Amber International Holding Ltd (AMBR) 2021 Q1 法說會逐字稿

Hello, ladies and gentlemen, thank you for standing by for iClick Interactive Asia Group Limited's First Quarter 2021 Financial Results Conference Call. (Operator Instructions) Today's conference is being recorded.

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

Hello, everyone, and welcome to iClick's First Quarter 2021 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, TJ, Chief Executive Officer and Co-Founder of iClick, will first provide a high-level review of the first quarter 2021 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 first quarter and provide guidance for second quarter and full year of 2021. He will then turn the call back to TJ for closing remarks before the call is open 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 Litigation 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 include 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. TJ, please go ahead.

Thank you, Lisa, and welcome to the call, everyone. Despite ongoing COVID-19 impact, fiscal 2021 began with a strong performance as we reported record first quarter revenue, gross profit, adjusted EBITDA and adjusted net income.

We are encouraged that revenue in our core Marketing Solutions segment reached record first quarter levels of $54.8 million, up 23% year-over-year, benefiting from continuing ad spending recovery despite some lingering effects of the coronavirus pandemic.

Likewise, the momentum in our Enterprise Solutions segment also remains quite strong as this SaaS-based revenue reached $11.7 million in the first quarter, up 166% year-over-year and reached another quarterly record for the sixth consecutive quarter. Revenue from our higher-margin Enterprise Solutions segment accounted for approximately 18% of total revenue, much higher than 13% in the first quarter of 2020 and 11% for all of fiscal 2020.

These financial accomplishments are excellent indicators that we have the proper data-driven solutions and business strategy to help our clients benefit from the digital transformation opportunities in China, not to mention the significant operating leverage inherent in our structure as we continue to increase revenue. We firmly believe we are in the right spot at the right time as the digital revolution in China continues to unfold.

As I mentioned in our previous call, 2021 will be a year of investment in more new initiatives, particularly those that further develop and foster revenue in our SaaS-based Enterprise Solutions segment and M&A opportunities.

In addition to extending our efforts to continue gaining market share among the key account clients, we have also started to tap into the mid-tier clientele to leverage our experience and product offerings from the past 2 years. We remain on track to hit these objectives, and I'm happy to share with you more details on our strategy and execution.

As a reminder, at the beginning of this year, we announced a strategic partnership with Baozun, in which we will provide front-end solutions, including many programs [and many programs] store establishments, SaaS-based tools and data analytics platforms, while Baozun will handle operation services and back-end infrastructure services to jointly target key account customers in China.

The integration progress has been moving smoothly with both teams in frequent communication. Concurrently, both parties are introducing their respective clients to each other to help promote cross-selling opportunities. We are currently integrating all the technological resources and working on develop comprehensive solutions to fulfill demand from clients. We are also working on several pilot case clients and we'll share more details with you once they are ready.

We continue to see significant synergies not only from the one-stop solutions that key account customers desire, but also from exploring a number of target industry verticals to rapidly penetrate given our strong market presence and track record.

In addition to the extensive cross-selling opportunities we are seeing from the one-stop solutions developed with Baozun, we have also witnessed a higher conversion rate from over 3,000 clients in our Marketing Solutions segment and more willingness from them to adopt Enterprise Solutions. With our data-driven products, we can address all the issues and challenges they will likely face when exploring the [unprecedented] opportunities from private domain traffic or smart retail, leveraging leading technological capabilities and key account customer service experiences from both iClick and Baozun.

As we continue aggressively gaining higher market share among the key account customers, we view the mid-end clientele segment as being a huge untapped market based on the number of merchants in this segment. Given this opportunity, we have developed and launched a series of standard SaaS products, including iSCRM, with different solutions targeting the unique needs of clients across some key industry verticals.

We first introduced such solutions to the market in the first quarter, and the initial feedback from many mid-tier clients has been quite positive. As a result, we expect to start seeing some financial contribution from these new mid-tier clients beginning in the second quarter of 2021 and ramping at a faster pace in the second half of the year.

