Q3 2019 Earnings Call
Ladies and gentlemen to these conference calls just the budget and one to two minutes until such time your love we remain on music hold these computer standby. We thank you for your patience once again today's conference call at the beginning in one to two minutes until such time your line I mean on musical he's going to get a standby.
Thank you for your patience.
For the quarter times, the 19 earnings conference call at this time.
Oh listen only mode. After managements prepared remarks, there will be a question answer session.
Reminder, to these conference calls being recorded I wouldn't know, let's turn the meeting over to your host for todays call circa center, though these proceeds Chris.
Thank you Hello, everyone and thank you for joining us today.
Earnings release was distributed earlier today. It is available on the IR website at <unk> Dot dot.
Yes.
On the call today are Mr. way, Dunkel, Chairman and Chief Executive Officer, Mr. Fade, Chairman, President and Mr. Shannon.
<unk> Chief Financial Officer.
During the prepared remarks, all three will be available to answer your questions during the Q and a session that follows.
Before we begin I'd like to remind you that this conference call contains forward looking statements. These statements are made under the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
These forward looking statements can be identified by Terminologies, such as we'll expect anticipate future intends plans believes estimates confidence in similar statements.
Let me make.
Forward statements to periodic reports to the U.S. Securities and Exchange Commission in its annual report to shareholders in press releases and other in materials.
And I assume it's made by its officers directors are poised to third parties statements that are not historical facts, including but not limited to these statements are forward looking statements forward looking statements involve inherent risks and uncertainties a number of factors, which could cause actual results to differ materially from those contained in the forward looking statements.
Further information regarding these and other risks and factors is included in the company's filing with the U.S. Securities and Exchange Commission.
With that I'd now like to turn the conference over to Mr. <unk>. Please go ahead.
Thanks, Operator go.
Good money and even need way, we want with nickel and welcome to <unk> fourth quarter 2019 earnings call.
Oh right to kick off the scope I really alcobras and key operating data this quarter.
First on the non mobile app utilizing windup I'll be beneficial for US is well documented abbvies donations reached 1.39 media as of September 32019 from approximately 991000 last September .
We continue to see what they need string new apps using I'll ask me case, you end the call to.
We have a possibility.
With all the new apps coming onboard each mouse these obstacles or.
Jim Edification continues to generate solid growth woman does things, we launched a product is the end of 2018.
This quarter, we call it totaled more than 100 pain Casa less.
Speaking using these SDK, we should wait with which we fracked well he market entry I used the enormous growth potential.
Notable customers Inkjoy about shop out cool Fivea G.
Well, it says Gee and Tuniu.
Yeah, you will generate yet by Joe verification ASCII case has a 61 media Bondo meta.
Quickly, becoming the second largest about about surfaces service product dominated by a wide range of developers out to push SDK.
Second.
But I do STK establishes increased to 40.8 beat and as of September 2018, 2019 from 74, beaded lots and lots of scramble.
From the nominal from monthly I think a unique mobile devices, we cover a continued to increase.
Reaching 1.3 for me that in September 2019 fell 1.0 sleep Buda in September 2018.
This was fueled by the increasing number of apps that used to all at Teekay, particularly with the rest the adoption of Jeb Edification SDK.
Well, it's still early stage, how the beneficial faced cooperation with Tencent cow has reinforced our brands like on the.
Like automation as well as I'll, let the but up a customer acquisition.
Well that study into first quarter. All 2019, we saw the number of days customers increased to 2000 free on Joanne <unk> from 1877, a year ago.
Now let me discuss a few highlights for all I'll finish up with members during the cold up before and I think Shun then go used to say most detailed a bit either.
[noise] nothing gets colder Lilly off the game breaking down revenue Ito preclinical race developed or something.
Sop protocol and talking about getting terrific <unk> to reflect our cost Jared you focus on off so the app developers.
Total revenue if you went to pull into whats the renminbi twond, but to me it and I will free up 3% year over year.
Revenues from the beneficial basis increased 49%.
Renminbi <unk> 15.7 meta you would this appeal we lost the two that maybe 91.9 meta.
He said was many due to growth in the number of customers from 1170 to 1675, well I'll hop, where we met a stable.
Geraghty off the growth was driven by our continued penetration into the SDK market.
If you have education in particular I see your revenue increased six broader sequentially due.
The call to the top paying vertical encoder financial services E Commerce education, local interfaces and I said that.
