Amber International Holding Ltd (AMBR) 2020 Q4 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for iClick Interactive Asia Group Limited's Fourth Quarter and Full Year 2020 Financial Results Conference Call. (Operator Instructions) Today's conference call is being recorded.

I will now turn the call over to your host, Ms. Lisa Li, Investor Relations Director. Lisa, please go ahead.

Hello, everyone, and welcome to iClick's Fourth Quarter and Full Year 2020 Financial Results Conference Call. The company's results were issued earlier today and are posted online. You can download the earnings press release and sign up for our distribution list by visiting the IR section of our website at ir.i-click.com.

Jian Tang, T.J., Chief Executive Officer and Co-Founder of iClick, will first provide a high-level review of the fourth quarter and fiscal year 2020 results and share his thoughts on our execution strategy ahead. Chief Financial Officer, Terence Li, will follow and give us additional insights on the financial results for the fourth quarter and fiscal year 2020 and provide guidance for the first quarter and full year of 2021. He will then turn the call back over to T.J. for closing remarks before the call is opened for Q&A.

Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Legislation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's 20-F as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Please also note that iClick's earnings press release and this conference call includes discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. iClick's press release contains a reconciliation of the unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures.

I will now turn the call over to our Chief Executive Officer and Co-Founder, Jian Tang. T.J., please go ahead.

Thank you, Lisa, and welcome to the call, everyone. Given the global challenges faced in 2020 brought about primarily by the COVID-19 pandemic, I'm extremely gratified to share with you our strong financial results for 2020, which I believe are a testament to the correct strategy we have implemented under the strong execution and dedication of all the iClickers, the employees at our company.

Our customers continue to find tremendous value in our integrated data-driven solutions as they embrace the digital transformation opportunities in China. Meanwhile, we have formed close partnerships with many of the industry-leading technology players, including, but not limited to, Tencent and Baozun. These factors lead us to believe that a very bright future lies ahead, especially as the global economy continues to recover from the pandemic's impact and as China's digital revolution continues to evolve.

Despite its devastating impact, the COVID-19 pandemic has helped educate current and potential brand customers about the importance of digital transformation, online to off-line data integration and data analytics in the efforts to successfully devise personalized marketing campaigns, enhance the operating efficiency and ultimately boost their sales revenue.

Thanks to our key account customers, focused strategy and market-leading position, our Enterprise SaaS Solutions segment saw its revenue nearly tripled year-over-year in 2020 to USD 28.9 million. This was of course one of the significant growth drivers of our financial performance in 2020. And we expect continued growth in this segment to play a major role in our future financial growth.

2020 was another record-setting year for us as we set historical highs across our key financial and operating metrics, including: Gross billings, revenue, gross profit, adjusted EBITDA and adjusted net income. What is especially exciting to us is that 2020 was the first time we realized full year positive adjusted net income, which is a true milestone for our company. It indicates that we have successfully reached sufficient economies of scale with Marketing Solutions and underscores the pivotal strategy of, and execution within, our Enterprise Solutions segment.

As I mentioned in the past and reiterated in the shareholder letter issued in January, key to our strategic and financial goals is improved profitability in Marketing Solutions, further growth in the higher-margin Enterprise Solutions business and additional partnerships with other global technology players and leaders to further complement our product offerings, reach and penetration, especially in the Enterprise Solutions segment.

To this end, we started 2021 off strong with a strategic partnership with Baozun, a leading branded e-commerce service partner that helps brands execute their e-commerce strategies in China. Additionally, Baozun has become an important strategic shareholder of iClick, which underscores the importance of this partnership for both iClick and Baozun.

In this partnership, iClick will provide front-end SaaS-based solutions as well as data analytics platform, while Baozun is responsible for the online operation services and the back-end infrastructure services to brands. Together, we will establish an industry-leading private domain traffic e-commerce solution based on the Tencent ecosystem.

This strategic partnership will provide lots of synergistic benefits for iClick. First, we will benefit from cross-selling opportunities to over 260 of Baozun's branded partners. Having immediate access to such new potential key accounts is quite significant for us, and we will work diligently to gain business from such new opportunities. Second, we can accelerate the conversion rate of our existing clients in our Marketing Solutions to Enterprise SaaS Solutions with comprehensive turnkey solutions we provide to customers.

