[中报]三七互娱(002555):2022年半年度报告摘要（英文版）
原标题:三七互娱:2022年半年度报告摘要（英文版） 37 Interactive Entertainment Network Technology Group Co., Ltd. 2022 Interim Report (Summary) August 2022 Part I Important Notes, Table of Contents and Definitions The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors, supervisors and senior management of 37 Interactive Entertainment Network Technology Group Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the truthfulness, accuracy and completeness of the contents of this Report, and shall be jointly and severally liable for any misrepresentations, misleading statements or material omissions therein. Li Weiwei, the Company’s legal representative, and Ye Wei, the Company’s Chief Financial Officer & Board Secretary, hereby guarantee that the financial statements carried in this Report are truthful, accurate and complete. All the Company’s directors have attended the Board meeting for the review of this Report. There is uncertainty with respect to the plans and other forward-looking statements in this Report, which shall not be deemed as promises to investors. Investors and other stakeholders shall be fully aware of the risk and understand the difference between plans, forecasts and promises. Possible risks facing the Company and countermeasures have been detailed in “VII Risks Facing the Company and Countermeasures” under “Part III Management Discussion and Analysis” herein, which investors are kindly reminded to pay attention to. The Board has approved an interim dividend plan as follows: based on 2,217,864,281 shares, a cash dividend of RMB 3.5 (tax inclusive) per 10 shares is planned to be distributed to all the shareholders of the Company, with no bonus issue from either profit or capital reserves. Table of Contents Part I Important Notes, Table of Contents and Definitions ............................................................................................. 2 Part II Corporate Information and Key Financial Information ......................................................................................... 7 Part III Management Discussion and Analysis .............................................................................................................. 10 Part IV Corporate Governance .................................................................................................................................... 34 Part V Environmental and Social Responsibility ........................................................................................................... 38 Part VI Share Changes and Shareholder Information ................................................................................................... 41 Part VII Financial Statements ...................................................................................................................................... 47 Documents Available for Reference I The financial statements signed and stamped by the Company’s legal representative, and Chief Financial Officer; and II The originals of the announcements and documents disclosed to the public by the Company on the newspaper designated by the CSRC for information disclosure during the Reporting Period. The documents above are available at the Board Secretary’s Office of the Company. Definitions
Part II Corporate Information and Key Financial Information I Corporate Information
1. Contact Information of the Company Indicate by tick mark whether any change occurred to the registered address, office address and their zip codes, website address and email address of the Company in the Reporting Period. ? Applicable □ Not applicable
periodic reports in the Reporting Period. □ Applicable ? Not applicable The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing the Company’s periodic reports and the place for lodging such reports did not change in the Reporting Period. The said information can be found in the 2021 Annual Report. 3. Other Information Indicate by tick mark whether any change occurred to other information in the Reporting Period. □ Applicable ? Not applicable IV Key Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes ? No
□ Applicable ? Not applicable No difference for the Reporting Period. 2. Net Profit and Equity under CAS and Foreign Accounting Standards □ Applicable ? Not applicable No difference for the Reporting Period. VI Non-recurring profits and losses ? Applicable □ Not applicable Unit: RMB
□ Applicable ? Not applicable No such cases for the Reporting Period. Explanation of why the Company reclassifies as recurrent a non-recurring profits and losses item listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring Profits and Losses Items: □ Applicable ? Not applicable No such cases for the Reporting Period. Part III Management Discussion and Analysis I Principal Activity of the Company in the Reporting Period As one of the top 20 global public game companies, key cultural export companies of China, companies nominated for “Top 30 Cultural Enterprises of China”, civilized institutions in Guangdong Province, and Top 30 Cultural Enterprises of Guangzhou, 37 Interactive Entertainment is an outstanding listed Chinese A-share company engaged in comprehensive cultural and entertainment offerings. The Company focuses on cultural and creative businesses based on the development, publishing, and operation of online games. Meanwhile, it continues to make extensive investments in segments such as Metaverse, film and television, music, artist agency, animation, social entertainment, e-sports, culture and health, and new consumption, with an aim to build a comprehensive ecosystem and drive mutual empowerment of business value and cultural value. It has been steadily advancing its development strategy of “boutiqueization, diversification and globalization”. With “bringing joy to the world” as its mission, the Company is dedicated to becoming an excellent and sustainable entertainment enterprise. The Company has been operating in a steady and healthy manner. It adhered to the strategy of “integration of R&D and operation”, continued to pursue its strategic objectives, as well as kept driving product diversification and global marketing. During the Reporting Period, the Company recorded operating revenue of RMB 8.092 billion, with a year-over-year (YoY) increase of 7.34%; and a net profit attributable to the Listed