Revenue from talking about getting worked off what them, 8% year over year skewed to the floating free free factors first on the macro level. The Chinese economy has been something which has kept on that deal even by orbital ATK spending.
Nothing industry Special think policy changes were introduced to the Rocky we should that many appetites us to adult Oh wait and see approach. This directory. It was all the m., all cautious and tighten as spending by advertisers, but the comedy enough financial showcases the brzeczko.
Second if that if the economy slowing fundraising by every company has been very challenging.
These that rely on BC back in for marketing dollars to drive growth outpacing difficult times.
The risk of company succumbing to too much steps has increased.
Oh no to mitigate these risks we because strategically so in the expansion of our target them axiom basis.
Rick I was since being very selective in customer acquisition and awning Walt leaves the lodge reputable customers that was John financial position and ability to pay.
Further as we talk about in the Q2 earnings call in August .
Now in the process of transitioning for all our traditional talking multi modal two aneel SaaS based model.
These trends it does transition will impact the weight English we account for revenue and gross margin within all talking marketing business a lot.
What this means is that revenue previously outcome. Therefore on a BOE space I'm now on that based on the U.S. gap.
Hello.
Traditional talking about the business, we got F. reached tech way of about 15%, which will now be INO, 5% to 10% range under this Neal stock based model.
This new SaaS initially you had already generating Saudi resolved during the quarter crucial and free systems euros high there's a softer notebooks desktops alone.
That have [noise].
All righty stop and we expect more K cups and less to come on board that's called her.
Let me remind you again after a significant benefit that you stopped based model for us.
Well. These any short you may initially generates slow up top line talking about getting growth it will benefit us over the roll out we've improved gross margins that's working capital requirements.
The AD spend there or what have you seen customer base by working with Petrobras such as Crisil, who will catch up on to address a much larger type.
We also piece.
We will only able to capture a slice of direct customers F budget I will now have the opportunity to capture the majority of eat as they see the enormous benefits improved the ROI, we are able to offer.
Direct costs, unless we were able to use our data package to have that deep <unk> across all major media platform.
Our revenue mix has already and makes cats being fairly balanced this quarter as we've done financial service Butchko catch if they get <unk> of total AD revenue well look I mean, contributing 25% media and at the time and not the 18% and the remaining 27% contribute to other vertical.
But to be the other vertical equally e-commerce .
Education outdoors and.
And just off advertising inventory that essentially <unk> triple FID, so funny to present in dollar terms.
Let's say for talking marketing I would like to give you an update on like push our lives initial too, but I touched upon last culture.
By the end of the culture of more than 1000 asked already embedded in our life, which that's the case, we ask that does not go to grow as we progress.
This quarter, we already started to monetize the like Bush traffic by walking with a number of trial customers.
DCP M., we were able to achieve its very satisfactory.
I look forward to provide you more carla and updates on how would I push is progressing in the quarter ahead.
Yes, it will significantly expand our overall tuck in marketing gross margin for.
Now I will turn to called you'll see who will discuss Q people from us all free busiest lots of leasing south Florida in more detail.
Thank you Chris.
Come on the revenues from cost products, including financial risk management market intelligence and eyes on demonstrated impressive resistance and the growth by increasing 52% from really be 22 million in the third quarter last year today, maybe 33.6 million.
This was mainly due to the strong 18% year over year increase in the number of paying customers as well as continued expansion of ARPU, which increased to 29% year over year.
Year over year, all three product lines within five products generated revenue growth of around 50%.
For financial risk management, the public paying customers. This quarter included 360 finance, Joe for and the Pentagon credit consulting.
Our strategy remains very consistent we are focused on catering to the leading players in the banking in the consumer finance markets.
Strategy is clearly paying off as reflected in the solid organic growth.
In both customer numbers and our pool. It also helped us navigate the smoothly a challenging maki environment, where has been impacted by major policy changes.
We are also in the process of launching new products to help our customers monitor high risk you just to Mitch lending AFE.
Customer demand for this product has grown significantly following initial operate trial operation.
All my P. intelligence product is growing strongly.
Both consumer numbers and ARPU.
In both customer numbers and ARPU on both a year over year and the sequential basis, Neil cut some acquisition there has been particularly strong within the corporate segment. We have won new big corporate customers, such as Sony Mobile Netease called the music I Ci and the Starbucks as a result revenue.
Contribution from corporate customers also exceeded the revenue from the fund tough for us.
And lastly, Oh I zone business continued to generate solid the growth of over 40% year over year during the quarter.
