Author|Crane in the clouds
On April 12, Himalaya disclosed its IPO prospectus in Hong Kong, with joint sponsors including Goldman Sachs, Morgan Stanley, and CICC.
One of the biggest highlights is that Himalaya, which has been losing money for many years, will finally turn losses into profits in 2023. This is another profitable Internet company after iQiyi, Kuaishou and other companies in the near future.
In order to achieve its profitability goal, Himalaya has spared no effort to reduce costs and increase efficiency, including layoffs, salary cuts, and cutting marketing expenses. However, the mass layoffs two years ago caused a stir and had a negative impact on the company's reputation.
In addition, even if it is profitable, it cannot hide two major hidden dangers in the Himalayas.
One is about users, that is, the growth of the number of monthly active users of Himalaya has slowed down, and the listening time of daily active users has not increased but decreased.
The other is about revenue, that is, the company's revenue is no longer growing rapidly, but is stagnant, and the advertising revenue of the second largest business segment has declined for two consecutive years.
At present, the competition in the audio industry in which Himalaya is located is very fierce, with competitors such as Dragonfly FM and Litchi chasing after them, as well as Internet platforms such as Kuaishou and ByteDance.
It is difficult to cope with the environment surrounded by strong enemies by relying only on "throttling" measures such as layoffs and salary cuts, and it is necessary to find ways to "open source" and vigorously expand business sources and increase revenue.
An IPO is equivalent to stockpiling food and ammunition in advance, and it has become an unavoidable choice for Himalaya.
The "killer feature" behind the profit: 40% reduction in employees + 50% salary cut at the top + 560 million reduction in marketing expenses
For many years, as the boss of the audio industry, Himalaya has been mired in losses and unable to move.
According to the statistics of the prospectus, from 2018 to 2022, the losses of Himalaya were 774 million yuan, 773 million yuan, 605 million yuan, 718 million yuan and 296 million yuan respectively, and the cumulative loss in five years reached 3.166 billion yuan.
In 2023, Himalaya can finally get rid of the label of loss.
According to the prospectus, Himalaya will achieve a net profit of 3.736 billion yuan in 2023, with an adjusted net profit of 224 million yuan after deducting the impact of non-operating items (changes in the fair value of convertible redeemable preferred shares, share-based remuneration expenses, etc.).
According to the company, there are three reasons for achieving profitability in 2023: the expansion of user base, the enhancement of monetization ability, and the improvement of gross profit margin and operating efficiency brought about by the optimization of cost structure.
In fact, the key to profitability is to "reduce costs and increase efficiency". This is no stranger to Himalaya, which made a fuss two years ago because the cost reduction measures were too aggressive.
Since March 2022, Himalaya has been involved in layoffs several times. Rumor has it that after the entire department of Speed Edition was laid off, Himalaya initiated a larger layoff, accounting for 15% of the total workforce, and some departments reached 20%.
The speech of Yu Jianjun, founder and co-CEO of Himalaya, at the all-staff meeting indirectly confirmed the news of the company's layoffs.
Yu Jianjun stressed: Profits should not be made by making up figures, nor should they be obtained simply by reducing costs; it is necessary to control the costs reduced by layoffs within 10 percent of the total cost reductions, so as to avoid major fluctuations in personnel.
As for how many people Himalaya has laid off, we can find the answer from the prospectus.
The total number of employees in Himalaya decreased from 4,342 at the end of 2021 to 2,883 at the end of 2022, with a layoff rate of 33.6%, and then to 2,637 at the end of 2023, compared with 8.5% at the end of 2022.
If 2021 is used as a benchmark, Himalaya will lay off a total of 1,705 employees within two years, with a layoff rate of 39.26%.
At the same time as the knife on ordinary employees, three directors of Himalaya, including Yu Jianjun, took the initiative to reduce salaries, indicating the determination of the company's senior management to reduce costs.
The prospectus disclosed that the "salary, salary and bonus" of the three directors of Himalaya (Yu Jianjun, Li Xingren, and Shen Jieqiang) will be 3.759 million yuan, 2.08 million yuan, and 1.909 million yuan respectively in 2022, totaling 7.748 million yuan.
In 2023, it will be cut in half. The salaries of the above three people were 1.798 million yuan, 1.066 million yuan, and 1.099 million yuan respectively, totaling 3.963 million yuan.
