Flowing Cloud Announces 2023 Annual Results

Flowing Cloud Technology Ltd ("Flowing Cloud" or the "Company"); Stock Code: 6610.HK) is pleased to announce the audited consolidated results of the Company and its subsidiaries (collectively, the "Group") for the year ended December 31, 2023 (the "Reporting Period").

In 2023, amidst a complex and volatile external environment, the Group firmly grasped the industry's technological trends and era-defining opportunities and strove to enhance the quality of our content production and service levels, optimize our internal management models and focus on providing customers with multi-scenario, cross-ecosystem and comprehensive AR/VR content and services. During the Reporting Period, all business segments of the Company developed comprehensively, and the financial performance continued to grow, achieved a revenue of RMB1,244.7 million, representing an increase of 16.7% as compared to the previous year. The gross profit of the Company was RMB420.7 million, representing an increase of 12.5% as compared to the previous Reporting Period. Profit for the year amounted to RMB263.9 million, representing an increase of 11.6% as compared to the previous year. Adjusted net profit was RMB274.0 million, representing an increase of 6.3% as compared to the previous year. Basic and diluted earnings per share was RMB14.60 cents.

AR/VR marketing services: high-quality deliveries supported by technological strength, and the first time for the business landscape to go overseas.

The AR/VR marketing services business was the Group's primary source of revenue for 2023. During the Reporting Period, the Group continued to provide high-quality AR/VR marketing services to customers, and revenue from domestic marketing business increased by 9% year-on-year to RMB745.6 million, which was mainly attributable to the fact that the Group provided customers with comprehensive AR/VR marketing solutions featuring higher conversion rates and stronger user stickiness through delivering higher quality content and utilizing an efficient AR/VR content creation platform. In addition, the number of long-tail media institutions reached also increased from 4,378 in 2022 to 4,780 in 2023, representing a year-on-year increase of 9.2%.

The Group also expanded AR/VR marketing services overseas for the first time in 2023, providing marketing services to overseas customers based on mature AR/VR content creation and traffic distribution platform. During the Reporting Period, the Group's overseas marketing business recorded a revenue of RMB99.6 million. The Group served four foreign advertising agencies with a coverage of 374 overseas long-tail media institutions, marking the first step in successfully taking its AR/VR marketing services overseas.

AR/VR content: actively expanding multi-scenario applications and diversifying customer base

The Group's AR/VR content business recorded a revenue of RMB334.0 million in 2023. The number of AR/VR content business customers increased from 58 in 2022 to 75 in 2023. The number of AR/VR content projects it carried out increased from 149 in 2022 to 170 in 2023. The business development team actively expanded business resources and content scenarios over the past year, further diversifying the Group's customer base.

The Group focused its business on online AR/VR content development, creating online virtual content and platforms for several customers, including a well-known PRC Internet company and a major PRC telecommunications operator. In addition, the Group endeavored to explore new scenarios and experiences for offline AR/VR content. The Group collaborated with a Chinese state-owned airport group to create a "Digital Twin Airport Media Marketing Platform" for a city airport. As such, the level of digital services and operational efficiency of the airport were enhanced. Furthermore, the Group organized a "VR + Archaeology" exhibition for an AAAAA scenic spot in Sichuan Province, providing tourists with an immersive experience to explore the allure of ancient Sichuan civilization up-close.

During the Reporting Period, the Group also closely cooperated with the government and corporate customers in the downstream sectors to introduce a series of benchmark projects for the same. For example, the Group launched an online tourism exhibition center for an international tourism center in a city in Fujian Province. The center provides tourists with new ways to explore the city's scenic spots, understand its history and participate in its future development. The Group also built a metaverse city exhibition hall for a city in Zhejiang Province which has become the central exhibition building to attract investments in the local vicinity.

AR/VR SaaS service: new hardware platform continues to iterate and upgrade, and continuously improves delivery quality

Based extensive experience in developing AR/VR content and service projects, the Group has developed a standardized, simplified-code and user-friendly AR/VR SaaS platform, which empowers experiences such as AR/VR exhibition, AR/VR showcase, live-streaming and marketing, with the goal to improve the participation level and experience of their end users. In 2023, the Group's AR/VR SaaS service business recorded revenue of RMB57.6 million, representing a significant year-on-year increase of 31.7%.

