Ladies and gentlemen, good evening and welcome to Meitu's 2021 annual results earnings conference call. I am Coco, Senior Investor Relations Manager of Meitu. Joining me today to discuss our results are Mr. Wu Xinhong, the CEO, Mr. Gary Ngan, the CFO. I would like to take this opportunity to remind you that our remarks today may include certain forward-looking statements. A number of risks and factors beyond our control may cause the actual results to differ materially from those contemplated by these forward-looking statements. During this call, we will present both IFRS and non-IFRS financial measures. We may also discuss general market conditions for our industry, and such information may come from a variety of sources outside of Meitu. For a detailed discussion of the risk factors we face and non-IFRS measures, please refer to our public documents on corp.meitu.com.
Investors who are using Zoom App or Zoom PC, we suggest you can add your name or institution name. This will help us to invite you in the Q&A section. Now I would like to turn the call over to Mr. Wu Xinhong. He will present in Chinese, followed by a translation in English.
[Non-English content] Coco. [Non-English content] 2021 [Non-English content] 39.5% [Non-English content] 146.9%.
In 2021, total revenue grew by 39.5% year-over-year. The revenue reached around CNY 1.66 billion, and each of the business segments grew on a different level. The VIP subscription and image SaaS business have the largest growth. It grew by 146.9% year-over-year.
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For a year ended 2021, the number of global VIP members reached 4 million, with an increase of more than 100% compared to 1.7 million at the same period in 2020. The main reason behind the high growth of the VIP member is that our VIP features convey a sense of value for money and uniqueness for our paying VIP members.
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By studying our users, we deliver the functions catered to demands of the high-paying intention users, such as providing high-quality filters and assisting them to show the exquisite lifestyle and a good personal brand.
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Except for this, the VIP features can realize some effects that cannot be done manually. Therefore, compared to the regular users, VIP members can have a more efficient process and higher quality outcome. We will keep on iterating our products to meet user demands.
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With the initial success of the VIP subscription services, we found that we can also apply our experiences and capabilities to address work-related demands. We expand our product offerings from image tools to design tools. We launched the design solutions for corporate and personal work demands across several platforms, including desktop, app and web versions. These solutions throughout the remote and share collaboration functions.
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According to the Image SaaS strategy, we launched the six new subscription-based products officially in the launch event lately. These products cover both lifestyle related and work related demands. For example, for lifestyle scenarios, we launched a video processing app called Wink, and also the plot camera called Chic.
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For the work related scenarios, we launched a poster design function called Meitu Design Studio, a professional profile pic editor called [Non-English content] a design solution called Meitu for Mac, and also a one stop AI photo processing solution called [Non-English content]. Some of the products received positive reviews and user number was climbing. We will keep on investing in R&D to deliver a comprehensive product portfolio to stimulate new growth drivers.
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Those are our thoughts on the VIP subscription and image SaaS strategy. I would like to mention some other highlights in 2021. According to the statistics of App Annie, in January 2022, Meitu's overseas team ranked fourth in the overseas revenue list of Chinese game makers, and ranked first in the overseas revenue list of Chinese image makers.
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In 2021, our overseas growth and promotion strategy focused on the paid users growth, and this strategy achieved good financial results with a 54% increase in overseas revenue in 2021. This shows that although the overseas MAU declined due to the Indian ban policy on Chinese apps, we still make progress in revenues.
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Next, I would like to talk about the operations of the domestic image products. Massive user base is the core asset of Meitu. In terms of the domestic users, MAU of Meitu App and BeautyCam kept on leading the domestic image industry. According to the statistics of QuestMobile, in December 2021, both Meitu App and BeautyCam ranked first in the domestic image MAU list. For the future user growth strategy, we will input resources on different mobile app platforms, especially enhancing the Android versions app performance.
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For building the image ecology, we launched a function called Meitu style on Meitu App last year. We have seen more and more users rely on this function. In December 2021, number of this function users become 2.8 times of the number at the same period in 2020. This function can record a user's added method and effects and save as a template. Other users can one click apply this template and then spread out.
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In 2021, we kept on upgrading the Meitu style, adding features like recommendation, cut out and so on. We also have related events such as template creation camps, template competition to trigger the users creation passion and the template number growth. In the future, we will improve the Meitu style function with methods like refine operation and profit share mechanism. We will also try the monetization of this function to create a new growth engine.
