Amber International Holding Ltd (AMBR) 2022 Q1 法說會逐字稿

Hello, ladies and gentlemen, thank you for standing by for iClick Interactive Asia Group Limited 2022 First Quarter Unaudited Financial Results Conference Call. (Operator Instructions).

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

Hello, everyone, and welcome to 2022 iClick's first quarter unaudited 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.

In addition, during the call, management will give their prepared remarks in English. During the Q&A session, we will take questions in both English and in Mandarin and the third-party translator will provide consecutive translation. All translations are for convenience purposes only. In case of any translation discrepancy, management's statement in the original language shall prevail.

Jian Tang, T.J., Chairman, Chief Executive Officer and Co-Founder of iClick, will first provide a high-level review of the 2022 first quarter results and share his thoughts on our execution strategy going forward. Chief Financial Officer, David Zhang, will follow and give us additional insights on the financial results, as well as, provide guidance for the second quarter and for full year of 2022. 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 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 Chairman, Chief Executive Officer and Co-Founder, Jian Tang. T.J., please go ahead.

Thank you, Lisa and welcome to the call everyone. The first quarter of 2022 for iClick was highlighted by the successful refinement of our product mix, which drove a increase in our gross margin despite challenging market conditions.

On today's call I will first discuss, how we achieved this improvement, followed by how the macro uncertainties and other forces are affecting our implementations. And finally how we will leverage current market conditions to build a long term shareholder value.

First, the increase in our gross margin was achieved by our consistent focus on our higher margin Enterprise Solutions segment, while [conjunctively] unwinding lower margin, higher risk Marketing Solutions businesses. As a result, Enterprise Solutions revenue has continued its strong momentum, growing by 34% year-over-year to $15.7 million, a record high among any historical first quarter for this segment.

We are quite encouraged by this growth as it relates directly to what we expect to be the primary driver of our future revenue, our SaaS+X business model. This adjustment to our product mix will drive iClick's long-term success in the face of a complex cloud landscape defined by COVID-19 involvement and shifting regulatory and macro influencers.

The contraction in the overall advertising industry has led to a adverse impact on our Marketing Solutions business, as we discussed in our last earnings conference call, we have undertaken concerted action to direct our continued investment in higher growth and higher margin Enterprise Solutions business, while selectively winding down our Marketing Solutions, until such time as market conditions warranted resumption.

The regulatory clamped down on certain industries, we have served within our Marketing Solutions, as well as, the strict COVID-19 merchants to curtail the spread of the various -- have risked the challenges for us compared with the same period last year as we [whether] this broad-based industry-wide phenomenon. We believe our approach will help iClick better navigate these challenges, especially with the soft capital market landscape, narrowing the resources we can mobilize.

While these market factors also continue to challenge our client implementations and onboarding of Enterprise Solutions business in the first quarter and beyond. We are optimistic that our strategic shift will result in long-term value creation. Our SaaS+ business model empowers brands in China and made these challenging market conditions and continuously evolving business models as clients require a higher levels of guidance and the implementation from iClick regarding how they can enhance the consumers' loyalty and repurchase rates to drive continued revenue growth.

As a result, we believe our growing footprint will uniquely position the company to continue to capitalize on the very much intact mega digital transformation trend in China. In view of this, we have relentlessly upgraded and improved our SaaS+ product mix as we seek to meet the huge demands of our branded clients. For example, we launched the Douyin Version of iFans, one of our data analytics products that helps brands identify the most appropriate KOL to conduct a promotion. This upgrade in large coverage of iFans beyond its existing media platforms, Xiaohongshu and Bilibili.

With this upgrade, we are also able to articulate the one-stop smart marketing strategy for the branded clients and can nimbly adjust the strategy with real-time data analytics feedback. Another strong case study is the value we have helped XTEP a leading PRC-based professional sports brand achieved in advertising the appropriate and customized content marketing strategies based on product features to attract different groups of users and various scenarios.

In addition to the powerful data analytics features provided by iFans, we also have a dedicated operations team to facilitate the execution, ensuring the clients customization and evolving improvement with our deep experience and trusted guidance realizing the true value of the SaaS+ business model, the key strategy of our Enterprise Solutions.

