Recently, Baby Bus Co., Ltd. (hereinafter referred to as "Baby Bus") completed the financial information update and was resumed by the Shenzhen Stock Exchange for listing on the Growth Enterprise Market.
The updated prospectus shows that Baby Bus is positioned as a digital content provider for children's enlightenment. The offering intends to publicly issue no more than 41 million shares, and the funds raised will be used for product research and development and system upgrades, and the funds to be raised will be 1.848 billion yuan.
Advertising accounts for nearly 70% of revenue
Baby Bus was founded in 2009, and the legal representative is tang Guangyu, the founder of the company.
According to the prospectus, Baby Bus is a children's enlightenment digital content provider, its enlightenment brand "Baby Bus" has many users around the world, the company currently takes 0-8-year-old children and their parents as the main target users, and continues to develop, produce and operate audio, video, APP and other products characterized by "good sound, good looking and fun".
Interestingly, the main revenue method of Baby Bus has almost nothing to do with "education and training", but sells profits through advertising points based on traffic.
From the perspective of revenue model, Baby Bus mainly provides users with enlightenment audio and video and APP in a free way, and the resulting Internet user resources, and then cooperates in promoting by connecting the APP to advertising alliance customers (Baidu, Google, etc.), and at the same time authorizing children's enlightenment audio and video to third-party network audio and video media to play, so as to realize traffic monetization.
From 2018 to the first half of 2021, baby bus operating income was 254 million yuan, 526 million yuan, 649 million yuan and 395 million yuan, and net profit was 111 million yuan, 268 million yuan, 261 million yuan and 133 million yuan.
As mentioned in the prospectus, Baby Bus's revenue mainly comes from: the company's self-developed APP access to the programmed advertising SDK of Internet advertising alliance customers (Baidu, Google, etc.) to obtain revenue share; the licensing of audio and video products to third-party network audio and video media (YouTube, iQiyi, Tencent Video, Youku, Himalaya, etc.) to obtain licensing income; the sale of children's enlightenment derivatives (dolls, toys, books, etc.); users pay to download or subscribe.
According to the classification of baby bus's main business income, the APP cooperation promotion revenue in the first half of 2018-2021 was 185 million yuan, 383 million yuan, 498 million yuan and 273 million yuan, accounting for 72.7%, 72.87%, 76.76% and 69.02% of the main business income, respectively. This means that nearly 70% of Baby Bus's main business revenue comes from advertisements from Internet customers.
It is worth noting that from 2018 to the first half of 2021, baby bus operating income from the top five customers accounted for about 90%, and the customer concentration was high, and the main customers included Baidu, Google and other advertising alliances. In 2019 and 2020, Baby Bus's operating income from Baidu accounted for 57.12% and 50.74% respectively, and nearly 50% in 2018.
Compared with indirect advertising revenue, the direct income of Baby Bus has always been relatively low.
In addition to advertising business, baby bus revenue sources also include other revenue composed of user payment and derivative peripheral sales, the data shows that from 2018 to the first half of 2021, the company's other revenue accounted for 1.09%, 0.59%, 3.20%, 6.41% respectively.
However, the gross profit margin of Baby Bus is extremely high. According to the prospectus, in the first half of 2018-2021, the gross profit margin of the company's main business was 94.76%, 96.55%, 95.24% and 92.71% respectively. This gross margin performance is almost comparable to that of Moutai in Guizhou (600519).
The Xiaomi system and the good future department have withdrawn successively
The listing process of Baby Bus is also quite tortuous.
On June 29, 2021, Baby Bus's application for listing was accepted by the Gem Board, and the IPO sponsor was CITIC Construction Investment Securities, the accountant was Ernst & Young Huaming, and the lawyer was Beijing Zhong Lun.
On September 30, 2021, Baby Bus Co., Ltd. suspended its issuance and listing review in accordance with the relevant provisions of the Rules for the Review of the Issuance and Listing of Shares on the Growth Enterprise Market of the Shenzhen Stock Exchange because the financial information recorded in the IPO application documents had expired and needed to be submitted additionally.
On 27 December 2021, as the issuer had completed the updating of its financial information, the Shenzhen Stock Exchange resumed its issuance and listing review in accordance with the relevant provisions of Article 66 of the Rules for the Review of the Issuance and Listing of Shares on the Growth Enterprise Market of the Shenzhen Stock Exchange.
On December 28, 2021, Baby Bus updated the draft declaration.
It is worth mentioning that before the baby bus was listed, the Xiaomi system and the good future department have successively withdrawn from investment in it.
According to Tianyan, baby bus received an investment of $1 million from Shunwei Capital in 2013; in 2015, baby bus received an investment of 40 million yuan from Good Future and its genetic capital.
