Scienjoy Holding Corp (Form: 6-K, Received: 05/03/2021 07:35:29)

Total net revenues in fiscal year 2020 increased by 33.6% to RMB1,222.2 million (US$187.3 million) from RMB914.6 million in fiscal year 2019. This increase was driven by the Company’s increasing ability to attract and retain paying users and broadcasters to its platform. The number of paying users in fiscal year 2020 was 904,568, increasing by 30% from 697,475 in fiscal year 2019. The Company’s paying ratio in fiscal year 2020 improved to 2.7% from 2.1% in fiscal year 2019.

Cost of revenues in fiscal year 2020 increased by 33.2% to RMB959.9 million (US$147.1 million) from RMB720.6 million in fiscal year 2019. This increase was primarily attributable to a year-over-year increase of 39% in the Company’s revenue sharing fees and content costs in fiscal year 2020, which was in line with the growth of the Company’s live streaming operations in fiscal year 2020. Other costs in fiscal year 2020 increased by 70% year over year, which was consistent with the increase in revenue. User acquisition costs in fiscal year 2020 decreased by 8% year over year to RMB87.1 million (US$13.3) as a result of the Company’s ability to attract more viewers through its improved brand awareness and more quality content contributed by broadcasters.

Gross profit in fiscal year 2020 increased by 35.2% to RMB262.2 million (US$40.2 million) from RMB194.0 million in fiscal year 2019. Gross margin in fiscal year 2020, fiscal year 2019, and fiscal year 2018 was 21.5%, 21.2%, and 20.0%, respectively. As the Company continued to expand its brand influence and enhance the quality of its content offerings, it also improved its gross margin in turn.

Total operating expenses in fiscal year 2020 increased by 77.1% to RMB67.5 million (US$10.4 million) from RMB38.1 million in the fiscal year 2019.

Income from operations in fiscal year 2020 increased by 24.9% to RMB194.7 million (US$29.8 million) from RMB155.9 million in fiscal year 2019. This increase was due to a higher gross profit, partially offset by higher operating expenses. As a result, operating margin in fiscal year 2020 decreased to 15.9% from 17.0% in the fiscal year 2019.

Change in fair value of contingent consideration in fiscal year 2020 represented a loss of RMB14.1 million (U$$2.2 million) . Change in fair value of contingent consideration is derived from the Company’s reverse recapitalization with Wealthbridge Acquisition Limited on May 7, 2020, and acquisition of Beelive on August 10, 2020, which involved payments of future contingent consideration upon the achievement of certain financial performance targets and specific market price levels. Earn out liabilities are recorded for the estimated fair value of the contingent consideration on the merger date. The fair value of the contingent consideration is re-measured at each reporting period, and the change in fair value is recognized as either income or expense.

Change in fair value of warrant liabilities in fiscal 2020 amounted to RMB 3.9 million. The Company’s warrants assumed from SPAC acquisition that have complex terms, such as a clause in which the warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash upon a fundamental transaction that is considered outside of the control of management are considered to be a derivative that are recorded as a liability at fair value. The warrant derivative liability is adjusted to its fair value at the end of each reporting period, with the change being recorded as other expense or gain.

Net income in fiscal year 2020 increased by 17.5% to RMB176.1 million (US$27.0 million) from RMB149.9 million in fiscal year 2019.

Adjusted net income in fiscal year 2020, which excludes changes in fair value of contingent consideration, increased by 24.2% to RMB186.3 million (US$28.5 million) from RMB149.9 million in fiscal year 2019.

Basic and diluted net income per ordinary share in fiscal year 2020 were RMB7.56 (US$1.16) and RMB6.56 (US$1.01), respectively. In comparison, basic and diluted net income per ordinary share in fiscal year 2019 were RMB7.73 and RMB7.50, respectively.

Adjusted basic and diluted net income per ordinary share in fiscal year 2020 were RMB8.00 (US$1.23) and RMB6.94 (US$1.06), respectively. In comparison, adjusted basic and diluted net income per ordinary share in fiscal year 2019 were RMB7.73 and RMB7.50, respectively.

