Senior VP of China Literature, will take this question.

[Foreign Language] [Interpreted] First of all, from our view, the core online reading business will remain stable with its strategic positioning keeping unchanged. The revenue decline in the first half you mentioned was mainly due to the adjustments made for channels with lower user stickiness while the core pay-to-read products and ecosystem remains steady.

First of all, for our users, the proportion of free-to-read content with relatively lower monetization efficiency increased on our self-owned channels within Weixin ecosystem. Secondly, the content distribution is shifting from text to visuals such as short dramas and AI-animated dramas. This is the natural reallocation of content and traffic in the ecosystem in our view. Specifically, user attention is shifting towards visual content, while the visual content is adapted from our own IP and can ultimately feed incremental value back into the reading ecosystem.

As we previously mentioned, AI-animated dramas such as Three Thousand Shelters, [Foreign Language] and other project cases actually channels incremental users back to the reading ecosystem. In this sense, user value is shifting -- is flowing from text to visual format within our ecosystem and both formats are owned by China Literature.

So we believe the foundation of our online business remains solid. In the first half of this year, the ecosystem of our premium content creators stayed vibrant and the top-tier writers continue to hold steady. In the recent year, the contract renewal rate for our platinum and the phenomenal writers reached 100%. At the same time, emerging generation writers have been rising rapidly with new writers and their debut works accounting for 54% of all titles that exceeded 10,000 average chapter over the past 12 months.

We have also continued to attract external writers with the submission volume we received growing 14% year-over-year in the first half of this year, including submissions from a number of quality writers previously active on other platforms. Behind all of this is a robust and stable creator ecosystem, along with consistently leading IP incubation capabilities. These are the core assets that lay the foundation for downstream business such as short dramas, AI-animated dramas, TV series, films and merchandise, and we believe it also constitutes the moat of China Literature that is difficult to be replicated.

Looking into the medium to long term, the growth potential and the strategic focus for our online reading business are centered on 3 key directions. First, we will continue to solidify our premium content ecosystem, embrace and accelerate the content format upgrade from text to visual to amplify IP value while also feeding value back into the reading business. Second, we will expand the content supply and maintain a healthy and vibrant creator ecosystem. Third, we will firmly advance our overseas expansion strategy to unlock monetization opportunities in overseas markets.

These 3 measures will form powerful synergies, steadily incubate quality content and transform text-based content into richer multimedia formats driven by the joint integration of IP and AI to propel China Literature into its next phase of growth.

Your next question comes from Xueqing Zhang with CICC.

[Foreign Language] [Interpreted] I have a couple of questions. My first one is about overall IP business. IP operations delivered broad-based growth in the first half with particularly strong growth in merchandise GMV, while short dramas and AI-animated dramas emerged as new growth drivers. So how does management view the growth outlook for the second half? And where do you expect the key incremental contributions to come from? In particular, on game licensing, we have noticed that several major games based on IP licensed by China Literature will launch in the second half. So do you expect these titles to make a meaningful incremental contribution?

My second question about New Classics Media is the long-form video industry is undergoing a period of adjustment. As a leading television production company, how is NCM responding to the industry challenge and with the rapid development of AI video generation models, how does management view the company's strategy and opportunities going forward?

This is the conference Operator, we have temporarily lost connections with the speaker line. Please continue to hold. [Technical Difficulty] Thank you for holding. The conference will now recommence.

Our CEO Mr. Hou will take your questions regarding IP development and later on Mr. Cao from New Classic Media will take your question on video production.

[Foreign Language] [Interpreted] Yes, as you mentioned our IP business in the first half delivered very good results in various aspects with AI-animated dramas and short dramas becoming our new growth drivers and our merchandise business continue to achieve very good GMV performance and growth. So looking into the second half of the year, our IP business will continue to gain momentum, especially for the new business segment. Specifically, for short-form drama and AI-animated dramas, we are expanding production capacity while maintaining a high hit rate and pursuing a premium content strategy, both domestically and internationally.

Specifically, for short dramas, we plan to produce no fewer than 200 titles this year, representing an increase of approximately 70% year-over-year. In terms of AI-animated dramas, our capacity of premium production has already exceeded a 100 titles and our proven methodology for creating hits continues to deliver results.

While AI has lowered the barrier to digital content production, it has intensified the scarcity of high-quality IP. In the first half of the year, both our short dramas and AI-animated dramas consistently outperformed the industry blockbuster rate average by several multiples, a testament to our deep IP reserve, a creative ecosystem spanning the whole value chain and the story cores that deliver cross-generational and emotional resonance. At the same time, we have also rolled out premium AI-animated drama platforms, both domestically and internationally, to further strengthen our premium content strategy.

In the first half of 2026, our merchandise business continued to gain momentum across 4 key dimensions: IP influence, product development, channel expansion and brand licensing resulting in apparently stronger traction.

