Blue Hat Interactive Entertainment Technology (BHAT) 2019 Q4 法說會逐字稿

Hello, ladies and gentlemen, thank you for standing by for Blue Hat's fourth quarter and fiscal year 2019 earnings conference call. At this time, all participants are in a listen only mode. (Operator Instructions) Today's conference call is being recorded. I'll now turn the call over to your host, Mr. Sam Martin, from the Foote Group for opening remarks and introductions. Sam, please go ahead.

大家好，女士們、先生們，感謝你們出席 Blue Hat 第四季度和 2019 財年財報電話會議。此時，所有參與者都處於只聽模式。 （操作員指示）今天的電話會議正在錄音。現在，我將把電話轉給主持人、來自 Foote Group 的 Sam Martin 先生，讓他致開幕詞和介紹。薩姆，請繼續。

Thank you, operator. Hello, everyone, and thank you for joining us on today's call. Blue Hat announced its fourth quarter and fiscal year 2019 unaudited financial results on March 23, 2020, before US market open. An earnings release is available on the company's website.

謝謝你，接線員。大家好，感謝您參加今天的電話會議。 Blue Hat 於 2020 年 3 月 23 日美國股市開盤前公佈了其第四季度和 2019 財年未經審計的財務業績。該公司網站上提供了收益報告。

Today, you will hear from Blue Hat's CEO, Mr. Xiaodong Chen who will start off the call with a review of the company's basic operating results and report recent developments for the company. He will be followed by Mr. Caifan He, Blue Hat's Chief Financial Officer, who will give a detailed account of the company's unaudited financial results. Management will then take the time to answer some specific questions sent to the company by investors prior to the call, and there will be the opportunity to ask further questions afterwards.

今天，您將聽到藍帽首席執行官陳曉東先生的講話，他將回顧公司的基本經營業績並報告公司的近期發展。緊隨其後的是藍帽子首席財務官何彩帆先生，他將詳細介紹該公司未經審計的財務業績。然後，管理層將花時間回答投資者在電話會議之前向公司提出的一些具體問題，之後還有機會提出進一步的問題。

Before we proceed, I would like to remind you of our Safe Harbor statement. Our conference call may include forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the company. You are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof.

在我們繼續之前，我想提醒您我們的安全港聲明。我們的電話會議可能包括根據 1995 年《私人證券訴訟改革法案》的安全港條款做出的前瞻性陳述。所有前瞻性陳述本質上都具有不確定性，因為它們基於有關未來事件或未來業績的當前預期和假設。公司。請您注意不要過分依賴這些前瞻性陳述，這些陳述只是預測，僅代表截至本文發布之日的情況。

In evaluating such statements, you should carefully review the various risks and uncertainties and matters set forth in the company's filings with the Securities and Exchange Commission. These risks and uncertainties could cause the company's actual results to differ materially from those indicated in the forward-looking statements. There can be no assurance that such forward-looking statements will prove to be correct.

在評估此類聲明時，您應仔細審查公司向美國證券交易委員會提交的文件中列出的各種風險和不確定性以及事項。這些風險和不確定性可能導致公司的實際結果與前瞻性陳述中所示的結果存在重大差異。無法保證此類前瞻性陳述將被證明是正確的。

Information about the risks and uncertainties and other matters associated with investing in Blue Hat is included in the company's filings with the Securities and Exchange Commission, which we encourage you to review carefully before making an investment decision. The company does not assume any obligation to update any forward-looking statements as a result of new information, future events, change in market conditions or otherwise, except as required by law.

有關與投資 Blue Hat 相關的風險和不確定性以及其他事項的信息包含在該公司向美國證券交易委員會提交的文件中，我們鼓勵您在做出投資決定之前仔細查看這些文件。除法律要求外，公司不承擔因新信息、未來事件、市場條件變化或其他原因而更新任何前瞻性陳述的義務。

Now, I'm pleased to present Mr. Xiaodong Chen, CEO of Blue Hat.

現在，我很高興介紹藍帽首席執行官陳曉東先生。

(interpreted) Hello, everyone, and thank you for joining us on today's call. We are pleased to report that in the fourth quarter of 2019, Blue Hat's revenue and profitability continued to grow at an encouraging rate, marking a strong finish to the full year in which we became a US public company -- US listed public company, and made significant progress in sales, business development, and research and development.

