Our reporters Xu Xinyi and Wu Kezhong reported from Beijing
One year after proposing to break even, Xindong Company (02400. HK) handed over the 2022 answer sheet - the company's revenue hit a new high, gross profit and gross margin increased, and losses narrowed further.
The "turnover" of Xindong Company is mainly due to the launch of the new game and the long vitality of the "Sausage Party" game. In addition, the company took measures to reduce costs and increase efficiency, and reduced R&D personnel; The release of version numbers has also boosted the company's TapTap business line and game research and development.
However, TapTap did not maintain high growth throughout 2022. Its user scale and activity in the second half of 2022 decreased slightly year-on-year. A relevant person of the company told the "China Business News" reporter that this is related to the company's initiative to reduce investment, "We hope that user growth does not rely solely on launch, but through the continuous improvement of products, users will be retained for a long time."
Out of the trough of performance
On March 30, Xindong Company released its 2022 results announcement. According to the financial report, Xindong's revenue in 2022 increased by 26.9% year-on-year to 3.43 billion yuan, the highest in history; gross profit increased by 49.7% year-on-year to 1.84 billion yuan; and gross profit margin increased from 45.4% to 53.5%; Loss decreased by 37.4% year-on-year to MOP 570 million from MOP 920 million.
Xindong quickly got out of the trough of performance, mainly due to the performance improvement of "Sausage Party" and the launch of several new tours. According to the financial report, in 2022, the game business revenue of Xindong Company increased by 22.0% year-on-year to 2.45 billion yuan, of which online game revenue increased by 29.5% over the same period of the previous year to 2.31 billion yuan.
Sausage Party is a competitive tactical game launched in China in April 2018. The financial report disclosed that the number of active users and payment rate of the game reached new highs in 2022, driving the overall MPU (average monthly paying users) of the company's online game business to increase by 61.0% year-on-year, reaching 1.573 million.
In 2022, Xindong Company will launch four self-developed online games: "Party Star", "Firepower Soda", "Torchlight: Infinite" and "Raccoon Unhappy". According to the company's financial report, "Party Star" was launched in overseas markets in February 2022 and occupied the top three places in the Apple Store free game download list for a long time in Japan, and was launched in China in April of the same year; "Firepower Soda" was launched in overseas markets in May 2022, and was recommended by the Apple Store in 171 countries and regions around the world, and won the first place in the Apple Store free game download list in 11 countries and regions; Torchlight: Infinity was launched in overseas markets in October 2022 to support the interconnection and season-based operation model of PC, Android and Apple systems, and has been recognized by dark game enthusiasts.
However, Huang Yimeng, CEO of Xindong Company, said at the results meeting that the overseas commercialization results of "Firepower Soda" and "Torchlight: Infinite" are still far from expectations. "Torchlight: Infinity has a good first season, the second season will be worse than expected, the third season will be launched globally, and the product will be improved on a season-by-season basis." Huang Yimeng introduced, "After T3 ("Firesoda") has been commercialized overseas for more than a year, the core gameplay will be changed from 3v3 to 5v5, including hero-related adjustments. ”
The resumption of version issuance in 2022 will bring a certain boost to TapTap, a mobile game platform under Xindong Company. A relevant person from Xindong Company told reporters that according to the current pace of version distribution, nearly 1,000 new versions will be added a year, which means that TapTap stores have 1,000 new SKUs (single products) on the shelves, "This will be very helpful to players choosing new games and TapTap's recommendation system, and will also drive the purchase of games and achieve the growth of TapTap advertising revenue." The person also said that under the premise of the resumption of version number issuance, the company's self-developed games are also more likely to be launched in China, with very good positive effects.
"TapTap revenue grew significantly last year, so it didn't feel particularly 'winter'." Speaking of the launch of the game market, Huang Yimeng said at the performance meeting, "The recovery of this year's edition is expected to have a positive significance for the launch of the market. ”
According to Xindong's financial report, in 2022, the MAU (average monthly active users) of TapTap China will reach 41.5 million, a year-on-year increase of 31.3%; The number of game downloads was 801 million, a year-on-year increase of 38.3%; The number of new posts was 8.2 million, an increase of 22.1% year-on-year. Revenue from information services, including TapTap online promotion services, increased by 41.3% year-on-year to RMB980 million.