In addition to our product upgrades, we were honored to receive numerous awards, both domestically and internationally, which recognized our innovative efforts and outstanding products, most notably, the Hong Kong Institute of Marketing awarded iClick as the winner of Market Leadership in Digital Technology of 2021. We were also recognized by the prestigious, Asia-Pacific Stevie Awards, our international business awards competition opened to all organizations in the 29 nations of the Asia-Pacific region, receiving for gold strives and for achievements in product innovation, product innovation in paid media, planning and management, most innovative advertising or marketing team of the year, as well as, the marketing campaign of the year for COVID-19 related information.

Additionally, as part of 2024, Asia's most valuable companies in Hong Kong awards, iClick was recognized as Asia's most reliable marketing technology platform. And finally, at Digital Media awards [Ingrid] China, we were named the Digital Media Innovator of the Year. We are heartened by the strong industry recognition as it serves to validate our extraordinary efforts in delivering the most compelling and innovative solutions serving the digitalization of China.

This concludes my opening remarks, and I would now like to turn the call over to our CFO, David Zhang, to discuss the first quarter of 2022 financial results. David, please go ahead.

Thank you, T.J. Hello, everyone. I'm pleased to share with you our financial performance for the first quarter of 2022. Despite our ongoing challenging macro environment, we still reached a record high in Enterprise Solutions, in any of historical first quarters and improvement in our gross margin.

I would like to begin my comments with a few key highlights from the first quarter of 2022 compared to the same period of 2021. Revenue for the first quarter of 2022 was U.S. $47.4 million, decreased by 29% year-over-year. Looking at each segment separately revenue from Enterprise Solutions was U.S. $15.7 million, up 34% year-over-year, mainly driven by increasing needs for consumer behavior, data integration and the digital transformation.

Revenue from Marketing Solutions was U.S. $31.7 million decreased 42%, primarily due to our strategic [build-up] of online advertising business in favor of resources allocation to Enterprise Solutions business. Omicron outbreak and lockdown in Hong Kong and Shanghai. Gross profit margin was improved to 33.8% from 29.4% resulting from our resource allocation to the higher-margin Enterprise Solutions business and online advertising clients.

Gross profit dollar amount decreased by 18% year-over-year to U.S. $15 million in the first quarter of 2022, mainly due to the decline in Marketing Solutions segment. As of March 31, 2022, the company had cash and cash equivalents, time deposit and restricted cash of U.S. $91 million compared with U.S. $88.7 million as of December 31, 2021. For the rest of my discussion, I will focus on our non-GAAP measures. You may find the 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 2022 was a loss of U.S. $3.3 million compared with income of U.S. $3.6 million for the first quarter of 2021. Adjusted net loss for the first quarter of 2022 was U.S. $5.4 million compared with adjusted net income of U.S. $0.6 million in the first quarter of 2021.

Gross billing was U.S. $99.9 million for the first quarter of 2022 compared with U.S. $200 million for the first quarter of 2021. For further information, please see the detailed recap of other financial metrics in the press release we issued today. In December 2021, iClick announced a share repurchase program with aggregate value of up to U.S. $20 million in full year of 2022. As of March 31, 2022, the aggregate value of repurchased shares was a promisely U.S. $4.2 million.

In view of the resurgence of COVID-19 pandemic and various disease control measures implemented in China, including Shanghai and Beijing. Substantial uncertainties remain around the microeconomic conditions and the client demands. We shall and we will continue to significantly affect our client onboarding and solution implementation. Therefore, at this stage, we withdraw 2022 revenue guidance of Enterprise Solutions until visibility improves.

The company will closely monitor microenvironment and the balance internal resources, focus on product innovation and sales pipeline to keep iClick creating more value to customers in Enterprise Solutions, which we believe has higher growth potential.

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

Thank you, David. We have been adapting to evolving market conditions and the macro forces over the past year, which has led to iClick strategic shift in focus to concentrate investment in Enterprise Solutions, while strategically winding down the Marketing Solutions business. We are constantly evaluating our market position and the strategies to capture more market share in our high-growth, high-margin Enterprise Solutions business. While the Enterprise Solutions business may see some adverse impact on clients implementations and onboarding due in part to the strict measures resulting from containing the spread of COVID-19 in China for the first quarter and now into the second quarter, we deeply believe that the megatrend driving digitization across China remains intact, and we are well positioned to continue our growth in Enterprise Solutions.

iClick remains at the forefront of serving this enormous market, and we intend to remain a powerful and dynamic force driving that change. Our clients realize the tremendous value of our solutions, which are helping them to involve and capitalize on new capabilities, our devotion to innovation and to the highest aspirations of service and execution guide us through these challenging times. We are confident our discipline and our devotion will be rewarded in the long term for both our shareholders and our company alike.