Regarding top-tier IP influence, we are deepening our operations of flagship IPs and reinforcing them across 3 fronts, which are category expansion, event-driven activation and user experience to systematically unlock their full potential. For example, our immersive events like the Glory Pilgrimage, [Foreign Language] pop-ups for Ye Xiu's birth day and the debut of The Outcast Boy Group brought the IP closer to users, driving repeat purchases among core fans while deepening emotional connections between our IP characters and their audience.

On product development front, [Foreign Language] the top brand of Yuewen Group has rapidly grown into one of China's leading domestic anime merchandise brands with multiple premium each on Ichiban Kuji style product series covering new and popular categories such as bags and luggage, apparel and plush toys, addressing diverse fan demand for merchandise. Virtually every product we have launched today has sold out within moments of release.

Regarding channel expansion, our omnichannel network continues to improve. Online mini programs, like Xing Luo and e-commerce flagship stores are growing rapidly, while our offline store network is a whole expanding steadily and currently, we operate a total of 17 stores across the country. Notably, in the first half of this year, GMV from our online self-operated channels was 3x that of the same period last year, underscoring both the effectiveness of our self-operated channel network and the users growing brand recognition for Yuewen Goods.

Regarding brand licensing, since the beginning of this year, we have entered into licensing partnerships with hundreds of brands from a variety of industries, including goods and fashion toys, 3C digital products, food and beverage, apparel, restaurant chains and others.

So looking into the second half of this year in terms of merchandise business, we will continue to focus on product iteration, channel expansion and operational efficiency improvement. A key objective is to improve profit conversion efficiency and to achieve higher quality and more sustainable growth.

Regarding our overseas business, it is still in a growth phase with a clear strategic road map. The domestic online business currently provides content foundation for our international expansion and AI-powered translation is accelerating global reach, including those languages less companies spoken.

So the AI-powered translation is a key driver for the global reach. At the same time, incubation of original local IP is underway and steadily expanding. Multiple original literature works created by local writers in overseas markets have already entered the adaptation stages into various formats, including offline publication and audio books, and we plan to initiate collaborations on a series of additional titles in the second half of the year in terms of visualization and commercialization in the overseas market.

Our premium AI-animated drama platform, ToonScroll plans to launch over 1,000 titles within the year, and we have opened our first global collectible toy concept store in Singapore, both of which will contribute to future business growth.

In terms of games, we licensed our premium IP to game studios, earning both upfront licensing fees and the growing share sharing, which is a high-margin, low-risk revenue stream for China Literature that contributes to our IP operations business on a recurring basis.

Looking into the second half of this year, a number of key game titles are selected for launch. Notably, projects include, first of all, an MMO game adapted from Battle Through The Heavens, [Foreign Language] published by 37 Interactive Entertainment, which started open beta testing on July 29, 2026.

And secondly, management simulation mobile game adapted from My Heroic Husband, [Foreign Language] scheduled to launch its open beta testing across all platforms tomorrow, August 12, 2026. And third, a flagship UE 5 MMO game adapted from Lord of the Mysteries, [Foreign Language] developed by Kuaishou scheduled for open beta testing on August 23, 2026, for which preregistration is now fully open.

So the above are my comments on our IP business outlook. And next, Mr. Cao from NCM, will answer your question regarding media production.

[Foreign Language] [Interpreted] We believe the current industry downturn reflects 2 underlying dynamics, platforms tightening content budgets and short dramas increasingly capturing users' attention. However, consumers' willingness to pay for high-quality content remains intact. This adjustment cycle will accelerate the market curation, weeding out mediocre offerings, premium long-form dramas will become lesser and the strategy premium will grow.

In the current long-form drama market, consumer expectations for content are higher than ever. We believe that drama studios should refocus on the fundamentals of content creation with a dedicated emphasis on producing premium series of superior quality and depth. The IP value and emotional connection built up by a premium drama forms the bedrock of our content ecosystem and the ability to consistently produce such premium content is exactly New Classics Media's core competitive advantage.

Regarding AI technology, we believe that while AI video models will fundamentally reshape the production workflows, cost structure and delivery speed of human television projects, they cannot substitute for core value of compelling storytelling, outstanding performance and refined aesthetics.

Currently, we are exploring the application of the latest AI video technologies into our production process to reconstruct and upgrade our workflows, spanning script assessment and structural deconstruction, concept arts and digital asset design, virtual scene design and cinematography and the visual special effects among others.

That said, all of these efforts are anchored by the aesthetic judgment and creative instinct of our professional talent, whether a story carries emotional depth and whether a script meets the highest standard ultimately rest with our creators. Ultimately, professional creative talent is what makes a project succeed.

In July, China Literature entered into a partnership with Shanghai, Pudong New Area to co-establish the AI cultural and creative industry base, which has already attracted cultural creators and rolled out a series of AI industrial facilities. The initiative aims to establish an industrialized framework for high-quality AI-powered cultural and creative content with AI-powered film and television production serving as an important part and New Classics Media will also be deeply involved.

