On January 2, the news of the termination of the acquisition of YY Live caused an uproar: the next day, YY's parent company Huanju (YYUS) stock price fell 1466%, which is a break for the ** trend that lasted for half a year.
It is understood that the announcement was issued that the related party Moon terminated the equity acquisition agreement of YY Live in accordance with the previously signed agreement. This means that the acquisition of up to US$3.6 billion (about 25.6 billion yuan) has been terminated.
Looking back on 2020, when this acquisition was launched, live broadcast was still one of the hottest tracks, and YY live broadcast can be regarded as one of the top applications in the industry: in 2020, YY's total revenue reached 99500 million yuan, only one step away from 10 billion revenue.
However, time has passed, not only has the live broadcast track already entered the second half of the subsidence of dividends, but YY has gradually fallen behind its peers and has become "obscure". At a time when the Internet trend has shifted to a number of emerging tracks such as AI and big data, choosing to terminate acquisitions and withdraw funds will undoubtedly be better able to focus on other businesses; For the happy gathering that has long been determined to focus on overseas markets, YY, which has returned to its hands, is very "chicken".
In this regard, Huanju issued an announcement on the evening of January 1, saying that the ** of YY live broadcast has been basically completed on February 8, 2021, and some matters still need to be completed in the future. The Company is seeking legal advice for the Termination Statement and will consider all the options available to it in response to the Notice.
How the acquisition will develop in the future and how the funds involved will be divided will continue to affect the minds of investors on both sides.
Fundamentals show signs of recovery The first three quarters were all positive profits.
In the third quarter of 2023, Huanju handed over an answer sheet with "joys and worries". The "good news" is that the company's core business BIGO has achieved positive year-on-year revenue growth in a single quarter for the first time in six quarters, and the operating data has also performed steadily; The "worry" is that while revenue is stabilizing, the profitability indicator is still relatively weak.
In the third quarter of 2023, Huanju Group achieved revenue of 5$67.1 billion, an increase of 36%;Non-GAAP net profit for the quarter was $81.2 million, up 55%, with a net profit margin of 143%。
Among them, the revenue of the core business segment BIGO reached 4$94.1 billion, an increase of 49%, up 22%;BIGO's operating profit was $81.9 million, up 117% and an operating margin of 166%。In the quarter, Ligo's revenue continued to grow sequentially, continuing its earnings momentum, and Hago revenue also continued to record sequential growth.
According to Zhitong Financial APP, quarterly, Huanju achieved positive profitability in the first three quarters of this year, with Q1-Q3 revenue of 58.4 billion, 54.7 billion and 5US$6.7 billion, with a net profit of 02.8 billion, 15.5 billion and 0$7.3 billion.
The positive net profit was partly attributable to the company's continued reduction in cost pressures. In the third quarter, the company's operating costs were 357.9 billion US dollars, down 2.0 billion year-on-year3%;Operating expenses increased from 202.2 billion US dollars decreased to 1$91.3 billion. During the quarter, the Company continued to report positive operating cash flow of $72.9 million.
From the perspective of performance alone, the negative impact caused by Huanju's choice to divest the two core businesses of YY and Huya in 2020 has gradually subsided. After two consecutive years of losses, Huanju successfully turned a profit in 2022, and although the scale of revenue and profit is still not as high as before the divestiture, it also shows positive signs of recovery.
Overseas markets have become the new focus of Huanju's business. Since the acquisition of the overseas ** social platform BIGO at a valuation of nearly 2.2 billion US dollars in 2019, BIGO now covers the live broadcast product BIGO Live, the short ** platform LIKEE, the game social platform HAGO and the ** communication application IOM, etc., and has a layout in Southeast Asia, the Middle East, North America and the Western Pacific and other countries and regions.
