IPO Preview | Can Himalaya successfully break through the "profit and loss line" and make an impact on the Hong Kong stock market this time?

After several attempts, Ximalaya has once again submitted its listing application to the Hong Kong Stock Exchange.

As one of the earliest online audio platforms, according to data from Torch Insight, Ximalaya holds a 25% market share in the online audio industry in 2023 based on online audio revenue. It is the largest online audio platform in China.

If this listing is successful, Ximalaya is expected to become the "first online audio stock" in the Hong Kong stock market, with Goldman Sachs, Morgan Stanley, and CICC as joint sponsors.

Currently, in the "tri-polar" structure of the online audio market in China, can Ximalaya take the lead?

Diversified Revenue Sources in the Online Audio Industry "Ceiling"

Founded in 2012 by Yu Jianjun and Chen Yuxin, Ximalaya launched the online audio app "Ximalaya" in 2013. It mainly provides audio content through professional-generated content (PGC), professional user-generated content (PUGC), and user-generated content (UGC), covering audiobooks, entertainment audio, podcasts, premium knowledge sharing, and live broadcasts.

Since its establishment, Ximalaya has undergone 12 rounds of financing, including angel rounds to Series D domestically, and Series E1 to E4 rounds overseas, with a total financing amount of nearly 10 billion RMB. In 2021, Ximalaya submitted a prospectus to the U.S. SEC, withdrew its listing application later, and is now shifting to the Hong Kong stock market.

In terms of shareholders, before the IPO, Yu Jianjun held 10.61% of the shares, and Chen Yuxin held 10.02%. Among external investors, Xingwang Investment holds 10.72% of Ximalaya's shares, ZhiXin Capital holds 9.94%, Tencent, Xiaomi, and institutions under Yuewen Group hold 5.33%, 3.38%, and 3.05% respectively.

Currently, China's online audio market has formed a "tri-polar" structure consisting of Ximalaya, Lizhi (SOGP.US), and Qingting FM.

As a leader in the online audio industry, Ximalaya broke through 50 million users in 2014. According to Torch Insight research, Ximalaya has become the most favored online audio platform by users. By 2023, Ximalaya's average monthly active users have climbed to 302.6 million, including 133 million mobile users and 169.6 million users listening to audio content through the Internet of Things and other third-party platforms.

In terms of user growth, the prospectus shows that from 2021 to 2023, Ximalaya's average monthly active users were 267 million, 291 million, and 302 million respectively. In terms of content, the company has introduced a PGC+PUGC+UGC model to cover a comprehensive and balanced ecological content system from head IP to long-tail content, forming the most comprehensive audio content ecosystem in China to ensure its content advantage.

As of the end of 2023, the platform has approximately 488 million audio content items with a total duration of about 3.6 billion minutes. In 2023, the platform had about 2.9 million active content creators, forming the largest audio content library and the largest number of audio content creators With a massive user base and content, Ximalaya continues to advance in market share. In 2023, based on online audio revenue, Ximalaya's market share in the Chinese online audio industry is 25%.

From 2021 to 2023, Ximalaya achieved revenues of 58.6 billion yuan, 60.6 billion yuan, and 61.6 billion yuan respectively. The year-over-year revenue growth rates for 2022 and 2023 were 3.49% and 1.68% respectively, with gross profit margins of 54%, 51.9%, and 56.3% respectively.

Unlike Lizhi, which overly relies on audio entertainment for commercialization, Ximalaya has a more diversified monetization model. Currently, Ximalaya's revenue sources are mainly divided into four categories: subscriptions, advertising, live broadcasting, and other innovative products and services (such as selling IoT devices, IP derivative cultural and creative products), contributing revenue proportions of 51.7%, 23.1%, 18.4%, and 6.8% in 2023. Whether in terms of market share or revenue balance, the company maintains a leading position in the industry.

Crossing the "profit and loss line," embracing innovative businesses such as podcasts and artificial intelligence

Compared to previous attempts, the biggest difference in Ximalaya's recent listing on the Hong Kong Stock Exchange is the turnaround in profitability.

According to the Securities Times, from 2021 to 2023, Ximalaya's net profits were approximately -5.106 billion yuan, 3.7 billion yuan, and 3.736 billion yuan respectively. In 2021, the company's adjusted net profit was 718 million yuan, narrowing to 296 million yuan in 2022, and achieving a full-year adjusted net profit of 224 million yuan in 2023, officially crossing the "profit and loss line."

The significant improvement in the company's profitability is mainly attributed to new progress in cost reduction and efficiency improvement. In 2023, Ximalaya achieved operating costs of 26.9 billion yuan, a 7.71% year-on-year decrease, with the proportion of total revenue also decreasing from 48.1% to 43.7%. During the same period, research and development expenses, sales and marketing expenses were 9.3 billion yuan and 20.7 billion yuan respectively, decreasing by 0.75% and 2.2% year-on-year compared to 2022.

The company attributes the overall improvement in profitability in 2023 to the expansion of the user base, enhanced monetization capabilities, and the improvement in gross profit margin and operational efficiency brought about by optimizing cost structure.

Currently, online audio content in China still faces fierce competition for users' time and spending, and beyond the online audio industry, the company also needs to compete with other major internet companies that provide music, literature, games, videos, and other forms of online content.

In response, Ximalaya has chosen not to sit idly by but to embrace AI large models, planning to strengthen AI infrastructure and focus on audio AI large models to enhance the company's diversified, personalized, and emotional service approach while reducing production costs.

It is understood that in recent years, Ximalaya has been continuously seeking innovation, especially in the podcast and artificial intelligence fields. Podcasts have become a major focus of development in the past two years, although commercialization will take some time and face market competition In the field of audio AI, although the application of AI technology is currently mainly focused on the tool usage level and has not brought profound or structural changes to companies, research and exploration are still ongoing.

It is understood that Ximalaya has applied automatic speech recognition (ASR) technology, text-to-speech (TTS) technology, etc., in content production. For example, through TTS technology, Ximalaya has used AI-synthesized voice of the late master storyteller Shan Tianfang in audiobook production, reinterpreting works such as "Twelve Money Dart" and "Swordsmen of Mount Shu" in the style of Shan Tianfang's storytelling.

In addition, Ximalaya also plans to continue enriching its content offerings, developing audio adaptation programs, radio dramas, and other innovative content; at the same time, the company plans to improve product and service quality according to user needs to reach a wide range of users of different age groups.

In the AI era, the focus of internet companies has begun to shift. With Ximalaya's listing in Hong Kong this time, the raised funds will also be used to enhance content and empower content creators, strengthen online audio operation efficiency around next-generation technology, AI, and big data capabilities, and break through with new technologies.

For Ximalaya, the company has just crossed the breakeven line, how to further achieve innovative business implementation in the future, achieve sustainable revenue growth, and open up commercial space? Further in-depth exploration and accumulation are still needed