Kuke Music Holding Limited

Q1 2022 revenue increased 128.8% year over year to RMB 26.1 million from RMB 11.4 million. Licensing revenue rose 275.8% to RMB 1 million from RMB 0.3 million; subscription revenue slipped to RMB 3.4 million from RMB 4.3 million; smart music learning solutions revenue increased 9.4% to RMB 7.5 million from RMB 6.8 million; and live music events revenue reached RMB 13.8 million. Gross profit was RMB 0.2 million versus RMB 3.2 million a year ago, and gross margin was 0.7% versus 28.2%. Operating loss was RMB 36.6 million, net loss was RMB 35 million, and non-IFRS net loss was RMB 17.1 million; basic and diluted loss per ADS were both RMB 1.18, and non-IFRS loss per ADS was RMB 0.58. Management said gross margin was pressured by one-time disposal of obsolete inventory and increased amortization of royalty payments, and expects gross margin to normalize for the full year. No explicit full-year revenue or EPS guidance was given.

CEO He Yu framed Kuke as a classical-music platform built around licensing, subscriptions, live events, smart learning, and newer technology initiatives such as NFTs. He emphasized expanding classical music’s influence in China, leveraging the faster-growing Chinese recorded music market, deepening the partnership with Naxos, and growing internationally through artist relationships, sponsorships, and technology. His tone was strategic and optimistic, focused more on long-term market opportunity than near-term financial detail.

CFO Tony Chan highlighted the quarter’s reported figures and explained that the main drivers of the weaker gross margin were one-time obsolete inventory disposal and higher amortization of royalty payments. He noted operating expenses fell 18.9% to RMB 40 million, with administrative expenses down 38.9% to RMB 24.7 million, while impairment losses on financial assets rose to RMB 6.6 million, mainly from accounts receivable in smart music learning. He ended by citing RMB 41.7 million in cash and cash equivalents at March 31, 2022, saying the company had sufficient cash currently but could consider financing if an attractive acquisition opportunity arose.

Analysts focused on the sharp gross-margin decline, the sustainability of smart music learning sales growth, the drivers of licensing growth, and the company’s cash/financing plans. Management said gross margin should normalize for the full year, smart music learning growth should be sustainable because of stable public-school demand, and licensing benefited from a larger client base plus new use cases like long-form video and streaming demand. On cash, management said RMB 41.7 million was sufficient for now, but financing could be considered for a desirable M&A target.