Looking into the future, New Classics Media will stay true to its identity as a top-tier content creator with a relentless focus on excellence across the entire production process from script incubation and pre-production planning to filming and to post-production in order to bring more high-quality work to our audience. At the same time, we will capitalize on the dividends of technological innovation, deploying AI to reshape our productivity, including cost control, efficiency improvement and capacity expansion, thereby further strengthening our market leadership in the premium drama segment.

There are no further phone questions at this time. I'll now hand back to Maggie Zhou for closing remarks.

Thank you, operator. I will now conclude today's call. On behalf of the entire China Literature management team, I would like to thank you for your participation on today's conference call. If you have further questions about the company, please feel free to contact us. Thank you, and goodbye.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Good evening, ladies and gentlemen. Welcome to China Literature's 2025 Annual Results Conference Call. A copy of the annual results announcement can be found and downloaded from its Investor Relations website, https://ir.yuewen.com. [Operator Instructions]

I would now like to hand 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 2025 annual results conference call. Joining us today on the call are Mr. Xiaonan Hou, our CEO; and Mr. [ Jacky Xu ], our VP of Finance. For today's call, Mr. Hou will discuss the company's strategies and business highlights, and Mr. Xu will go through the financials. We will then open the call for questions.

Before we begin, I'd also like to remind you that management's comments during the call will include forward-looking statements that are based on our current expectations. All statements other than statements of future forecast during the conference call are forward-looking statements, which are 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 but not as a substitute for the measures of the company's financial performance prepared in accordance with IFRS. Please take a minute to read the risk factors and non-IFRS measures discussion in China Official's 2025 annual results earnings release.

I'll now turn the call over to our Chief Executive Officer, Mr. Xiaonan Hou.

Thank you, Maggie. Good evening, everyone, and welcome to today's earnings call. Before we begin discussing the results, I would like to share some of our recent thoughts and plans at the strategic and operational levels. Over the past year, 2025, we all witnessed the profound impact of artificial intelligence. As 2026 begins, the content industry is accelerating further. With the release of new versions of multimodal large models, film quality AI content generation is rapidly becoming a reality. We believe that in the near future, the barriers to multimedia production will continue to fall, inviting more nontraditional creators into the field. IP once limited to text will be transformed faster and at lower cost into drama series and films, animation games and even immersive interactive experiences.

As technology and efficiency stop being barriers, the value of high-quality content will rise to new heights. In the era of content abundance, the industry is shifting from a capacity competition to a value competition, where the question is not who produces more, but who tells the better story. This precisely encapsulates the core capability that China Literature has accumulated over two decades. We have the industry's deepest IP library, the most robust creator ecosystem that truly understands content and now with AI as our accelerator. These three strengths together are unlocking new value growth opportunities for premium IPs. We stand at the start of a new era and are already building momentum.

Our guiding question in this transformation is clear. How can we leverage our unique advantages to fully empower the industry's best creators and together reach new frontiers of imagination ahead of the market. We have made numerous attempts and achieved remarkable progress. For example, in our AI animated drama business, we launched AI animated drama assistant, [Foreign Language] in the second half of 2025 to boost creator productivity. The tool spans narrative techniques and enriches visual expression with continuous iteration as the underlying technology advances.

We also moved decisively into the production of AI animated dramas, helping bring numerous standout titles to market. Since the second half of 2025, we have released nearly 1,000 AI animated dramas, more than 100 surpassed 10 million views and 12 exceeded 100 million views. Moreover, revenue from AI animated dramas exceeded RMB 100 million in the second half of 2025. This is a validation of AI's large-scale commercialization within the IP industry. The rapid takeoff of our AI-animated drama business perfectly illustrates our 2025 strategy.

On One track, we deepened our content ecosystem, built premium offerings and accelerated new business rollouts. On the other, we fully promoted AI iteration to improve IP development efficiency and build momentum for future breakthroughs. In 2026, we will continue on these two tracks, pushing harder for deeper technology and content integration.

Next, I will provide a detailed review of our business performance in 2025. First, in IP incubation, our online reading premium content ecosystem continued to drive. In 2025, our platform attracted 400,000 new writers, over 800,000 new logos and added more than 42 billion characters, providing a steady pipeline of high-quality content. Top-tier creative output continued to strengthen. On our flagship Qidian reading app, the number of new titles averaging over 100,000 subscriptions per chapter grew 40% year-over-year. And for the first time, two blockbuster titles surpassed 300,000 subscriptions per chapter. Meanwhile, the number of post 2,000 writers earning over RMB 1 million annually jumped 150%. Our community has also become more robust. Works exceeding 100,000 collections increased by 80% and titles receiving more than 10,000 monthly tickets increased by 20%.

