Dismantling The 733 Page Prospectus Of Fast Hand: A Step Ahead Of Tremolo Is An Amazing Jump Of GIF Fast To Short Video Platform

In the past two or three years, short video is undoubtedly the most concerned area of the Internet industry. After several rounds of fighting, the field has formed a pattern of warble tone and fast hand.

After years of running, the outside world is also very curious about the development of short video platform. And recently, Shuo Yin and fast hand have come out of the market news, about the "short video first share" of the fight has also lifted the appetite of the outside world.

Today, fast forward is one step ahead. On the evening of November 5, it submitted its application for offering to the Hong Kong stock exchange. With the disclosure of various data, nine years after its establishment, GIF has become a fast hand of the short video giant, which has finally revealed the mystery.

Through the 733 page prospectus, the reporter of 21st century economic report has sorted out the core information of fast hand in the aspects of enterprise development, finance, users and shareholder financing.

Among them, about the timing of the listing of fast track, some analysts say that it is to preempt the chattering sound, but from the content of the prospectus, perhaps the pressure from shareholders is the key to promote the listing of express.

According to the prospectus, as of June 30 and September 30, 2020, fasthand recorded two huge current liabilities of RMB 106.3 billion and RMB 122.8 billion respectively. These two current liabilities are mainly due to the redemption right of convertible redeemable preferred shares.

It is understood that as the holders of such preferred shares can ask express to redeem the preferred shares within one year from June 30, 2020 and September 30, 2020, the shares are included in current liabilities.

According to the prior preferred stock redemption agreement of fast hand, shareholders of fast hand's Series D preferred shares, ABC Series preferred shares and series D-1 preferred shares will be able to redeem from January 21, February 13, and March 15, 2021. The redemption price is the higher of the current issue price or current fair market value of the preferred stock.

For express, its current valuation is already very high. If the early shareholders ask for redemption of preferred shares, they can only see the current fair market value. In this case, listing becomes imminent. With the fast start of the listing process, the prospectus shows that in October 2020, all holders of fasthand's preferred shares agreed to change the redemption start date to April 30, 2022.

On the evening of November 5, the company submitted its IPO application to the Hong Kong stock exchange. -Visual China

From profit to loss in the first half of the year

According to the prospectus, in 2017, 2018, 2019 and the first half of 2020, the revenue of express was 8.3 billion yuan, 20.3 billion yuan, 39.1 billion yuan and 25.3 billion yuan respectively, and the net losses were 20 billion yuan, 12.4 billion yuan, 19.7 billion yuan and 68.1 billion yuan respectively.

It should be pointed out here that the huge loss is mainly caused by the change of fair value brought about by the valuation increase of fast hand. According to the disclosure, in 2017, 2018, 2019 and the first half of 2020, the corresponding fair value changes of fast hand were 20.5 billion yuan, 11.9 billion yuan, 19.9 billion yuan and 61.2 billion yuan respectively. Excluding these non recurring gains and losses, the adjusted profits of express are 777 million yuan, 182 million yuan, 1.3 billion yuan and negative 6.3 billion yuan respectively.

After adjustment, the profit changed from profit to loss in the first half of this year, which shows that the cost of fast hand this year is much higher than that in the past. In terms of the cost of sales, the corresponding expenditures of fasthand in 2017, 2018, 2019 and the first half of 2020 are 5.7 billion yuan, 14.5 billion yuan, 25 billion yuan and 16.6 billion yuan respectively.

The sales cost of express mainly includes the income sharing and related taxes, bandwidth fees and server hosting costs, depreciation of property and equipment and right to use assets, intangible assets amortization, payment channel fees, etc. During the reporting period, the proportion of sales cost in revenue of express was relatively stable, basically maintained at about 65%, and only reached 71% in 2018.

In addition to the cost of sales, sales and marketing expenses are another major expenditure item. Sales and marketing expenditure is mainly on promotion and advertising, including marketing, brand promotion and advertising activities.

In 2017, 2018, 2019 and the first half of 2020, the sales and marketing expenses of express were 1.4 billion yuan, 4.2 billion yuan, 9.8 billion yuan and 13.7 billion yuan respectively, accounting for 16.4%, 21%, 25.2% and 54.1% of total revenue respectively.

As can be seen, the sales and marketing expenses of express increased sharply in the first half of this year, with a year-on-year increase of 354%. According to the prospectus, this was mainly due to the increase in marketing, brand promotion and advertising activities, in particular the marketing expenses for the promotion of Express Express Edition and other applications, as well as the increase in brand marketing activities.