（翻譯）大家好，感謝您參加今天的電話會議。我們很高興地報告，2019年第四季度，藍帽的收入和盈利能力繼續以令人鼓舞的速度增長，為我們成為美國上市公司——美國上市公眾公司——的全年畫上了圓滿的句號。在銷售、業務開發和研發方面取得了重大進展。

Our innovative toys and games continue to receive strong market approval from customers both in China and overseas. Q4 saw the launch of several new products, including a version of our Bouncing Bubble product produced in partnership with Talking Tom and Friends, as well as our AR Dinosaur, an educational toy that comes in five different types of dinosaur, each with their own personality. Launched at the 18th China International Toy Fair in Shanghai in October, the AR Dinosaur product comes with five physical AR cards, which when placed under the toy will activate its AR features. The launch of the product at the fair helped Blue Hat (inaudible) attract a large number of visitors, demonstrating its broad base of appeal.

我們的創新玩具和遊戲繼續獲得中國和海外客戶的強烈市場認可。第四季度推出了多款新產品，包括與會說話的湯姆和朋友合作生產的彈跳泡泡產品版本，以及我們的 AR 恐龍，這是一種教育玩具，有五種不同類型的恐龍，每種恐龍都有自己的個性。 AR恐龍產品於10月在上海第十八屆中國國際玩具博覽會上推出，配有五張實體AR卡，將其放在玩具下方即可激活其AR功能。該產品在展會上的推出幫助藍帽（聽不清）吸引了大量參觀者，展示了其廣泛的吸引力。

During the fourth quarter and the second half of the year, one of our key areas of focus has been the diversification of our business as we launch new smart education offerings in preschools alongside our traditionally strong business lines of toys and games. We now offer tailored, smart education products that use our AR technology to bring early education to life in both state-operated and privately-run preschools in China.

在第四季度和下半年，我們的重點關注領域之一是業務多元化，除了我們傳統上強大的玩具和遊戲業務線外，我們還在學前班推出了新的智能教育產品。現在，我們提供量身定制的智能教育產品，利用我們的 AR 技術，將早期教育帶入中國的公立和私立幼兒園。

Including both our established AR child safety courses and our newly launched immersive education initiatives, our smart education products are used -- are already in use in more than 30 preschools in the Chinese provinces at Fujian and Guangdong.

包括我們已建立的AR兒童安全課程和新推出的沉浸式教育舉措，我們的智能教育產品已經在中國福建和廣東省的30多家幼兒園使用。

During the fourth quarter, we announced the launch of our smart immersive education classes, a product range that currently includes three separate products that can be sold and used separately or together. Smart Immersive Cognitive Education classes, Smart Screen Immersive Education Classes, and Smart Immersive Physical Education classes. All three products are developed by Blue Hat's in-house team of educational experts and are feasible for different teaching scenarios, having received wide praise from parents, teachers, and students.

在第四季度，我們宣布推出智能沉浸式教育課程，該產品系列目前包括三個單獨的產品，可以單獨或一起銷售和使用。智慧沉浸式認知教育課堂、智慧屏沉浸式教育課堂、智慧沉浸式體育課堂。這三款產品均由藍帽內部教育專家團隊研發，適用於不同的教學場景，受到了家長、老師和學生的廣泛好評。

Another significant recent development for us in the smart education space during the quarter was the upgrade of our system for evaluating children's ability in an educational context. The system is a central component of our Smart Immersive educational products, and is expected to be officially put into use after the beginning of the 2020 preschool spring semester in China. As a result of the update, our evaluation system can now track and record children's learning behavior, learning processes, and developmental data in each activity to form a traceable growth track.

本季度我們在智慧教育領域的另一個重大進展是我們在教育背景下評估兒童能力的系統的升級。該系統是我們智能沉浸式教育產品的核心組成部分，預計將於2020年中國學前春季學期開學後正式投入使用。經過更新，我們的評價系統現在可以跟踪記錄孩子在每次活動中的學習行為、學習過程和發展數據，形成可追溯的成長軌跡。

We believe this data-based approach serves as an invaluable resource when designing curriculum structure, highlighting students who may require extra attention, and allowing for efficient allocation of the appropriate teaching content. We believe it will improve our ability to obtain partnership agreements with additional preschools in China.