Pursuant to the Share Exchange Agreement dated as of October 28, 2019, entered into by and among Scienjoy, Scienjoy Inc., Lavacano Holding Limited (“Lavacano”), and WBY Entertainment Holding Ltd. (“WBY”, together with Lavacano, the “Sellers”), the Sellers will be entitled to receive 3,000,000 ordinary shares of the Company if Scienjoy’s net income before tax for the year ended December 31, 2020, is greater than or equal to either US$28,300,000 or RMB190,000,000 (the “Scienjoy 2020 Earnout Target”). Scienjoy had fulfilled the Scienjoy 2020 Earnout Target as of fiscal year end 2020.

Pursuant to the Equity Acquisition Framework Agreement dated as of August 10, 2020, Cosmic Soar Limited will be entitled to receive 540,960 ordinary shares of the Company since the Beelive 2020 Earnout Target had been fulfilled as of fiscal year end 2020.

The Company expects its total net revenues to be in the range of RMB383 million to RMB394 million in the first quarter of 2021, which represents a year-over-year increase of 77% to 82%. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change, particularly in respect to the potential impact of COVID-19 on the economy in China and other markets around the world.

In January 2021, the Company, through its wholly owned subsidiary, Scienjoy Inc., purchased from Cross Wealth Investment Holding Limited, an entity related to two directors of the Company, 606,061 ordinary shares of Goldenbridge Acquisition Limited (“Goldenbridge”) for an aggregated consideration of US$2,000,000. Goldenbridge was formed as a special purpose acquisition company.

On February 23, 2021, the Company entered into a common stock purchase agreement (the “Purchase Agreement”) and an escrow agreement with White Lion Capital LLC, a Nevada limited liability company (the “Investor”), which provide that, upon the terms and subject to the conditions and limitations set forth therein, the Investor is committed to purchase the Company’s ordinary shares, no par value, with an aggregate offering price of up to US$30,000,000 (“Commitment Amount”) from time to time during the Commitment Period, which starts on the date of the filing of the initial registration statement covering the resale of securities issued under the Purchase Agreement, and shall terminate on the earlier of (i) the date on which the Investor shall have purchased shares equal to the Commitment Amount, (ii) the six month anniversary of the filing of such initial registration statement, or (iii) the date on which the Purchase Agreement is terminated.

Founded in 2011, Scienjoy is a leading show live streaming video entertainment social platform in China. With approximately 250 million registered users, Scienjoy currently operates four primary online live streaming brands on five mobile apps: Showself, Lehai, Haixiu and Beelive International and Beelive Chinese (Mifeng), each using Scienjoy’s own mobile applications. Through this collection of online live streaming brands, Scienjoy has created a vibrant, interactive, and close community. Scienjoy operates a mobile live streaming business through which it provides live streaming entertainment from professional “broadcasters” to end-users, allowing for the operation of live social video communities. Using Scienjoy’s mobile applications, users can select broadcasters and enter real time video rooms to interact with them. In addition to real-time interactions, users can also view photos posted by broadcasters on their personal pages, leave comments, and engage in private chats with broadcasters when they are not streaming. In addition, users can also play fun and simple games by using virtual currencies within the video rooms while watching the live streaming of a broadcaster. For more information, please see http://ir.Scienjoy.com/.

Use of Non-GAAP Financial Measures

Adjusted net income is calculated as net income adjusted for change in fair value of contingent consideration and warrant liabilities. Adjusted basic and diluted net income per ordinary share is non-GAAP net income (loss) attributable to ordinary shareholders divided by weighted average number of ordinary shares used in the calculation of non-GAAP basic and diluted net income per ordinary share. The non-GAAP financial measures are presented to enhance investors’ overall understanding of the Company’s financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. Investors are encouraged to review the reconciliation of the historical non-GAAP financial measures to its most directly comparable GAAP financial measures. As non-GAAP financial measures have material limitations as analytical metrics and may not be calculated in the same manner by all companies, they may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measures as a substitute for, or superior to, such metrics in accordance with US GAAP.

