Newborn Town Inc. (9911.HK) Announced 2020 Annual Results

Revenue Increased by 203%, while Net Profit up by 67%

Voice-Chat, Video Communication Social Networking Business Steps into Rapid Growth Phase

On 24th March, Newborn Town Inc. (9911.HK), the flagship internet company going global with focus on globalized social networking business, is pleased to announce the audited consolidated results of the Company and its subsidiaries (collectively the ''Group'') for the year ended 31 December 2020 (the ''Year''). The Group has achieved rapid growth in revenue, profit and traffic scale by successfully implementing the "Traffic +" strategy in the social networking and games segments.

• Revenue and Net Profit Increased significantly whilst cash flow was solid

Since 2020, Newborn Town has driven forward the "Traffic +" strategy, contracting the resources on developing the utilities apps and advertising platform, whilst placing strong emphasis on exploring social networking products and games. With the outstanding financial performance, the Group's strategic upgrade has achieved remarkable results.

As of 31 December 2020, total revenue reached RMB1,181.6 million, with a year-on-year growth of 203.2%. Gross profit reached RMB752.5 million in 2020, a year-on-year increase of 187.7%. Profit for the year reached RMB114.3 million, a year-on-year increase of 67.1%. And the adjusted net profit amounted to RMB154.9 million, a year-on-year increase of 41.5%.

In terms of cash flow, the Group's net cash inflow from operating activities in 2020 amounted to approximately RMB 300 million. As of December 31, 2020, the Group's cash and cash equivalents reached RMB431.0 million, with total assets amounted to RMB1.27 billion.

• Social Networking segment as main driving force, leading to a 55-fold increase in in-app purchases revenue

During the Year, Newborn Town recorded revenue of RMB657.5 million from value-added services (In-app purchase), a year-on-year increase of 5,549.8%. Meanwhile, in-app purchase has become the Group's main revenue source, accounting for 55.6% of total revenue (the corresponding percentage was 3% in 2019).

According to the announcement, the rapid growth in revenue from in-app purchase was mainly contributed by social networking products, whereas mid to hardcore games made up of a smaller portion. The monetization scenarios included gifting during live streams, purchasing premium app functions, purchasing chatting hours, membership subscriptions and other diversified methods.

Another source of revenue was traffic monetization business contributed from the mobile games developed by the Group. The segment revenue reached RMB511.2 million, a year-on-year growth of 120.3%.

• The scale of Social Networking business continued to expand, establishing an ecosystem for Voice-Chat, Video Communication Social Networking products

In 2020, Newborn Town's business scales continued to expand, with 11.36 million average monthly active users for social networking products and 11.51 million average monthly active users for mobile games. In particular, social networking products achieved remarkable performance with a cumulative number of over 183 million downloads, indicating a continuous improvement on the user stickiness and duration of use.

Since 2020, voice-chat, video communication social networking products have become the strong trend in social networking industry. Newborn Town actively promoted its three core social networking products, namely Yiyo, the video communication application, MICO, the comprehensive social networking platform, and YoHo, the voice-chat social networking application, and became one of the leading Chinese internet companies in overseas social networking field.

MICO, the first social networking application launched by the Group devoted effort in developed markets last year, and successfully ranked the top 20 best-selling social networking applications in the United States. Yiyo, nicknamed as "the video version of Tinder " has successfully entered into the top 20 downloads of global social networking applications on Google Play. YoHo, the voice-chat product, has become the top 2 voice-chat social networking platforms in the Middle East region, and the top 10 best-selling social networking applications on Google Play in the Gulf Cooperation Council (GCC).

On the whole, Newborn Town's social networking products continued to expand into the Middle East, Southeast Asia, South Asia, and have grown rapidly in North America, while actively extending to regions of huge growth potential such as Japan, South Korea, and Europe.

• Greater resources devoted in R&D, and enhanced operational efficiency through the upgrade of middle platform

As the first batch of Top Developers certified by Google Play in China, Newborn Town has solid foundation in technology and product development. In recent years, it has continued to make efforts in refining the AI technology as well as R&D for social networking products.

According to the announcement, as of December 31, 2020, the Group has a total of 424 employees, of which 181 are R&D personnel, accounting for 43% of the total employees. The Group's investment in R&D during the Year reached RMB58.5 million, a year-on-year increase of 188.8%. In addition, the Group's revenue contributed by each employee reached RMB2.79 million in 2020, representing a year-on-year increase of 26.6%. This signified a substantial improvement on operational efficiency through the empowerment of the AI engine and middle platform.

Apart from increased investment in R&D, Newborn Town pushed forward the product localization operation strategy with the launch of high-quality voice-chat, video communication social networking products to cater for the needs in different markets. Leveraging on "Optimized Technology & Operation", Newborn Town has created dual growth factors jointly driving the rapid business expansion.

Mr. Liu Chunhe, the Chairman of Newborn Town Inc. described, "2020 marks a crucial year as Newborn Town achieved remarkable growth. The Company will maintain its firm foothold in the global market with social networking business as its core and continually expand the business portfolio."