"Base Plate + Growth Plate" dual layout, IDREAMSKY actively expands its global market

"At its core, IDREAMSKY is doing two things: introducing overseas boutique games and developing self-made games for global expansion," said Lei Junwen, Chief Financial Officer of IDREAMSKY (01119), at the mid-year performance meeting in 2024.

Since its establishment in 2009, IDREAMSKY has been known for introducing overseas boutique games and has nearly 15 years of history, achieving success with multiple national-level products. Starting from 2019, the company has gradually ventured into self-development, with its self-made games being continuously delivered in recent years.

From the early days of source code-based collaboration to strategic exploration of self-development breakthroughs, on August 30th, IDREAMSKY showcased its strategic achievements through various development stages.

Strong foundation in gaming, significant increase in operational cash inflow

In the first half of this year, by focusing on long-term operation of classic games and continuous introduction of overseas boutique games, IDREAMSKY maintained steady development of its core business.

During the period, the company achieved operating income of 850 million RMB, a 5% increase compared to the previous period; adjusted net profit reached 3.3 million RMB, mainly driven by growth in core game revenue and a significant decrease in marketing expenses.

Although the company's revenue decreased to a certain extent compared to the first half of last year, it was mainly due to the reduction of non-core game operations in the previous year, while non-core games still contributed in the current period. The decline was also influenced by the natural decline of "Subway Surfers" which performed exceptionally well during the Spring Festival period last year.

Nevertheless, the company's core games still showed strong growth in the first half of this year. According to the Zhitong Finance APP, during the first half of the year, the games "Dream Garden" and "Dream Home" consistently ranked in the top three in the elimination category, becoming the most popular games among Chinese female players. Both games achieved a 14% year-on-year revenue growth, reaching a new high.

It is worth mentioning that the user base of "Dream Garden" and "Dream Home" is still steadily growing. For a product that has been online for 7 years, the revenue and user base continue to grow, which is rare in the industry.

With IDREAMSKY's continuous deep cultivation in introducing overseas boutique games, the company has become one of the preferred partners for overseas game developers entering China. In January this year, IDREAMSKY introduced the first realistic mecha-themed real-time combat game in China, "Mecha Squadron", which has launched 10 new versions since its release, showing strong revenue growth exceeding expectations.

Lei Junwen also mentioned at the performance meeting that it is expected that "Mecha Squadron" will continue to contribute significantly to the company's cash flow in the second half of the year.

Furthermore, in terms of expenses, the company's marketing expenses saw a significant decrease in the first half of this year, with a year-on-year decrease of approximately 23.4%. Lei Junwen explained that the decrease in marketing expenses was mainly due to the continuous improvement in customer acquisition efficiency and the company's expertise in refined operations, including in-game operations and community operations through Fanbook.

In comparison, the company's research and development expenses saw a significant increase in the first half of the year, reaching around 153 million RMB, an 8.7% year-on-year increase, mainly due to increased investment in multi-platform development of "Karabichu" Despite a significant increase in research and development expenses, in the first half of 2024, IDREAMSKY still achieved a substantial growth in cash flow, with operating cash net inflow reaching 33.8 million yuan, a 365% increase compared to the previous period. In terms of the balance sheet, the company's interest-bearing debt in the first half of the year decreased by 13% compared to the same period last year, and the interest rate also decreased, optimizing the balance sheet.

IDREAMSKY has always focused on the quality of income and operating cash flow in terms of finance. From the performance in the first half of the year, the company's existing game user base showed steady growth and excellent cash flow performance. With new games set to be launched successively, the company's profitability and cash generation capability are expected to become even stronger.

According to Lei Junwen, the continuous introduction of the company's existing products and overseas products has formed the company's business foundation. Through season and event operations, continuous iterative development of content, Lei believes that the global launch of "Karabichu" on PC in the second half of this year and the launch of the mobile game early next year will significantly boost the company's performance and contribute to its growth.

Self-developed games bear fruit, actively expanding the global market

In recent years, IDREAMSKY has been continuously cultivating the self-developed game track, and now it is gradually bearing fruit.

If "Honor All-Star" is the proof of IDREAMSKY's self-developed capabilities, then "Karabichu" is a further demonstration of the company's elevated level of self-developed game expertise.

As the world's first anime competitive shooting game, "Karabichu" has gained recognition from users, especially a large number of young users, through its unique game mechanics and anime art style. Now, "Karabichu" has reached a key stage of delivery on a global scale for PC and domestically for mobile.

According to the Zhitong Finance APP, "Karabichu" adopts a seasonal operation model. Since its launch on PC in China, by the end of Season 6, it has successfully delivered 17 characters, 16 maps, and 7 modes. With the continuous updates of new characters, maps, and gameplay, the product's growth momentum is strong.

During this summer vacation, "Karabichu" saw a significant increase in data, with a nearly 40% increase in daily active users and an average daily online time of about 120 minutes. In July of this year, the number of paying users increased by over 30% month-on-month, and the average revenue per paying user (ARPPU) increased by nearly 40%.

At the same time, taking event operations as an important part of product development, since 2024, IDREAMSKY has successively held events such as university competitions and the Starlight Cup, attracting the attention and participation of new users, deepening the brand's influence among young consumer groups.

Regarding overseas market planning, Lei Junwen, the company's CFO, stated that the current Chinese gaming market accounts for about 25% of the global market. By exporting self-developed products, IDREAMSKY aims to expand into the remaining three-quarters of the market. It is expected that within the next two years, overseas revenue will account for or even exceed 50% of total revenue.

In the fourth quarter of 2024, "Karabichu" on PC is planned to be globally released, covering regions such as Europe, America, Japan, South Korea, Southeast Asia, and South America. The overseas first round of closed beta testing (CBT-1) has received positive feedback, and the mobile game is also expected to be launched in the first quarter of 2025 With its unique innovation and product strength, "Karabichu" has officially joined the 2024 Saudi Arabia Esports World Cup (EWC), greatly enhancing the global visibility of the product and helping to expand overseas markets. At the same time, the host end of "Karabichu" has also been adapted to Sony, attracting wide attention from players at the 2024 Sony ChinaJoy Expo, with plans to go live in 2025.

In terms of planning, in the second half of this year, "Karabichu" is about to enter a period of performance delivery, reaching a new high. Lei Junwen predicts that with the successive launch of the overseas PC version, host version, mobile game version, and domestic mobile game version of "Karabichu", the company's revenue, gross profit margin, net profit, and operating cash flow will see significant and sustainable improvement.

Looking ahead, Chen Xiangyu, Chairman of IDREAMSKY's Board of Directors, stated that the company will continue to enhance its core competitiveness, optimize existing game products, and steadily promote the multi-platform launch of games such as "Karabichu" globally. At the same time, the company is actively seeking and seizing new market opportunities, continuously introducing more high-quality games in various niche segments, bringing more high-quality games to global players, and creating greater value