The net profit of Zhiwen Group in 2021 was 2.0371 billion yuan

On March 24, Beijing time, Chuwen Group (Nasdaq: MOMO) announced its unaudited financial results for the fourth quarter and full year of 2021. According to the financial report, in the fourth quarter of 2021, the net revenue of The Company reached 3,674.2 million yuan (about US$576.6 million), and the net profit attributable to the Company was 280.9 million yuan (about US$44.1 million) not measured in accordance with US GAAP.

According to data compiled by Bloomberg, Wall Street analysts average expect The Group's revenue for the fourth quarter of 2021 to be 3,616.5 million yuan. According to the financial report, the fourth quarter of 2021 revenue of Zhiwen Group was 3.6742 billion yuan (about 576.6 million US dollars), exceeding Wall Street expectations.

Summary of fourth quarter 2021 results

Net revenue reached $3,674.2 million (approximately $576.6 million).

Net profit attributable to ZWC was RMB280.9 million (approximately US$44.1 million) not measured in accordance with U.S. GAAP. This figure includes accrued $207.4 million (approximately $32.5 million) of withholding income tax. Excluding this expense, for the fourth quarter of 2021, net profit attributable to ZWG was RMB488.3 million (approximately US$76.6 million) in non-GAAP measures.

As measured by U.S. GAAP, net loss attributable to ZWG was $4,242.7 million (approximately $665.8 million). This is due to the Group's fair value in the capital markets significantly lower than the carrying amount of its net assets. After a detailed impairment analysis, the Group included impairment losses on goodwill of $4,397.0 million (approximately US$690.0 million) and intangible assets other than operating licenses in the consolidated operating and comprehensive income statements for the year ended 31 December 2021. The impairment did not involve any cash outflows.

Non-GAAP net income per Ads was $1.38 (approximately $0.22).

A diluted net loss per Ads was $21.50 (approximately $3.37) per US GAAP basis.

In December 2021, Momo's main app had 114.1 million monthly active users.

In the fourth quarter of 2021, the total number of paid users of live streaming services and value-added services reached 11.4 million (including 2.5 million paid users of Tantan).

Summary of full-year 2021 financial results

Net revenue reached $14,575.7 million (approximately $2,287.2 million).

Net profit attributable to ZWG was RMB2,037.1 million (approximately US$319.7 million) not measured in accordance with US GAAP.

Net loss attributable to ZWG was RMB2,913.7 million (approximately US$457.2 million) as measured by US GAAP.

Non-GAAP net income was $9.56 (approximately $1.50) per Ads.

A diluted net loss per American Depositary Share (ADS) was $14.40 (approximately $2.26), as measured by U.S. GAAP.

Fourth Quarter 2021 Financial Results

Net revenue

Net revenue for the fourth quarter of 2021 was $3,674.2 million (approximately $576.6 million).

Revenue from live streaming services for the fourth quarter of 2021 was RMB2,148.8 million (approximately US$337.2 million).

Value-added services revenue for the fourth quarter of 2021 reached $1,475.7 million (approximately $231.6 million), up 5.3 percent from $1,401.3 million in the previous year. Value-added service revenue includes virtual gift service revenue and membership subscription service revenue. The growth in value-added service revenue is mainly due to the continuous growth of Momo's main App virtual gift business, which is due to continuous innovation in products and operations, Momo has introduced more paid solutions to enhance users' social entertainment experience, and the rapid growth of independent new Apps revenue.

Mobile marketing revenue for the fourth quarter of 2021 was $25.4 million (approximately $4 million) and mobile game revenue was $19.3 million (approximately $3 million).

The net revenue of Momo's main app for the fourth quarter of 2021 was 3,235.6 million yuan (approximately US$507.7 million). Exploration's net revenue for the fourth quarter of 2021 was $437.2 million (approximately $68.6 million).

Costs and expenses

Costs and expenses for the fourth quarter of 2021 were $7,729.4 million (approximately $1,212.9 million), up 134.9 percent from $3,290.0 million for the year-ago quarter. The increase in costs and expenses was mainly due to:

1. Increase in impairment losses on goodwill and intangible assets of RMB4,397.0 million (approximately US$690.0 million);

2. Increase in revenue share with virtual gift recipients and Momo anchors in the virtual gift service;

This increase was partially offset by a decrease in the revenue share of streamers related to the Tantan live streaming business and a decrease in personnel-related expenses, including a decrease in option incentive fees due to a decrease in the number of employees and a decrease in the fair value of options granted during the period.

