Scienjoy Holding Corporation (“Scienjoy”, the “Company”, or “We”) (NASDAQ: SJ), a leading live entertainment mobile streaming platform in China, today announced its financial results for the first quarter ended March 31, 2022.
First Quarter 2022 Operating and Financial Highlights
- Total net revenues increased by 27.0% to RMB 463.4 million (US$73.1 million) from RMB365.0 million in the same period of 2021, exceeding the high end of the estimated range for total net revenues released by the Company on May 17, 2022.
- Gross profit increased by 42.8% to RMB114.5 million (US$18.1 million) from RMB80.1 million in the same period of 2021. Gross margin increased to 24.7% from 22.0% in the same period of 2021.
- Net income increased by 17.3% to RMB83.2 million (US$13.1 million) from RMB71.0 million in the same period of 2021.
- Adjusted net income decreased to RMB77.7 million (US$12.3 million) from RMB83.5 million in the same period of 2021.
- Total paying users decreased to 248,988 from 291,949 in the same period of 2021.
- Total number of active broadcasters decreased to 50,317 from 143,980 in the same period of 2021.
- As of March 31, 2022, the Company had RMB205.4 million (US$32.4 million) in cash and cash equivalents, which represented a decrease from RMB240.9 million as of December 31, 2021.
Mr. Victor He, Chairman and Chief Executive Officer of Scienjoy, commented, “We started the new fiscal year by delivering solid results amid the resurgence of COVID-19 cases in China and the complex macro environment. In the first quarter of 2022, our financial metrics demonstrated strong resilience against market volatility and were a testimonial to our business strategies as we provided high-quality content across our platforms to our users. The acquisition of Hongle.tv showed the continuing execution in expanding our platform categories. We remain confident in our business model and our ability to add additional value to our broadcasters and users. We will continue to leverage the strengths of our strong position in the market to enhance and expand the relationship with our users and deliver high-quality content to them. Moreover, developing the metaverse project remains a key focus for us, which will integrate user experience with advanced technologies, attract more users, and enhance our brand awareness. Looking ahead to the remainder of 2022, fueled by our continuing focus on research and development (R&D), we believe our multiple live streaming platforms, integrated with our advanced technologies and content investment, will position Scienjoy well to generate more value for our shareholders in the long term.”
Mr. Denny Tang, Chief Financial Officer of Scienjoy, added, “In the first quarter of 2022, we delivered a strong financial performance with a 27% increase in our total revenue, compared to the same period of 2021. We maintained our healthy growth momentum, bolstered by the phenomenal rise of the digital economy and the successful execution of our business strategies. Reinforcing our competitive edge, we expanded our capabilities to improve users’ experience on our platforms including Hongle.tv acquired in December 2021 with our superior content. We continued our efforts to satisfy users’ demands for high-quality content on our platforms by further optimizing content and online infrastructure capacity through technology innovation. Also, our R&D investments in developing metaverse live streaming and upgrading our platform brands remained to be our fundamental support for future growth. As macroeconomic uncertainties remain in the near future, we will prioritize improving our operational efficiency and aim to achieve sustainable profitability in the long-term, while synchronizing our business model aligning with the trend of China’s digital economy. We believe our financial position sets a solid foundation to support our growth objectives and strategic business development.”
First Quarter 2022 Financial Results
Total net revenues in the first quarter of 2022 increased by 27.0% to RMB463.4 million (US$73.1 million) from RMB365.0 million in the same period of 2021, because more quality content was provided through our integrated multiple live streaming platforms, including Hongren platforms we acquired in December 2021 and our ARPPU in the first quarter of 2022 increased by 46% comparing to the same period of 2021, partially offset by decrease in number of paying users.
Cost of revenues in the first quarter of 2022 increased by 22.5% to RMB349.0 million (US$55.0 million) from RMB284.9 million in the same period of 2021. This increase was primarily attributable to a year-over-year increase of RMB65.9 million, or 27.1%, in the Company’s revenue sharing fees and content costs, which was in line with the growth of the Company’s live streaming operations in the first quarter of 2022.
Gross profit in the first quarter of 2022 increased by 42.8% to RMB114.5 million (US$18.1 million) from RMB80.1 million in the same period of 2021.
Total operating expenses in the first quarter of 2022 increased by 81.6% to RMB36.2 million (US$5.7 million) from RMB20.0 million in the same period of 2021.
- Sales and marketing expenses in the first quarter of 2022 decreased by 47.1% to RMB0.6 million (US$92,000) from RMB1.1 million in the same period of 2021, primarily due to fewer marketing activities.
- General and administrative expenses in the first quarter of 2022 increased by 116.0% to RMB19.1 million (US$3.0 million) from RMB8.8 million in the same period of 2021. This increase was mainly caused by more consulting and professional fees due to the expansion of the Company, as well as higher employee salary and welfare as compared to the same period of 2021.
