Tubatu hits IPO again: get rid of the loss dilemma, but the profitability has not been improved

After the Hong Kong stock IPO in 2018, the Internet home improvement company Tubatu once again launched an attack on the IPO.

After the Hong Kong stock IPO in 2018, the Internet home improvement company Tubatu once again launched an attack on the IPO.

On June 30, the official website of the Shenzhen Stock Exchange indicated that Tubatu Group Co., Ltd. (hereinafter referred to as "Tubatu")'s application for listing on the GEM has been accepted. CICC is the sponsor.

The prospectus shows that Tubatu’s public offering will not exceed 60 million shares, and the total equity ratio after the issuance exceeds 240 million shares. It is estimated that a total of 704 million yuan will be raised, which will be mainly used for the company’s technology research and development and data platform upgrade projects and operations. Information platform construction project, operation service center construction and omnichannel marketing construction project and supplementary working capital.

In terms of shareholding structure, before the IPO, Tubatu founder Wang Guobin and co-founder Xie Shuying, directly and indirectly, held 50.63% of the company's shares. The two are husband and wife and are also the joint actual controllers of the company. Among institutional shareholders, Jingwei China holds 20.59%, Sequoia China holds 14.90%, and 58.com holds 10%.

Profitability has not improved significantly

Earlier, Tubatu had completed 3 rounds of financing, namely the $1.5 million Series A financing of Jingwei Venture Capital in 2011, the $16 million Series B financing of Sequoia Capital and Jingwei Venture Capital in 2014, and 2015 including 58 of the same cities, Sequoia Capital and Jingwei Venture Capital raised a total of US$200 million in Series C financing. After that, Tubatu did not seek financing in the capital market again.

Is Tubatu not short of money? During the reporting period (2018-2020), Tubatu’s revenue was 583 million yuan, 680 million yuan, and 615 million yuan respectively. The prospectus stated that the decline in revenue in 2020 was due to the impact of the epidemic. In terms of net profit, it maintained growth, reaching RMB 38.62 million, RMB 79.67 million, and RMB 86.59 million.

It is worth noting that Tubatu has been criticized by the outside world because of its losses. The prospectus submitted to the Hong Kong Stock Exchange in 2018 shows that from 2015 to 2017, Tubatu's net losses reached 750 million yuan, 560 million yuan, and 1.111 billion yuan, respectively, and the accumulated losses in the three years exceeded 2.4 billion yuan.

Why did Tubatu’s performance "reverse" in 2018? In fact, this is related to the financial statistical algorithm. This part of the loss includes the fair value loss of the large convertible redeemable preferred stock recognized in the same period. This part of the convertible redeemable preference shares will be converted into ordinary shares after listing, and the fair value loss will be a one-time loss under the financial accounting rules.

Excluding the above-mentioned one-time accounting losses, Tubatu's adjusted profits in 2015, 2016, and 2017 were -139 million, -105.8 million, and 63.5 million, respectively. Tubatu's adjusted profit for the first half of 2018 was 21 million. It was 10.9 million yuan in the same period in 2017.

It can be seen that although Tubatu's profitability has increased, it has not increased significantly.

Increase in traffic acquisition costs

As an Internet platform company, Tubatu highly relies on online platform business. During the reporting period, the revenue of this business reached 500 million yuan, 655 million yuan and 615 million yuan, respectively, accounting for 85.72% of the revenue. , 96.34% and 99.94%. With the termination of the self-operated home improvement business at the end of 2019, the proportion of revenue dropped to zero.

Among them, the proportion of smart order matching service business has gradually increased, reaching 66.84%, 75.29%, and 76.25% respectively. It can be seen that the matching business between owners and platform service providers is the core of platform revenue.

As of the end of the reporting period, the company's business has covered 347 cities, with a cumulative number of owners and users of 30,359,800. The platform has accumulatively settled 114,900 home improvement companies, and the cumulative number of building materials business users has reached 9,400, and successfully matched owners and installation companies for 7.718 million times. Every time an order is successfully matched with an installation company, Tubatu can charge the installation company a certain matching service fee. The average unit price in the past three years is between 408 yuan and 430 yuan.