The results of cost reduction and efficiency improvement have been revealed
Due to the loss recorded by continuing to invest heavily in R&D, XD adopted a series of measures to reduce costs and increase efficiency last year, among which the reduction in R&D was particularly obvious. According to the financial report, its adjusted EBITDA loss has narrowed significantly by 56.7% compared with the same period in 2021 to 350 million yuan.
The financial report disclosed that due to the project restructuring of the game division, as of December 31, 2022, the number of R&D personnel of Xindong Company was 1,196, a decrease of 439 from the end of 2021; R&D expenditure increased by 3.4% year-on-year to MOP 1.28 billion, mainly due to higher termination of employment compensation and higher expenses for professional and technical services.
In terms of sales and marketing, HeartBeat's expenses increased by 18.3% year-on-year to $920 million, mainly due to the increase in marketing expenditure of TapTap and the launch of new games.
Although TapTap's user scale and activity increased greatly in 2022, its performance in the second half of the year was slightly insufficient compared with the first half. Compared with the first half of the year, TapTap had 279,000 fewer MAUs in the second half of the year; the number of game downloads and new posts in the second half of last year decreased slightly compared to the first half of the year.
A relevant person from Xindong Company told reporters that TapTap is still far from the user ceiling in China, so the company is not worried about the potential of user growth. Talking about the reasons why TapTap's user scale did not maintain the growth rate in the first half of last year, the person said that firstly, because the product situation in the domestic mobile game market in the second half of last year was relatively dull, and there were no particularly hot new works, and secondly, because the company took the initiative to reduce the scale of UA (investment) based on the ROI (return on investment) situation at that time.
"Compared with the UA of the entire Internet industry regardless of cost and quality in previous years, we hope that user growth will not rely solely on UA, but through the continuous improvement of products, better meet the needs of players, keep users for a long time, and then combine high-quality UA to promote user growth together." The person said that this year, Xindong will still combine the goal of achieving company-level breakeven at the end of the year, comprehensively consider the costs and benefits of UA, focus on improving user quality and satisfaction with TapTap, and achieve user growth.
The break-even target remains unchanged
Regarding Xindong's expectations for performance, a relevant person of the company said that Huang Yimeng said in a shareholder letter last year that he would achieve breakeven in 2023, and this goal has not changed, "Our two games "Firepower Soda" and "Torchlight: Infinite" have already received version numbers, and another self-developed work "Sword of the Lily of the Valley" is also expected to get a version number within this year." In fact, we are confident in the continuous improvement and enhancement of the entire business this year."
It is revealed that "Fire Soda" and "Torchlight: Infinite" are expected to be launched in China in May and June. According to the financial report, Xindong currently has four online games in the research and development stage, of which "Sword of the Lily of the Valley" is expected to start overseas testing in the second or third quarter of 2023.
Regarding the recently hotly debated AIGC (artificial intelligence generated content) technology, the above-mentioned person told reporters that Xindong Company is one of the earliest companies in the game industry to explore and research AIGC, and it is expected that this technology will improve the company's business in two aspects: in terms of TapTap, because the platform precipitates a large amount of game-related content, it is very suitable for targeted training; In terms of the art middle stage, Xindong tried to integrate AIGC into the workflow about two months ago, and after training on Stable Diffusion (Wen Sheng Graph Model), it found that the effect was worth looking forward to. "If you want to really have a very efficient productivity and workflow, it is expected to take about half a year." The person said.
At the performance meeting, Huang Yimeng said that AIGC will have an impact on the game industry in three directions: AI participation in game production, platforms providing new services through AI, and AI providing players with a different game experience. "For small developers, they used to have no art ability and could not make games, but now with the help of MJ and SD (artificial intelligence painting tools), they can obtain certain art capabilities and make games that they could not do before. For game companies that have already industrialized, it will take some time for AIGC to fully integrate into the workflow and form large-scale productivity, such as half a year later. So the future trend is that small teams may make creative games with AIGC, which is good for TapTap. Huang Yimeng said, "People may overestimate the changes brought by AI in the short term, now even ChatGPT can not bring users the same experience as real people, and the future direction may not be the AI of NPCs." We currently maintain a strong focus, and the company also has a small team exploring it. ”