In IP visualization, China Literature delivered positive results across traditional strengths such as film, drama series and animation with its IP dominating various major industry rankings in 2025. More importantly, we embraced new production models and technologies, leveraging our rich IP library to expand into emerging businesses like short dramas and AI animated dramas, achieving significant progress and laying the foundation for an IP plus AI creation ecosystem.

In the premium drama series and film segment, several top-tier series adapted from our IPs premiere in 2025, such as A Record of a Mortal's Journey to Immortality [Foreign Language] Flourished Peony [Foreign Language] and I am Nobody [Foreign Language] all of which ranked #1 in platform popularity charts during their respective broadcast periods. According to Enlightent, 5 out of the top 10 long-form dramas by cumulative views across all platforms of 2025 were adapted from our IPs. Meanwhile, our self-produced premium series, The Narcotic Operation [Foreign Language] debuted on Tencent Video, reaching a popularity index above 28,000 and earning press from multiple mainstream media outlets. Earlier in 2026, we also released the drama series, The Richest Poor Guy [Foreign Language] and The Devil Between Us [Foreign Language], both of which earned strong critical reception and audience traction.

In the animation segment, sequel series such as Battle Through the Heavens [Foreign Language] Stellar Transformations [Foreign Language] and Candle in the Tomb [Foreign Language] constantly ranked among the top titles on platform popularity charts. According to Enlightent, 9 out of the top 10 animation series by cumulative views across all platforms of 2025 were adapted from our IPs, reinforcing our clear leadership in animation.

Notably, we are pleased to report breakthrough progress in the fast-growing short drama and AI animated drama business. In the short drama segment, we launched more than 120 short dramas in 2025, delivering strong results from our premium content strategy with frequent breakout hit. One representative title set a record with gross revenue exceeding RMB 80 million and ranked #4 on Enlightent's viewership charts in 2025 with more than 3.5 billion views.

We have expanded beyond our strength in modern room into male-oriented genres, period and costume dramas and more building a diversified high-quality premium content matrix with long life cycles. The success of short dramas is rooted in China Literature's rich IP reserve, robust creator network and end-to-end IP development capabilities. We are also expanding our short drama footprint through strategic investments, further strengthening our advantage in premium content.

In the AI animated drama segment, we launched four major initiatives to build a dedicated ecosystem. We opened our IP library, established a creator support fund, built out AIGC tools such as the AI-Animated Drama Assistant [Foreign Language] and provided full stack support across production, distribution and IP partnerships. This initiative fueled rapid growth of our AI animated drama business. As noted, since its official launch in the second half of 2025, revenue from AI animated drama series has surpassed RMB 100 million, showing strong momentum and substantial market potential.

In IP commercialization and monetization, we achieved historic breakthroughs and accelerated our systematic build-out in 2025. GMV of the IP merchandise products business exceeded RMB 1.1 billion, more than double the figure of 2024. This was driven by four core engines, product, channel, operations and ecosystem. On the product front, our design capabilities and supply chain efficiency improved further, achieving industry-leading speed and quality. We expanded into new categories such as precious metals, vinyl plush toys, bags and accessories and introduced new sales mechanics such as Ichiban Kuji draws.

On the channel front, we refined our self-operated e-commerce metrics comprising self-operated live streaming rooms plus flagship online stores plus mini programs and continue to expand off-line self-operated stores across 10 core cities nationwide. We also teamed with over 10,000 channel partners to reach users across early consumption scenarios.

On the operation front, we run a series of online and offline campaigns around multiple top IPs to strengthen IP influence and fan engagement. On the ecosystem front, we advanced our IP plus consumer strategy, signing licensing partnerships with over 200 leading customer brands to embed our IP across diverse everyday scenarios. In the online game segment, we continue to license high-quality IPs to partners.

Our flagship title, Douluo Continent: Soul Hunting World, [Foreign Language] generated RMB 300 million in its first month after launching in 2025. Several new games also secured publication licenses, including Battle Through the Heavens [Foreign Language], Douluo Continent [Foreign Language], and The Hidden Ones [Foreign Language] We look forward to strong player reception at release.

Finally, I would like to share our new technology explorations and practices. In 2025, we embedded AI across our entire content production chain and built a suite of AI solutions spanning the full IP life cycle. In online literature, our writer assistant [Foreign Language] creation platform received a major upgrade with the integration of the Smart Pen Tongjian [Foreign Language] AI engine which can perform real-time in-depth analysis of tens of millions of words to support writers. The tool is now officially available industry-wide. Also, a few days ago, we rolled out writer cloud, an AI creative agent built on the popular open cloud framework inside our writer assistant tool. This further helps writers work faster and more creatively and it's the first tool of its kind in online literature sector during the current everyone raising shim trend. We will keep upgrading our writer tools to make writing smoother and more enjoyable.

In IP adaptation, we launched the copyright assistant [Foreign Language] which deep mines China Literature's library of millions of words and accurately matches titles to meet downstream adoption needs, significantly accelerating the sourcing, screening and development of high-quality IP assets.