These joint efforts will save our branded partners from having to develop and maintain the infrastructure to conduct e-commerce business on WeChat. Recall that we serve more than 3,000 Marketing Solutions clients, and being able to convert many of these customers to higher-margin Enterprise Solutions customers would certainly fit our longer-term strategy. We are confident we can become the first choice for key account customers through this partnership with Baozun, expedite the market share gains among the key account customers and in turn enjoy significant upside here.

Lastly, this strategic partnership will allow us to concentrate our resources on developing the standard SaaS products we will use to penetrate the mid-tier client segment, which will become another growth driver for Enterprise SaaS Solutions business. We have focused on the key account customers over the past 2 years since we launched Enterprise Solutions in 2019 and have accumulated deep expertise for selective industry verticals. We are able to now leverage and replicate the standard modules used successfully with those early customers to tap into a wider clientele.

In view of the huge market potential, we anticipate committing more resources to enhance not only our research and development efforts, but also marketing initiatives. We have already established R&D centers in Xi'an and Hubei, where we are aggressively building up a stronger R&D labor force to devote to the customized solutions and developing the standard products.

Moreover, we want to further penetrate the mid-tier client market. And to this end, we also introduced and worked with a number of potential distributors to help us drive additional revenue from the less-penetrated customer segment.

Looking ahead, we see 2021 as a year full of opportunities and investments. As always, we remain very open to M&A opportunities that can complement our current product offerings or enhance our market-leading capabilities in data analytics and omnichannel management. As an example, our announced acquisition of Parllay will enhance our marketing automation and brand reach expertise in WeChat-based CRM, e-commerce, and marketing SaaS solutions in China and will be our appropriate product for both mid-tier clients and key account customers.

Beyond the continuous product offerings enhancement, we are also keen to explore targets or partnerships that have already built a significant number of specific-industry verticals clients which we are able to cross-sell our products to. With these, we are confident we can see synergistic benefits from both product integration and acquisition of new clients through cross-selling opportunities.

In the meantime, we will continue to execute on our international expansion strategy, which will be primarily driven by the partnerships we have formed in 2020. Due to travel restrictions resulting from the pandemic, we also see greater urgency for the international brands to execute their China expansion strategy and expect this dynamic to offer us additional growth possibilities.

This concludes my opening remarks. And I would now like to turn the call over to our CFO, Terence Li, to discuss the fourth quarter and full year 2020 financials. Terence?

Thank you, T.J. Hi, everyone. I'm very pleased to share with you our record-setting performance for 2020. As T.J. mentioned previously, despite the challenging macro environment brought by COVID-19, we still managed to rack up highs in gross billing, revenue, gross profit, adjusted EBITDA in 2020 as well as full year positive adjusted net income for the first time.

I would like to begin my comments with a few key highlights from the full year and the fourth quarter of 2020. We reported revenues of $234.7 million (sic) [$254.7 million] for 2020, an increase of 28% year-over-year. Revenue for the fourth quarter of 2020 were $78.7 million, an increase of 39% year-on-year. The increase was driven by healthy growth in Marketing Solutions and strong trajectory from Enterprise Solutions.

Looking at each business separately, Marketing Solutions reported a record high $225.9 million in revenue for 2020, a 20% year-over-year growth. For the fourth quarter of 2020, revenue from this business segment grew 28% to $68.1 million compared with the same period of last year primarily due to growth in market demand from specific action marketing campaigns

I'm also very excited to share the results of the Enterprise Solutions business, which nearly tripled its revenue from 2019 and reached $28.9 million in 2020. In the fourth quarter of 2020, Enterprise Solutions hit another record quarterly high with revenues of $10.6 million. The robust growth indicates the strong demand we see from our key accounts clients across selective industry verticals. It is also worth noting that Enterprise Solutions account for more than 10% of total revenues just 2 years from launching this new business segment.

Gross profit grew by 36% year-over-year in the fourth quarter to $25.3 million (sic) [$23.3 million] and by 28% for the full year of 2020 to $73.3 million, mainly due to continued growth in Marketing Solutions and rising contribution from higher-margin Enterprise Solutions.