Shunwei Capital belongs to Xiaomi, and Lei Jun is one of its founders. However, since the second half of 2018, Shunwei Capital has successively transferred 21.42% of the equity of the baby bus it holds to Mingqiang Investment, with a total transfer price of about US$22.18 million.
Like the Xiaomi system, Good Future also withdrew from the ranks of baby bus shareholders soon after. In 2019, Good Future's Xinxin Xiangrong transferred its 3% equity interest in Baby Bus to Ming Qiang Investment for 30 million yuan, and was no longer a shareholder of Baby Bus.
Cut off with "online education"
It is not difficult to see from the prospectus of Baby Bus that Baby Bus has always avoided words such as early education and games, and has tried its best to "cut" with "online education", positioning itself as a digital content provider for children's enlightenment.
But there is no doubt that the baby bus product line and early childhood education have a high degree of overlap.
According to the prospectus, Baby Bus intends to raise 1.848 billion yuan, of which 464 million yuan is used for animation product research and development projects, 449 million yuan is used for APP product development and upgrading projects, 0.92 billion yuan is used for children's story research and development and upgrading projects, 122 million yuan is used for preschool teacher shell research and development projects, 170 million yuan is used for derivatives industrialization and its supporting projects, 155 million yuan is used for operation system upgrade projects, and 0.46 billion yuan is used for big data analysis system upgrade projects. 350 million yuan was used for the Fuzhou R&D center project.
Previously, Baby Bus also filed 6 education Apps in the Fujian Provincial Department of Education, involving mathematics, English and other education fields, and the recent relevant filing information disappeared, and the Fujian Provincial Department of Education replied that Baby Bus has taken the initiative to apply for the removal of related products.
In addition, the "Opinions on Guiding and Regulating the Orderly and Healthy Development of Educational Mobile Internet Applications" previously issued by the education department clearly stipulates that educational APP shall not be implanted in commercial advertisements and games, and the relevant regulatory policies stipulate that online training shall not be carried out for preschool children aged 3-6.
Is there a correlation between the APP developed and upgraded by Baby Bus and the preschool online training APP? Can we really get rid of the "early education" label and avoid pressure from the policy side? These are all questions that need to be answered urgently in front of baby buses for baby buses that are breaking through the IPO.
Intellectual property litigation is rife
Notably, in August 2021, BabyBus Network, a subsidiary of BabyBus, was sued by Moonbug Entertainment Limited and Treasure Studio, Inc. in the U.S. District Court for the Northern District of California, alleging that the "Super JoJo" image and related video intentionally infringed its intellectual property rights.
At present, a number of IP images created by Baby Bus (such as: "Strange", "Wonderful", "Super Baby JoJo", "Monkey Sheriff", etc.) are widely known to users, and have formed a "Baby Bus" children's enlightenment brand with industry influence, which has a good reputation and brand recognition among users.
Baby Bus said that although the company attaches great importance to the protection of intellectual property rights such as brand image and trademark, there is still a risk that the company's brand, IP image and trademark will be fraudulently used and preemptively registered by others, which may adversely affect the company's daily operation and market reputation.
Specific to the above lawsuits, Baby Bus said that the "Super JoJo" image and main works are independently created by the company and launched in 2019, and its image can be traced back to the 2D version of the character cartoon image "Doudou" created and launched by the company in 2016. The company's "SuperJoJo" is relatively delicate and compact in terms of bones and facial features, which is the image of an oriental boy, which is quite different from the plaintiff's "JJ" European and American style, and the image features claimed by the plaintiff are the common settings of the cartoon image of young children, which have appeared in large quantities before the plaintiff used it.
At present, the litigation case is still in the trial stage, Baby Bus has submitted a reply and filed a counterclaim, but if the lawsuit is lost, Baby Bus may no longer be able to use the "Super JoJo" image and face compensation to the plaintiff, which may have a certain adverse impact on the issuer.
Baby Bus also said in the prospectus that there are a small number of links in the research and development process that need to use the copyright of others, and the company has established a set of copyright management processes to obtain the permission of the right holder before using it as much as possible. The Company has taken a series of measures to avoid infringement of the relevant rights and interests of copyright owners, but does not exclude the possibility of third parties accusing the Company of infringing its intellectual property rights, thereby adversely affecting the Company.
Baby Bus said that high-quality and rich audio-visual content is one of the company's core competitiveness, and a lot of manpower, material resources and financial resources need to be invested in the early research and development process. Therefore, enterprises in the industry face the challenge of content being misappropriated by third parties, plagiarized, and disseminated without consent. With the rapid development of information technology, copyright protection of digital content faces difficulties in obtaining evidence and high costs of rights protection.
During the reporting period, Baby Bus had 4 unfinished lawsuits, in addition to the above-mentioned lawsuits, there were 3 cases in which the plaintiffs sued the defendants for copyright infringement and trademark rights.