Description of the event
The company disclosed its 2023 results. In 2023, the company achieved revenue of 3.389 billion yuan (-1.2% YoY), achieved a net loss of 83 million yuan to mother, and an adjusted net loss of 34 million yuan to mother. Among them, in the second half of 2023, the company achieved revenue of 1,636 billion yuan (-10.9% YoY), achieved a net loss of 173 million yuan to mother, and an adjusted net loss of 147 million yuan to mother.
Incident comments
Game business: The performance of main games has declined, and self-developed products have entered the launch cycle one after another
1) Affected by factors such as the external environment and the launch of several competitors, the MAU and MPU of the company's main product “Sausage Party” declined in 2023, leading to a decline in overall game revenue. Game revenue in 2023 was -14.7% YoY to $2,092 million, of which 23H2 game revenue was -29.0% YoY to $942 million. The average number of monthly paying players in 2023 was -16.9% year-on-year, and the share of paying players increased slightly by 0.8 pct to 10.5%; in the second half of 2023, the average number of monthly paying players increased by -24.2% to 1.225 million, and the share of paying players increased 1.1 pct to 10.5%. In 2023, the company launched new games such as “Firepower Soda”, “Torchlight: Infinite”, and “Sword of the Suzuran”, which is expected to continue to provide potential for future game revenue growth.
2) Due to the decline in sales of the relatively low-profit agency product “Sausage Party”, the share of self-developed game revenue increased, and the company's gross margin of the game business in 2023 was +1.2pct year-on-year to 46.7%.
TapTap: Benefiting from the recovery in demand for game delivery, commercial potential continues to be unleashed
Due to the increase in the number of new games launched in the Chinese market in 2023, demand from players and advertisers picked up, and the increase in non-advertising revenue such as cloud play, the TapTap platform's revenue in 2023 was +32.6% year-on-year to 1.297 billion, of which revenue in the second half of the year was +36.0% to 694 million. Or due to promotion cost control, TapTap China's MAU was -13.6% year-on-year to 35.81 million. The company implemented several strategy adjustments to TapTap in 23 years, and TapTap China users regained growth. In the second half of 2023, TapTap China's MAU increased to 37.65 million month-on-month, and the year-on-year decline also narrowed significantly. The 2023Q4TapTap China MAU has re-entered the year-on-year growth range.
Self-research strength and gradual verification of community commercial value. Focus on key new games and TapTap's subsequent performance in 2024? 1) The company continues to promote the optimization and adjustment of the R&D system. The cost side has improved, and the trend of cost reduction and efficiency will continue in 2023. At the end of 2023, the company's game development personnel decreased by 12.6% year-on-year to 746 people. In 2023, the sales expense ratio was -1.4pct to 25.5% year-on-year, and the R&D expense ratio was -7.5pct to 30.0% year-on-year. Furthermore, the increase in revenue share of the high-margin TapTap business also contributed to the company's overall gross margin of +7.5pct to 61.0% in 2023.
2) The company's self-developed placement game “Let's Go Muffin” was launched in Hong Kong, Macao and Taiwan in January 2024, and has been on the top of the Apple iOS game bestseller list in the three regions several times, and may be launched in mainland China and overseas markets one after another starting in Q2. Furthermore, as of 2023.12.31, the company still has 4 games in the development stage. The key self-developed projects “Heartwarming Town” and “Ether Restart Day” were approved in December 2023 and January 2024 respectively, and the self-developed products have entered the launch cycle one after another.
Risk warning
1. Product version number approval, launch progress, turnover performance and user growth fall short of expected risks; 2. Industry regulatory risks.