Company’s shareholders of RMB 1.695 billion, up by 98.56% YoY. With the continual rollout of the Company’s “globalization” strategy, the overseas revenue amounted to RMB 3.033 billion during the first half of 2022, increasing by 48.33% YoY, a record high. As a public company, the Company focuses on corporate social responsibility and social welfare. During the Reporting Period, under the leadership of the Party Committee, the Company steadily carried on with its “social value co-creation plan”. It continued to input resources to provide support in six areas—rural education, rural industrial development, industry-university-research talent training, functional game development, employee career development, and scientific and technological innovation, to help achieve common prosperity around the country. Meanwhile, it actively mobilized internal and external resources to promote talent cultivation and charitable volunteer services, playing its part as a corporate citizen. (I) Industry Overview for the Reporting Period 1. Changes in industry-related economic situation and their impacts on the Company Against the backdrop of a booming digital economy, China's game industry is also leveraging the advantages of resources and users. It pushes the boundaries and accelerates the pace of industrial development through methods such as technology drivers, industrial integration and cultural innovation. The game industry has seriously implemented the requirements of the central government, maintained righteousness and innovation, forged ahead, strove to take up the cultural mission, continuously strengthened the content construction, continued to regulate the development of the industry and made efforts to expand overseas markets. The industry's ecosystem has continued to be improved, the strength and competitiveness have been continuously enhanced, and the pace of high-quality development has become more determined. It insists on giving priority to social benefits, and actively assumes social responsibilities, which has increasingly become an industry consensus. The game industry has ushered in new development opportunities. According to the China's Game Industry Report from January to June 2022 jointly released by Game Publishing Committee of China Audio-video and Digital Publishing Association (CADPA) and China Game Industry Research Institute, from January to June 2022, the actual sales revenue of China's game market was RMB 147.789 billion, a YoY decrease of 1.80%, the first YoY decline in recent years. The scale of Chinese game users dropped by 0.13% YoY. The decline in both the market revenue and user scale is mainly due to the reduction of user income, a decrease in consumption intention and the increasing operating costs of game companies during the COVID-19 pandemic. The declining trend in user scale indicates that the game industry has basically lost its "demographic dividend" and may have entered an era of competition for existing users. At the same time, strengthening the global market layout has become a breakthrough strategy for China's original games to achieve sustainable development. From January to June 2022, the actual sales revenue of China's homegrown games in the overseas market rose by 6.16% YoY to USD 8.989 billion, marking steady growth for China’s games in "going global". From the average growth rate in the past five years, the share of China's game export has shown a stable increase. Exported games have maintained better growth in the three aspects of download, use length and payment of users. On the whole, the threshold of game development and barriers to competition has been substantially raised in the current game industry. Top game companies embracing strengths in the R&D and publishing of quality products and operation are more likely to benefit from the new situation. Against this backdrop, the Company adheres to the development strategy of “boutiqueization, diversification and globalization”. It takes the main business as its core and deepens the strategy of "integration of R&D and operation" and "dual engines at home and abroad", with an aim to drive high-quality, sustainable development. During the Reporting Period, the Company kept its leading role in R&D capabilities by strengthening the output of quality games. Moreover, it advanced the "diversification" strategy from the aspects of R&D and publishing, and reserved varied quality games on different themes through independent development, investment in R&D-oriented companies, and enhanced cooperation with developers capable of producing quality games. In addition, the Company, through independently developed AI systems, consolidated refined operation, increased operating efficiency, and prolonged the life cycle of quality games. The Company's overseas business has grown rapidly and the pace of exporting has been accelerated. With the strategy of "tailored games", the Company has explored the global market through diversified high-quality games, and the overseas business has become the new growth engine of the Company. In addition, with the continuous upgrading of industry technology, the development efficiency and product experience of games have been constantly improved, and the business transformation has accelerated. The rise of "Metaverse" and other emerging concepts have triggered extensive attention from many industries and investors. As one with a forward-looking strategic vision, the Company follows industry changes closely and focuses on exploring Metaverse and the related technologies. Based on its early investment layout, it continues to extend its investment to high-quality upstream and downstream enterprises in the fields including optical modules, AR glasses, VR/AR content, cloud game and spatial intelligence technology, covering links such as optics, display, whole machine, application and system. The Company has identified new business forms combined with its existing advantages and leading technologies to realize the collaboration of internal and external resources in the field of technology, promoting the benign complementation of its business and capital operation. 