As you may recall, 2020 was not only a record-setting year in terms of financial performances, it was also a year in which we received tremendous support from the capital market. We completed a private placement and a follow-on offering in June and September, respectively, of 2020, and welcomed a number of prestigious international investors as solid long-term shareholders. As a result, we have a healthy cash balance, including cash, cash equivalents, time deposit and restricted cash of $94.5 million as of December 31, 2020, compared with $61.1 million as of December 31, 2019.

For the rest of my discussion, I will focus on our non-GAAP results. You can find reconciliations of these non-GAAP results in the press release we post earlier today and which can be accessed at our Investor Relations website.

Adjusted EBITDA for the fourth quarter and full year of 2020 was $5.1 million and $17.3 million, respectively. Both metrics show a strong increase compared with the same respective periods last year, indicating the operating leverage that the company has achieved. As mentioned earlier in the call, we also recognized the first ever full year adjusted net income in 2020 as it reached $7.6 million. The adjusted net income for the fourth quarter was $2.1 million, making the fifth consecutive quarter of positive adjusted net income.

Gross billing in 2020 grew 6% year-over-year to $76 million -- to $678 million, primarily as a result of increased demand from our key e-commerce, online entertainment and media and online education and training verticals and partially offset by the weakness from the hotel and hospitality industry resulting from the pandemic. Meanwhile, in view of the higher uncertainty associated with COVID-19, we strategically shift our focus to high-quality clients and business to manage our risks.

All in all, the fourth quarter of 2020 was extremely strong, and we believe it was a good way to finish the year that was challenging in very many ways. For further information, please see the detailed recap of other financial measures in the press release we issued today.

On January 15, 2020, we announced the share repurchase program in which we could purchase up to $10 million of our own ADS through December 29, 2020. On December 10, 2020, we announced another share repurchase program, in which we could purchase up to $15 million of our own ADS from December 30, 2020, to December 31, 2021. As of December 31, 2020, the aggregate values of ADS purchased was approximately $5.7 million.

I would like to conclude my remarks with our outlook for the first quarter of 2021 and for the full year 2021. This look at our outlook for revenue is based on current market conditions and reflects our current gauge of the COVID-19 pandemic impact. These assumptions are subject to change.

We now project our 2021 revenue guidance to be between $315 million and $335 million. Revenue from Enterprise Solutions for the year is estimated to be between $60 million and $65 million. We estimate our first quarter 2021 revenue to be between $60 million and $65 million. Revenue from Enterprise Solutions for the first quarter is estimated to be between $10.5 million and $11.5 million.

Looking ahead of 2021, as T.J. mentioned, it will be a year of investment and forward opportunity for us. We continue to be cautiously optimistic for the recovery of the Marketing Solutions as the vaccine rollout would progress on a global scale. In the meantime, we remain very excited about the rapid growth of the Enterprise Solutions and the enormous total addressable market. In view of these opportunities, we will allocate our resources more strategically to help support the growth on both business segments. Additionally, we will keep exploring more M&A and capital market opportunities that could help the company stay on track to [evolve] into the integrated enterprise and marketing cloud platform to benefit from the rapidly growing online to off-line digital transformation and SaaS market in China.

With that, I'll now turn the call back over to T.J. for closing remarks.

Thank you, Terence. Our strong financial results in 2020 are indicative that our integrated Enterprise and Marketing Solutions are well received by customers. We will see incredibly significant market opportunities ahead in the online to off-line digital transformation initiatives from many current and prospective customers. The underlying consumer transactions that key accounts and enterprise customers are looking to penetrate literally amount to trillions of dollars, and we believe our solutions can help such enterprises more efficiently and profitably capture such spending.

For Marketing Solutions, we expect another year of healthy organic growth, given the continued growth in the digital advertising market in China and the rising online advertising mix and programmatic advertising penetration, which is our key business focus and the necessary foundation for the company as a whole.

We also expect the Enterprise Solutions segment to continue its rapid growth given the large blue ocean of opportunities we see as digital transformation unfolds in China. We definitely see a higher proportion of total revenue in 2021 from Enterprise Solutions than it was in 2020 as we form a very clear strategy to continue gaining market share with key account customers as well as tapping into the newly developed mid-tier clientele. We will work expediently to grow our customers base in this higher gross margin segment of ours.

