Betta executive interpretation of the second quarter financial report: the past few quarters still maintain a high user stickiness

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Sina science and technology news, Beijing time on August 10 evening news, Betta today released the financial report of the second quarter of 2020 as of June 30, with total net revenue of RMB 2.508.2 billion (about USD 354.4 million), up 33.9% compared with RMB 1872.7 million in the same period of last year. Net profit was 319.3 million yuan (about US $45.1 million), compared with 23.2 million yuan in the same period of last year. Not in accordance with US GAAP, the net profit was 322.9 million yuan (about US $45.6 million), compared with 52.6 million yuan in the same period of last year.
After the release of the financial report, Betta CEO Chen Shaojie, chief strategy officer (CSO) Su Mingming, vice president and CFO Cao Hao attended the subsequent financial report conference call to interpret the key points of the financial report and answer analysts’ questions.
The following is the main content of the Q & a session:
Bank of America Merrill Lynch analyst: Good evening, management. Thank you for taking my question. Then my first question is about the matter that Tencent, which you just announced today, may promote the merger of Betta and tiger teeth. If you can, do the management have any views on this, can you share with us? Then the second question is also relevant. At present, we and Tencent in the game resources cooperation, what are the main cooperation methods and projects? Will there be any changes after that? thank you.
Cao Hao: I have answered this question. Just as our CEO mentioned, the board of directors has just received the proposal from Tencent. Now, it has not been able to evaluate the relevant details and make no decision. Please refer to our new news release and other thinking documents for details. The second question is Tencent’s proposal this time. We feel that Tencent has taken live game broadcasting as a more important strategic position, which is the best for our future development. Then we have been cooperating with Tencent’s gamers and other projects. In the early stage, we and Tencent have made a lot of new explorations in the construction of the middle platform. At present, we are exploring various new tasks and plans that may be implemented in the future with Tencent, the major shareholder. For example, the permanent entrance in the game database and so on. If these can be generally implemented, I think it can promote the number of mobile terminals and further improve the market penetration rate.
Citibank analyst: Good evening, management. Thank you for taking my question. I have a question for the client. We can see that in the second quarter, due to the resumption of work, there is a growth trend in terms of monthly living users (MAU) of mobile and PC in the second quarter. Would you like to ask the company from the internal data monitoring, our user behavior in the second quarter is different from before? thank you.
Chen Shaojie: let me answer this question. In the past few quarters, the trend of user behavior is basically the same, showing a relatively high user stickiness. For example, we also introduced that the resource retention rate of our average registered users is still above 75%. Compared with the data in the past few quarters, this data is relatively stable.
At the same time, we do continuous analysis and monitoring of our user behavior data. We find that with the increase of users’ years of using the platform, the average monthly viewing time of users will continue to increase, and the curve of this growth basically keeps the same state among different user groups joining the platform at each time point. This shows that with the passage of time, our users gradually precipitate into high-quality users and loyal platform fans on the platform, so on the whole, our user behavior trend has not changed.
Jefferies, an investment bank: Good evening. Thank you for accepting my questions. My question is about the revenue in the second quarter, especially in terms of the growth of live broadcast revenue. What are the main drivers?
Cao Hao: although in the second quarter, China gradually returned to work and school, and the overall traffic and number of paying users were facing some short-term pressure, but through long-term lean operation, the platform has cultivated users’ payment habits, and has continued to develop and optimize the user function mode with interaction as the core, and enhance the communication between the anchor and the user through different products, so as to adjust The willingness and frequency of users to pay have been changed. The total number of paying users reached 7.6 million, which was basically the same as that in the first quarter. However, in terms of up value, it increased by about 9.5% month on month, reaching 306 yuan.
Through the refined operation of the divisions, we have improved the liquidity efficiency of each division, especially the liquidity of some divisions continued to increase in this quarter. In addition, the platform strengthens the diversified construction of live content and improves the cashing efficiency and income contribution of non game partitions.
Through the close cooperation with the labor union and the application of a product specially aimed at improving the income of the middle waist anchor, the cashing efficiency of the middle waist anchor has been continuously increased, as well as the daily activities on a weekly basis. In combination with the large-scale marketing activities in the second quarter, it has continued to play a positive and stable role in increasing revenue.
Morgan Stanley analyst: thank the management for accepting my questions. Congratulations on the company’s excellent performance. My question is about the anchor of your new game. What’s the situation of anchor recruitment for new games such as wild fighting and other mobile games? Then how do you recruit these head anchors for each new game section?
Su Mingming: Thank you for answering. For our new games, there are two main ways to recruit anchors. The first is that our platform will first excavate and guide the high-quality anchors of similar game partitions to broadcast live in the new game partition. This can quickly ensure the content quality of the new game partition, so as to attract more new users through this high-quality content and gain the first opportunity 。