In AI animated dramas, our AI animated drama assistant [Foreign Language] integrates with multiple leading domestic and international multimodal large models, supporting full workflow from text to visuals significantly improving adaptation efficiency and greatly lowering the barrier to animated drama production.

For global expansion, AI translation has substantially extended the international reach of Chinese language works. By the end of 2025, more than 17,000 AI translated works were available on WebNovel with revenue up 39% year-over-year and contributing over 1/3 of the platform's total revenues, making AI translation a key driver of overseas growth. Looking ahead, we stand at the dawn of a new wave of transformation in the content industry with emerging business models and accelerating technology. This one timeless truth remains unchanged. High-quality content is and will always be the core. This is the foundation of China literature. We believe the synergy between IP and AI will continue to power the industry going forward. IP is the soul. AI is the engine. The role of technology is to maximize the impact of exceptional stories. We will embed AI across every key stage of creative assistance, premium production, IP development and global expansion from leading deployment into new formats such as AI animated dramas to systematic improvements in IP development efficiency and value creation. Our IP plus AI ecosystem will serve as a scalable engine that amplifies the content value and drive China Literature's sustainable long-term growth.

This concludes my remarks. I will hand it over to Jacky to review the company's financial performance. Thank you.

Thank you, Mr. Hou. Hello, everyone. In 2025, our total revenues were RMB 7.37 billion compared with RMB 8.12 billion in 2024. Let's take a look at our online business first. Online business revenues were RMB 4.05 billion compared with RMB 4.03 billion in 2024. Breaking down further, revenues from our self-owned platform products increased 0.9% year-over-year to RMB 3.56 billion, mainly driven by our focus on growing core product operations and continuous production of high-quality content. Revenues from our self-operated channels on Tencent products decreased 22.3% year-over-year to RMB 191 million, mainly driven by a decrease in advertising revenues associated with the continuous refinement of content distribution practices of Tencent channels and prioritization of distribution through company's core pay products. Revenues from third-party platforms increased 15.7% year-over-year to RMB 294 million, primarily due to expanded collaboration with third-party distribution partners.

In terms of operating metrics, our total average MAUs were 137.8 million in 2025 compared with 166.6 million in 2024. Breaking down further, MAUs on our self-owned platform products remained stable on a year-over-year basis at 104.1 million compared with 103.8 million in 2024. MAUs from our self-operated channels on Tencent products were 33.7 million compared with 62.8 million in 2024, primarily due to our ongoing optimization of operational efficiency by concentrating more content distribution through our core pay-to-read products, which resulted in a decline in user acquisition through free-to-read channels. Average MPUs were 9 million compared with 9.1 million in 2024. This was mainly due to an increase in promotional activities during the year, which led to some low spending users being classified as free users over the period. Monthly ARPU was RMB 32.9 increased 2.8% year-over-year from RMB 32 in 2024, mainly due to a decline in the proportion of low spending users.

Now turning to IP operations and other businesses. In 2025, revenues from IP operations and others were RMB 3.32 billion compared with RMB 4.09 billion in 2024. In this segment, revenues from IP operations decreased 20% year-over-year to RMB 3.19 billion. The decrease was primarily due to scheduling delays that led to fewer releases of drama series and film projects in 2025. Meanwhile, new businesses such as IP merchandise products, short dramas and AI animated dramas have been developing rapidly. In particular, the IP merchandise products business generated over RMB 1.1 billion in GMV in 2025, over twice RMB 500 million in 2024. And the company's AI-animated dramas business generated over RMB 100 million revenue in the second half of 2025. Revenues from the others category, mainly generated by sales of physical books increased 28.4% year-over-year to RMB 128 million.

Now let's look at costs and expenses. In 2025, our cost of revenues decreased 5.5% year-over-year to RMB 4 billion, primarily due to lower production costs of drama series and films in line with the decrease in revenues from fewer releases during the year. As a result, our gross profit was RMB 3.4 billion compared with RMB 3.9 billion in 2024. Gross margin was 46.1% compared with 48.3% in 2024. Our selling and marketing expenses decreased 11.1% year-over-year to RMB 2 billion as a result of a decrease in marketing and promotional expenses associated with light release schedule, drama series and film projects. As a percentage of revenues, our selling and marketing expenses were 27.3% in 2025 compared with 27.8% in 2024. Our G&A expenses decreased 11.9% year-over-year to RMB 1 billion. As a percentage of revenues, our G&A expenses decreased 13.7% in 2025 compared with 14.1% in 2024. Our net other losses of RMB 1.2 billion in 2025 compared with net other losses of RMB 974 million in 2024. The net losses in 2025 were primarily due to a RMB 1.8 billion impairment loss of goodwill attributable to New Classics Media. However, it was partially offset by gains from certain investee companies. This impairment charge is noncash in nature and therefore, is not included in our non-IFRS financials. As a result of the above factors, our operating loss was RMB 805 million in 2025 compared with RMB 336 million operating loss in 2024. On a non-IFRS basis, operating profit was RMB 735 million compared with RMB 985 million operating profit in 2024. Our net loss to shareholders was RMB 776 million in 2025 compared with a loss of RMB 209 million in 2024. On a non-IFRS basis, our net profit to shareholders was RMB 859 million compared with a profit of RMB 1.1 billion in 2024. That concludes our financial review part.