Under the Internet marketing service model, one of the main operating expenses of Internet platform companies is the cost of purchasing Internet advertising traffic. During the reporting period, the company's traffic acquisition fees were 140 million yuan, 210 million yuan and 220 million yuan, accounting for 24.3%, 30.3% and 35% of revenue respectively. The customer acquisition cost of company traffic is on the rise.

The composition of employees also shows Tubatu's dependence on "marketing promotion". Among the 1,264 employees, 492 are sales personnel, accounting for nearly 40%, and the remaining R&D, customer service and quality inspection personnel, each accounting for no more than 20%.

However, short-term traffic realization is not a long-term solution. After the listing of Qijia.com, a home improvement platform (Qi Yi Technology: 01739.HK), the stock price has fallen all the way, and the market value has been cut. It can be seen that although marketing by spending money can bring temporary traffic and users, service quality and word-of-mouth are the lasting core competitiveness.

In terms of black cat complaints, the current number of complaints about Tubat rabbits has reached 108. In addition, the Tianyan Check showed that there are currently 186 legal proceedings against Tubatu, of which 84 are caused by decoration contract disputes.

In addition, as e-commerce platforms such as JD.com and Tmall enter the Internet home improvement market, Tubatu’s traffic advantage will be greatly weakened. After all, the integrated e-commerce platform itself has its own "traffic" and can provide users with one-click services for decoration and building materials purchases.

Build the largest data platform in the home improvement industry

It is understood that to seize more data traffic, Tubatu will make every decoration demand point into an APP, so that no matter what the user chooses, it can be guaranteed on the Tubatu platform.

The founder of Tubatu, Wang Guobin, told Jiemian News Greater Bay Area Channel reporters in 2020 that for 12 years, Tubatu has focused on nothing more than making home improvement data online with the help of new technologies such as the Internet.

"Through big data and online closed-loop transactions, we have become the largest data platform in the home improvement industry."

Therefore, Tubatu’s R&D costs account for a higher proportion of its peers. The R&D investment in the past three years was RMB 68,028,900, RMB 67,631,600, and RMB 65.494, respectively, accounting for 11.66%, 9.94%, and 10.64% of operating income, respectively. In 2020, the proportion of R&D personnel will reach 19.86%, which is significantly higher than the R&D investment of Qijia.com, another vertical platform for home improvement.

Tubatu also gave a risk warning in the prospectus. It may be due to improper operations by employees, failure to promptly revise privacy protection policies by relevant regulations, information system security vulnerabilities, etc., resulting in non-compliance with user personal information protection in the business operation process. According to laws and regulations, the user will be sued or punished by the competent authority.

Moreover, as a Shenzhen company, Tubatu is also about to face the supervision of the new law, namely the "Shenzhen Special Economic Zone Data Regulations" that will be implemented on January 1 next year.

The "Shenzhen Special Economic Zone Data Regulations" clarified the personal data processing rules based on "inform-consent", that is, the processing of personal information should obtain personal consent under the premise of full notification in advance, and the data processor should provide a way to withdraw consent. Unreasonable restrictions or unreasonable conditions are imposed on the withdrawal of consent.

Regarding the failure of Tubatu's listing in Hong Kong in 2018, it is reported that it failed the review due to funding issues. The funding issue refers to its "decoration guarantee", which is regarded as a milestone business in Tubatu. As a third party, the decoration guarantee has escorted the owner a large amount of more than 600 million decoration funds, which is considered to have a greater financial risk.

The prospectus mentioned that in response to this problem, Tubatu has gradually adjusted the funds for the custody of renovation funds to Ping An Bank's "e-commerce witness treasure" payment and settlement platform. Currently, it no longer conducts fund custody and settlement on its own.