As always, I wish to especially acknowledge and thank our clients, partners and key stakeholders for the continued support and all of our iClickers without whom our success would not be possible. We will prevail on the [camp] with sound management, team focus on the prudent investments in the resources and solutions that remain the drivers of our success.

Thank you all for participating in today's conference call and for your continued support. 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 comes from the line of Colin Liu from China Renaissance.

Thanks management for the chance to raise our questions. I have 2 questions here. The first one is actually about the customer demand on Enterprise Solution. Well, we noticed that management mentioned about some delays of onboarding and implementation due to the COVID restrictions, a lot of measures and other limitations. So just wonder how resilient do you think actually the customer demand for our Enterprise Solution is. And once all the restrictions are being lifted up in the near future, we will see a very fast rebound of the revenue growth of Enterprise Solutions in the second half of this year?

And then my second -- my second question is about, the Marketing Solutions segment. We noticed that there were a lot of regulatory headwinds in second half last year. And in the first quarter this year, we have seen very [strict] a lot of measures and the macro weaknesses in China. So has all the native factors being reflected on the first year -- on the first quarter's numbers in management's views or maybe in second quarter, we will continue to encounter some difficulties. Is it fair to say that we reached the bottom in terms of the Marketing Solution growth? Or is it too early to say?

This is T.J. I will take 2 questions from you. First question is about customer demand for our Enterprise Solutions. As mentioned, indeed, the COVID has produced a big impact on us. First is the impact from the fifth round of COVID [resurgence] in Hong Kong. And we have a lot of business in Hong Kong and then followed by Shanghai lockdown starting from the late of March. Shanghai is now under lockdown for 2 months. And the Beijing is -- and then followed by Beijing, which is under lockdown for nearly a month. Therefore, I think the profit impact on our Enterprise Solutions business mainly lies with several fronts. First is the onboarding of new customers. Second is the onboarding of new needs from existing customers. The third is the implementation of Customer Solutions. And this means it's quite difficult to predict the future growth of Enterprise Solutions, because the current economic environment is far from normal.

I believe you are quite concerned about the demand in the mid to long term, and this is our concern, too. And recently, most of our colleagues are under lockdown in Shanghai and Beijing, but we keep a very close communication with our clients. Those demands in pipeline with those demands that have already been briefed and on the implementation are being delivered according to schedule. And what is problematic? Is those new demands. And we've observed that our client decision-making cycle becomes longer -- but these other customers' demands are there, and they are even more new demands from them, because most of the customers we serve are bigger ones. And in spite of the pandemic and the macro weaknesses, they have no problem of survival. And in addition, they have a lot of off-line updates. So there's urgent need for them to find a Digital Solution. Therefore, there remain a strong demand for our Enterprise Solutions business. So we expect that in the second half of this year, if the pandemic is put under control and if economic activities resume and become normal, we can expect a strong -- a pretty good growth of Enterprise Solutions business and a strong demand.

Okay, about your second question -- about your second question, is regarding the Marketing Solutions. In the first few months of this year, we continue to see the lingering effect of the tightening regulations in the industries -- and also, we've seen the more macro headwinds, as well as, the implication from the strict COVID measures. This actually has affected adversely our advertising clients in the Marketing Solutions business, because most of them actually suffer a lot from the logistics and the supply chain and even delivery problems. And we see that some customers, although they've tried to place advertisements during this period, yet the consumers actually in the end, dropped orders, because of the poor service quality. Therefore, we have seen that those large advertising clients have cut their budget drastically.

And Q2, I don't think the things will turn better for the advertising industry, because the impact from the COVID-19 is too severe for that. And in the second half of this year, if the economy doesn't rebound and if the strict COVID control policies are not lifted, they will continue to be serious impact on the advertising industry. But for us, we've already made a strategic move to scale back our Marketing Solutions business. We've intentionally cut those high-risk low-margin businesses, so to channel more resources to Enterprise Solutions business. So for us, I think the impact is smaller.

The next question comes from the line of Nelson Cheung from Citi.

My first question is about your Marketing Solutions. Just wonder, given most of the verticals have been adversely impacted due to the pandemic. Wondering if there's any resilience verticals that could support our business for example, like FMCG?