Given our outlook for both Marketing Solutions and Enterprise Solutions, we are, again, certainly optimistic in the company's resilient top line growth outlook, both in 2021 and beyond.

I would like, once again, to take this opportunity to thank all our customers and shareholders for their support over the past 12 months. It was a very challenging year, yet we believe our performance shows our ability to overcome obstacles, deliver leading-edge data solutions and generate shareholders' value.

Also, I want to thank all iClickers for the execution during very challenging times and their dedication to the company. Our people truly are the most important asset for the company.

This concludes our prepared remarks. Thank you for joining us on today's call. We will now open the call to questions. Operator, please go ahead.

(Operator Instructions) The first question is from Nelson Cheung from Citi.

T.J. and Terence, congratulations on the strong quarter of results. Actually, I have a few questions for the company.

My first question is related to the strong guidance of Enterprise Solutions in 2021. Can management share whether you have incorporated the financial impact from Baozun partnership? And if so, what would be the impact on the partnership? And also, I would like to know what would be the target revenue mix for standard SaaS product in 2021.

And my second question is related to the Baozun partnership. And can management share some latest progress of Baozun partnership? And for example, how many clients have been referred from Baozun right now? And what is the progress of the e-commerce solutions and the private domain network?

And finally, just a quick question on Enterprise Solutions. And looking back in 2020, what would be the biggest lesson that management has learned in expanding your Enterprise Solutions business? And going forward into 2021, how would management prioritize your resource in terms of client acquisition, product development and M&A?

(foreign language)

Thank you, Nelson. This is Terence. Let me take your first questions about the budgets on the Baozun deal. We haven't fully budget the deal yet because it just kicks in the first quarter. As we probably have discussed before, we probably would visualize more income and solid cases going into the second half of the year. So the current budget doesn't really fully take into account that. Possibly 10%, 20% of that was budgeted right now, but we believe there are more potential to come. And that's, for your first part of the question, my quick answer.

Maybe T.J. could answer your concern or your questions about the execution part about the Baozun business. T.J., please.

(foreign language)

[Interpreted] Okay. Let me try to answer the second part of your question about our cooperation with Baozun. Actually, the Baozun deal was closed at the end of January. And since then, both iClick and Baozun have established an implementation team which directly reports to CEOs of both sides. And the team meets on a weekly basis to talk about the cooperation.

And our cooperation currently focuses on 2 areas. First is we combine our best products and operation services into a complete solution to provide to our customers. And second, we are explore the feasibility of these solutions on some client base.

(foreign language)

[Interpreted] And as to the third part of your question. I'm not sure I understand correctly. Is it about the biggest challenges? Or the lessons we've learned in 2020?

Yes. (foreign language)

(foreign language)

Well, in 2020, we still think that the digital operation or the SaaS business are the blue ocean market in China. Therefore, we've started to sell SaaS products to our key accounts, which is also our teams. And after over 1 year of operation, the performance has confirmed our decision. And also, we're focused at the very beginning on familiar clientele and rapidly explored business models on them. So in the first 2 years, we focused on consumables.

(foreign language)

[Interpreted] So next up, in 2021, our Enterprise Solutions, we still have great potential for us to tap into, not only in terms of the KA customer base, where we have great advantages over, but also in terms of mid-end customers.

This year, we will adopt a new strategy, that is we cooperate with Baozun in terms of Enterprise Solutions by rapidly and efficiently acquiring key account customers. At the same time, the cooperation with Baozun will allow us to channel more resources in developing more and better standard products to acquire mid-end customers in a fast manner.

(foreign language)

[Interpreted] At the same time, when it comes to overseas expansion, we are working with Oracle to target our overseas customers with the enterprise solutions.

And we think there is another big opportunity facing us, is that we will leverage strategic investments and acquisitions to rapidly acquire mid-end customers.

(foreign language)

[Interpreted] So this wraps up my answer to our question.

The next question is from Brian Kinstlinger from Alliance Global Partners.

