Meitu, Inc. ("Meitu" or the "Company"), has announced its audited consolidated results for the year ended December 31, 2019. Highlights for the period are as follows:

Revenues (excluding discontinued operations) reached RMB977.9 million, growing 3.2% year over year. In particular, revenue growth from online advertising remained strong and grew 21.1% year over year to RMB751.9 million in 2019.

Gross profit (excluding discontinued operations) reached RMB699.3 million and grew 42.1% year over year. Gross margin also expanded to 71.5% from 51.9% due to growing proportion of higher-margin businesses in the revenue mix such as premium subscriptions and online advertising. In addition, cost of revenues, such as bandwidth costs and content monitoring fees declined year over year due to the implementation of a cost optimization program that focused on efficiency enhancement.

Adjusted net loss from continuing operations attributable to owners of the Company for 2019 reduced significantly by 77.7% to RMB190.8 million, with a positive adjusted net profit in the fourth quarter of 2019.

Meitu app's user engagement continued to grow, with social users' average daily time spent on the app reaching 13.6 minutes per day in the second half year of 2019, as compared to 12.5 minutes in the first half year of 2019. During the 2020 Chinese New Year, daily photos and video views in Meitu app surged by 53% year over year, thanks to the Company's continuous effort to transform toward social engagement.

Continued to optimize strategic transformation and strived to let everyone become beautiful easily

In 2019, Meitu continued to refine its strategy around social and beauty, and have accordingly established the mission "to let everyone become beautiful easily" and the vision "to empower the beauty industry and make beauty more accessible to our users". In particular, Meitu has launched a number of tailored advertising products that allow brand advertisers to better engage with consumers. In addition, the Company has launched a professional-grade skin analyzer and joined hands with beauty industry practitioners to empower consumers to make smarter skin care decisions through a better understanding of their skin conditions. During the period, the Company has also partnered with Shanghai Skin Disease Hospital, a leading dermatology hospital and one of the earliest recipients of an Internet hospital license in Shanghai, to provide services that enable remote dermatologist consultation and medicine delivery directly through the Company's photo app.

During the period, the Company strived to make the content on the Meitu app more geared towards beauty-related content, such as cosmetic product reviews, makeup tutorials, fashion, health and wellness. Meanwhile, the Company continued to grow user engagement on its social app Meitu, with social users' average daily time spent on the app reaching 13.6 minutes in the second half of 2019. As the Company further reinforced its platform's positioning in beauty-related content in late 2019, it has seen encouraging improvement in the number of high-quality content creators in early 2020. After the completion of the acquisition of approximately 57.09% effective equity interest of Dajie Net Investment Holdings Ltd. ("Dajie Net"), the two companies have started working closely to further drive Meitu app's social ecosystem.

Online advertising achieved remarkable performance, achieving significant growth in both gross profits and gross profit margins

In light of its strategy upgrade in 2019, the Company adjusted the way it presents revenue, which aligns with its key business focus. Meitu generates revenues from (i) online advertising services; (ii) premium subscription services and in-app purchases; (iii) Internet value-added services and (iv) others.

Online advertising

Despite the macro uncertainty and industry headwinds in 2019, revenue from online advertising increased by 21.1% year on year to RMB751.9 million, representing 76.9% of the Company's total revenue. The increase was mainly due to an increase in average revenue per domestic key account advertiser, as the Company increased its focus on brand advertisers with big budgets and created comprehensive marketing solutions geared towards their specific needs. In 2019, the Company strived to enrich the social interactive features of Meitu app. The Company achieved significant improvements through its initiatives on product and operation, and gained an increase in client recognition for its marketing value. With steady traffic and growing user engagements, the Company continued to ramp up its inventories and introduce new ads formats (such as hotshot and Topview) to retain client interest. In addition to display ads, programmatic ads also achieved healthy growth, due to enhancements of eCPM (earnings per 1,000 ads impressions) and filling rate resulting from auction algorithm optimization. Looking ahead, the Company will continue to improve its advertising technology to enhance overall ads performance.