In addition to fulfilling demand of domestic clients, we have also launched another standard SaaS-based product called iSmartGo. iSmartGo was specifically designed to fulfill the strong cross-border e-commerce demand from foreign brands that are aggressively tapping into the enormous smart retail market in China, in part to capture the lost revenue due to travel restrictions resulting from the pandemic. iSmartGo helps those brands build and operate their own private domain traffic marketplace based on the WeChat ecosystem and eliminates the need for our clients to develop and maintain the necessary e-commerce infrastructure themselves.

On the M&A front, we are always looking for opportunities to scale our product offerings both wider and deeper. Ideally, our M&A targets will have 3 key characteristics.

First, we will offer cross-channel SaaS products or technological capabilities that will allow us to more easily manage omnichannel platforms, including but not limited to WeChat, on behalf of our clients.

Second, their products will enhance our current offerings, including data analytics capabilities will offer more functionality modules beyond our current key focus on customer relations management.

And third, they will already have a strong base of clients in certain industry verticals that we can cross-sell our current data solutions into.

Our acquisition of Parllay is a terrific example of how we carefully target a candidate and integrate it into our suite of digital solutions offerings. Parllay has enhanced our marketing automation and brought expertise in WeChat-based SaaS solutions that has helped us accelerate the growth of Enterprise Solutions.

We have been exploring and assessing the M&A opportunities carefully and will share future developments with you as any of them become mature.

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

Thank you, TJ. Hello, everyone. I'm happy to share with you our strong financial performances in the first quarter of 2021.

Despite the ongoing effects of the coronavirus pandemic and an ad spending market that has yet to fully recover, the first quarter financials set many seasonal records, including record first quarter revenues, gross profit, adjusted EBITDA and adjusted net income.

First quarter total revenue increased 36% year-over-year to $66.6 million. This growth was driven by growth in both our Marketing Solutions and Enterprise Solutions segments. Marketing Solutions set a first quarter revenue record of $54.8 million, up 23% year-over-year, driven by growing market demand on performance marketing campaigns. Enterprise Solutions revenue in the first quarter was $11.7 million, up 166% year-over-year and a new quarterly record, and accounted for 18% of our total revenue, also a new high.

Gross profit grew by 47% year-over-year in the first quarter to $19.5 million primarily due to continued growth in Marketing Solutions and rising contribution from higher-margin Enterprise Solutions.

Cash, cash equivalents, time deposits and restricted cash as of March 31, 2021, was $100.2 million compared to $94.5 million as of December 31, 2020. Our balance sheet remains strong to accommodate both our organic growth and M&A opportunities. We have in place a $50 million ADS repurchase program through December 31, 2021. And as of March 31, 2021, the aggregate value of purchased shares was approximately $1.1 million.

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 posted earlier today and which can be accessed at our Investor Relations website.

Adjusted EBITDA for the first quarter of 2021 was $3.6 million, up 54% year-over-year. Adjusted net income for the first quarter of 2021 was $647,000 versus $553,000 in the first quarter of 2020, making the sixth consecutive quarter of positive adjusted net income. Gross billings in the first quarter of 2021 was $200 million, up 27% from the period a year ago and driven by recovery in advertising spend.

Overall, we are pleased with the financial performance in the first quarter and optimistic that future quarters will continue along a similar growth trajectory. For further information, please see the detailed recap of other financial metrics in the press release we issued today.

As we have emphasized in our prepared remarks, 2021 will be a year of investment and full of opportunities for us. Growing our Enterprise Solutions contributions remain a high priority. And we continue to roll out a number of products and seek partnership and M&A opportunities to further accomplish this goal.

The off-line to online digital transformation in China continues to be a powerful tailwind for companies like ours that can innovate around this megatrend. The large available market opportunities in front of us and the potential to gain market shares have us confident that any investment initiative will pay for over the longer term, even if this lead to some short-term [red for] profitability. In addition to managing both top line growth and bottom line profitability as best we can, our key focus in 2021 will be the top line growth for Enterprise Solutions.

I would now like to conclude on my remarks with our outlook for the second quarter of and full year 2021. Please note that our outlook for revenue is based on current market conditions and reflect our current gauge of the COVID-19. These assumptions are subject to change.