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Except for the image business, we also proactively develop the beauty SaaS. We provide ERP and supply chain management solution cater for cosmetic stores with our subsidiary Meidd. We provided AI skin analysis based customer insight solution cater for skin care brands, medical aesthetic clinics and beauty salons, via Meitu Eve.
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Meidd provided the ERP services to cosmetic stores in the sinking market, helping the merchants to manage data such as marketing, sales and inventory data. Now it has served over 11,500 stores in more than 250 cities. Based on that, Meidd obtains a complete grasp of the cosmetic market supply and demand trend by evaluating the data on its ERP system. With this information, Meidd reduce the information asymmetry between the upstream supply and downstream sales networks, improving its efficiency as a whole. In 2021, the business line from supply chain management increased by 4 times compared to the level in 2020.
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Meitu Eve provided the AI skin analysis based customer management solution for skin care brands, medical aesthetic clinics, beauty salons and so on. Supported by the unique AI algorithm, it can analyze the skin data and then recommend proper skin care products. Also, it builds a complete customer skin profile and proceeded the post-sales customer management. This will finally help clients increase the sales conversion and promote the brands.
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Although these two solutions target on different areas, they are sharing the same goal, which is the customer success. We hope our services can assist the customers to better promote themselves, no matter with customer management or data insight analysis services. My section is finished now. Please welcome Gary to talk about the financials.
Thank you, Xinhong. First of all, I would like to talk about the profit and loss for 2021. In the year of 2021, revenue was CNY 1.66 billion, significantly increased by 39.5% year-over-year. The revenue growth is mainly driven by our new business of VIP subscription and image SaaS. This business segment has increased 146.9% year-over-year, and has been continuing to grow. It is now our second largest revenue contributor, representing around 31.2% of total revenues, higher than 17.6% in 2020. This also shows that Meitu is reducing its reliance on a single business stream. Moving on to online advertising. Revenue was around CNY 766 million, increased 12.5% year-over-year. The online advertising business is relatively stable throughout the past two years, and we are now proactively expanding our customer base.
Meanwhile, our promotion model becomes more diversified, and we have introduced more creative solutions for our clients, such as holding these themed activities to interact with our users to realize brand marketing. In terms of the VIP subscription and image SaaS business, this is a much more natural business model because it fits better with the form of the image app. As we previously mentioned, the VIP subscription services currently is addressing mostly the lifestyle related scenarios and the image SaaS business is addressing more the work-related demands. Revenue from this segment reached CNY 519 million in 2021. The vast majority or about 90% of the revenues within this business line is coming from the VIP subscription services. To give everyone a little bit of a background, we started this VIP subscription service in our overseas applications back in 2019.
After achieving very promising results in overseas business, we applied this business model to our domestic Chinese app in late 2020. As we can see throughout 2021, the domestic VIP subscription revenue has grown very significantly. It grew about 14 x compared to 2020. In the future, we will launch more and more new features and products to deliver a comprehensive product portfolio. We are very positive about the future of this business segment. Finally, from the IMS and other revenues, in 2021 also increased significantly with about a 20% year-over-year. The IMS business is obviously the highest proportion within this business line. It accounts for about 86.3% within this business line. The absolute dollar amount is about CNY 258 million. Just to touch a little bit upon the recent acquisition of Meidd.
We have completed the acquisition in January 2022, and after the completion, we now own about 63.35% of Meidd, and its financial results will be consolidated after its completion. In 2021, there is actually no contribution from Meidd. To just give everybody a sense of its current state of operation, its revenue currently is about CNY 15 million per month. Now moving on to gross profit. The total gross profit was about CNY 1.125 billion, increased by about 41.7% year-over-year. Gross profit margin was 67.5%, increased by one percentage point over last year. The increase in gross profit margin is mainly because the VIP subscription and image SaaS business revenue contribution has been increasing, and this business carries a very high gross margin. That is why there is an expansion in gross margin. Moving on, I will talk a little bit about the expenses structure.
Sales and marketing, R&D, and administrative expenses have respectively increased by 36%, 35%, and 28.7% in the full year of 2021. As we all know, Meitu's main expenses are mostly related to staff costs. As we are expanding in every business segment, especially in the VIP subscription and image SaaS, there is inevitably some increase in staff cost. Marketing cost has also increased in 2021. Just to conclude, this year, we have achieved the second consecutive year of annual profit in terms of adjusted net profit. The adjusted net profit for this year was CNY 85.1 million. I think this is mainly because of a very large increase in gross profit, driven by the VIP subscription model. Finally, in terms of cash, as of December 2021, we have around CNY 1.26 billion of cash and other liquidity on our account.
