The company released its 2024 three-quarter report: revenue for the first three quarters was 0.509 billion yuan, up 15.1% year on year; net profit to mother was 0.039 billion yuan, turning a year-on-year loss into profit; after deducting non-net profit of -0.096 billion yuan, the loss narrowed year over year. Among them, 24Q3 revenue was 0.172 billion yuan, up 9.7% year on year; net profit to mother was -0.024 billion yuan, loss increased year on year; after deducting non-net profit - -0.032 billion yuan, loss increased year on year. Third-quarter results were in line with expectations.

Accelerate the transition to subscriptions, and core metrics continue to grow rapidly. The company's overall subscription revenue for the first three quarters was 0.245 billion yuan, +65.8% year-on-year, accounting for 48.1%; of these, 24Q3 subscription revenue was 0.09 billion yuan, +62.4% year-on-year, accounting for more than half, reaching 52.5%. Subscription ARR increased to 0.366 billion yuan at the end of 24Q3, +72.0% year over year. Meanwhile, the subscription renewal rate remained high at 93%. The three-quarter report data once again shows that the company's subscription transformation has achieved remarkable results. In 24Q3, due to certain fluctuations in revenue contributed by core PC agents, the channel revenue growth rate declined and dragged down permanent license revenue. We expect the revenue side to continue to accelerate as the share of subsequent subscriptions increases. In 24Q3, the company's sales/management/R&D expenses increased by 7.7%/22.2%/14.9% respectively. It is expected that the subsequent cost growth rate will slow down, opening up space for profit release.

The global layout is smooth. Looking at the subregions, the company's revenue share in North America/Europe/Asia Pacific/Mainland China in the first three quarters was 55%/25%/7%/9%, respectively. Among them, the two major regional markets of Europe and Asia Pacific are still growing rapidly; the North American market has been affected by both a large revenue base and subscription transformation, and the growth rate has slowed. Overall, the company is continuously improving its reach to global end users by building a strict channel network.

AI+PDF capabilities are deeply integrated, and separate pricing for AI assistants has been completed. The company further incorporates the company's unique layout document recognition capabilities on the basis of document summarization, content rewriting, text translation, etc. that can be achieved in a large model, improving the interaction accuracy and interactive experience between AI and PDF document content, and implementing more PDF functions based on AI instructions.

Currently, the company has launched a paid subscription service for AI Assistant overseas. The subscription price is 49.99 US dollars/year, which is expected to bring new support to the company's performance.

Maintaining a “buy” rating: We maintained the company's 2024-2026 revenue forecast of 0.705/0.852/1.064 billion yuan, up 15.4%/20.9%/25.0% year-on-year respectively; maintaining the net profit forecast value of -0.23/+0.45/+0.119 billion yuan. Since it is still in the subscription transformation period, both apparent revenue and profit are affected. It is recommended to focus on core indicators such as subscription revenue share and ARR; it is expected that after the company initially reaches the transformation goals in 2025, apparent revenue and profit will begin to be released at an accelerated pace. Maintain a “buy” rating.

Risk warning: no profit in the short term; Adobe exerts greater competitive pressure; domestic business expansion results fall short of expectations; changes in the overseas business environment. On June 29, the listed company disclosed a response notice to the Shanghai Stock Exchange's “Information Disclosure and Supervision Work Letter on the 2023 Annual Report of Fujian Foxit Software Development Co., Ltd.”, prompting attention.