In the face of increasing competition in the social media platform industry, the Company continues to enhance its advantages to differentiate with a focus on beauty-related content offerings for the female mass market to create and share their beauty tips. This strategic focus also aligns with Meitu's strengths in the fast-moving consumer goods and luxury brands.

Premium subscription services and in-app purchases

Revenue from premium subscription services and in-app purchases increased significantly by 518.1% year on year to RMB86.0 million, and expanded to 8.8% as a percentage of total revenue. The Company introduced a new business model for its overseas app (BeautyPlus and AirBrush) to obtain the massive and continuous growing global user base. The premium subscription business was launched in the second half of 2018 and achieved remarkable performance in the first half of 2019. It maintained strong growth momentum in the second half of 2019 and recorded more than double in revenue as compared to the first half of the year. Such an increase was mainly benefitted from favorable demographic factors (i.e. overseas users are more willing to pay), enhanced brand recognition, targeted product localization and effective go-to-market strategy. Premium subscriptions will remain one of Meitu's core monetization efforts moving forward, as the Company sees untapped growth potential in both average revenue per paying user and the number of paying users.

Internet value-added services ("IVAS") and others

IVAS primarily consist of a variety of mobile value-added services offerings. For example, the Company leverages its platform and user base to promote mobile entertainment and related services, such as casual mobile games, online literature, musical and video services for third-party partners, and shares revenues.  The current IVAS revenue does not include revenue from the "showroom live streaming" business, which took up a significant share of "Internet Value Added Services and others" revenue under the Company's previous business categorisation. The Company will continue to use live streaming in beauty-related content offerings and to commercialize. However, "showroom live streaming" does not align with the Company's adjusted strategic focus and is now categorised as part of "others" business. In 2019, revenue from IVAS increased by 21.0% year over year to RMB45.6 million from RMB37.7 million in 2018, benefitted from the Company's continued effort to enrich service offerings and to enhance distribution efficiency using a recommendation algorithm.

"Others" business includes: 1) innovation businesses that are in a nascent stage with marginal revenue contributions, such as MeituEve, a professional-grade skin analyzer and Meitu Skin Doctor, a remote dermatologist consultation servicing platform; and 2) businesses that do not align with the Company's future strategic focus, for example, showroom live streaming. In addition, revenues from providing imaging technology and brand licensing business to third-party smartphone manufacturers were included in this category, albeit its insignificant scale. In 2019, revenue from others decreased by 65.7% year over year to RMB94.4 million from RMB275.2 million in 2018, mainly due to the decline of live streaming business amid increasingly fierce competition.

 Continue to deepen strategy adjustment and strive to explore new growth opportunities in 2020

Looking ahead to 2020, the Company will focus on building a unique position in the beauty industry by providing a variety of beauty-related offerings and continue to improve commercialization. In the near term, the global public health situation may significantly affect to the Company's profitability. Certain brand advertisers have become more cautious with their advertising budgets due to the Novel Coronavirus (COVID-19) outbreak in China in early 2020. The Company is aware of such negative impact on its advertising business. On the other hand, as people may continue to avoid going out, the Company will continue to explore new growth opportunities and new initiatives such as the remote dermatologist consultation service, which will be launched in the second quarter of this year. Given the macroeconomic uncertainty clouded by the outbreak of COVID-19, the Company will continue to be prudent in cost management, while testing different business models to develop the long-term vision of creating a "beauty ecosystem".

Meitu's Chief Financial Officer Gary Ngan said, "In 2019, the Company strived to optimize business structure, to achieve the new vision of ‘empowering the beauty industry and make beauty more accessible to our users'. Our strategy adjustment started to bear fruit in 2019 and we recorded a positive adjusted net profit in the fourth quarter of 2019. Given the global uncertainties, it is too early to forecast our profitability for this year. However, we will remain very vigilant and flexible, and strive to create long-term value for shareholders."