Meitu (1357) H2 2021 earnings summary

Executive summary

• FY2021 revenue rose 39.5% YoY to CNY 1.66bn, driven by VIP subscriptions and image SaaS, which grew 146.9% and reached 31.2% of revenue.

• Adjusted net profit was CNY 85.1m, marking a second consecutive year of annual adjusted profit; gross profit growth was led by the high-margin subscription business.

• Strategy centers on expanding paid consumer subscriptions, work-oriented image SaaS, overseas monetization and beauty SaaS solutions.

Financial highlights

• Revenue was CNY 1.66bn, up 39.5% YoY; online advertising revenue was CNY 766m, up 12.5%.

• VIP subscription and image SaaS revenue reached CNY 519m, up 146.9% YoY; the segment represented 31.2% of revenue versus 17.6% in 2020.

• IMS and other revenue increased ~20% YoY; IMS contributed CNY 258m and 86.3% of that business line.

• Total gross profit was ~CNY 1.125bn, up ~41.7% YoY; adjusted net profit was CNY 85.1m.

Outlook and guidance

• Subscription and advertising revenues are expected to be close in 2022, with subscriptions assumed to surpass advertising by 2023.

• Domestic VIP paying penetration was ~1%+, versus 7%-8% overseas; domestic penetration could move toward 7%-8% long term, but not within the next two years.

• R&D investment is expected to keep increasing, while R&D expense as a share of revenue is expected to be lower in 2022 as revenue grows rapidly.

• Operating cash flow was considered likely to turn positive in 2022; overall MAU had a good chance of returning to growth in 2022.