Let's move on to a Q&A session.

Thank you for the presentation. Now we will start the Q&A session. [Operator Instructions]. The first question comes from Xueqing Zhang with CICC.

[Foreign Language] [Interpreted] I have two questions. My first question about short drama business. After three years of rapid growth in the short drama industry, how do you view the long-term opportunities in this industry? What's our current positioning and the strategy in the short drama ecosystem, which part of the value chain that the company plan to participate in, such as IP licensing, production, marketing and traffic acquisition or operating short drama platforms?

And how should we think about the role of short drama in virtualizing and expanding China Literature's IP portfolio?

My third question is about the overseas business. Could management share your overall strategy for international markets as well as any recent progress and targets that you can share with us?

[Foreign Language] [Interpreted] Thank you for your question. I will take your questions. After three years of rapid growth, we have observed a clear trend towards premiumization in the short drama market and only high-quality content is likely to deliver strong returns, which closely aligns with our industry investments. We remain committed to producing high-quality short dramas by leveraging our strong creator ecosystem and rich IP library. We launched more than 120 outstanding short drama titles in 2025. And as of now, our short drama have accumulated over 50 billion total views across all platforms.

We achieved many outstanding results in 2025. In 2025, our primary focus was on raising the hit rate of our short drama with the core objective of producing more high-quality short drama content. For example, our representative titles launch in 2025 recorded over 3.5 billion views across all platforms, generated a gross transaction volume of over RMB 80 million and ranked #4 on Enlightent's viewership trends in 2025.

After that, several other breakout themes emerged. The male-oriented title ranked #1 on short drama platform for the first five days after release and in its first release on free short drama platform reached the top 3 in trending shows and top 2 among new releases, achieving over 1 billion views across all platforms. We also had multiple female-oriented titles with over 1 billion views each, entering the top 5 of the hot list on free platform. Overall, we have built a diversified high-quality premium content metric with long life cycles in 2025. And across all titles released in 2025, more than half were labeled as hit short drama by leading platform. These metrics collectively demonstrate our expertise in creating hit drama.

From an industry chain perspective, we retain core control over short drama repining and commercialization, including paid advertising and traffic acquisition for subscription model as well as partnerships with great short drama platform. For production, we primarily adopt a co-production model that leverages resources across the industry ecosystem. This approach is designed to play to our core strength as a content company and to create high-quality short drama for audiences. Furthermore, the short drama business is an important part of China Literature's full IP industrial chain development compared to the long-form drama, this short quick model is inherently well suited to efficient visual adaptation of mid-tier IP. It also aligns with our vast library of online literature and our creator ecosystem.

Overall in 2025, our short drama business has grown rapidly with a notable increase in take rate and a clear rise in profitability. In 2026, building upon our established methodology for creating key short drama, we will further deepen industry cooperation and enhance our production capacity. We plan to release more than 200 short dramas in 2026, and we believe the short drama business will deliver even more outstanding performance.

Regard your question about overseas business, we also have made very great progress in 2025. We see several key requirements for building global IP, accelerating production capacity through AI, expanding the film chain overseas rollout and ensuring strong local creation and localized operations of IP. We accelerated the rapid growth in the global expansion of online novel through AI. Key highlights include that in 2025, we added over 10,000 AI translated titles, more than 4x the number in 2024. At the same time, the AI translated work now contributed over 1/3 of WebNovel's total revenue. Leveraging AI translation, we also made break growth in some smaller language markets besides those English markets with Latin America and Southeast Asia demonstrating particularly strong momentum last year.

Our diverse IP offerings have continued to expand its global footprint across formats, including audiobooks, animation, film and drama series adaptation. For example, the animation adaptation of the Lord of Mysteries was released simultaneously in over 190 countries and regions in 2025 and opened with an IMDB rating of 9.3, becoming a new benchmark for Chinese IP overseas. Furthermore, it requires global industry collaboration for great story to grow into a world-class IP. We are working to build a global industrial ecosystem that covers the upstream and downstream of IP and thereby deepening international cooperation across the IP value chain. We have partnered with international players such as Disney, Netflix and Sony Pictures as well as leading regional partners in Japan, Southeast Asia and Latin America to roll out more than 1,000 published titles, over 2,000 comics and over 100 animation, film and drama series production overseas.

With these initiatives, we are committed to leveraging the resources and expertise accumulated in China's IP industry chain to build a more open global IP ecosystem and to actively embrace the new opportunities brought by AI technology in order to accelerate business growth.

[Operator Instructions] Your next question comes from [indiscernible] with CLSA.