Although the global economy is somewhat uncertain, we can confidently say that our strong balance sheet and cash reserve can fully support us in seizing some of the next growth opportunities and generate long-term value for shareholder. This concludes our prepared remarks, and we can now open the floor to question and answer. Thank you.
Thank you, management. Now we can enter the Q&A section. Investors who are using Zoom App or Zoom PC version, please click the hand-raising button to raise your questions, then we will unmute your voice. Investor who are dialing in this meeting, please press star nine for raising a question, and then you will hear a phone prompt. Please press star six to unmute your voice. Before asking questions, please tell us the name of the organization and yourself. I repeat. Now we can enter the Q&A. Okay, now we have a question from the investor called Melody Chan.
Thank you, management, for taking my question. I have a question on our VIP subscription business. As mentioned earlier, our business has grown very fast. How should we think about the business trend in 2022? If we are going to invest more in the R&D part to further drive the business. [Non-English content]
Okay. Let me just take this question. If you look at the VIP subscription and image SaaS business, as I just mentioned, about 90% of that is coming from the VIP subscription part, which is a mainly To C business. It is consumer facing. As I said, it is more related to the lifestyle related demands. The remaining 10% is about the image SaaS business, which is catering more for the work demand. I think if you look at the growth rate, which is about 140%+, it is clearly showing a very strong momentum, and this momentum has continued be showing in the first couple of months in 2022. That is the first point.
Secondly, I think from the work demand point of view, I think there is a lot of exciting products that has been already announced and upcoming, as Xinhong has earlier mentioned, such as the Meitu for Mac and the poster related features. I think from the point of view as the business potential, I think the work demand part of this business is going to be very strong because having to use these features for work means that you are also generating money by yourself. I think the users are actually much more likely to pay for the work-related features when compared to the features related to lifestyle. We have seen in many different similar products, both in China and in overseas markets, that the work-related SaaS business actually carry a much higher paying percentage compared to lifestyle-related features.
Got it. Thank you.
Thank you.
Investors who are using Zoom App or Zoom PC version, please click the hand-raising button to raise a question, then we will unmute your voice. Investors who are dialing in in this meeting, please press star nine for raising a question, and then you will hear a phone prompt, please press star six to unmute your voice. Before asking questions, please tell us the name of the organization and yourself. [Non-English content] We have an online question. [Non-English content ] How is the development of the overseas business development? What is the plan for the next phase?
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Gary, [Non-English content]
OK, [Non-English content]
OK.
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[Non-English content] AirBrush, BeautyPlus [Non-English content]
OK, I will just combine the two answers into one. First of all, the overseas revenue has also been growing very quickly. It is in its double digits in the year of 2021. Obviously, it is a little bit slower than the Chinese business, because it has started much earlier than the domestic business. As we have mentioned in the first half of 2021's results call, the strategy of the overseas business is to focus more on the developed countries, and we will try to use a very targeted way to market our apps to attract these high-paying intention users, and try to convert them into paying users.
Finally, Xinhong just added that similar to the domestic business, the overseas business is also adding more business-to-business elements to it. It is very similar to what we are doing in China, because previously, overseas apps like AirBrush and BeautyPlus are mostly To C, it is to consumer, but now we are also going to expand our product offering to cover business needs. Thank you.
Investors who are using Zoom App or Zoom PC version, please click the hand-raising button to raise your question. Then we will unmute your voice. Investors who are dialing in in this meeting, please press star nine for raising a question. [Non-English content ] We have an online question.
The question is: I would like to know if you project that subscriptions will surpass the online advertising. If yes, do you think it will happen in 2022 or 2023? [Non-English content]
Thanks for the questions. I think it is probably going to be very close. The two business is going to be very close in 2022. I think that the assumption is it will surpass that of advertising by 2023. Thank you.
We have an online question. The question is: [Non-English content ] OK, the question is: What is the trend of the VIP members number growth in or after 2022? And how about the R&D investment plan afterwards? Thank you.
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So let me just translate what I said just now. In terms of the VIP members, I will give a little bit of a directional guidance. If you look at the paying penetration in the domestic app right now, it is about 1%, plus a little bit, and the overseas is about 7%-8%. I think that basically tells that the domestic business is still in a very early stage, and it is very likely to move towards 7%-8% in the long term. Obviously, it is not going to be next two years to reach this kind of level.