- Research and development expenses in the first quarter of 2022 increased by 75.8% to RMB16.8 million (US$2.7 million) from RMB9.6 million in the same period of 2021. The increase was due to a higher R&D headcount and the Company had share based compensation of RMB2.0 million in the first quarter of 2022, no such expenses were incurred in the same period of 2021.
- Recovery of doubtful accounts in the first quarter of 2022 was RMB0.3 million (US$41,000) as compared to a provision for doubtful accounts of RMB0.4 million in the same period of 2021, as a result of the Company’s increased collection efforts.
Income from operations in the first quarter of 2022 increased by 30.0% to RMB78.2 million (US$12.3 million) from RMB60.2 million in the same period of 2021.
Change in fair value of contingent consideration in the first quarter of 2022 recorded a gain of RMB4.7 million (US$748,000) as compared to a loss of RMB11.8 million in the same period of 2021. Change in fair value of contingent consideration is derived from the Company’s reverse recapitalization with Wealthbridge Acquisition Limited on May 7, 2020, acquisition of Beelive on August 10, 2020, and acquisition of Hongren on December 29, 2021 which involved payments of future contingent consideration upon the achievement of certain financial performance targets and specific market price levels. Earn out liabilities are recorded for the estimated fair value of the contingent consideration on the merger date. The fair value of the contingent consideration is re-measured at each reporting period, and the change in fair value is recognized as either income or expense.
Change in fair value of warrant liabilities in the first quarter of 2022 recorded a gain of RMB4.5 million (US$710,000) as compared to a loss of RMB0.7 million in the same period of 2021. The Company’s warrants assumed from the SPAC acquisition that has complex terms, such as a clause in which the warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash upon a fundamental transaction that is considered outside of the control of management are considered to be a derivative that are recorded as a liability at fair value. The warrant derivative liability is adjusted to its fair value at the end of each reporting period, with the change being recorded as other expense or gain.
Change in fair value of investment in the first quarter of 2022 decreased by 97.3% to RMB0.7 million (US$112,000) from 26.2 million in the same period of 2021. Change in fair value of investment is primarily related to investment in marketable securities. In January 2021, the Company, through its wholly owned subsidiary, Scienjoy Inc., purchased from Cross Wealth Investment Holding Limited, an entity related to two directors of the Company, 606,061 ordinary shares of Goldenbridge Acquisition Limited (“Goldenbridge”) for an aggregated consideration of US$2 million. Goldenbridge was formed as a special purpose acquisition company. The investment was classified as investment in marketable security, which is adjusted to its fair value at the end of each reporting period, with the change being recorded as other expense or gain.
Net income in the first quarter of 2022 increased by 17.3% to RMB83.2 million (US$13.1 million) from RMB71.0 million in the same period of 2021.
Adjusted net income in the first quarter of 2022, decreased to RMB77.7 million (US$12.3 million) from RMB83.5 million in the same period of 2021.
Basic and diluted net income per ordinary share in the first quarter of 2022 were both RMB2.34(US$0.37). In comparison, basic and diluted net income per ordinary share in the same period of 2021 were both RMB2.32.
Adjusted basic and diluted net income per ordinary share in the first quarter of 2022 were both RMB2.18 (US$0.34). In comparison, adjusted basic and diluted net income per ordinary share in the same period of 2021 were both RMB2.73.
The Company adopted ASU 2016-02, Leases (Topic 842) on January 1, 2022. The guidance requires the lessee to record operating leases on the balance sheet with a right-of-use asset and corresponding liability for future payment obligations. The Company recognized right of use assets and lease liabilities of approximately RMB12.2 million and RMB11.7 million as of March 31, 2022.
As of March 31, 2022, the Company had cash and cash equivalents of RMB205.4 million (US$32.4 million) compared to RMB240.9 million as of December 31, 2021.
Business Outlook
The Company expects its total net revenues to be in the range of RMB 438 million to RMB 478 million in the second quarter of 2022. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change, particularly with respect to the potential impact of COVID-19 on the economy in China and other markets around the world.
Recent Developments
On December 29, 2021, the Company has entered into an equity acquisition framework agreement (the “Agreement”) to acquire 100% equity interest in Beijing Weiliantong Tech Co., Ltd (“Weiliantong”), which holds Hongle.tv, and 100% equity interest in Golden Shield Enterprises Limited (“Golden Shield“), which holds the NFT business for a total consideration of RMB280 million (approximately US$43.8 million). The objective of the Agreement is to support the Company’s strategic growth initiative of acquiring the top-tier online live streaming platform Hongle.tv and expanding the NFT business scope. The transaction was closed on January 1, 2022.
