Dongfang's selection salary has been exposed, and 1.36 billion yuan has been issued to Dong Yuhui

Oriental Selection released a semi-annual report, and salary expenses rose sharply

It seems that Dongfang Selection is still willing to pay employees.

On the evening of January 24, Dongfang Selection released its interim results for the 2024 fiscal year. For the six months ended November 30, 2023, Oriental Selection's total revenue increased by 34.4% year-on-year to RMB2.8 billion, and its net profit decreased by 57.4% year-on-year to RMB249 million.

Oriental Selection FY2024 Interim Results Source: Oriental Selection Announcement

Among them, the GMV of Dongfang Selection reached RMB5.7 billion within half a year, the total revenue of its self-operated products and live-streaming e-commerce segment increased by 36.6% to RMB2.41 billion, and the total revenue of self-operated products reached approximately RMB1.9 billion. However, the total cost of revenue of the self-operated products and live broadcast e-commerce segment reached 1.6 billion yuan, the gross profit was 794 million yuan, and the gross profit margin decreased to 32.9%.

In this regard, the financial report explained that it was mainly due to the rapid development of self-operated products and live broadcast e-commerce business. It is worth noting that the total salary expenses disclosed in the financial report have approached the gross profit of Dongfang Selection in the past six months.

According to the financial report, for the six months ended November 30, 2023, the total salary expenses (including share-based remuneration expenses) incurred by the group have reached 625 million yuan, a year-on-year increase of 167.7%.

Oriental Selection's salary and welfare expenses Source: Oriental Selection's financial report

According to Oriental Selection's annual report for fiscal year 2023, from June 1, 2022 to May 31, 2023, its total salary expenses were 736 million yuan. In other words, in the year and a half after Dongfang Selection became popular, the total salary expenditure has reached 1.36 billion yuan.

Of course, it can be seen in the financial report that although administrative expenses, including employee salaries, also rose by 129.6%, they only reached 143 million yuan. Therefore, the salary expenses are not all real cash, and the majority of the compensation expenses are share-based remuneration expenses.

Oriental Selection also said in the financial report: "Our success depends on our ability to attract, retain and motivate qualified personnel. The Group regularly reviews the remuneration policies and packages of its employees. In addition to pension and internal training schemes, discretionary bonuses, share awards and share options may also be granted to employees based on the results of their performance assessments. ”

For example, on April 11 last year, the equity incentive that Dongfang Selection had been planning for a long time was officially implemented, and a total of 30.459 million share awards were granted to 154 people. Based on the closing price of HK$29 on the day, the total value of the share awards was as high as HK$883 million (approximately RMB775 million).

It is worth mentioning that Sun Dongxu, the CEO of Oriental Selection at the time, received the most share awards, reaching 3 million shares, which was worth about 87 million Hong Kong dollars (about 76.27 million yuan) at that time.

However, equity incentives are not received all at once, but vested in three years, with 20%-50% of the total number of share awards vested each year, and the grantee needs to meet a specific threshold for performance evaluation within one year before the vesting date. In other words, if Dong Yuhui and other anchors want to cash out all the shares in their hands, they need to stay in Dongfang Selection for at least three years.

At the recent financial report meeting, Yu Minhong revealed: "The equity incentive for all anchors, including Yuhui, will be added again, and there will be no additional in the next two years." This is the necessary means to stabilize the team. ”

The "additional once" in Yu Minhong's mouth may refer to the "small composition" turmoil not long ago, Yu Minhong said in the live broadcast that the company will soon launch a round of major adjustments, including the treatment of all anchors. According to him, this adjustment is not only for Dong Yuhui alone, but for all the company's anchors.

However, it is worth noting that the "small composition" turmoil occurred in December last year and was not within the scope of this financial report disclosure. Even so, Dongfang Selection's salary and welfare expenses still increased by 168%, which shows that the treatment of employees has always been very good.

I just don't know whether most of the salary and benefits selected by Dongfang are in the hands of the management or the anchor.

Net profit halved, where did the money go?

After the latest financial report of Oriental Selection was issued, the stock price of Hong Kong stocks fell by more than 10% to the lowest in nearly 8 months, mainly because the market was not satisfied with the net profit performance of Oriental Selection in the past six months.

While revenue increased by 34.4% to RMB2.8 billion, Dongfang Selection's net profit decreased by 57.4% to RMB249 million. The most direct reason behind the increase in revenue but not profit is of course the increase in costs.

Dongfang Selection also said in the financial report that it was mainly due to the substantial growth of the company's business, which led to the increase in inventory costs and transportation costs of self-operated products. In addition, in order to expand the scale of self-operated product selection, recruit more employees for the live broadcast business, invest more sales and marketing expenses, and develop and launch the "Oriental Selection App", which has also caused a significant increase in cost expenditure.

