With the "obsession" of listing, after several setbacks of IPO breakthroughs, Himalaya once again submitted a listing application to the Hong Kong Stock Exchange.
In mid-April, Himalaya officially submitted its prospectus to the Hong Kong Stock Exchange, with Goldman Sachs, Morgan Stanley and CICC as joint sponsors. As one of the earliest online audio platforms in China, according to CIC Consulting data cited in the prospectus, in 2023, Ximalaya will account for 25% of the market share of the online audio industry in terms of online audio revenue, making it the largest online audio platform in China.
Founded in 2012, Himalaya has received a total of 12 rounds of financing, covering domestic angel rounds to D rounds, and overseas E1 to E4 rounds, with a total financing amount of nearly 10 billion yuan. As early as 2018, the company has been repeatedly rumored to be listed, but all of them have been officially denied. Until April 2021, Himalaya submitted a prospectus to the SEC in the United States, but then withdrew its listing application. Then, in September of the same year, Himalaya shifted its listing target to the Hong Kong stock market and updated its prospectus in March 2022, but there has been no progress since then. After a two-year hiatus, Himalaya has once again launched its IPO plan.
Profitability mainly depends on cost reduction
"It's not that important how much you make a profit. The significance of making a profit itself is very important, which shows that Himalaya can make its own blood without external forces. In August 2022, Yu Jianjun, founder and CEO of Himalaya, said at an internal staff meeting that he would achieve a single-quarter profit in the fourth quarter of 2022, reverse the long-term loss, and achieve a full-year profit in 2023.
According to the prospectus, from 2021 to 2023, Himalaya's revenue will be 5.86 billion yuan, 6.06 billion yuan and 6.16 billion yuan respectively, of which the year-on-year revenue growth rate in 2022 and 2023 will be 3.49% and 1.68% respectively, the gross profit margin will be 54%, 51.9% and 56.3% respectively, the net profit in the same period will be about -5.106 billion yuan, 3.7 billion yuan and 3.736 billion yuan respectively, and the adjusted net profit will be -718 million yuan respectively. $296 million and $224 million, turning losses into profits.
Prior to making a profit, Himalaya had been losing money for many years. Wind data shows that from 2019 to 2021, Himalaya's revenue was 2.698 billion yuan, 4.076 billion yuan and 5.857 billion yuan respectively, the net loss was 1.925 billion yuan, 2.882 billion yuan and 5.106 billion yuan respectively, and the adjusted loss was 748 million yuan, 539 million yuan and 759 million yuan respectively, with a cumulative loss of more than 2 billion yuan in three years.
In the prospectus, Himalaya divides its business into four categories, namely subscription, advertising, live streaming, and other innovative products and services. The revenue of these four major businesses in 2023 will be 3.189 billion yuan, 1.423 billion yuan, 1.13 billion yuan and 418 million yuan respectively, accounting for 51.7%, 23.1%, 18.4% and 6.8% of the revenue respectively.
Subscription services are the basic market of Himalaya, mainly from membership subscription and paid on-demand models, accounting for more than half of the revenue from 2021 to 2023, but the revenue growth rate has slowed down significantly. From 2021 to 2023, the revenue of Himalaya's subscription services will increase from 2.991 billion yuan to 3.189 billion yuan, with a cumulative growth rate of only 6.6% in two years. Specifically, in 2023, Himalaya's membership subscription revenue will increase by 8.45% year-on-year to 2.494 billion yuan, accounting for about 40.5% of revenue, and the revenue of paid on-demand listening services will decrease by 11.14% year-on-year to 694 million yuan, accounting for 11.25% of revenue.
In contrast, advertising revenue, Himalaya's second-largest source of revenue, has declined. From 2021 to 2023, its advertising revenue will be 1.488 billion yuan, 1.469 billion yuan, and 1.423 billion yuan respectively, accounting for 25.4%, 24.2%, and 23.1% of revenue, respectively.
Revenue from the livestreaming business, which mainly comes from the sale of consumable virtual gifts and items, also declined last year. In addition, Himalaya derives part of its revenue from other innovative products. From 2021 to 2023, the revenue of this part will be 376 million yuan, 356 million yuan and 418 million yuan respectively, accounting for 6.4%, 5.9% and 6.8% respectively.