The Group continuously iterates and upgrades its SaaS platform, with ongoing optimizations in the development process and improvements in delivery quality. These efforts aim to promote the platform as the choice for more small-and medium-sized AR/VR content developers. During the Reporting Period, the number of paid users of our AR/VR SaaS platform increased by 103% year-on-year to 9,283, and the number of customized AR/VR SaaS projects increased to 402, representing an increase of 26% as compared to 2022.

Exploring new business: expanding AI + digital characters services for the first time, and developing emerging C-end content

The Group is continuously exploring new directions for development and is capitalizing on AI and industry trends to create new points of business growth. In 2023, recognizing the substantial demand for C-end content from consumers, the Group ventured into the development and operation services of digital characters for the first time, and secured a leading position in this emerging field.

During the Reporting Period, the Group not only successfully created popular digital characters such as Li Hao Duck and Mo Xiaoyu, but also provided a full-range, digital character solution that includes production, live operation and commercial monetization for customers from different industries, including a famous AAAAA scenic spot in China. During the Reporting Period, the Group's digital character matrix amassed nearly 5 million fans and upwards of 20 million likes. In the future, the Group plans to initiate the commercialization process by leveraging the fan economy, establishing commercial partnerships, engaging in live streaming e-commerce, and exploring other methods.

In 2023, the Group also expanded into new consumer C-end content fields such as "XR + Content". For example, it launched dozens of short dramas on the WeChat mini-program platform. As its first step in expanding into the "XR + Drama Content" field, the short drama business brought it valuable industry experience. Moreover, the Group collaborated with a strategic partner to co-produce the XR version of a concert by a well-known Chinese girl group. In the future, it will continue to explore the application of content offerings for XR headsets, bringing immersive XR content entertainment experiences to end users.

Future Outlook

In 2024, the strong support from the Chinese government for digital technology and the digital industry will place the industry on the "fast track" of growth. The potential market size of the industry will further expand, and the Group will benefit from the rapid development of technology and the continuous improvement of the industry ecosystem, thus advancing the rapid development of new quality productive forces. Moreover, the release of new hardware platforms will greatly boost the demand for AR/VR content, and the interaction and viewing experience upgrades brought by new devices will lead to an explosive growth in the demand for AR/VR content and marketing.

The Group will remain committed to developing AR/VR content and services as its principal line of business. While consolidating our existing business, it will explore new businesses, new formats and new directions in an effort to expand the business landscape of the Company. Specifically, it will use its existing business as a foundation and continue to expand into different industry applications; continue to capitalize on the demand increase for content brought about by hardware upgrades and create a batch of quality projects; seize development opportunities from new technologies such as AI to boost the second growth curve; continue to expand the metaverse ecosystem and bring investment returns to the Company and benefit a wide range of upstream and downstream enterprises of the industrial chain.

About Flowing Cloud Technology Ltd

Founded in 2008, Flowing Cloud Technology Ltd initially focused on game research, development and publishing. In 2015, it officially began providing AR/VR enterprise services, offering high-quality AR/VR content and comprehensive AR/VR marketing services and creation platforms for customers. It has since evolved into a leading provider in core technologies such as the metaverse, AR/VR, artificial intelligence and big data. On October 18, 2022, Flowing Cloud was listed on the Main Board of the Hong Kong Stock Exchange, hailed as the first stock in China's metaverse industry. As a pioneer deeply rooted in cutting-edge technology, Flowing Cloud provides partners with advanced technological solutions to high-efficiency operation, effective cost control and overall improvement of market competitiveness through its innovative spirit and research capabilities. Its business spans multiple economic sectors, including consumption, finance, industry, cultural tourism and education. Currently, the Company has established deep partnerships with over a hundred enterprises, including internet giants such as Baidu, JD.com, Ali, Tencent, Douyin and Kuaishou, jointly laying out and promoting the development of the metaverse industry.