Great. Can you highlight any changes in the end markets for Marketing Solutions? For example, has travel returned at all? Did e-commerce remain strong? And any other verticals worth mentioning?

And then secondly, you talked about a lot of different aspects of investing in R&D, in sales and marketing in relation to Baozun as well as your enterprise business. Maybe talk about the impact to -- or what are the size of those investments maybe from a dollar perspective on an annual basis from an expense base?

Pardon me. Is your line on mute? Hello?

Hello. I think T.J. will answer. From my end, actually, the changes in terms of demand on the marketing Solutions Side is still the e-commerce, the online entertainment and the education sector, basically the strongest sector in the year and also picking up quite well going into 2021. And we see some of the travel, hospitality sector and branding customer lowering some of the budgets. And in the first quarter, I think this trend remain quite the same comparing to the previous year in the fourth quarter.

And then in terms of the investments and expenses. The way you go driving stronger growth for the enterprise side. Can you kind of touch on the impact on the expenses?

In 2020, we basically add on certain new engineers, an R&D team, in the Enterprise Solutions. In particular, we add on more like 200 engineers in the team. So probably, we add on at least like $5 million during the year in terms of OpEx for the R&D in terms of the Enterprise Solutions. We also add on some marketing expenses as well. And totally extra like $10 million for the year in 2020.

And we believe that we'll still be going on to invest more going into 2021. And we still project around 200 more engineers to be recruited during the year. And also, we're building up some channel partners right now, and there would be some new budgets and models in terms of these reseller models that we are going into when we work with these new channel partners.

And again, I think 2021, we will see some uptick in terms of these marketing and R&D dollars, but should have a positive impact overall in terms of the growth and even speed up further the growth in the Enterprise Solutions.

The next question is from Colin Liu from China Renaissance.

T.J., Terence, I just have one actually. It's more regarding the partnership overseas, particularly with Oracle and other overseas partners. And T.J. also mentioned just now that we saw a lot of opportunities from foreign brands trying to tap into Chinese market with trouble transferring, which we don't really know when it's going to let up.

So how should we see the partnership with overseas partners? And how should we see overseas coming into China? What sort of business opportunities are there? And is there going to be any sort of upside to our revenue growth in this year and perhaps even next?

This is Terence. I think the deal with Oracle was one typical examples how we may work with some overseas partners. And I think Oracle's solutions is obviously very good solutions. Hopefully, but probably in China, there would be some other adaptation and localizations that they need to try to cater for. And I guess our team, with the local expertise, would be some of the very good partners for them when they try to localize the solutions and also execute locally in China. We do have the domain and the knowledge, we'll be able to help them and to resell the solution and also integrate that with our existing enterprise SaaS solutions and to provide more choices and values for the customers internationally.

I think going forward, the international market, particularly after the corporate -- when the travel will be permitted, I think we will see even more of these type of opportunities going around.

And that's my input on that. We will see if T.J. has any comment to add on.

(foreign language)

[Interpreted] Well, as to international business, this year, our strategy is to sell our standard products, including the acquired SaaS products through our sales channel, our own sales channel, as well as the strategic partners' channels. For example, Oracle's.

The next question is from Thomas Chong from Jefferies.

Can you comment about the competitive landscape in the Enterprise Solutions business? And also our thoughts about the margin profile of this business over the long run.

(foreign language)

[Interpreted] Well, let me try to answer your question. As to the Enterprise Solutions market in China, I think we need to look at it from different client segments. In China, we think that Enterprise Solutions market can be divided into key account segments, mid-end segments and small- and medium-sized enterprises. So we need to adopt different strategies to tackle with or to serve different client segments.

And for all these years, we have been focusing on key accounts, who not only need standard products, but also customized services because they need to match or link up standard products with their own IT infrastructure. And as to the key account customers that have been growing on e-commerce platform in China, they need suppliers to help them use the tools and products in their daily operation. After 2 years of operation and practices in China, we now have established quite an advantage over key account customers. And in particular, early this year, we have established a cooperation with Baozun, which will further consolidate our leading position in the key accounts segment.