2. Changes in industrial policy environment and their impacts on the Company (1) In May 2022, the Opinions on Promoting the Implementation of the National Cultural Digitalization Strategy was issued by the General Office of the CPC Central Committee and the State Council. The document elevated "cultural digitalization" to a national strategy, made a top-level design for cultural digitalization, and provided an important platform for cultural inheritance and dissemination. With the introduction of "new infrastructure" policies in cultural fields including information infrastructure, integration infrastructure and innovation infrastructure, the relevant artificial intelligence, 5G and data center construction have become the technological basis for driving the development of cultural industries. Meanwhile, the cultural consumption market is increasingly diverse, personalized and experience-focused. The integration of culture and technology has infiltrated technology into all aspects, including production and consumption, of the digital culture segment, which is essential for promoting cultural digitalization and empowering the real economy. The Company sticks to innovation promotion. It continuously improves its technological capabilities by relying on multiple innovative technologies such as artificial intelligence, big data and block chain, and explores new digital culture experience through diversified combination of digital technology and its business. On one hand, the Company closely follows the development trend of Metaverse technology and industry, creates the Metaverse Game Art Museum, integrates the brand with game IPs, traditional culture and social interaction, and deepens the application scenarios of Metaverse. Additionally, the Company continues to explore the new experience of immersive social interactions by launching a range of digital collections that are developed based on self-developed game IPs, the corporate mascot "Onion" and national culture park IPs. On the other hand, the Company always values the guidance of positive energy. In the development of self-developed games and function games, it integrates the excellent traditional Chinese culture, presents famous ancient paintings, non-legacy craftsmanship and traditional customs in a digital way, and inherits the excellent traditional culture. (2) On 6 June 2021, the Guidelines on Enhancing the Protection of Minors of the Steering Group of the Protection of Minors of the State Council (hereinafter referred to as the “Guidelines”) were officially issued. Revolving around the implementation of the Civil Code and the Law on the Protection of Minors, the Guidelines refined and specified the relevant articles of law, raising a total of 25 tasks. Specifically, in terms of cyber protection, the Guidelines raised requirements such as improving the system of regulations and policies, making more efforts to prevent minors from Internet addiction, and strengthening the online protection of minors' personal information. On 30 August 2021, the National Press and Publication Administration issued the Notice on Further Imposing Strict Administrative Measures to Prevent Minors from Becoming Addicted to Online Games (hereinafter referred to as the "Notice"), which addresses further strict management measures to resolutely prevent minors from being addicted to online games and effectively protect their physical and mental health in terms of the problem of excessive use and even addiction to online games of minors. On 14 March 2022, the Cyberspace Administration of China solicited public opinions again on the Regulations on the Protection of Minors Online (Draft for Comment). Public consultation was held again on issues including minors' poor awareness and ability to use the Internet safely and properly, online illegal and bad information that affect minors' physical and mental health, abuse of minors' personal information and Internet addiction. As one of the first game enterprises to launch the real-name registration and anti-addiction system, the Company has implemented anti-addiction throughout the entire process of R&D and operation. The Company has completed the connection to the national real-name authentication system and has, under the latest requirements, upgraded the anti-addiction system for minors in all its games since 1 September 2021. Up to now, all the Company's games have connected to the anti-addiction system and launched the age suitability reminders. During the Reporting Period, facial recognition technology was also introduced to further prevent minors from using adult accounts fraudulently. Additionally, the Company added contents applicable to children to its Privacy Policy in line with the user habits of juveniles under 14 years old and their guardians. It contributed to turning China's gaming industry more standardized by actively participating in the compilation of group standards for the gaming industry led by the China Audio-video and Digital Publishing Association ("CADPA"), such as the Specifications on Age Ratings of Online Games, the Specifications on Parent Monitoring Platforms, and Online Game Terminology. In addition to various anti-addiction protection measures for minors, the Company has launched the "Guardianship Project of Online Games for Minors' Parents" many years ago, and connected parents to do a good job in supervising minors on the basis of the implementation of the new anti-addiction rules, allowing parents to limit or prohibit minor's game time in accordance with the actual situation. The Company has set up the special process and the customer compliant specialists to deal with all kinds of problems related to minor players. The Company will further upgrade the guardianship project for parents in the future, further upgrade and improve the protection system for minors through the positive synergy of multiple dimensions, and build a green and healthy game ecosystem to protect the healthy growth of minors. (3) On 10 June 2021, the Data Security Law of the People's Republic of China (hereinafter referred to as the "Data Security Law") was adopted at the 29th session of the Standing Committee of the 13th National People's Congress of the People's Republic of China. The Data Security Law is enacted for the purposes of regulating data processing activities, safeguarding data security, promoting data development and utilization, and protecting the legal rights and interests of individuals and organizations. In June 2022, the State Administration for Market Regulation and the Cyberspace Administration of China