Litchi released its financial report, and its annual revenue increased by 41% year-on-year, and its profitability increased significantly

U.S. Stock Research Agency learned that before the U.S. stock market on March 10, China Online Audio's first stock, Litchi Group (NASDAQ: LIZI), released its fourth quarter and full-year financial reports for 2021.

Financial data show that Lychee performed well in the fourth quarter and full year of 2021, and the revenue indicators continued to improve. Among them, the fourth quarter revenue hit a record high, up 33% year-on-year, reaching 560 million yuan, and achieved quarterly profit; 2021 natural annual revenue increased by 41% year-on-year to 2.1 billion yuan. Gross profit in the fourth quarter increased by 53% year-on-year to $182 million, and annual gross profit increased by 68% year-on-year to $617 million.

Previously, the well-known brokerage Needham expected Lychee's fourth-quarter revenue to be 530 million yuan, a loss of 17 million yuan; Lychee's 2021 annual revenue was expected to be 2.09 billion yuan. From the data point of view, Lychee's revenue and profit performance were significantly better than analysts expected, and achieved a quarterly turnaround.

According to user data, the average number of monthly active users of Litchi mobile terminal reached 54.1 million in the fourth quarter, and the average number of monthly active users of the audio entertainment business increased to 9.4 million. Thanks to the strong commercial performance of the audio entertainment business, the average number of monthly paid subscribers in the fourth quarter of Litchi increased by 18% year-on-year to 497,300.

Regarding Lychee's performance for the full year of 2021, management said on the performance conference call, "2021 is a year of continuous improvement, firm implementation of the strategic plan, and high-speed growth of Lychee. While continuously expanding our global influence, we have deeply optimized our diversified product portfolio, strengthened the development of core technologies, pursued efficiency and value maximization with a more refined operational strategy, and continued to reach key milestones. It is worth noting that Lychee's domestic business has achieved profitability at the operating level in 2021, and the management has also said that it will promote business growth with the goal of achieving full profitability at the group level in the medium and long term.

The audio ecosystem is developing steadily, and the profit performance continues to improve

Looking at the fourth quarter and annual financial reports of 2021, the profit indicators of Lychee may become the biggest highlight.

While continuously enriching the audio ecosystem, Litchi effectively promoted commercial development, with quarterly gross margins and annual gross margins both increasing by 400 basis points over the same period last year, increasing to 32% and 29% respectively; and for the first time, it turned a loss into a profit at the GAAP level, achieving a net profit of 8.92 million yuan, and the adjusted net profit increased by 237% year-on-year to 18.25 million yuan.

Good financial profitability is inseparable from the effective layout of the business direction. Since the second half of 2021, Lychee has continuously adjusted and optimized its product operation and marketing strategies, focusing on the development of core audio categories. Through the holding of rich activities such as the Lychee 2021 Annual Festival and the Spring Cultivation Lychee Program, it has effectively increased the participation of users, and continuously attracted a wider range of user groups to join the ranks of content creators, and promoted the active participation of medium and long-tail content creators in creative interaction. In response, Litchi management said, "The average number of monthly active users of the audio entertainment business continued to grow to 9.4 million in the fourth quarter, and the size of paid users and revenue showed a steady growth trend, further highlighting our commercialization potential." ”

In terms of how to maintain steady revenue growth in 2022, Lychee management said that it will continue to carry out refined operations in the audio entertainment sector, focus on core user groups, launch diversified functional gameplay, continue to promote the conversion of paying users, improve the level of user payment, and enhance the overall revenue scale and profitability. At the same time, it will continue to lay out more countries and regions, expand business boundaries, improve the overall scale of paying users and the level of user payment, and drive revenue growth throughout the year.

In the medium and long term, further promoting revenue diversification has become the focus, including opening up new markets and incubating new products, gradually increasing the revenue scale of overseas business, providing more increments for overall revenue growth, while improving operational efficiency, optimizing cost structure, and aiming to achieve full profitability in the medium and long term.