Also, typically speaking, the overseas market has a slightly higher paying percentage in its mature state. In terms of the R&D investment, I think it will continue to grow, but because the revenue growth is very rapid right now, I think it is safe to assume that the R&D expenses as a percentage of revenue is going to be a bit lower in 2023. 2022, sorry.
OK, thank you management. Investors who are using Zoom App or Zoom PC version, please click hand raising button to raise the questions. OK, we have an online question. The question is: [Non-English content ] So the growth of the revenue for 2021 is mainly driven by the growth in the VIP subscription and image SaaS business. What is the reason that users want to become VIP members? Xinhong, [Non-English content] ].
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Let me just translate the answer. We have done a lot of user survey and we realize that there is a lot of these personalized demands that are not being satisfied at the moment. That is why there is a lot of features that we have launched to satisfy these demands. Ultimately, the idea is to sell the VIP membership such that the user feels that it is very value for money, and also they are able to derive some sense of uniqueness, and having something that other people do not have if they do not become a member.
This is sort of how we think about in terms of the user psychology and also from the features to drive this VIP business. On top of that, because we have talked a lot about the social elements or the demands for the social interaction for the VIP business. At the same time, we see there is a tremendous potential in the design related or work related demands. For example, aside from creating posters, some people also have the demand for building personal brand or do some personal marketing for himself. These are the different reasons and how we think about what kind of features that we create to drive the VIP business. Thank you.
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Just to add on, we actually have seen the younger generation has a much, much higher intent to pay compared to years ago. I think this is also one of the biggest drivers for our VIP subscription business.
Okay, thank you management. We have an online question. The question is: [Non-English content ] Do you management have any expectation on the operating cash flow in 2022? When will the operating cash flow to be a positive figure?
I think it is quite likely that in 2022 our operating cash flow will be positive.
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[Non-English content ] We have an online question that: Do we have any competitor with the Meitu Eve and the image SaaS business? Xinhong, [Non-English content ].
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No。
OK。
First answer first. There are actually quite a number of competitors for both Meitu Eve and the image SaaS business. Our view is that a competitive market, actually it's very good to drive the team to work harder and move faster. Obviously, I think Meitu is a pioneer in a lot of both technology and the product offering in these two business segments. For example, next month we are going to launch the new version of the Meitu Eve Panoramic AI Skin Analyzer, and there will be some very world-leading technology involved in this new product.
OK, [Non-English content ]. Meitu has a lot of data and technical experiences in the portrait AI. Can we apply these type of technologies in the field of the avatar creation? What's the point of view of the management?
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As we all know, Meitu has always been focusing on helping users to manage their face, facial image, and we used to help people manage their real face, obviously. We are thinking more about, is there a pathway to switch from helping people to manage their actual face to their virtual identity?
And that is why we have a product, which in a nutshell, is an editor for virtual avatar that will be coming out into closed beta by the end of this year. This editor is going to help both our business partners, for example, make it easier for them to create virtual idols. This editor will also help end consumers to help them to create avatars that can perform things like video chat or live streaming, things like that. This product will come into closed beta by the end of this year, and we currently plan to launch it next year.
OK, thank you management. We will take the last question. [Non-English content ] What is the point of view from the company on the market cap management or do the management consider any stock share buyback?
OK, let me just take this question. Previously we have bought back some of the shares, so we would not rule that out. But currently we have no plans to repurchase shares.
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Coco.
We will take next question. The 2021 MAU has not increased year over year. Has the industry growth peaked? Are there future growth plans? [Non-English content]
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[Non-English content] Let me just quickly translate that. If you look at our 2021 MAU, it has not increased. The main reason is because the Indian MAU, because the Indian government has blocked all Chinese app. If you take that effect out, our MAU actually has remained relatively stable. Our view is that the MAU industry, there is still a lot of potential to grow. But I think in order to capture that potential, we will have to find different scenarios in order to basically try to address the demand in various different image scenarios from our users. We actually have launched several products which has generated very good traction as we have mentioned earlier in the call.
It's not being reflected in the 2021 results, obviously, but I think we should be able to see that in 2022, there's a good chance that our overall MAU can go back into a growth trajectory.
OK, thank you management. Due to the time constraints, we will close the meeting. [Non-English content ] Thanks for joining tonight's conference and thanks again for your participation. Should you have any questions, please contact Meitu IR team. [Non-English content]
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Thank you, bye bye. Thank you.
Bye bye.