[Foreign Language] [Interpreted] Thanks for taking my questions which are related to AI animated drama business. So, firstly, what are the primary commercialization pathway at this stage? And what have you established a scalable business model for AI animated drama?

And secondly, regarding the current industry landscape and the company's own resources and advantages, how are management thinking the short-term and mid- to long-term development and overall strategic priority of this segment?

And finally, what is the positioning of AI animated drama in your overall broader IP life cycle strategy? For example, what are the key initiatives you will implement to further maximize the IP value on the platform?

[Foreign Language] [Interpreted] Thank you for your question. Actually, the AI drama is a new content format that emerged in this industry last year. And we understand that it is a new form of integration between AI and animation content that is rapidly evolving in the digital content ecosystem. Breakthroughs in large model capabilities enable creators to adapt text content into animated content at lower cost with far greater speed and on a much larger scale.

As AIGC technologies continue to advance, we expect the format to evolve from animation style drama to AI-animated drama with a broader range of genres and themes. Like live action short drama, the production of AI animated drama comprises three core stages: the IP and great development, AIGC content production and commercialization distribution. First, great development is a key strategic focus and one of our core strengths. We have a vast IP library and a vibrant creator ecosystem in the history. These are all important resources for developing our AI animated drama business and providing a solid creative foundation.

In terms of AIGC content production, we have partnered with high-quality production capacity across the industry and made a strategic investment in leading AI animated drama producer [Foreign Language] to further bolster our output. Currently, overall industry production efficiency is relatively high and AI large model capabilities for animated dramas are evolving rapidly, leading to continuous improvement in production quality at the same cost levels. We will continue to upgrade our plans in step with industry trends and technological development. We also provide creators with the AI animated drama assistant [Foreign Language] meant to crucial that enables efficient one-stop animated drama creation. AI animated drama assistant has integrated multiple leading domestic and international image and video generation large models. It not only supplies creators with powerful tooling and matches the best model to each creative stage, but also delivers clear advantages in video content [indiscernible] and script development. We believe these advanced AI tools will effectively accelerate and amplify China Literature's IP value.

In terms of commercialization, we are developing both paid and free AI animated drama offerings and have built strong partnerships with major short video platforms as well as mid and long video platforms. We believe the market demand for high-quality premium AI animated drama will grow rapidly in the future. And that is also our advantage. And therefore, our short-term focus for AI animated drama is to refine a repeatable playbook for creating blockbusters. We've already seen strong early traction. Since the second half of 2025, we have released nearly 1,000 AI animated dramas, more than 100 surpassed 10 million views and 12 exceeded 100 million views, setting a new industry benchmark for mega hits. Revenue from our AI animated drama business also exceeded RMB 100 million in the second half of 2025. Building on this momentum, in 2026, we will further focus on breakthroughs introducing premium and core titles for broader expansion.

Your next question comes from [indiscernible] with Guangfa.

[Foreign Language] [Interpreted] I will translate the question myself. And given the solid performance of our IP derivative products, what's your development strategy for IP derivative business over the past year?

And my second question is about looking ahead, what are the upcoming development plans? Could you also share details of the IP structure as well as signing and develop new signs for fashion IP.

[Foreign Language] [Interpreted] Thank you for your question. We are very happy to see that our IP merchandise products business delivered very strong results in 2025 with GMV exceeding RMB 1.1 billion, more than double that of 2024. And this was driven by the business team's continuous breakthroughs across the whole value chain, including product design, production, channel and user operations. In terms of product design, thanks to improved design capabilities and supply chain efficiency, our IP merchandise products released in 2025 was more than 4x that of 2024. In terms of channels, our channels have achieved rapid and balanced growth. Our self-operated online mini program, live streaming room and flagship online stores all expanded quickly, and our own retail stores in major group shopping districts consistently ranked among the top sellers in their mall. In addition, we collaborated with over 10,000 online and offline distribution channels and our partnership with these channel partners are continuously deepening.

In terms of categories, we continue to deepen our focus on soft accessory segments such as goods and collectible cards and released more products that have proven popular with our audience. The [indiscernible] developed together with [indiscernible] was launched in the second half of last year and was warmly embraced by the market, selling on several times on release. In addition, we introduced new concepts and themes such as the commemorative [indiscernible] products, cookie time, cookie draws, essential and bags, apparel and accessories. We also introduced more practical merchandise and co-branded IP products, all of which have been well received across our channels.

In terms of IP, many IP have drawn strong market recognition, including The King's Avatar [Foreign Language] Lord of the Mysteries, [Foreign Language] The Hidden Ones [Foreign Language] Dao of the Bizarre Immortal [Foreign Language] The Fox Spirit Matchmaker [Foreign Language] Battle Through the Heavens [Foreign Language] and Joy of Life [Foreign Language]. Several leading IPs also launched visual product this year, and we look forward to the potential synergies across different IP formats. Beyond merchandising existing content IP into anime style derivatives, the team has made significant progress on trended toy IP, not only the first generation flexibles for we mentioned earlier. Follow-on releases for along with several other trend toy IP are expected to debut this year.

