Revenue returned to high growth in the first half of the year, and adjusted losses narrowed sharply. In the first half of 2023, the company achieved revenue of 1,210 million yuan, an increase of 34.5% over the previous year, of which subscription solution revenue was about 706 million yuan, an increase of 21.4% over the previous year; revenue from merchant solutions was about 504 million yuan, an increase of 58.3% over the previous year. The company achieved gross profit of about 816 million yuan, an increase of 36.6% over the previous year, and overall gross margin rebounded.

The adjusted net loss was approximately $254 million, which is 55.2% narrower than the same period last year. This is mainly because in an environment of macroeconomic recovery, subscription and merchant solution revenue has resumed growth, gross margin has stabilized, and in particular, demand for merchant solution advertising has rebounded markedly.

Subscription Solution: Continue to adhere to the three strategies of promoting mass customization, ecology and internationalization. In the first half of 2023, in terms of mass customization, the company's smart retail revenue reached 312 million yuan, an increase of 32% over the previous year.

The company launched an integrated omni-channel user operation solution covering online and offline enterprise, public domain and private domain, and expansion of new and repurchases; in addition, the company officially launched the “Make every effort” plan to promote an increase in the unit price for large customers.

In terms of ecology, the company launched Weimob WAI, an AI application product, greatly enhanced its technical capabilities for automatic content creation, and continued to promote the “AI+SaaS” layout. In the first half of 2023, the company's Weimob Cloud Platform developed and released 39 new cloud market applications and services, and added 9 high-quality ecological partners.

In terms of internationalization, the company's precision marketing business was upgraded to “WeChat Marketing,” and WeUnion Marketing has reached cooperation with AppleAds, Google Ads and other media.

Merchant Solution: The precision marketing business was upgraded to “micro-union marketing” to further seize market opportunities. In the first half of 2023, with economic recovery and consumption recovery, the company achieved a comprehensive upgrade of “media resources, service links, and digital technology” based on the TSO full-link marketing strategy. In terms of media resource expansion, the company officially became the only authorized service provider for the automotive industry in East China Zone 1 in the Tencent advertising area. In terms of in-depth service links, the company's WeChat video channel provides brands with one-stop solutions such as live streaming, global shopping, talent matching, and operation and running. Currently, it has served more than 5,000 enterprises.

Actively explore the video account ecosystem and fully embrace the WOS ecosystem. In the first half of 2023, the company continued to strengthen the integrated experience of native products and video accounts and user operation capacity building to help enterprises obtain video account business growth dividends. At present, well-known brands such as Lele Tea, Hot Air, and Belle have reached in-depth cooperation with the Weimob video account business, and leading brands in the industry, such as Lenovo, Mengniu Chunzhen, Anta, and Sankeshu, which have cooperated with Weimeng Video, have all achieved rapid growth in the video account business. The company itself has also gained an absolute advantage in Tencent's video advertising business. At the same time, the company fully embraces the WOS new business operating system, improves the digital business infrastructure, establishes an open ecosystem to attract partners, respond quickly and meet the diverse needs of customers, and enhances overall R&D efficiency.

Profit forecasting and valuation analysis. We believe that the company's subscription solution, or SaaS business, is still in a period of rapid growth, and the subscription solution is still expected to maintain a revenue growth rate of 25-30% in 2023-2025. We believe that in terms of marketing business, in the future, the company will gradually shift its business focus to merchant solutions to provide customers with accurate marketing services, and the digital media business revenue will be zero.

Risk warning. There is a risk of loss of SaaS business customers, and traffic costs are increasing.