announced to carry out data security management certification, with the release of the Implementation Rules on Data Security Management Certification. Network operators are encouraged to standardize the processing and strengthen the security protection of network data through certification. In the process of management system construction for information security, the Company has identified and evaluated information security risks of products and services around more than ten aspects such as information asset management, access control, password management, information security event management, information security management in business continuity management, compliance management, etc., established information security policy, risk level evaluation and disposal measures for each sub-business module, improved system documents and management processes, and formed a complete information security management system. In terms of information security management and user privacy protection, based on strict management policies and process system, the Company adopts industry-leading technologies and benchmark them with international standards, strictly controls information security risks, and guarantees data security to ensure the security of users' personal information to the maximum extent. In user privacy protection, for example, the Company implements the seven principles of legality, consistent authority and responsibility, minimum sufficient information collection, individual consent, user participation, and ensuring security in the management of the whole life cycle of user data. Around the security of user private information, the Company has also adopted a variety of technical means to prevent illegal access to unauthorized information by personnel. Meanwhile, the Company also encrypts, anonymizes and de-identifies sensitive information assets to protect them from being illegal cracked. Such technologies and measures strongly ensure the security of user privacy information. The Company ensures that it runs the business in strict compliance with applicable laws and regulations throughout the world, and protects the users’ right to manage personal information. A response procedure has been stipulated to inform users of any possible cost and necessary actions needed to be taken. In 2021, the Company has obtained the international-standard ISO/IEC 27001 certification for information security management system issued by SGS, an internationally recognized inspection, testing and certification institution, which means that the Company's information security management has been recognized by a third-party impartial institution which is internationally authoritative. (II) Overview of the Company’s main businesses in the Reporting Period 1. Main businesses and business models of the Company During the Reporting Period, the Company's main businesses included the development, publishing, and operation of online games. The operating modes of the Company’s online games mainly include independent operation and third-party joint operation. Under the independent operation mode, the Company obtains the licenses of games through independent R&D or being an operator of other games, and publishes and operates these products through its own or third-party channels. The Company is fully responsible for the operation, promotion and maintenance of the games; providing unified management services for online promotion, online customer service and top-up payment; and updating games along with game developers based on the real-time feedback of users and games. Under the third-party joint operation mode, the Company cooperates with one or more game operators or game application platforms to jointly operate games. And the aforesaid parties are responsible for the management of their own channels, including operation, promotion, the recharge and charge system, while the Company provides technical support services along with game developers. 2. Overview of the Company’s main businesses and products The Company specializes in the development and publishing of games for global players, with the world’s leading game development brand “Three Seven Games”, as well as professional game publishing brands “37Mobile”, “37GAMES” and “37Online”. During the Reporting Period, the domestic game industry entered a period of high-quality development. Game players' requirements for the quality of online games have increased significantly, the effect of the boutique strategy has been obvious, and the development of high-quality games has been certified. The Company precisely grasped the industry development trends, made continuous improvements in operation, and remained a top performer in the industry, while adhering to the "boutiqueization, diversification and globalization" strategy. 37 Interactive Entertainment
During the Reporting Period, the Company recorded operating revenue of RMB 7.739 billion,from mobile games, a YoY increase of 9.51%. The mobile game offering has become more diversified, game quality sees considerable improvement, and the mobile game business maintains the leading position in domestic and overseas markets. During the Reporting Period, multiple games including The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决), All for Glory (荣耀大天使), and The Soul Land: Wu Hun Jue Xing (斗罗大陆：武魂觉醒) performed well in the growth stage. Meanwhile, its overseas business accelerated again. Various globally published games, such as Puzzles & Survival, Song of the Castle in the Sky (云上城之歌), and The Road to Be Shopkeeper (叫我大掌柜), made outstanding contributions, proving the Company's boutiqueization advantages in long-term game operation and promoting business transformation and upgrade as well as steady development. ① Research and development of mobile games The Company places high emphasis on R&D investments and R&D talent cultivation, and refines management to improve quality and efficiency. The Company's game development brand of “Three Seven Games” is mainly based in Guangzhou, while the Company has also established R&D subsidiaries or R&D branches in Suzhou, Xiamen, Wuhan and Beijing to attract multi-category talents. A professional layout has been established in multiple market segments like SLG, MMORPG, card games and simulation, making the Company a benchmark for the R&D of innovative games in the industry. The Company's