我們相信，這種基於數據的方法在設計課程結構、突出可能需要額外關注的學生以及允許有效分配適當的教學內容時是寶貴的資源。我們相信，這將提高我們與中國更多幼兒園達成合作協議的能力。

International expansion remains a key goal for Blue Hat, and we have seen encouraging progress in how this has developed over the last few months. Our AR Racer product already has a user base of over 4 million, with significant numbers of players in China as well as overseas communities such as Russia, Korea, UK, and Saudi Arabia.

國際擴張仍然是 Blue Hat 的一個關鍵目標，我們在過去幾個月中看到了令人鼓舞的進展。我們的AR Racer產品已經擁有超過400萬用戶群，在中國以及俄羅斯、韓國、英國和沙特阿拉伯等海外社區擁有大量玩家。

We were recently excited to announce the issuance of a US patent for AR Racer's core technology that connects the physical toy with the virtual content of a mobile game. The awarding of the patent represents a huge step forward in our marketing efforts overseas. And as a result, we are in discussions with major distributors in the US.

我們最近很高興地宣布 AR Racer 核心技術獲得美國專利，該技術將實體玩具與手機遊戲的虛擬內容連接起來。該專利的授予標誌著我們在海外營銷工作中向前邁出了一大步。因此，我們正在與美國的主要分銷商進行討論。

The international appeal of our products is also being realized, with one recent example being the attention given to the AR Glow interactive glowstick product by crowds of international buyers at the 126th China Import and Export Fair in Guangzhou in November.

我們產品的國際吸引力也正在得到體現，最近的一個例子是，11月在廣州舉行的第126屆中國進出口商品交易會上，AR Glow互動熒光棒產品受到了眾多國際買家的關注。

Looking ahead, we are excited about the future as the Blue Hat team continues to operate on the cutting edge of the toy, game, education and AR industries. We believe our industry-leading technology, strong intellectual property, research and development capabilities, and understanding of child-focused content, all help us to stand out from our competitors and to be well placed for continuing future growth. Our products can help parents ensure that their children are entertained as well as educated. And we intend to continue to accomplish even more in the years ahead as a result your continued support.

展望未來，我們對未來感到興奮，因為 Blue Hat 團隊將繼續走在玩具、遊戲、教育和 AR 行業的前沿。我們相信，我們行業領先的技術、強大的知識產權、研發能力以及對以兒童為中心的內容的理解，都有助於我們從競爭對手中脫穎而出，並為未來的持續增長做好準備。我們的產品可以幫助父母確保他們的孩子得到娛樂和教育。由於您的持續支持，我們打算在未來幾年繼續取得更多成就。

This concludes my prepared remarks. I will now turn the call over to Mr. Caifan He, CFO Blue Hat, to review financial results for the fourth quarter and fiscal year 2019. Mr. He, please go ahead.

我準備好的發言到此結束。我現在將電話轉給藍帽子首席財務官何彩帆先生，回顧2019年第四季度和財年的財務業績。何先生，請繼續。

(interpreted) Thank you very much, Xiaodong. Hello, everyone. Thank you for joining us today. Now I'll go through the quarterly financial highlights, the full year financial results, and financial outlook.

（翻譯）非常感謝你，曉東。大家好。感謝您今天加入我們。現在我將介紹季度財務亮點、全年財務業績和財務前景。

For the fourth quarter of 2019, our total revenues increased by 18.3% year over year to $11.8 million. Our gross profit increased by 15.2% year over year $7.9 million. Our income from operations increased by 24.4% year over year to $6.2 million. And our net income increased by 26.2% year over year to $6.2 million.