The globalization strategy is advancing rapidly, and the strategy of diversifying the product matrix is planned to be implemented

Recently, Lychee's global social product TIYA has successfully launched a new version, which not only upgrades the overall visual design, but also comprehensively optimizes the product functions and creates simple and easy-to-use social tools. According to Lychee, the new version innovatively launched the "real-time interactive group space" function, which supports users to switch to the real-time interactive space of multiple people with one click, bringing users a more convenient real-time communication method, and supporting multimedia functions such as images and screen sharing on the basis of text chat, so as to meet the real-time interaction needs of users in an all-round way. In addition, in the new TIYA version, it supports two kinds of group chat use scenarios, private and open, and meets the needs of users who are familiar with the group chat and the public group chat.

For users, the new version of TIYA is no longer a single communication platform, but has been upgraded to a simpler and easier real-time interactive space with rich text carrying capacity. Users can switch to the multi-person real-time interactive group chat space on TIYA, share text, pictures and even video content without restrictions, and the audio real-time chat that can be accessed at any time makes communication more interesting and richer.

The iterative innovation of the above product functions has greatly stimulated user activity and effectively improved user stickiness. In December 2021, TIYA's average daily real-time voice room time per user increased by 68% over the same period last year, and the number of pairs of friend relationships continued to grow to 14 times that of the same period last year; by the end of 2021, TIYA's cumulative downloads reached nearly 20 million.

It is worth noting that Lychee is sparing no effort to promote localization construction and operation, and has officially set up the global headquarters of TIYA in Singapore, which will also serve as the global innovation center of Lychee Group, helping the cultivation of the Group's talent echelon and fully supporting the expansion of international business.

The market view is that if Lychee copies the experience and business model of the domestic audio entertainment business to more markets and localizes operations according to the characteristics of different markets, it may bring new revenue opportunities. In this regard, the management said that as Lychee continues to promote the strategy of commercial innovation, it is expected that the proportion of overseas business revenue in the group will gradually increase, and more breakthroughs will be made in international business.

Build the core competitiveness of technology, self-developed technology to empower product multi-terminal layout

Looking back at Lychee 2021, Lychee adheres to technological innovation while promoting product innovation. Lychee management believes: "Self-developed core technology can provide users with richer and more differentiated audio entertainment and interactive social experience, and it is also the basis for us to build core advantages in market competition." Thanks to this, Litchi will continue to optimize and upgrade two self-developed technologies in 2021: DOREME, an audio and video streaming technology platform, and VoderX, an instant voice communication platform. Through customized technical support, the two self-developed technologies support Lychee's products to provide a variety of innovative product functions and forms to meet the diverse audio needs of users.

Lychee's self-developed technology supports Lychee's multi-terminal product layout, which is effectively compatible with a variety of in-vehicle operating systems and vehicle networking platforms. In December of last year, Lychee was invited to participate in the 2021 Huawei Intelligent Vehicle Solution Ecology Forum and was selected as one of the "2021 Huawei Intelligent Vehicle Solution Excellent Partners", after Lychee's vertical podcast platform Lychee Podcast successfully joined huawei Hongmeng Ecology, truly realizing "visible can speak" by supporting voice search and voice control functions, while providing "one-click seamless circulation" function. Supports cross-screen connection of Litchi podcasts in different devices of Huawei's Hongmeng system, providing users with an uninterrupted podcast listening experience.

Good business performance and investment in audio technology, so that Lychee is also widely recognized by the society and the industry. In 2021, Lychee was selected as "Top 100 Enterprises in Comprehensive Internet Strength" by the Internet Society of China for the third consecutive year.

Looking forward to 2022, Lychee management said, "We will unswervingly implement the globalization strategy, enter more regions and markets with a multi-product matrix, rely on the original product operation experience, and innovate in combination with the localization environment, tap more commercialization potential, create a more competitive audio ecosystem, and create more value for shareholders and society."