For the fourth quarter of 2021, costs and expenses not measured in accordance with U.S. GAAP were $3,205.8 million (approximately $503.1 million), an increase of 3.6 percent from $3,095.9 million in the year-ago quarter.

Operating profit

Non-GAAP operating profit for the fourth quarter of 2021 was $507.0 million (approximately $79.6 million). Not measured in accordance with U.S. GAAP, Momo's main app operating profit for the fourth quarter of 2021 was 658.4 million yuan (about $103.3 million). Not measured in accordance with U.S. GAAP, Tantan's operating loss for the fourth quarter of 2021 was $145.0 million (approximately $22.8 million).

Operating loss for the fourth quarter of 2021, as measured by U.S. GAAP, was $4,016.6 million (approximately $630.3 million), including a goodwill impairment provision of $4,397.0 million. In the fourth quarter of 2021, Momo's main app operating profit was 549.3 million yuan (about $86.2 million). Exploration's operating loss for the fourth quarter of 2021 was $162.5 million (approximately $25.5 million).

Income tax expense

Income tax expense for the fourth quarter of 2021 was $296.5 million (approximately $46.5 million), compared to $5.5 million for the same period last year. The increase in income tax expense was primarily due to:

1. In the fourth quarter of 2021, based on the undistributed profits generated by our wholly foreign-owned enterprises in 2021, we recorded a withholding tax of 207.4 million yuan (about US$32.5 million).

2. In the fourth quarter of 2020, the preferential tax rate for one of our major profit-generating entities was adjusted from 12.5% to 10.0%, so we rushed back our income tax expense of $113.4 million in the fourth quarter of 2020. The entity was approved as a key software enterprise in FY2019 in 2020.

Net profit

Non-GAAP net income for the fourth quarter of 2021 was $279.6 million (approximately $43.9 million). Not measured in accordance with U.S. GAAP, Momo's main app's net profit for the fourth quarter of 2021 was 415.8 million yuan (about $65.3 million). Non-GAAP net loss for the fourth quarter of 2021 was $129.9 million (approximately $20.4 million).

Net loss for the fourth quarter of 2021 was $4,244.0 million (approximately $666.0 million), as measured by U.S. GAAP. The net profit of Momo's main app in the fourth quarter of 2021 was 306.7 million yuan (about $48.1 million). Exploration's net loss for the fourth quarter of 2021 was $147.3 million (approximately $23.1 million).

Net profit attributable to the Zwing Group

Not measured in accordance with U.S. GAAP, net profit attributable to ZWG for the fourth quarter of 2021 was RMB280.9 million (approximately US$44.1 million).

Net loss attributable to ZW Group for the fourth quarter of 2021 was RMB4,242.7 million (approximately US$665.8 million), as measured by US GAAP.

Net income per American Depositary Shares (ADS).

Non-GAAP net income per Ads diluted net income for the fourth quarter of 2021 was $1.38 (approximately $0.22).

Diluted net loss per Ads for the fourth quarter of 2021, as measured by U.S. GAAP, was $21.50 (approximately $3.37).

Cash and cash flow

As of December 31, 2021, the Group held $15,707 million (approximately US$2,464.8 million) in cash, cash equivalents, short-term deposits, long-term deposits and long-term restricted cash. Net cash from operating activities for the fourth quarter of 2021 was $665.5 million (approximately $104.4 million).

Full Year 2021 Financial Results

Net revenue for the full year 2021 was $14,575.7 million (approximately $2,287.2 million).

Not measured in accordance with U.S. GAAP, net profit attributable to ZWG for the full year 2021 was RMB2,037.1 million (approximately US$319.7 million).

In accordance with U.S. GAAP, the net loss attributable to The Company for the full year 2021 was $2,913.7 million (approximately $457.2 million).

Non-GAAP net income per American Depository Shares (ADS) was $9.56 (approximately $1.50) for the full year 2021.

A diluted net loss per Ads for the full year 2021 was $14.40 (approximately $2.26), as measured by U.S. GAAP.

Net cash from operating activities for the full year 2021 was $1,559.2 million (approximately $244.7 million).

Recent developments

Special cash dividend scheme

The Board of Directors of Zwing Group announced a special cash dividend package of $0.64 per ADS, or $0.32 per ordinary share. These cash dividends will be paid on April 29, 2022 to shareholders who are still on record after the closing of the trading day on April 13, 2022. The ex-dividend date is April 12, 2022. The total amount of the distribution is approximately $127 million, which will be paid in cash from the company's surplus.