2019年第四季度，我們的總收入同比增長18.3%，達到1180萬美元。我們的毛利潤比去年同期的 790 萬美元增長了 15.2%。我們的運營收入同比增長 24.4% 至 620 萬美元。我們的淨利潤同比增長 26.2%，達到 620 萬美元。

For the full year 2019, total revenues were $26.8 million for the fiscal year 2019, an increase of $5.3 million or 28.6% from $18.5 million for the same period ended December 31, 2018. The overall increase was primarily attributable to the increased sales of interactive toys in the game series category and mobile games.

2019 年全年，2019 財年的總收入為 2680 萬美元，比截至 2018 年 12 月 31 日的同期的 1850 萬美元增加了 530 萬美元，增幅為 28.6%。總體增長主要歸因於互動產品銷售額的增加遊戲系列類玩具和手機遊戲。

Revenues from sales of interactive toys and the games series category were $21.2 million for the fiscal year 2019, an increase of $4.3 million or 25.2% from $16.9 million for the same period ended December 31, 2018. Interactive toys in the games series category are a range of toys enhanced with AR technology, which we believe make them easier to play, more interactive, and more instructive than traditional toys. The increase was primarily a result of the improvement of market recognition.

2019財年互動玩具和遊戲系列類別的銷售收入為2120萬美元，比截至2018年12月31日同期的1690萬美元增加了430萬美元，增幅為25.2%。遊戲系列類別的互動玩具是一系列採用 AR 技術增強的玩具，我們相信這些玩具比傳統玩具更容易玩、更具互動性且更具教育意義。這一增長主要是由於市場認可度的提高。

Revenues from sales of interactive toys in the animation series category were $160,672 for the fiscal year 2019, an increase of $361,966 or 69.3% from $522,638 for the same period ended December 31, 2018. This decrease was the result of our business strategy to shift away from interactive toys in the animation series category and towards toys -- and towards interactive toys in the games series category.

2019財年，動畫系列類別互動玩具的銷售收入為160,672美元，比截至2018年12月31日的同期的522,638美元增加了361,966美元，增幅為69.3%。這一下降是我們業務戰略轉向的結果。從動畫系列類別的互動玩具到遊戲系列類別的玩具。

Revenues from mobile games were $2.5 million for the fiscal year 2019, an increase of $1.4 million or 126.8% from $1.1 million for the same period ended December 31, 2018. This increase was the result of the popularity of our first mobile game, [Trending Bo Ye], which was launched in the fourth quarter of 2018 and received positive feedback from the market.

2019 財年手機遊戲收入為 250 萬美元，較截至 2018 年 12 月 31 日同期的 110 萬美元增加 140 萬美元，增幅 126.8%。 這一增長得益於我們的首款手機遊戲 [Trending] 的受歡迎。博野】於2018年第四季度推出，獲得市場積極反饋。

Gross profit was $16.3 million for the fiscal year 2019, an increase of $3.9 million or 31.2% from $12.4 million for the same period ended December 31, 2018. Gross margin of the three different segments were as follows. Interactive toys in the games series category increased 24% amounting to $2.7 million. Interactive toys in the animation series category decreased 43.7%, amounting to $62,805, and mobile games increased 124.3% amounting to $1.2 million.

2019財年的毛利潤為1630萬美元，比截至2018年12月31日同期的1240萬美元增加了390萬美元，增幅為31.2%。三個不同部門的毛利率如下。遊戲系列類別中的互動玩具增長了 24%，達到 270 萬美元。動漫系列類互動玩具下降 43.7%，達 62,805 美元；手機遊戲增長 124.3%，達 120 萬美元。

Gross profit margin was 68.4% for the fiscal year 2019 compared to 67% for the same period of 2018.

2019財年的毛利率為68.4%，而2018年同期為67%。

Total operating expenses were $6.8 million for the fiscal year 2019, an increase of $2.7 million or 64.6% from $4.1 million for the same period ended December 31, 2018. This increase was mainly attributable to the $162,549 increase in selling expenses, the $1.7 million increase in general and administrative expenses, and the $743,657 increase in research and development expenses for the fiscal year 2019 compared to the same period of 2018.

