Excluding Guoxin factors, revenue increased by 18.3% year-on-year. Interpretation of the three major strategies behind NetQin's Q1 financial report

On May 27, NQin Technology Co., Ltd. (NYSE: NQ) announced its unaudited financial results for the first quarter ended March 31, 2016. The financial report data showed that the net revenue for the quarter was US$73.5 million, which increased by 18.3% compared with the same period last year excluding the Guoxin factor; the company's operating loss was US$7.3 million, which was narrowed by more than half year-on-year.

Judging from these two sets of data, NetQin's performance this quarter is worthy of recognition, but in fact this is not an unexpected result. NetQin's Q1 performance is closely related to the strategies implemented by the company in recent times.

Control costs – sell non-core businesses

NetQin's narrowing of operating losses in the first quarter was partly due to the reduction of operating expenses. Data shows that operating expenses in the first quarter of 2016 totaled US$25 million, compared with US$35.6 million in the same period last year, a year-on-year decrease of 29.9%. Operating expenses under non-GAAP, that is, excluding option expenses and amortization expenses of intangible assets caused by mergers and acquisitions, were US$16 million this quarter, compared with US$22.3 million in the same period last year, a year-on-year decrease of 28.1%.

The main reason for the year-on-year decrease in operating expenses was the decrease in sales costs of enterprise mobility business due to the sale of Guoxin and the overall decrease in hardware sales in this segment. Even excluding the Guoxin factor, total operating expenses decreased by 22.4% year-on-year, and non-GAAP operating expenses decreased by 14.7% year-on-year.

It can be seen that NetQin's strategy of strictly implementing cost control, such as selling non-core businesses, has begun to show results.

Strengthen the main body - increase investment in mobile games and live broadcast platforms

Among the increased revenue, the contribution of mobile value-added services is quite eye-catching. It can be seen that NetQin's mobile value-added service revenue this quarter was US$42.7 million, an increase of 70.0% from US$25.1 million in the same period last year.

On the one hand, after selling the Guoxin business, the company no longer focuses on hardware sales, and the status of mobile games and mobile social video live streaming platforms has been further highlighted; on the other hand, NetQin has taken a positive attitude to actively strengthen its mobile business by increasing investment. The financial report explains that excluding the Guoxin factor, the operating cost increased by 22.2% year-on-year, partly due to the increase in user acquisition costs for mobile games and mobile social video live streaming platforms.

In this way, NetQin's business structure becomes increasingly clear, and the advantages of the mobile terminal become more obvious.

In-depth operations - focus on developing mobile value-added services

Looking at the increase in revenue from mobile value-added services, it is composed of two parts: revenue from mobile games and revenue from mobile social video live streaming platforms. Among them, the growth in mobile game revenue is mainly due to the continued expansion of Feiliu Games in the domestic and overseas markets. This quarter, Feiliu Games' revenue increased by 43.1% year-on-year. At the same time, the revenue of the mobile social video live streaming platform increased significantly, thanks to the rapid growth of Xiuse's video live streaming business, and its revenue increased by 319.9% ​​year-on-year.

In terms of its core business, NetQin has adopted a "intensive and meticulous" approach to operation. Operational indicator data show that NetQin's average monthly active users are 190.3 million. The in-depth operation of mobile users has also led to the continued expansion of the advertising network and the monetization income brought by advertising and third-party application traffic diversion. The figures in the financial report confirm this. NetQin's advertising revenue in 2016 was US$19.8 million, compared with US$17.5 million in the same period last year, a year-on-year increase of 12.8%.

"We have had a good start in 2016," said Mr. Xu Zemin, CEO of NetQin. "We are focusing on our core areas of consumer and entertainment businesses, which are generating positive growth and better profitability trends. Our team will continue to focus on execution and achieving better results." With the three real strategies hidden behind the financial report: controlling costs, strengthening the main body, and deepening operations, there is indeed reason to believe that NetQin's future prospects are promising.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.