The homepage of the Oriental Selection App

It can also be seen from the financial report that the inventory cost of Dongfang Selection increased by 155% to 360 million yuan, R&D expenses (mainly used for App research and development) increased by 56.5% to 75.5 million yuan, and sales and marketing expenses increased by 145.6% to 560 million yuan. It is reported that the increase in sales and marketing expenses was mainly due to "the increase in staff costs due to the recruitment and attraction of more talents for self-operated products and live broadcast business operations".

Therefore, in the final analysis, the increased costs of Dongfang Selection in the past six months are mainly used on employees.

As for the increase in staff costs, it is due to the increase in remuneration on the one hand, and the increase in the number of employees on the other.

According to the previous financial report of Oriental Selection, as of November 30, 2022, it had a total of 1,260 full-time employees and 410 part-time employees, with a total salary expenditure of 233 million yuan in half a year, and in the same period in 2023, the number of full-time employees and 720 part-time employees in Oriental Selection increased by 167.7% to 625 million yuan.

The number of employees has only increased by 50%, but the salary expense has increased by 168%, which shows that the treatment of employees has also improved.

Despite this, due to the opaque treatment of anchors such as Dong Yuhui, there are still many fans who are dissatisfied. After the "small composition" turmoil in December, although Dong Yuhui was promoted to "senior partner", he did not enter the company's management, and the outside world could not see the real benefits he received.

At the previous shareholders' meeting, Dongfang Selection revealed that the newly established "Walking with Hui" studio is 100% controlled by Dongfang Selection, all performance and profits belong to Dongfang Selection, and the salary structure of all personnel is basically the same as the original system. However, Dong Yuhui has also received a lot of equity incentives, and has been bound to Dongfang Selection through equity, and will not just get commissions like MCN institutions.

According to the management, the supply chain and personnel incentives are still up to Dongfang Selection, and Dong Yuhui can decide what to sell and what not to sell. In other words, although Dong Yuhui has a certain degree of autonomy in the content of the live broadcast, he is still unable to grasp the real power at the level of corporate decision-making, which has still become an unstable factor in Dongfang Selection at the level of public opinion.

The "civil strife" has not yet been settled, and the distribution of benefits is still a difficult problem

In the previous "small composition" turmoil, Luo Yonghao once came forward to speak out for Dong Yuhui, thinking that he should take at least half of the proceeds of Dongfang Selection.

According to him, the head live broadcast e-commerce companies basically make the most fair and just distribution based on sales data, such as beauty wrist and make a friend, although it is not a family business, Li Jiaqi and Luo Yonghao can take most of the profits. "What about Dong Yuhui? From the Oriental selection, he was assigned to a fraction of the fraction."

Luo Yonghao's original Weibo Source: Weibo

If it is really according to what Luo Yonghao said, Dongfang Selection's gross profit of self-operated products and live broadcast e-commerce business in the past six months is 750 million yuan, and Dong Yuhui can at least share 375 million yuan.

However, the management of Dongfang Selection has always emphasized that Dongfang Selection is not a traditional MCN organization, and will not adopt the same salary model as an MCN organization.

From the perspective of personnel scale, Dongfang Selection now has more than 2,500 employees, of which the total number of Dongfang Selection's self-operated products and live broadcast e-commerce team is 1,587 people, including 643 supply chain and product team members, and the team size seems to have reached the configuration of the head anchor.

If Dong Yuhui is really directly allowed to take half of the profits, it will be unfair to the other more than 1,500 behind-the-scenes members. So Dongfang Selection chose to "go to Dong" and set up a separate account for Dong Yuhui to "walk with Hui" to ensure that Dongfang Selection's main account and self-operated products will not continue to rely on Dong Yuhui, and the distribution of benefits is also clearer.

Gray Dolphin data shows that in the past month, the performance of Dongfang Selection and Hui on the Douyin platform is very close. Among them, the total sales scale of Dongfang Selection is about 610 million yuan, and the sales scale of its peers with Hui is nearly 640 million yuan, which is the result of the latter only being on the air for half a month.

Up to now, Youhui is still rapidly expanding its influence at a rate of more than 100,000 fans per day, while Dongfang Selection is still losing 10,000 to tens of thousands of fans per day.

Dongfang Selection & Comparison with the number of fans of Hui Peer Source: Douyin screenshot

According to the management of Dongfang Selection, the current performance and profitability of Hui Peer are very impressive, and non-live sales on Douyin have accounted for 30% of self-operated product sales. However, at the financial report meeting, the management also repeatedly emphasized that walking with Hui did not affect the sales of Dongfang Selection's large number, and the development of the main account was still stable.

As for the actual situation of Dongfang selection after Dong Yuhui's independence, it will be fully reflected in the next financial report, and we will continue to pay attention.

Author | Li Songyue