2019財年的總運營費用為680萬美元，比截至2018年12月31日的同期的410萬美元增加了270萬美元，增幅為64.6%。這一增長主要是由於銷售費用增加了162,549美元，增加了170萬美元。與 2018 年同期相比，2019 財年的一般和管理費用增加了 743,657 美元，研發費用增加了 743,657 美元。

Research and development expenses were $1,030,499 for the fiscal year 2019, an increase of $743,657 or 259.3% from $286,842 for the same period ended December 31, 2018. This increase was primarily a result of research and development to develop a smart preschool platform, including a range of immersive educational products and AR interactive toys in the games series category.

2019財年的研發費用為1,030,499美元，比截至2018年12月31日的同期的286,842美元增加了743,657美元，即259.3%。這一增長主要是由於開發智能學前平台的研發費用，包括遊戲系列品類中的一系列沉浸式教育產品和AR互動玩具。

Income from operations was $9.5 million for the fiscal year 2019, an increase of $1.3 million or 14.8% from $8.3 million for the same period ended December 31, 2018. Total other income net was $45,422 for the fiscal year 2019 compared to total other income net of $207,371 for the same period ended December 31, 2018. The decrease in total other income net was due to the decrease in interest income from short-term deposits.

2019 財年的運營收入為 950 萬美元，較截至 2018 年 12 月 31 日止同期的 830 萬美元增加了 130 萬美元，增幅為 14.8%。與其他收入淨額總額相比，2019 財年的其他收入淨額總額為 45,422 美元截至2018年12月31日的同期為207,371美元。其他收入淨額總額減少是由於短期存款利息收入減少。

Our income taxes were $488,000 for the fiscal year 2019 compared to a provision for income taxes of $600,000 for the same period ended December 31, 2018. The decrease was due to tax reduction provided by the local government.

我們 2019 財年的所得稅為 488,000 美元，而截至 2018 年 12 月 31 日的同期所得稅撥備為 600,000 美元。減少的原因是當地政府提供的減稅。

Net income was $9.1 million for the fiscal year 2019, an increase of $1.2 million or 14.9% from $7.9 million for the same period ended December 31, 2018.

2019財年淨利潤為910萬美元，比截至2018年12月31日同期的790萬美元增加120萬美元，增幅14.9%。

Basic and diluted earnings per share were $0.26 for the fiscal year 2019 compared to $0.24 for the same period ended December 31, 2018.

2019 財年的基本和稀釋每股收益為 0.26 美元，而截至 2018 年 12 月 31 日的同期為 0.24 美元。

Cash, cash equivalents, and restricted cash. As of December 31, 2019, the company's cash, cash equivalents, and restricted cash totaled to $15.5 million including net proceeds of approximately $6.4 million through the company from the IPO, which closed in July 2019. In connection with the IPO, the company's ordinary shares began trading on the NASDAQ capital market on July 26, 2019 under the symbol BHAT.

現金、現金等價物和限制性現金。截至 2019 年 12 月 31 日，該公司的現金、現金等價物和限制性現金總計為 1,550 萬美元，其中包括該公司通過 IPO 獲得的淨收益約 640 萬美元，該 IPO 於 2019 年 7 月結束。股票於2019年7月26日開始在納斯達克資本市場交易，代碼為BHAT。

Finally, I'd like to update you on the first quarter 2020 outlook. Blue Hat expects revenue in the first quarter of 2020 to decrease 20% to 25% due to the adverse impact of the COVID-19 outbreak on the company's sales and operations.

最後，我想向您介紹 2020 年第一季度的最新展望。 Blue Hat預計，由於COVID-19疫情對公司銷售和運營造成不利影響，2020年第一季度收入將下降20%至25%。

The above outlook is based on the information available as of today's press release and reflects the company's current and preliminary expectations and estimates which are all subject to change.

上述展望基於截至今天新聞稿的現有信息，反映了公司當前和初步的預期和估計，這些預期和估計都可能發生變化。

Please note that our unaudited financial information is preliminary. The [audited] financial statements and related notes to be included in the company's annual report on Form 20-F for the year ended December 31, 2019 is still in progress.

請注意，我們未經審計的財務信息是初步的。截至2019年12月31日止年度，將納入公司20-F表年度報告的[經審計]財務報表和相關附註仍在進行中。

This concludes management's overall report of business and financial results. The company would now like to take this opportunity to address a few questions asked prior to the call by [some] investors.