According to Zhitong Financial APP, in the third quarter, the company's live broadcast business revenue was about 4$9.6 billion, accounting for about 8748%, which is still the most important revenue pillar of Huanju; Among them, overseas business income is 43.6 billion US dollars, accounting for about 87 percent of live broadcast revenue9%。
Comparing the financial data of the first three quarters of 2022 with the first three quarters of 2023, although the overseas live broadcast revenue increased from 13$400 million fell slightly to $12US$500 million, but its share of revenue has increased from about 79% to 84%, and the importance of overseas markets has become more prominent.
Can the outstanding performance of overseas markets translate into good performance?
Despite the seemingly unsatisfactory results, Bigo, the core product of Huanju, continued to perform solidly in the third quarter, firmly holding a leading market position.
According to Zhitong Financial APP, in terms of operating data, the company's global social entertainment MAU increased by 2% year-on-year in the third quarter6% up to 276.8 billion. Among them, Bigo Live continued to promote the diversification of content supply, launched games such as stranger social real match to strengthen the social experience, and refined and hierarchical operations for high-end new users and female users, driving the monthly active users (MAU) to achieve double-digit growth for six consecutive quarters, with a year-on-year increase of 14% to 40.3 million in this quarter.
In the third quarter, the number of users in the BIGO segment continued to grow steadily, but the average revenue of paying users declined. Specifically, the number of paying users in Q3 was 1.61 million, a year-on-year increase of 66%, ARPPU also increased month-on-month; The average revenue per paying user is 253$4, down 24%。
LiAce continued its profitability in the third quarter, achieving mid-single-digit revenue growth quarter-on-quarter, and driving an overall increase of 14% in average time spent per capita by focusing on deepening creator services and strengthening community interaction7%, but MAU decreased by -19% and -5% year-on-year;
HAGO continues to optimize the distribution efficiency and push strategy of multi-person real-time interactive rooms in different regions, launches a new family operation system, iterates the IM interaction function, and improves the social activity of users. The average length of time spent on social channels increased quarter-on-quarter to nearly 958 minutes, the average time of multi-person voice room increased by 12%。
In recent years, domestic Internet leading companies have done well in overseas live social tracks, such as TikTok, Huya's Nimo TV, Lizhi's Tiya, and Zhiwen Group's Soulchill. in dataIn the ranking of China's non-game manufacturers and applications in terms of overseas revenue released by AI, Huanju Group has long ranked in the top two, second only to ByteDance.
In October, LIKEE, a short-form app under Huanju, performed the most well in the Middle East (especially in Saudi Arabia), with the app second only to TikTok in terms of volume and revenue in many Middle East markets, and consumer spending in Saudi Arabia increased more than TikTok.
In November, Bigo Live ranked No. 1 in the top 10 best-selling live apps in the United States, further expanding the U.S. market while maintaining stability in the Middle East, while the short-streaming app Likee increased its revenue by 5% compared with the previous month, and its ranking climbed 2 places to No. 5.
In the context of market share leadership, the pressure on the earnings performance of Huanju may be partly due to more pessimistic consumer spending expectations. The data shows that holiday sales for Americans from the beginning of November 2023 to Christmas Eve increased by 31%, which is 7.5% higher than the same period last year6% slowed down compared to a decline of 45 percentage points; Data from the University of Michigan for December 2023 showed that the consumer confidence index is still down nearly 30% compared to the same period in 2019.
The agency pointed out that the recovery of users' online entertainment spending may be slower than expected when the global macro economy is still uncertain, which also brings some uncertainty to the growth prospects of Huanju.
Brief summary. The fundamental trend is improving, and the advantages of leading market position are superimposed, and there is still a lot of potential growth space for Huanju in the future. From a market point of view, the company's cumulative shareholder feedback in the first three quarters of this year reached 3US$55.4 billion (including buybacks and dividends), and the continued large-scale buybacks also reflect management's confidence in the long-term development prospects.
Considering the uncertainty of the subsequent direction of the acquisition and the time it will take for the market to digest the negative impact, investors can pay attention to the subsequent stock price trend and look for more cost-effective long-term allocation opportunities in a timely manner.