In the first half of this year, it is not difficult to understand the increase in the expenses of various large-scale marketing activities, such as sponsoring the Spring Festival Gala, introducing many stars such as Jay Chou, and subsidies for live e-commerce. Of course, the increase in sales and marketing expenses in the first half of the year is also the main reason for the loss of express.

In terms of revenue, the main cashing ways of express are live broadcasting, online marketing services and e-commerce. Among them, live broadcasting is the core revenue source of fast hand.

In 2017, 2018, 2019 and the first half of 2020, the proportion of fast hand live broadcasting revenue was 95.3%, 91.7%, 80.4% and 68.5%, respectively; the proportion of online marketing service revenue was 4.7%, 8.2%, 19.0% and 28.3%, respectively; the proportion of other services (including e-commerce, online games and other value-added services) was 0, 0.1%, 0.6% and 3.2%.

The revenue of live broadcast mainly comes from users' reward, while the online marketing service mainly comes from advertising. The difference in revenue composition is also a big difference between kuaiyin and its competitors. In terms of revenue capability, the live broadcast revenue is too dependent on the interaction between users and anchors, which makes it difficult for the platform to promote directly. Therefore, in recent two years, express has also increased its investment in advertising business. In September this year, it opened up public domain traffic through the revision of its version, which is also to further attract more revenue Attract more brand advertising.

As for e-commerce, it is also a booming business at present. It is disclosed that the Gmv of e-commerce promoted by fasthand will be 96.6 million, 59.6 billion and 109.6 billion respectively in 2018, 2019 and the first half of 2020. Although the Gmv of e-commerce continues to rise, the contribution of this part of business to the revenue of express is still not high.

Daily living users: 302 million

According to the prospectus, in the first half of 2020, the average daily and monthly active users of fasthand's applications and small programs were 302 million and 776 million respectively. In addition, fasthand launched its derivative products of fast hand main station in August 2019, and in August 2020, the average daily active users of the Express Edition exceeded 100 million.

In June 2019, Su Hua and Cheng Yixiao, the founders of fast hand, jointly issued a letter from all staff, proposing that seeing fast hands become "slow" and making them sleep and food difficult, and announced that fast hand would open a combat mode to protect the future. The first goal of the battle is to reach 300 million dau before the Spring Festival in 2020.

The sprint of 300 million dau is called "K3 campaign" within the Clippers. According to the media reports, the key strategies of this campaign mainly include two, one is to rely on the quick release version, and the other is to rely on the red envelope of the Spring Festival Gala. In February this year, express announced that rihuo had exceeded 300 million by the beginning of 2020.

In addition, the prospectus also disclosed that in the first half of the first half of the year, the average daily use time of the fast hand application by active users exceeded 85 minutes, and the average daily visit to the express app exceeded 10 times.

In terms of paying users, in 2017, 2018, 2019 and the first half of 2020, the average monthly payment number of fast hand live broadcast was 12.6 million, 28.3 million, 48.9 million and 64 million respectively, and the average monthly income of fast hand live broadcast users was 52.5 yuan, 54.9 yuan, 53.6 yuan and 45.2 yuan, respectively.

Shareholders and financing

From June 2014 to February 2020, fast hand has conducted six rounds of financing, with an accumulated financing amount of more than 4.8 billion US dollars. The latest round of financing was in February this year, and the f round financing of fast hand reached 3 billion US dollars.

In terms of equity, Suhua held 12.65%, Cheng Yixiao held 10.02%, Yinxin held 2.42% and Yang Yuanxi held 2.07%. In addition, Tencent holds 21.57% equity of fast hand, which is the largest shareholder of express. Wuyuan capital (formerly Chenxing capital) holds 16.66%, DCM holds 9.23%, DST holds 6.43%, baidu holds 3.78%, Sequoia Capital holds 3.20% and Boyu capital holds 2.29%.

Among them, Wuyuan capital was the early investor of fast hand, and participated in the first three rounds of investment of ABC, while Tencent took a stake in fast hand very early. It started to participate in round B and invested heavily in each round since round D.

On the whole, after several rounds of financing, fast hand's shareholder array is already very large. However, due to the AB share structure, the real control of express is still in the hands of Suhua and Cheng Yixiao. According to the prospectus, Suhua and Cheng Yixiao hold all class A shares, of which Suhua holds 55.79% of class A shares and Cheng Yixiao holds 44.21%.

In addition, Tencent is not only a major shareholder of express, but also has a very close business relationship with express. According to the disclosure, the business cooperation between express and Tencent is mainly divided into three parts, namely, marketing and promotion services, cloud services and technical services, and payment services.

In terms of marketing and promotion, express and Tencent provide services to each other. In 2017, 2018, 2019 and the first half of 2020, the marketing and promotion service fees paid by express to Tencent were 100000 yuan, 29.3 million yuan, 10.3 million yuan and 5.7 million yuan respectively, while Tencent paid 11.4 million yuan, 302 million yuan and 337 million yuan in 2018, 2019 and the first half of 2020, respectively.