We estimate our second quarter 2021 revenue to be between $72 million and $77 million. Revenue from Enterprise Solutions for the second quarter is estimated to be between $12 million and $13 million. In the meantime, we revised up our 2021 revenue guidance to be between $318 million to $338 million with revenue from Enterprise Solutions for the year to be between $62 million and $68 million.

With that, I now turn the call back over to TJ for closing remarks.

Thank you, Terence. We are proud that the financial momentum established in 2020 has carried over into 2021 and expect these growth trends to continue. We are committed to growing the higher-margin Enterprise Solutions segment at a rapid pace and continue to view Marketing Solutions segment as the essential base revenue and profitability of the company. The online to off-line digital transformation initiatives for many customers are still in the early stage, and we are steadfast in our resolve to remain the market leader for brands looking to capitalize to this digital revolution in China. Our data-driven solutions can help such brand customers effectively tap into Chinese consumer behavior.

We still see significant growth opportunities for both Marketing Solutions and Enterprise Solutions and continue to expect Enterprise Solutions to account for an increasingly larger percentage of total revenue. Our strategic initiatives I discussed earlier are really focused on making this happen, both in 2021 and beyond.

I want to thank all our customers that entrust us to help them grow their businesses as the digital revolution unfolds in China. I want to reiterate my appreciation to all the iClickers who help us deliver innovative data solutions to our customers. And I certainly want to thank all our shareholders who have chosen to seek capital appreciation with us and have impressed the confidence in our management team here at iClick.

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) Our first question is from Brian Kinstlinger of Alliance Global Partners.

First, can you update us on the progress you're making with the Oracle and HubSpot partnerships? And when do you think those might become more meaningful growth drivers to your business?

(interpreted) Thank you for your question. As our cooperation with Oracle and HubSpot, as I've mentioned last time, we are actively promoting the cooperation with them, and we are actively promoting the private domain solution to overseas customers.

And in Q1 this year, we've launched a specific product targeting foreign brands called iSmartGo. And this product will help overseas customers go into the Chinese market and become part of our WeChat ecosystem.

And in the future, we're going to rely on the iSmartGo to further our cooperation with these 2 companies. But it will take time because it will take a rather long time to roll out this tool to more customers and make more customers aware of the functions of these product. But I believe that this tool is a very useful one for our overseas customers.

The next question is from Nelson Cheung of Citi.

(foreign language) So let me translate myself. So thank you management and congratulations on the strong set of quarterly results. So I have 2 questions.

The first question is regarding your revised guidance annually. Just wonder whether the incremental revenue from the Enterprise Solutions, what would be the driver of your revised guidance? Is it due to the growth of mid-tier clients or higher certainty on the Baozun partnership?

And my second question is related to the client mix in your Enterprise Solutions. Just wonder, management, if you can provide more color on current mix of KA and mid-tier clients and whether you're on track to meet the 3,000 mid-tier client target this year?

Thank you, Nelson. This is Terence. And for your first question about the guidance. We revised the guidance up on enterprise SaaS solutions mainly because we see general demand is stronger than before in the market. And secondly, we also believe that some of the case that we run right now with Baozun and some of the standardized products that we're launching to the market probably would start to kick in some numbers starting from June.

So maybe sometimes earlier than our original budgets, that numbers may be kicking in from the second half. So that's why we raised it a bit and more like kind of showing to the market that we have more confidence right now on that numbers.

On the second part of the question, I think I would let TJ to address the questions.

(interpreted) As to your question about our mid-tier customers, the progress and the outlook this year. Well, in Q1 this year, we've already done a lot of work. We've been leveraging distributors to reach out to customers, and we've seen very encouraging progress. We've already acquired some early adopters who have bought standard SaaS product from us, and we also provided operational services to them. So the initial feedback is being -- is very positive.

As to the revenue recognition, well, as the mid-tier customer base grows and as these customers purchase our products, we will gradually recognize our revenue. And therefore, I think that we will see the financial contribution from mid-tier customers kicking in since -- in the second quarter this year. So I think that it is highly likely that we're going to acquire 3,000 to 5,000 mid-tier customers this year.

