Earnings Transcript for GSMG - Q4 Fiscal Year 2020

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Glory Star New Media Group Holdings Limited's Full Year 2020 Earnings Conference Call. . After the management's prepared remarks, we will have a question-and-answer session. Today's conference call is being recorded, and a webcast replay will be available at Glory Star's IR website. Now I'd like to hand the conference over to your speaker host today, Mr. Yida Ye, Glory Star's Executive Assistant. Please go ahead, Mr. Ye.

Yida Ye: Thank you, Mike. Hello, everyone, and welcome to our earnings conference call for the full year of 2020. Our financial and operating results were released earlier and are currently available on both our IR website at ir.yaoshixinghui.com or ir.gsmg.co and Newswire.

Bing Zhang: Hello, everyone, and thank you for joining Glory Star's Earnings Call for the Full Year of 2020. Despite the outbreak of COVID-19 and macroeconomic challenges, the government's effective control of epidemic has led to a strong economic recovery in China. As a result of the macroeconomic turnaround and our business resiliency, the sum total of the second, third and fourth quarter revenues in 2020 were higher than our total revenues for the full year of 2019. More broadly, our total revenues in 2020 increased by 88.2% year-over-year to USD 123.8 million, where net income attributable to Glory Star in 2020 reached a record high, increasing by 11.2% year-over-year to USD 29.3 million. We achieved that outperformance by executing our visionary strategy during the period. For example, we developed a series of products in-house to further extend their use cases and refined our user experiences. We also accelerate our efforts to forge more partnerships with leading platforms to further enhance our use to value proposition and diversify our revenue stream. As such efforts and as of year-end, our CHEERS App downloads have increased by 98% year-over-year to 169 million. Daily average users had increased by 180% year-over-year to 5.4 million. And our gross merchandise value had increased by 581% year-over-year to USD 132 million. Going forward, to fuel our growth momentum, we will continue to refine user experiences, expand product use cases and cover new consumption through quality content offerings and enhance user stickiness by introducing more proprietary technology products and establishing more collaboration with other leading businesses. Now turning to our business update. During 2020, to broaden the range of our product use cases, we continued to invest in research and development, upgrade our products and enrich our catalog of high-quality content offering. As such, we unlocked a wider variety of product use cases for our users and thus enabled them to more easily access our premium shopping, live streaming, media and game content.

Perry Lu: All right. It's my turn now. And thank you, Mr. Zhang, and hello, everyone. This is Perry. I'm the Chief Financial Officer of the company. Before explaining our financial details, please note, our numbers are in U.S. dollar terms unless otherwise stated. Despite the macro challenges, we achieved very strong results in 2020 during the year. As a result of China's economic recovery, our diversified business segment, leading R&D capabilities and the active address on consumer taste, we generate substantial growth in both our top line and bottom line with increased financial capability from our recent equity offering. We are confident we'll continue to capitalize on the emerging opportunities to further promote our rapid development in the post-pandemic world. In the full year of 2020, we grew our revenue by 88.2% year-over-year to $123.8 million. By breaking these numbers down, revenues from our CHEERS App, the Internet business, increased by 195.3% year-over-year to $83.6 million, accounting for 67.5% of our total revenues. Importantly, revenue contribution from our Internet business ramped up significantly in the period mainly due to our continuous optimization of our online digital media and entertainment platform. Meanwhile, our Media business revenue increased by 7.2% year-over-year to $40.2 million. That is accounting for the remaining 32.5% of our total revenues. Just to break down our revenues further, our advertising revenue increased by 116.3% to $104.7 million in the full year of 2020 as we continued to improve our content offering on our CHEERS platform. That is including short videos, live shows, online games, network dramas and many others, which attract a significant number of active users and advertisers, in turn. At the same time, CHEERS e-Mall market service revenue grew by 126.4% year-over-year to $1.5 million in the full year of 2020. That is mostly because we continue to optimize our service and merchandise offering of our e-Mall platform through cooperation with many business customers as the pandemic led to the restriction of outdoor activities, we meet strong demand for online entertainment and shopping. We also grew our customized content production revenue at 12.1% year-over-year to $10.2 million in the full year of 2020 as our shopping and streaming revenue continues to gain traction. Our cost of revenue increased by 20.6% year-over-year to $38.5 million. That is mainly in line with increase in our revenue and partially offset by improved cost management.

Operator: . And the first question we have will come from Kwai Wu , Investor.

Unidentified Analyst: I have a question for you. What is the company's strategic vision for its business model? Will the company's main business model be more focused on e-commerce or Internet media in the future?

Bing Zhang: All right. To extend our coverage beyond our core mission of enriching people's life, we provide vibrant content and premium products and services that span across the online entertainment industry, that expand our product use cases and better satisfy users' demand for diverse and personalized entertainment solutions and content consumption.

Bing Zhang: First of all, as new entertainment company, we not only have strong Internet product and innovation capabilities, we also have top-tier content production personnel and equipment. We will continue to strengthen our high-quality lifestyle content offerings in the professionally generated content area. In 2021, we will open the platform to all users to create more content, varying from professionally generated content to a mix of professionally generated content, professionally -- professional-user-generated content and user-generated content. We will accelerate the expansion of our content offerings, enrich our product use cases and improve our user experiences, participation and belonging. Secondly, in terms of business focus, we will focus on high-quality, lifestyle-related areas. We will provide the differentiated products in all lifestyle-related business verticals and enhance our leadership position in this area. Furthermore, in terms of corporate strategy, we will continue to improve our CHEERS e-Mall product matrix, enhance our strategic cooperation with Taobao and JD.com as well as enrich our private label. We will also extend our businesses in lower-tier cities, optimize our connections with SaaS service providers and other third-party service providers and accelerate the launch of Cheer Chat, Cheer Pay, in-vehicle interactive audio and video content applications and other products in the media and e-commerce sectors. Last but not least, we will continue to enhance our competitive advantage in R&D, seek collaboration opportunities with the research institute of other companies and with universities and build a comprehensive headquarters with research, innovation and education all in the same place. As of now, for example, we are in the process of building our Cheers Academy in Wuxi. Okay. That concludes our answers.

Operator: Very well, thank you, sir. And as there are no further questions at this time, I would like to hand the conference back over to the management team for any closing remarks. Gentlemen?

Yida Ye: Okay. Thank you again for joining our call. If you have any further questions, please feel free to contact us or request through our IR website or you send an e-mail. We look forward to speaking with everyone in our next earnings call. Have a good one.

Perry Lu: Thank you.

Operator: And we thank everyone for your time also. The conference call has now concluded. At this time, you may disconnect your lines. Thank you, take care, and have a great day, everyone.