R&D arm profoundly implemented the strategy of "boutiqueization, diversification, and globalization", and its self-developed reserve product projects included game genres such as MMORPG, SLG, card games, and simulation games, while the Company considered the plan of global publishing of products at the early stage of the projects. The Company carries on with the "boutiqueization” strategy and keeps exploring and practicing cutting-edge technologies in R&D. For instance, the battle strategy mobile card game The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决), as a milestone of the Company’s self-developed products, ranked as high as the Top 4 of iOS grossing chart shortly after its launch, with the highest monthly gross billing exceeding RMB 700 million, which is a strong proof of the Company's R&D strength. The game is developed using the Next-Gen 3D engine and the PBR (Physically Based Rendering) technology. Through technologies such as real-time seamless day-night switch and dynamic volume-based ray tracing, it creates The Soul Land that meets the fantasies of each fan of The Soul Land with its multi-aspect gameplay design and construction of a friendly social system. The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决) has unified the Company's R&D process and underlying logic in the field of next-gen games, developed a set of systems that can be inherited and constantly iterated, effectively improved the efficiency of game R&D and broke the ceiling for idea creation, and laid a solid foundation for the Company's boutiqueization strategy. On top of that, the Company continues to work on key areas including MMORPG, SLG, card games and simulation games. It has nearly 10 self-developed products in the pipeline, including mobile games Ba Ye (霸业), Code Magic M (代号魔幻M), Code Gu Feng (代号古风), Code WTB 3D (代号3D版WTB), Code GOE (代号GOE), Code G2 (代号G2), Code D8 (代号D8) , Code Soul MMO (代号斗 罗MMO), etc., covering genres and themes such as western magic, different-world fantasy, medieval history, history of the Three Kingdoms, ancient style, female-oriented, and oriental fantasy. Global publishing planning was carried out at the early stage of all these projects as part of the “boutiqueization, diversification and globalization” strategy. In addition, on the basis of the self-development brand, the Company also strengthens its self-development capability by acquiring R&D teams, and cooperates with EyuGame, Karma Game, and other excellent game developers in a long-term and in- depth manner through its investments, forming a rich external R&D reserve and diversifying the presence on the product supply side. With the strong advantage created by the implementation of the "integration of R&D and operation" strategy over the years and the expertise in market insights, user preference identification and analysis at the early stage of a project, the Company is able to use its own numerical experience to polish the products together with the developers to ensure that the quality of the products reaches a better level before launching. The Company also assists the R&D team in polishing and adjusting the products with the feedback from the operation department, so as to improve the success rate of the products and prolong the product life cycle. Meanwhile, the Company actively embraces technological innovation in R&D brought by digital technologies. It leverages artificial intelligence, big data and other technologies to increase R&D efficiency through a series of technology platforms. Take “Zeus”, a self-developed middle platform for game development, as an example. Supported by one-stop service module, the Zeus platform can provide service and coordination flexibly and freely. It can effectively realize the automation and standardization across the whole process of R&D, deployment and operation, and clear a path for interconnectivity between systems of different departments, thus greatly automating systems and business processes. On top of that, the Company’s homegrown data analysis system "Athena", monitoring and early warning system “Poseidon" and user profiling system "Ares" can help the research team find and solve problems in a quicker and more accurate way, substantially improve the quality of products, reduce development costs, and provide assistance for the refined operation of games. Furthermore, the Company continues to explore deep application of the AI technology to games. It has created “Cupid”, an AI-powered R&D platform, with the help of which the research on "3D key point detection-based AI motion capture" has been carried out to conduct spatial modeling of videos, and use AI algorithms to achieve high-precision and high-performance motion capture, thus effectively reducing R&D cost and improving R&D efficiency. The Company continues to explore diversification in product types, themes, gameplay, etc., studies and improves rendering technologies for engines such as Unity, and keeps improving art quality. It is dedicated to in-depth exploration and becoming a first- class game company that can provide global players with various gaming products, based on quality content, operation experience in multiple types of products, and advantages in numerical value and gameplay. ② Publishing of mobile games During the Reporting Period, the strategy of “boutiqueization, diversification and globalization” was continuously deepened, the advantage of “integration of R&D and operation” was strong, and the product matrix was of high quality and diversified. The highest monthly gross billing of the Company’s globally published mobile games exceeded RMB 2 billion,, with the total number of newly registered global users surpassing 130 million and the highest number of global MAUs of over 40 million. As many as 6 existing games recorded more than RMB 100 million of monthly average gross billing across the world, of which the earliest one launched has been running for nearly four years. These long-period and diversified products underpin the Company’s healthy operating performance, showcasing its long-term operation capability. 1) Domestic market During the Reporting Period, the Company brought diversified experiences to players through high-quality independently- developed and agency games, and insisted on refined operation ideas. Also, it kept exploring innovative marketing with the （未完）  |