Secondly, our platform will recruit a large number of new anchors through the cooperative game trade union to ensure that there is enough content supply for the partition and give users more content selection. In the process of each anchor in the live broadcast of the new game, our operators will gradually explore potential excellent anchors and provide corresponding resource support to train them to become new partitions Head or waist anchor. Because the betta platform has a lot of high-quality anchor resources in the industry, and we have in-depth cooperation, even investment relationship with the industry’s leading game trade unions, so that we can continue to maintain a leading edge in the operation of new games. Therefore, based on the advantages mentioned just now, for most of the new games such as wild fighting or other online games in the past, we are in the leading position in the industry in terms of broadcast volume, user activity and other data. We will continue to play such an advantage to ensure that DF mobile games or other new games can continue to maintain the industry leading level when they are launched in the future.
J.P. Morgan: Good evening, management. Congratulations on the strong performance. I’d like to ask a quick question. What plans do we have or what are the driving forces for this content in the future? In addition, have we been exploring some new products and some realization modes? thank you.
Cao Hao: let me answer this question. As for the future content plan, in terms of games, we will continue to strengthen the League of heroes, including the investment in other E-sports games, and then pay special attention to the emergence of new popular games and explore more game categories suitable for live broadcast. For example, in the second quarter, we saw the game focusing on wild fighting. The data performance of this platform was good. We also continued to recruit anchors for each new game partition to ensure the supply of high-quality content and attract more users to our platform. Moreover, we will also focus on the creation of E-sports community content and the exploration of the extension field of short video in the game.
In the non game sector, we will continue to enrich the content ecology, providing food, life, show, outdoor, quadratic and other sectors to meet the different needs of users with different content.
In terms of innovation, we have been making some new attempts and transforming. For example, we launched voice chat. As a new business model, voice chat has maintained a steady growth trend since it was launched in October last year, which further improves the operation efficiency of the platform.
In the medium and long term, we are actively preparing for the deployment of cloud games. In addition to cloud game distribution, advertising business is also gradually mature, which will become one of our main cash generating points.
Huaxing capital analyst: Thank you, management. There are two numerical problems. One is that we see that the cost of bandwidth has increased a little in this quarter. What are the reasons for the increase? And then what do we think about this trend? The other is the sales expenses. We see that the sales expenses have also decreased a lot compared with the same period of the same period, but the month on month ratio has also increased. How should we look at this problem?
Chen Shaojie: let me first answer the question about the first bandwidth cost. In the second quarter, the bandwidth cost rose month on month. The reason for this is that, on the one hand, the competitions in the second quarter are actually more intensive than those in the first quarter. On the other hand, the participation of users of the platform has been further improved, and the platform has always been committed to improving the viewing experience of users, providing users with more choices of high-quality content in this quarter. It is expected that in the second half of this year, the bandwidth cost may maintain a slight growth trend on a month on month basis, mainly because the competitions in the third and fourth quarters will be more intensive.
The second problem is about the sales expenses. Our sales expenses mainly include some human costs of personnel, as well as other brand publicity such as promotion, online and offline activities and sponsorship of E-sports teams. There are several reasons for the month on month increase in our sales expenses in the second quarter. The first is because the event is gradually recovering, we have increased the investment in the publicity of the event, and we have also increased the sponsorship investment for some influential E-sports teams. In addition, we have increased investment in customer acquisition promotion in some channels. Because we are optimistic about the development of e-sports industry for a long time, we will continue to increase investment in E-sports related activities and team tactics. At the same time, with the upgrading of our products and the improvement of traffic conversion efficiency, we also plan to enhance channel promotion. Therefore, the absolute value of sales expenses in the future will maintain a stable growth, but we think that the proportion of sales expenses in revenue will continue to be optimized.
Tian Hao capital analyst: management, congratulations on the strong performance. I have a question about your going out to sea. In my speech, I have already talked about the situation in Japan. I wonder if we can give some more specific information, such as how many Maus we have in Japan and what is the payment rate? What are our head games in Japan? In the future, what kind of games will we launch to attract Japanese customers? Is there any other area under consideration besides going to Japan?
Chen Shaojie: Hello, thank you for your question. Let me answer it. As we mentioned earlier, we have made some overseas investment in Southeast Asia, Latin America and India. However, in these markets, we have not been particularly good in terms of payment and user habits, so we still maintain the continuous operation of these markets, but have reduced the corresponding investment.

But we attach great importance to the Japanese market. From the second quarter of last year, we started to set foot in the Japanese market. In the second quarter of this year, we continued to strengthen our investment in the Japanese market. Our product is called mildom in Japan. This product was launched at the end of September last year, and the current development trend is relatively good. According to the relevant data of the Japanese live game market survey report released in June by a third-party consulting agency, mildom’s data on the number of downloads, users and user activity of mobile terminals have been in the forefront of Japan’s live game market. And for other live game platforms in Japan, our mildom has a better growth trend. In the future, we will continue to expand the potential of the Japanese market and conduct in-depth cooperation with partners with local resources in Japan, hoping to generate large-scale profits in the Japanese market in the future.
The reason why we attach importance to the Japanese market is that Japan’s overall game market size is second only to that of the United States and China, and it has a strong tendency to consume mobile games and mobile game players. Compared with European and American countries, Japan’s mobile travel consumption capacity is about twice that of European and American countries. However, compared with the European and American countries, the development of the live game industry in Japan is at a very early stage, which is not consistent with its huge game market scale, which shows that the Japanese game live broadcasting industry still has great market potential, so we have penetrated into the Japanese market earlier, hoping to achieve better results.