According to the information, Yu Jianjun is the co-founder of Himalaya, and currently serves as an executive director, chairman of the board of directors and chief executive officer of the company, mainly responsible for the company's overall executive affairs and business planning, as well as the overall management of the group.
Li Xingren is an Executive Director of Himalaya and has served as the Company's Vice President since October 2015, responsible for the subscription business and content production.
Shen Jieqiang, has been an executive director of the Company since April 2021. He served as the chief financial officer of the Company from September 2015 to December 2017 and has been the vice president since December 2017, responsible for finance, risk management and internal control.
The two-pronged combination of layoffs + salary cuts has caused Himalaya's employee benefit expenses to decline for 2 consecutive years. From 192 million yuan in 2021, a decrease of 7.5% to 177 million yuan in 2022, and a further decrease of 34.9% to 115 million yuan in 2023.
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In addition to personnel costs, Himalaya has also taken the initiative to reduce operating expenses.
The largest component is "sales and marketing expenses", which mainly include channel promotion expenses, brand and advertising expenses, commissions paid to distributors and other platforms, and employee benefits expenses of sales and marketing personnel.
Against this backdrop, Himalaya's sales and marketing expenses have been declining for two consecutive years. From 2.63 billion yuan in 2021 to 2.115 billion yuan in 2022, and then to 2.07 billion yuan in 2023, a total decrease of 560 million yuan or 21.29% in two years.
At the same time, the proportion of sales and marketing expenses in total revenue also decreased from 44.9% in 2021 to 34.9% in 2022 and 33.6% in 2023.
Himalaya explained in the prospectus that this is due to the company's strategic adjustment of sales and marketing spending priorities, resulting in changes in the company's channel promotion expenses and brand promotion and advertising expenses.
The mobile payment rate and listening time both declined, and the advertising revenue fell for two consecutive years
While the quality of earnings is not good, Himalaya has other hidden dangers.
First of all, the growth of the average number of monthly active users, which is an important indicator, has encountered a bottleneck, which limits the imagination of Himalaya's future development.
According to CIC's research, in 2023, Himalaya will have 303 million monthly active users, including 133 million average mobile users and 170 million average monthly active users who listen to its audio content through IoT and other third-party platforms.
In terms of longitudinal comparison, from 2021 to 2023, the number of monthly active users of Himalaya will be 268 million, 291 million, and 303 million respectively, with year-on-year growth rates of 7.2%, 8.6%, and 4.1%, respectively. Among them, the growth rate in 2023 will slow down significantly.
It is worth noting that the payment rate of monthly active users/members and the listening time of daily active users on the Ximalaya mobile terminal have both entered the downward channel.
The former decreased from 12.9% in 2021 and 2022 to 11.9% in 2023, while the latter decreased from 144 minutes in 2021 to 142 minutes in 2022 and 130 minutes in 2023.
Ximalaya explained that the decline in mobile payment rates in 2023 is mainly due to the company's strategic focus to attract and retain users with higher average order value, and to strengthen the sustainability of products with greater monetization potential.
The decrease in listening time for daily active users is mainly due to the growing popularity of podcasts among the average monthly active users on mobile, which have relatively short content durations compared to audiobooks.
Compared with the number of monthly active users, Himalaya's revenue growth is more obvious than the number of monthly active users.
According to the prospectus, Himalaya's revenue mainly comes from three aspects, subscription (including membership subscription and paid on-demand listening services), advertising, and live broadcast. A small portion comes from "other innovative services and products", including the sale of self-developed IoT devices, IP-derived cultural and creative products, customized audio services, e-commerce and reverse publishing (converting popular albums into published books).
From 2021 to 2023, Himalaya's revenue will be 5.856 billion, 6.061 billion, and 6.163 billion respectively, with growth rates of 43.7%, 3.5%, and 1.7%, respectively. Among them, revenue growth in 2022 and 2023 will almost stagnate, far less than the growth rate in 2021, let alone 2019 and 2020 (81.49% and 51.29% increase).
It is worth mentioning that the revenue of Himalaya's second largest business segment advertising (mainly display advertising, audio advertising and branding activities) has declined for two consecutive years. From 1.488 billion in 2021, to 1.469 billion in 2022, and then to 1.423 billion in 2023.