Revenue growth slowed, but Himalaya turned a profit last year, mainly due to cost reductions. According to the prospectus, Himalaya's sales and marketing expenses will decrease from 2.63 billion yuan in 2021 to 2.11 billion yuan in 2022, and further reduce to 2.07 billion yuan in 2023, with a cumulative decrease of 560 million yuan in two years. Correspondingly, Himalaya also experienced a significant decrease in sales and marketing expenses as a percentage of total revenue, from 44.9% in 2021 to 33.6% in 2023.
At the same time, Himalaya is also cutting R&D spending, gradually decreasing from $1.03 billion in 2021 to $930 million in 2023, and R&D spending as a percentage of total revenue has also decreased from 17.5% in 2021 to 15.1% in 2023.
In addition to relying on the reduction of costs, in the past two years, Himalaya has also shrunk the scale of personnel. According to the data, as of December 31, 2021, the number of full-time employees in Himalaya was 4,342, which decreased to 2,883 by the end of 2022, and further decreased to 2,637 by the end of 2023. According to the prospectus, due to the decrease in employee benefit expenses, Himalaya's administrative expenses plummeted from 1.414 billion yuan in 2021 to 468 million yuan in 2023.
Tencent, Xiaomi, and China Literature are shareholders
According to public information, Ximalaya was founded by Yu Jianjun and Chen Yuxin in August 2012, and launched the online audio app "Himalaya" in 2013, mainly through professional production content (PGC), professional user generated content (PUGC), user generated content (UGC) to provide audio content, content forms covering audiobooks, pan-entertainment audio, podcasts, boutique knowledge sharing and live broadcasts.
At present, Himalaya's revenue comes more from mobile users. From 2021 to 2023, the average monthly active paying users of Himalaya mobile will be about 14.9 million, 15.7 million and 15.8 million, respectively, with a significant slowdown in growth. At the same time, the average listening time of daily active users also decreased, from 144 minutes in 2021 to 130 minutes in 2023.
In the prospectus, Ximalaya admitted that the company is currently facing fierce competition from other online audio content providers in China, including Dragonfly FM and Lizhi, for users, their time and spending, and in emerging scenarios such as the Internet of Things and in-vehicle devices, the company also faces competition from other major Internet companies that provide other forms of online content such as music, literature, games and videos, including ByteDance, Tencent and Kuaishou.
Surrounded by competitors, it will take time to verify how much potential Himalaya has in the future, and for Himalaya itself, landing in the capital market may be imminent.
According to the prospectus, Himalaya has been restructured several times, initially obtaining overseas financing, and then carrying out multiple rounds of domestic financing after the dismantling of the VIE structure and restructuring in 2015. In 2018, Himalaya targeted its listing location overseas, and once again carried out corporate restructuring and multiple rounds of overseas financing. Himalaya's most recent round of financing took place in April 2021, with a post-investment valuation of US$4.345 billion, equivalent to more than 30 billion yuan.
Before the IPO, Yu Jianjun held 10.61% of the shares and Chen Yuxin held 10.02% of the shares. As the largest external investor, Xingwang Investment holds a 10.72% stake in Himalaya, followed by Trustbridge Capital with a 9.94% stake. In addition, Tencent, Xiaomi, and China Literature's subsidiaries hold 5.33%, 3.38%, and 3.05% of the shares in Himalaya, respectively.
"Previously, Himalaya's first listing plan in the United States was affected by the volatility of the Chinese concept stock market, and the subsequent two attempts to IPO in Hong Kong stocks suffered setbacks, the core of which is that Hong Kong stocks are relatively sluggish and fail to give them the expected valuation, and the liquidity of Hong Kong stocks may not be satisfactory. Shen Meng, director of Chanson Capital, pointed out in an interview with the International Financial News that Himalaya has an urgent need for listing, "However, with the extension of the investment cycle of Himalaya, some investors may have adjusted their expectations for the return of Himalaya's listing based on their own interests." If the company continues to delay the listing process, the negative impact on investors will be even more significant. ”