管理層關於業務和財務業績的總體報告到此結束。該公司現在想藉此機會回答[一些]投資者在電話會議之前提出的一些問題。

And so the first question that we received was the extent to which the coronavirus outbreak could affect Blue Hat's business.

因此，我們收到的第一個問題是冠狀病毒的爆發可能在多大程度上影響藍帽的業務。

Mr. Chen, would you like to address it?

陳先生，您願意發言嗎？

(spoken in foreign language)

（用外語說）

Mr. Chen's answer was, would you not see the coronavirus outbreak having a substantial impact on our business for the full year? While the first quarter is expected to be impacted as per our guidance, we believe that sales will likely rebound. We hope that the strict measures taken by the Chinese government will help to return things back to normal in the second quarter. However, our outlook is based on information available to date and reflects our current and preliminary expectations and estimates which are subject to change. Thank you Mr. Chen.

陳總的回答是，您認為新冠疫情的爆發對我們全年的業務不會產生重大影響嗎？雖然根據我們的指導，第一季度預計會受到影響，但我們相信銷售額可能會反彈。我們希望中國政府採取的嚴格措施有助於第二季度一切恢復正常。然而，我們的展望是基於迄今為止可獲得的信息，反映了我們當前和初步的預期和估計，這些預期和估計可能會發生變化。謝謝陳先生。

And now the second question we received was from some investors who wanted to know about Blue Hat's pipeline of new products. And their specific questions were, will the company launch new products during the first half of 2020 or will the coronavirus outbreak delay the release of all new products? Mr. Chen, would you like to go ahead?

現在我們收到的第二個問題來自一些投資者，他們想了解藍帽的新產品線。他們的具體問題是，公司會在2020年上半年推出新產品還是會因冠狀病毒爆發而推遲所有新產品的發布？陳先生，您要繼續嗎？

(interpreted) We're looking forward to potentially launching new products at the end of Q2 or beginning of Q3, around the time of the China Toy Expo. We have new products in the pipeline across all of our business lines, AR toys, games, and educational products.

（解釋）我們預計可能會在第二季度末或第三季度初，即中國玩具博覽會期間推出新產品。我們的所有業務線、AR 玩具、遊戲和教育產品都在醞釀新產品。

And the final question that we received was, what's the outlook for the educational business? How fast do you expect it to grow in 2020?

我們收到的最後一個問題是，教育行業的前景如何？您預計 2020 年增長速度有多快？

(interpreted) China has around 300,000 preschools and around 180 million children. So the potential market size for our products is huge. We offer unique products that we believe are highly attractive to preschools across China and can be tailored to a school's individual needs. We partner with both state-operated and private preschools and the courses and products are designed by our team of educational experts who have an intimate understanding of requirements in the market. We anticipate the number of preschools we offer our smart education products in will grow from the current level of over 30 schools to at least 100 schools by the end of the year.

（解讀）中國約有30萬所幼兒園，約1.8億兒童。所以我們產品的潛在市場規模是巨大的。我們提供獨特的產品，我們相信這些產品對中國各地的幼兒園極具吸引力，並且可以根據學校的個性化需求進行定制。我們與公立和私立幼兒園合作，課程和產品由我們的教育專家團隊設計，他們對市場需求有深入的了解。我們預計，到年底，我們提供智慧教育產品的幼兒園數量將從目前的30多所學校增加到至少100所學校。

This concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead.

我們準備好的發言到此結束。我們現在開始提問。接線員，請繼續。

(operator instructions) As there is no further questions now, I would like to turn the call back over to the company for closing remarks.

（接線員指示） 由於現在沒有其他問題，我想將電話轉回公司進行結束語。

Thank you once again for joining us today. If you have any further questions, please feel free to contact Blue Hat's Investor Relations department through the e-mail address ir@bluehatgroup.net

再次感謝您今天加入我們。如果您有任何其他問題，請隨時通過電子郵件地址 ir@bluehatgroup.net 聯繫 Blue Hat 投資者關係部門

Thank you much.

非常感謝。

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

本次電話會議到此結束。您現在可以斷開線路。謝謝。