And our next question comes from Thomas Chong of Jefferies.

(foreign language) Can management talk about the GP margin trend for the Enterprise Solutions as well as the merchants, in terms of the number of merchants, the size of the merchants, as well as the penetration or the mix across different industry?

(interpreted) Thank you for your question about the customer growth of Enterprise Solutions. Well, this year, we will focus on 2 directions. The first direction is we will continue to expand key account client base. By the end of 2020, we had a little bit over 200 key account clients. And in first quarter this year, we added another 40 key account clients. And for the whole year in 2021, we're going to upsell to the merchant -- to the Marketing Solutions customers as well as further cooperating with Baozun. And in this way, we are going to acquire 200 to 300 new key accounts clients.

And the second direction is to sell our standard SaaS products to mid-tier customers. And this year, our target is to acquire 3,000 to 5,000 of them. And based on the progress we've seen, the target will be -- will very likely be achieved.

Thomas, this is Terence. Let me add on your gross profit margin questions. Firstly, about our key accounts. We are still standing at relatively high margins, at the 60% to 65% gross profit margin. And on standardized products, we actually believe that it would be even better and it could be at the 75% range and because that is more standardized and most of R&D expenses have been expensed off before. So that's the current kind of profiles of the 2 segments that we have. Thank you.

The next question [Julian Chang of ESG Bank].

(foreign language) I'll translate myself. Congratulations to the management for the strong quarter. My question relates to our mobile marketing business. Advertising industry has been recovered from the pandemic in China, and with the enlarging budget from advertiser across verticals and [accelerated] revenue growth on the publisher's side. What's the management's outlook for the recovery trend and its impact on our Marketing Solutions billing and revenue in upcoming quarters?

And also, the launch of the duplications of iOS 14 IDFA, will they impact our targeted accuracy and attribution? And what will be our accounting management?

(interpreted) Well, thank you for your question. I will first take the question about the advertising outlook. Yes, we've seen the recovery of advertising industry this year. And many industries have seen their advertising budget getting closer to the normal level. This is largely due to the fact that the pandemic is under well-control in both China and the rest of the world.

For some industries, such as travel and hospitality, they will see [retaliatory] recovery in 2021. On the other hand, some industries are subjected to adverse impact from regulation, such as online education. And there are also some onetime events. For example, the BCI Xinjiang cotton incident has negatively affected the advertising spending of apparel industry.

But if you look at the Marketing Solutions business of iClick, you will see that the revenue contributions from different industrial clients are quite balanced. And therefore, our Marketing Solutions business has been enjoying a healthy growth. And this is in line with our strategy this year, that is to focus on steady and healthy growth. And in addition, this year, for Marketing Solutions business, we're going to focus more on developing the KOL- and MCN-related business.

So in conclusion, in 2020, the overall advertising industry will enjoy healthy recovery, and our iClick Marketing Solutions business will also grow steadily.

Okay. As to the second part of your question about the Apple's IDFA policy. As far as I understand, this policy has had a limited impact on the Marketing Solutions business of us, and there are several reasons. It also has limited impact on the advertising industry and businesses. There are several reasons.

First is the Apple's market share in China is small. And for our Marketing Solutions business, our exposure to Apple is around 10%. So very limited.

And the second is this policy was newly launched. So it may take some time for us to see whether the customers will opt out or not because it will require the upgrading of the cell phones, upgrading of the operating systems and upgrading of the app. So it all takes time. And this is from hardware perspective.

And also from industry perspective, the advertising or marketing industry is also actively exploring alternatives around this policy. So -- and as far as we understand, The ad placement via IDFA is just around 10%. So very limited. And therefore, we think that the IDFA policy of Apple has had limited impact on us.

And when iClick serving our customers at current stage, we rely very heavily on first-party data provided by customers centered on CDP platform, and which actually will depend on the login status of users. So this is my answer to your question.

(Operator Instructions) Thank you. As there are no further questions, I'd like to turn the call back over to the company for closing remarks. Please go ahead.

Thank you 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 the conference call. You may now disconnect your line. Thank you.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.