The proportion of advertising revenue in total revenue has also declined, from 25.4% in 2021, to 24.2% in 2022, and then to 23.1% in 2023.
Himalaya said that the company's optimization of products and services for advertisers in 2023 and the provision of a package of advertising solutions across multiple formats and interfaces to major advertisers to reactivate the company's advertising inventory and achieve synergies for advertisers will be a strong driving force for further growth in advertising revenue in the future.
After its establishment, 12 rounds of financing raised tens of billions, and the highest valuation of Himalaya was 28 billion
Himalaya, which stands on the sound economy + knowledge payment outlet, has been the darling of capital since its establishment in 2012.
According to the information disclosed in the prospectus, since 2012, Himalaya has received a total of 12 rounds of financing, including domestic angel rounds, overseas A and B rounds, domestic B-1 rounds and B-2 rounds, domestic C-1 rounds and C-2 rounds, domestic D rounds, and overseas E1 to E 4 rounds.
The above 12 rounds of financing raised US$1.0895 million, US$11.7075 million, US$40.7648 million, RMB1.123 billion, RMB300 million, RMB373 million, RMB165 million, RMB1 billion, US$4.0397 million, US$557 million, US$325 million, and US$20 million respectively. A total of 2.961 billion yuan + 960 million US dollars were raised, which is nearly 10 billion yuan when converted into RMB.
Along with a number of financings, Himalaya's valuation has also risen.
The company's post-investment valuation has continued to climb from US$3.45 million in 2012 to US$4.345 billion in the last round of 2020, equivalent to more than RMB 28 billion. In other words, in 8 years, the valuation of Himalaya has increased by more than 1,200 times.
After various capitals rushed to enter the game, Himalaya's shareholder lineup can be called luxurious.
Among them, there are strategic investors such as Tencent (5.33%), China Literature (3.05%), Xiaomi (3.38%), Baidu, Good Future, Sony Music, etc., as well as financial investors such as General Atlantic, Trustbridge Capital, Goldman Sachs, Xingwang Investment, Genesis Partner Capital, Pricewater Capital, and Whale Capital.
Moreover, Himalaya and the above-mentioned investment institutions are not only related in equity, but also in business cooperation.
For example, in 2015, Himalaya signed a 20-year online audio rights agreement with an affiliate of China Literature, which allowed the company to produce and deliver a large number of audiobooks.
Today, Himalaya is the undisputed leader in the online audio space.
According to CIC, in 2023, the average monthly active users (133 million) of the main Ximalaya mobile app ranked first among online audio apps in China, and mobile users listened to audio content about 60.5% of the total mobile listening time of all online audio platforms in China.
In 2023, in terms of online audio revenue, Himalaya has a market share of 25% in China's online audio industry, much higher than the 13% share of the second place.
Moreover, the subdivision in which Himalaya is located has huge market potential in the future.
According to CIC, the revenue of China's online audio market grew from RMB4 billion in 2018 to RMB25 billion in 2023, at a CAGR of 44.0%, and is expected to grow further to RMB51 billion by 2028, at a CAGR of 15.3% from 2023 to 2028.
The revenue of the IoT/in-vehicle online audio market grew from $58.6 million in 2018 to $1 billion in 2023, at a CAGR of 77.5%, and is expected to grow further to $2.5 billion by 2028, at a CAGR of 19.5% from 2023 to 2028.
Of course, Himalaya is facing no small amount of competitive pressure. Among them, there are not only competitors in the audio industry such as Dragonfly FM and Lizhi, but also large Internet companies that have crossed over from the field of short video and live broadcast, such as Kuaishou (podcast app "Kayak"), ByteDance (Tomato Listening), etc.
Surprisingly, despite the blessing of luxury shareholders + audio faucets, Himalaya's listing journey has been quite bumpy.
Not only failed to win the title of "China's No. 1 Online Audio Stock", but also failed to hit the IPO three times in a row, including 1 listing in the United States and 2 listings in Hong Kong.
Now that Ximalaya has entered the IPO for the fourth time, whether it can finally be successfully listed and exceed the valuation of 28 billion, and what impact it will have on the audio industry pattern, it is worth further attention.