For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of Non-GAAP Results” near the end of this release.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.5250 to US$1.00, the noon buying rate in effect on December 31, 2020, in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB amounts could have been, or could be, converted, realized or settled in U.S. dollars at that rate on December 31, 2020, or at any other rate.

Safe Harbor Statement

Certain statements made in this release are “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, are: the ability to manage growth; ability to identify and integrate other future acquisitions; ability to obtain additional financing in the future to fund capital expenditures; fluctuations in general economic and business conditions; costs or other factors adversely affecting the Company’s profitability; litigation involving patents, intellectual property, and other matters; potential changes in the legislative and regulatory environment; a pandemic or epidemic. The forward-looking statements contained in this release are also subject to other risks and uncertainties, including those more fully described in the Company’s filings with the Securities and Exchange Commission (“SEC”) from time to time. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Such information speaks only as of the date of this release.

Investor Relations Contact

Ray Chen
VP, Investor relations
Scienjoy Holding Corporation
+86-010-64428188
ray.chen@scienjoy.com

Sharon Zhou

ICR LLC.

+1 (212) 537-9254

scienjoy.ir@icrinc.com

	Scienjoy Holding Corporation

Date: May 3, 2021	By:	/s/ Xiaowu He
	Name:	Xiaowu He
	Title:	Chief Executive Officer

Exhibit No.		Description
99.1		Press Release, dated May 3, 2021.

	As of December 31,
	2019		2020			2020
	RMB		RMB			USD
ASSETS
Current assets
Cash and cash equivalents		137,351		224,768			34,447
Accounts receivable, net		120,110		228,214			34,975
Prepaid expenses and other current assets		11,557		13,753			2,108
Amounts due from related parties		7		7			1
Loan receivables - related parties		500		-			-
Total current assets		269,525		466,742			71,531

Property and equipment, net		736		1,356			208
Intangible assets, net		195		239,634			36,726
Goodwill		-		92,069			14,110
Long term investment		5,000		5,000			766
Long term deposits and other assets		2,761		1,382			212
Deferred IPO costs		1,307		-			-
Deferred tax assets		474		5,654			867
Total non-current assets		10,473		345,095			52,889
TOTAL ASSETS		279,998		811,837			124,420

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable		27,163		67,089			10,281
Accrued salary and employee benefits		8,727		18,141			2,780
Accrued expenses and other current liabilities		6,852		12,358			1,894
Current portion of contingent consideration – earn-out liability		-		92,183			14,128
Warrant liabilities		-		29,558			4,530
Income tax payable		8,435		8,581			1,315
Loan payables - related parties		5,525		-			-
Amounts due to related parties		8,482		-			-
Deferred revenue		40,288		49,567			7,596
Total current liabilities		105,472		277,477			42,524

Non-current liabilities
Deferred tax liabilities		-		59,729			9,154
Contingent consideration – earn-out liability		-		15,116			2,317
Total non-current liabilities		-		74,845			11,471
TOTAL LIABILITIES		105,472		352,322			53,995
Commitments and contingencies Shareholders’ equity*
Ordinary share, no par value, unlimited shares authorized, 19,400,000 and 27,037,302 shares issued and outstanding as of December 31, 2019 and 2020, respectively		9,664		(96,349	)		(14,766	)
Shares to be issued		-		200,100			30,667
Statutory reserves		12,059		18,352			2,813
Retained earnings		152,803		322,610			49,442
Accumulated other comprehensive income		-		14,802			2,269
Total shareholders’ equity		174,526		459,515			70,425
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		279,998		811,837			124,420

	For the years ended December 31,
	2018			2019			2020			2020
	RMB			RMB			RMB			USD
Live streaming - consumable virtual items revenue		716,561			884,385			1,187,431			181,982
Live streaming - time based virtual item revenue		26,432			26,812			29,596			4,536
Technical services		25			3,429			5,156			790
Total revenue		743,018			914,626			1,222,183			187,308

Cost of revenues		(594,084	)		(720,637	)		(959,939	)		(147,117	)