And my second question is related to Enterprise Solutions. Just wonder management to see if you have any long-term target for gross margin of your Enterprise Solution business? And how could we achieve that? Is that through cross-selling of your products and customers, as well as, potential upselling capability?

This is T.J. I will take your first question, and David will answer the second question. First question is about the resilient verticals in the Marketing Solutions business. In Q1, we have intentionally scaled back on Marketing Solutions business. Since last year, we have selectively cut those low-margin, high-risk businesses with very long (inaudible) of accounts receivables, such as gaming and some channels. And for FMCG and other consumables in Q1, they were affected to some extent, but it's not because of the industry problems, it's mainly because Q1 there is a spring festival. So usually, Q1 is a low season for e-commerce. And so, seasonal factors play a bigger role in the Q1 performance. In Q2, I believe that consumables and those industries that are highly related to offline economies will be affected to a larger extent.

This is David. I will take the second question about the gross profit margin of the Enterprise Solutions. Our expectation is under normal operating environment, our Enterprise Solutions gross profit margin will be around 50% to 60%, which is healthy given our SaaS+ business model. How to achieve that? Well, first, the demand for our digital product is growing with a strong momentum. In spite of the short-term impact from the COVID related control measures, we hope that the demand will rebound very soon. And the second is our product mix is healthy. We have both the SaaS tools as well as the services. The customers can buy a full stack solutions. They can also buy a particular product or function or services. And also, we will carry out the communication with our customers based on their needs, so as to increase their loyalty and stickiness. And thanks to our continuous efforts, we now have a wide variety of product and services options for our customers. So I believe that we can achieve that goal.

(Operator Instructions). The next question comes from the line of Thomas Chong from Jefferies.

I have 2 questions. My first question is about Marketing Solutions. So as mentioned that we are scaling down our low-margin high risk Marketing Solutions business, just wondering, how about process and update about right now? And how much percent of the type of business have been scaled down?

And my second question is about SaaS+X strategy. As we talked in the prepared remarks, could management share more color about the strategies and products?

This is David. I will take the first question, and T.J. will take the second question. Since the fourth quarter of last year, we have started to scale down on low-margin and high-risk Marketing Solutions business. And currently speaking, we have achieved our target. We've cut 1/3 of that business. So you can see that the Marketing Solutions revenue has dropped by 42%. Of course, there are many other reasons at play here. For example, the macro headwinds and the logistics, the problems caused by the COVID control measures, but we hope that these are just short-term variables that will go away very quickly. And currently, we have $91 million cash on hand, more than the end of last year. We've also paid back $18.5 million bank loans, and we've also reduced operating leverage. Therefore, we have enough resources to support the further development of Enterprise Solutions development, and we are currently in a very good shape in terms of the business development and survival

This is T.J. The second question is about the SaaS+ strategy of Enterprise Solutions business. While currently, our SaaS+ business models actually provide both the products and the services to brands. Our logic is that now a lot of domestic international brands, as well as, some emerging China fashion brands, they are in desperate need of online digital solutions. And so, we want to meet the needs for that. And we mainly work on 2 ecosystems. One is WeChat, the other is KOL. And for WeChat, we provide like as a CRM and the mini programs, as well as, some back-office digital operating platforms to connect their online stores with the off-line stores. And a case in study is [L'Oreal]. This year, many brands of L'Oreal will use our system. We now provide L'Oreal with 2 systems. One is [WeSocioo], which is CRM system. The other is cloud store, which is mini -- which is a B2C shopping mall based on the mini programs. And it will actually link the consumers or inform the consumers of the inventories at the closest outlet of (inaudible) as to the Wesocioo , we want to connect over 1,000 of our sales guys of offline stores of L'Oreal with the consumers so that in spite of the lockdown, these sales guys can still provide online services to their consumers.

As to KOL ecosystem, we also have a specific products and services. Now more and more big brands, including Chinese ones and international ones are using KOL platforms, such as the Xiaohongshu, Bilibili and Douyin. And our systems will help brands to identify appropriate KOL. We also offer tools to create content strategies for brands so that they can deliver the right messages to their clients. So our -- the goal of our SaaS+ strategy is to help brands to operate in the WeChat and KOL ecosystem, so as to increase their sales.

As there are no further questions, I'd like to turn the call back over to the company for the closing remarks.

Thank you once again for joining us today. If you have further questions, please feel free to contact iClick's investor relations department through the contact information provided on our website. Thank you, and see you next time. Bye-bye.

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