Over the long term, we are optimistic on the growth potential of our IP merchandise business by leveraging years of content leadership and sharp insights into the merchandising market and its consumers. we aim to create homegrown IP merchandise blockbusters in China and accelerate our business growth trajectory.

Your next question comes from Jenny Yuan with UBS.

[Foreign Language] [Interpreted] I have two questions. So first of all, could you please provide an update on your cases pipeline for this year?

And next, could you please also elaborate on the company's overall AI strategy and progress across various scenarios? And if any quantitative metrics you can share, would be highly appreciated.

[Foreign Language] [Interpreted] I will invite [ Mr. Tao ] to answer your question about [ MCM ], and I will further invite [ Mr. Huang ] to answer your question about AI.

And regarding your question about MCM, MCM is expected to broadcast six to eight drama series this year. Among them, The Richest Poor Guy [Foreign Language] and The Devil Between Us [Foreign Language] in February and delivered outstanding results. The Richest Poor Guy reached a popularity index above 25,000 during broadcasting period and topped several authorated rankings, including #1 for online drama popularity chart on [indiscernible] platform and #1 for full episode viewership on the Wintep platform. The Devil Between Us rose to #1 on [indiscernible] top 10 [indiscernible] and consistently led [indiscernible] ranking as well as [indiscernible] online drama. Beyond that, we expect to further release more drama series this year, such as The Princess [Foreign Language] [indiscernible] in addition, drama series, including Joy of Life 3, [indiscernible] My Heroic Husband 2, the Guardians of the Dafeng [Foreign Language] The Sole Heir of the General's Family and [ Honorable Man ] going to ride the win all the space evident [indiscernible] are also progressing steadily are also expected to be released this year.

[Foreign Language] [Interpreted] I'll take your question about the AI. As a content company, we actively embrace AI technology to empower China leverages entire content ecosystem. We have purposely developing and deploying AI across a variety of scenarios and including the creation and AI visualization, AI translation and also the thought digging and have made very solid progress.

First, I will introduce our writer assistant. We have comprehensively upgraded the writer assistant, integrating the AI capabilities of smart content to enable deep understanding of [indiscernible]. This can analyze long literary work in real time and support scenarios like deep recall, slot summarization, character relationship mapping and foreshadowing detection. Writer Assistant is now open to online over writers industry-wide. And there are some data to share. Since the new version launched, the smart content DAUs have more than doubled and average daily token consumption has risen by over 90%. And we observed that the also AI interaction frequency has increased by more than 100% and also the writer assistance DAU is more than doubled year-on-year.

Recently, we integrated the [ cloud ] AI agent, the [indiscernible] pick off the internal data, acting like a personal QQ style assistant, it helps collect trending topics, evaluate and analyze with all data processed locally for security and efficiency. We will continue rapid iteration and plan to add features such as cross-platform same genre analysis, reader preference insights and AI-generated chapter illustration to further enhance the offering.

Besides the writer assistant, I will highlight the other tool, the AI-Animated Drama Assistant [Foreign Language] AI-Animated Drama Assistant is the industry's first one of creation platform developed by us for adapting online models into AI-animated dramas. It provides full process support for AI animated drama creation from novel adaptation and visual style to asset production on One platform.

Benefiting from our vertical expertise in online literature, our AI animated drama assistant has clear advantages in content understanding and in the efficiency of lighting and adaptation. Since its launch -- initial launch in October last year, over 100 AI animated drama studios have paid to use the AI animated drama assistant and generated over 1 million views.

We have another assistant, it's a copyright assistant [Foreign Language]. It focuses on providing precise title selection and content understanding for IP adapters. It can quickly match millions of work in China Literature IP library with downstream adaptation needs and further activate the development potential of our IP assets. Internally, we have observed that in IP retrieval and value assessment, the copyright assistant is tens of times more efficient than the traditional manual method. And more importantly, it enables AI to rapidly interpret and uncover adaptation value of content in IP library that are too large for humans to fully accept today. Therefore, the copyright assistance delivers substantial business value, both in improving efficiency of existing assets and in expanding new opportunities.

Certainly, our AI transformation capability we highlighted before when talking about the overseas business has continued to drive our overseas expansion. By leveraging AI, we efficiently converted content into multiple languages and has accelerated the globalization of our online models, significantly broadened our multilingual user base and help nurture a healthier overseas creator ecosystem.

Overall, we are very optimistic that AI can boost the efficiency of production capacity across various other content formats and that it can closely complement our creative strength and story to drive sustained business growth and monetization of China Literature. Thank you.

Thank you. I will now hand the call back to Maggie Zhou.

Thank you. Due to the time constraints, we'll now have to conclude today's call. On behalf of the entire China Literature management team, 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.