Gross profit		148,934			193,989			262,244			40,191

Sales and marketing expenses		(5,005	)		(3,804	)		(10,121	)		(1,551	)
General and administrative expenses		(16,265	)		(11,957	)		(33,889	)		(5,194	)
Research and development expenses		(10,957	)		(21,523	)		(31,780	)		(4,870	)
Provision (recovery) for doubtful accounts		(6,826	)		(854	)		8,253			1,265

Income from operations		109,881			155,851			194,707			29,841

Interest income		1,444			1,005			2,960			454
Other income (loss), net		31			(310	)		(4,702	)		(721	)
Foreign exchange gain (loss), net		11			(5	)		703			108
Change in fair value of warrant liabilities								3,904			597
Change in fair value of contingent consideration		-			-			(14,068	)		(2,156	)

Income before income taxes		111,367			156,541			183,504			28,123

Income tax expense		(4,627	)		(6,623	)		(7,404	)		(1,135	)

Net income		106,740			149,918			176,100			26,988

Other comprehensive income - foreign currency translation adjustment		-			-			14,802			2,269
Comprehensive income attributable to the Company’s shareholders		106,740			149,918			190,902			29,257

Weighted average number of shares *
Basic		19,400,000			19,400,000			23,287,706			23,287,706
Diluted		20,002,000			20,002,000			26,828,666			26,828,666

Earnings per share
Basic		5.50			7.73			7.56			1.16
Diluted		5.34			7.50			6.56			1.01

	●	Total net revenues increased by 33.6% to RMB1,222.2 million (US$187.3 million) from RMB914.6 million in fiscal year 2019, and the Company’s quarterly net revenues exceeded its guidance forecasts for the third and fourth quarters of fiscal year 2020.

	●	Gross profit was RMB262.2 million (US$40.2 million), representing a year-over-year increase of 35.2% in fiscal year 2020 as compared to a year-over-year increase of 30.3% in fiscal year 2019. Gross margin further improved to 21.5% in fiscal year 2020 from 21.2% in fiscal year 2019 and 20.0% in fiscal year 2018.

	●	Net income increased by 17.5% to RMB176.1 million (US$27.0 million) from RMB149.9 million in fiscal year 2019.

	●	Adjusted net income^[1] increased by 24.2% to RMB186.3 million (US$28.5 million) from RMB149.9 million in fiscal year 2019.

	●	Earnout targets for both Scienjoy and Beelive in fiscal year 2020 were fulfilled.

	●	Total paying users increased by 30% to 904,568 from 697,475 in fiscal year 2019.

	●	Total number of active broadcasters increased by 455.2% to 192,389 from 34,651 in fiscal year 2019.

	●	Sales and marketing expenses in fiscal year 2020 increased by 166.1% to RMB10.1 million (US$1.6 million) from RMB3.8 million in fiscal year 2019. This increase was mainly due to the additional promotional activities that the Company executed in fiscal year 2020 following an uptick in online user traffic as more users spent an increased amount of time online at home watching the Company’s live streaming content during the COVID-19 outbreak.

	●	General and administrative expenses in fiscal year 2020 increased by 183.4% to RMB33.9 million (US$5.2 million) from RMB12.0 million in fiscal year 2019. This increase was caused by higher employee benefits, increased headcounts, as well as additional consulting and professional fees that the Company incurred as a result of its listing as a public company.

	●	Research and development expenses in fiscal year 2020 increased by 47.7% to RMB31.8 million (US$4.9 million) from RMB21.5 million in fiscal year 2019. This increase was due to the increases in R&D headcount and benefits to relevant employees as the Company continued to strengthen its technological capabilities.

	For the years ended
	December 31,		December 31,		December 31,			December 31,
	2018		2019		2020			2020
	RMB		RMB		RMB			US$

Net income		106,740		149,918		176,100			26,988
Less:
Change in fair value of warrants liability		-		-		3,904			597
Change in fair value of contingent consideration		-		-		(14,068	)		(2,156	)
Adjusted net income		106,740		149,918		186,264			28,547

Adjusted net income per ordinary share
Basic		5.50		7.73		8.00			1.23
Diluted		5.34		7.50		6.94			1.06