(foreign language)

[Interpreted] Well, as to the mid-end customer segments and small- and medium-sized customer segments, standard products will be a better choice. In the second half of last year, we've already launched standard SaaS products to cater to the needs of these 2 market segments. And this year, we're going to formally enter the competitive landscape of the mid-end customer market or segment.

And as to the SME or small- and medium sized business market segment and some mid-end customer segments, there are 2 famous companies you must have already known, that is Weimob and Youzan. Both of them are listed in Hong Kong, and they have acquired some market share in this specific segment. But I think that mid-end customer segment is a huge one, and we have found our execution pathway through periods of exploration. So later this year, we are going to disclose our operational data. And we have already developed our products and tried them on some of our customers. So I believe most likely that this year, we're going to gain enough growth in this market segment.

(foreign language)

[Interpreted] So this is my view about the Enterprise Solutions business in China. So this is my view about the Enterprise Solutions in China.

The next question is from Carson Lo from HSBC.

T.J., Terence and Lisa, congratulations on the strong quarter results. So I have 2 questions here relating to the Enterprise Solutions.

So the first one is kind of broad to what Thomas had asked about the competitive landscape. So in terms of the standard products that we are going to tap into the mid-tier or SME market, so from the customer perspective, what does the management thinks is, in terms of the product itself, what is the differentiator of iClick's products versus the peers, like what T.J. has mentioned, China and Weimob?

And then in terms of the margin. So because we are going to adopt the reseller model, so how is the margin profile for these SME standard products versus what we provide to the KA? And that's the first question.

And the second question is, I want to ask more about the customer base, the KA customers for the Enterprise Solutions. So how many customers have [seen demand] in Q4? And what's the customer number by end 2020?

And also, out of the customers that we acquired in 2019, so how many of them have actually renewed contract with us in 2020?

Carson, thank you very much for the questions. Let me first take the questions about, firstly, our customer number for 2020 and the fourth quarter, and then about some analysis about the margins profile would be in terms of the new standardized product that we're going to launch.

Firstly, in the fourth quarter of 2020 on the key account clients on Enterprise Solutions, we got pretty much, again, another 50, 60 clients. So all together for the year, it's actually up to 200 already for the Enterprise SaaS Solutions client.

And the retention rate right now is pretty well, over 95% plus. We probably lost some really small clients, but not significant one.

And in terms of the margin profile about the new standardized solutions that we are launching, I think comparing to some of the peers, you can see some of the standardized product, pretty much would enjoy relatively high gross margin, like 70%, 80% plus. I guess there would be some accounting models that we need to further study. But basically, that would be the kind of models that we are also looking for, for the standardized product.

And there would be a substantial or much more marketing dollars in terms of some revenue sharing as we -- to some of the channel partners. And that probably would be like 50% in terms of the dollars generated, have to be shared with these distributors. But that would be reflected in the operating expenses as part of the sales and marketing dollars, as you guys probably are familiar with. And that's the typical models, and we're also looking forward towards a similar profile at the moment.

But having said so, we didn't really run into that in 2020. We just kick start that part of business in 2021, and not really significant at the moment. And I think that's my answer towards some of your questions. And I will leave the product differentiation part to T.J.

(foreign language)

[Interpreted] Well, okay. I'd like to answer your question about the difference between our standard products and competitor products.

First, we have very clear positioning for our client base. We target chain stores with 10 to 20 and even more outlets in third and fourth tier cities in China, and I'm pleased there are a lot of them in the Chinese market.

And the second, we not only provide mini apps to them. We also have the social CRM based on WeChat Work product. So these products will help these enterprises to improve their operating capabilities and better serve their off-line customers and can also help channel off-line traffic to online platforms.

So our differences lie in 2 areas. First is the off-line to online integrated solution based on WeChat Work. And the second is we have accumulated great operational experiences with key account customers. So we can replicate these operational methodology and practices to serve mid-end customers.

In conclusion, what differentiated us from others is we not only sell products, we also help customers to understand how to use our products.

As there are no further questions, I'd like to turn the call back over to the company -- to Lisa Li for closing remarks. Please go ahead.

Thank you, everyone, once again for joining us today. If you have any further questions, please feel free to contact iClick's Investor Relations department through the contact information provided on our website. Thank you.

This concludes this conference call. You may now disconnect your line. Thank you.