Author: HeLiang
Compile: value
Source: GPLP
Since the popularity of live-streaming in 2020, JOYY Inc. (JOYY) has turned in a report with a sharp decline in net profit.
On May 21, JOYY released an unaudited financial report for the first quarter of fiscal year 2020, reporting a revenue of 7.149 billion yuan, up 49.53% year on year. Net profit was 387 million yuan, down 87.60% year on year.
Income increases but profit decreases; R&D and marketing costs soaring
From the perspective of revenue structure, in the first fiscal quarter, JOYY’s live-streaming revenue was 6.756 billion yuan, with a year-on-year growth of 50.6%, mainly due to the continuous increase of live revenue of Huya and BIGO. Other revenue was 393 million yuan, up 33% year on year, mainly due to an increase in BIGO’s advertising revenue.
From the user data point of view, JOYY mobile monthly active users increased to 177.6 million, a year-on-year growth of 33.4%.Among them, the mobile monthly active users of YY live streaming were 45.1 million, with a year-on-year growth of 21.7%.The number of users of Huya was 74.7 million, a year-on-year growth of 38.6%.
So, why JOYY’s income increased but profit decreased?
The report shows that in the first quarter of the financial year, the R&D, marketing and interest expenses of JOYY all increased significantly, and the R&D expenses were 722 million yuan, a year-on-year increase of 78.27%.The marketing expenditure was 1.039 billion yuan, up 94.57% year on year; the interest expense was 125 million yuan, a year-on-year increase of 1983.33%.
In response, JOYY said the increase of R&D cost was mainly caused by higher salaries after the merge with the BIGO. Also, it is caused by the increased sales and marketing activities in overseas markets and depreciation and amortization related to the BIGO merger.
Overseas income only accounts for 30 percent of the total and makes a little profit
JOYY has always been “burning money” for its overseas business, bringing a large number of new users for its overseas business. According to the data, BIGO LIVE had 26.7 million mobile monthly active users, a year-on-year increase of 37.8%. Hago has 31 million mobile monthly active users, up 36.3% year on year. IMO has 211 million mobile monthly active users, while Likee has 131.6 million mobile monthly active users.
But burning money for new users cannot balance the revenue.
In the fiscal first quarter, BIGO Live’s revenue rose 92.4% to 1.972 billion, accounting for 27.58% of total revenue. Although revenue rose, the business still lost money. In the first quarter, BIGO reported a loss of 146 million.
Huya contributes a third of its revenue, will be off JOYY’s financial reports
It is worth noting that JOYY’s revenue growth is inseparable from Huya’s performance contribution. According to the financial results released by Huya, in the first fiscal quarter, Huya realized a revenue of 2.412 billion yuan, a year-on-year growth of 47.84%. Its net profit was 171 million yuan, up 169.82% year on year.
It can be seen that Huya contributed 33.74% of the revenue of JOYY.
On April 3rd Tencent bought 16.52 million Huya’s shares from JOYY, becoming Huya’s the largest shareholder. From the second quarter of 2020, Huya will no longer be listed as JOYY’ subsidiary company, which means JOYY has lost the Huya, the “cornucopia”.
YY live-streaming, another product under JOYY’s brand, also showed a negative growth in user fees .In the first financial quarter, paid users of YY live broadcast totaled 4 million, and 4.1 million in the same period of 2019, a decrease of 3.6% compared with the same period last year.
For the second fiscal quarter of 2020, JOYY expects its net income to be between 5 billion yuan and 5.15 billion yuan, a year-on-year growth of 16.7% to 20.2% after excluding the revenue contribution from Huya in the same period of fiscal 2019.
Will second-quarter results live up to expectations? GPLP will continue to follow.