In terms of cloud services and technical services, the relevant service fees paid by express to Tencent in 2017, 2018, 2019 and the first half of 2020 were 209 million yuan, 631 million yuan, 814 million yuan and 756 million yuan respectively. According to the prospectus, the increase in this part of the fees is mainly due to the increased user traffic of express and the overall business growth.

In terms of payment services, in 2017, 2018, 2019 and the first half of 2020, express paid Tencent 59 million yuan, 141 million yuan, 219 million yuan and 184 million yuan respectively. The increase in this part of the cost is mainly due to the growth of fast e-commerce business and the overall expansion of live broadcasting business.

Gif transform short video platform

The development of fast hand can be traced back to the launch of GIF express in 2011. GIF express is an app for users to make and share GIF moving pictures. In 2013, GIF express was transformed into a short video social platform, officially becoming the current fast hand. In 2016, it launched live broadcasting service.

Cheng Yixiao, the current co-founder, executive director and chief product officer, is the founder of GIF express. Before founding fast hand, Cheng Yixiao worked in HP and Renren successively.

At present, Cheng Yixiao is in charge of product related affairs, including the development of new applications, product iteration, development of new application functions and user interface optimization. In addition, Cheng Yixiao also led the incubation of new business (e-commerce and online games), ecosystem maintenance and development, and strategic investment and acquisition.

In terms of product concept, Cheng Yixiao is an advocate of original content. Since GIF was launched quickly, Cheng Yixiao has formulated and adhered to the policy of not embedding forwarding or posting functions in products, aiming to encourage users to publish original content. According to the prospectus, the content creators of fast hand applications account for about 26% of the average monthly active users. So far, the content library of fast hand has contained 26 billion short videos.

Su Hua, the current co-founder, executive director, chairman and CEO of fasthand, actually joined fasthand in November 2013. Su Hua graduated from Tsinghua University in 2005 and worked as an engineer in Google China and Baidu group.

In the book what is fast hand, Zhang Fei, an early investor of fast hand, said that in 2013, GIF express encountered three development bottlenecks, namely, transformation, financing and team. As for the team, Zhang Feijian looks for a CEO to complement him. Cheng Yixiao also agrees.

Zhang Fei said that Su Hua and Cheng Yixiao, one who understands technology and the other understands products, are a good combination. In order to attract Suhua to join, Chenxing capital and Cheng Yixiao team at that time diluted half of their shares and gave 50% to Suhua and his team.

Su Hua's participation has played an important role in GIF's rapid transformation of short video platform. After that, he led the team to improve the algorithm of content recommendation application and introduce artificial intelligence technology, which helped express achieve more efficient and personalized content recommendation.

At present, Suhua is mainly responsible for the strategy and key decisions of fasthand, including strategic direction formulation, business management, business innovation, technology, R & D, corporate culture, public relations publicity, government affairs, finance, legal affairs, commercialization, talent recruitment and overseas expansion.

As of June 30, 2020, express has 16387 full-time employees, including 5127 R & D personnel, accounting for 31.3%.

In 2017, 2018, 2019 and the first half of 2020, fasthand's R & D expenditure was 476 million yuan, 1.8 billion yuan, 2.9 billion yuan and 2.3 billion yuan respectively, accounting for 23.1%, 26.8%, 21.5% and 13.6% of the operating expenses in the same period.

According to the prospectus, during the business record period, in addition to the frequent and regular optimization of the fast hand platform, the R & D team of kuaihou has also carried out a number of major R & D projects, and successfully developed personalized content recommendation system, multiple deep learning and reinforcement learning algorithms, hybrid cloud computing platform that can quickly expand the capacity, and increase special effects as a content creation tool and artificial intelligence media Processing and live source station system and advanced content analysis system.

So far, fasthand has registered 967 patents, 864 software and other copyrights, 3395 trademarks and 928 major domain names in China, and 455 trademarks overseas. In addition, fasthand has also submitted 2711 patents and 1193 trademark applications in China and 333 trademark applications overseas.

So far, fasthand has not owned any property, but has leased 61 properties in China for business operation, with a total construction area of about 197700 square meters. Among them, fasthand is headquartered in Beijing and has offices in 26 cities in China, the United States, India, Singapore, Indonesia and Brazil.

Prior to listing, express mainly used cash from shareholders' capital injection, issuance of convertible redeemable preferred shares and cash from operating activities to meet working capital and other capital needs. As of June 30, 2020, the cash and cash equivalents held by express were RMB 5.7 billion.