Oh paying customers included get to auto EG and the China Urban Penny Institute.
We see continued its solid demand across the real estate, no retail and urban planning verticals.
With that.
I'll pass the call to Shannon.
[noise] thanks, Thanks space.
Since Chris I think it has already talk about our topline numbers for the quarter Oh go through some of our the piano items.
Gross margin for Q treat increased meaningfully from up to 28.2% from 26.2% loss border.
He's also a direct result of optimized product mix.
For services and SaaS based products generate a much higher gross margin and contribute a larger percentage off a little bit revenue during the quarter.
Revenue contribution grew from 17% last quarter to 20% this quarter.
Yeah, let me be times, our gross profit increased by 7% to let me be 57 million.
Total operating expenses increased by 41 cents year over year to let me be hundred 11.5 million in particular.
R&D expenses increased 16% do let me be 43.3 million.
This was mainly due to increases in stock cost.
Depreciation and amortization.
Ben beef costs.
Selling and marketing expenses increased 26% to really be 30.5 million.
Mainly due to increases in staff cost marketing expenses and leasing office expenses.
Do you any expenses increased 115% to let me be 37.7 million.
Mainly due to increased in staff costs professional fees and bad debt allowance off rupee 17.8 million.
This wouldn't be 17.8 million bad loans. This quarter was related to specific companies, having difficulties in repaying debt outstanding debts to us.
The majority of the 17.8 million is related to a single e-commerce customer.
It was not able to raise additional funds from the existing and prospective investors and shareholders.
And those public leader that it could not repeat and supply is.
As Chris mentioned, we have been very selective in customer acquisition, and we only what we flush and reputable customer.
Based on the assessment.
At the time of this call we believe.
Just to be one off events and that related to this specific customer.
Yeah, no other material bet on Gulf would that they'd be aware off at this time.
Our adjusted EBITDA was negative for maybe 26 million in Q2 thousand 19 compared to negative I.
Let me be 6.9 million into same quarter 2018.
Excluding the bad debt allowance, our adjusted EBITDA would have been negative 8.2 million, let me be.
Onto the balance sheet items.
Well, let me be like seven 1.4 million that's off my 32019.
The key assets.
That's offset them, but the idea well cash and cash equivalent of 420 million.
Cash and cash equivalent increased by 38 million sequentially. This is a direct result of our disciplined one thing off credit.
To customers and collection efforts.
The cost me. So go 150 milligram, maybe prepayments were 97 million.
Fixed assets will really be hundred 10 million long term investment 134 million feet.
Total current liabilities increased from living be Onesix formula and that's off 12 to do you want 2018 to 200 million.
932019.
The key current liabilities item work.
Accounts payable of 22 million.
Deferred revenue of 85 million accrued liabilities of 91 million.
That's off my 32019, we maintained a healthy lever of working capital of roaming be 501 million.
Looking forward, we expect total revenues for the full year 2019 to be in the range of let me be Michael 9 million to let me be 919 million representing growth of 27% to 29% year over year.
And lastly, before I conclude.
I'll give a quick update on the share repurchase plan.
As of September Thirtyth 2019, we have repurchased a total of 805.
Yes, and 648 medias since the start off while repurchase program.
Third quarter this year, we repurchased 7907.
37.
The average purchase price of U.S. dollar tree 0.77, spending a total U.S. dollar spending like one 9000.
We continue to monitor the needs to repurchase depending on the market conditions and the underlying share price.
And this concludes managements prepared remarks.
I'm happy to take.
I should know.
Thank you, ladies and gentlemen, though we will know because the question and answer session over the telephone to ask a question simply press star one from your telephone now and please wait for your name to be announce again. So I asked the question Press Star one form your telephone now and to cancel your request.
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Once again, it's star once asked the question.
Your first question comes from the line of her review you be very group from Credit Suisse, Let's now open.
Hi, Good evening management. Thanks for taking my question I have a question regarding the topline revenue our favorite about the reported.
<unk> of this potter is or there's a bit off from the guidance that other management formally like evolving writing second quarter earnings.
For the mantra that help us to work through the kind of a challenger so difficulties gotta, we haven't been experienced during this quarter.
To the resolving the relative to witness or even revenue.
So called me My question is about the.
Operating costs here. Despite the one time off a cost out for the gena airline I can imagine or help us to understand it sounds sort of marketing.
Expansion for the year research and development expenses on a percentage of revenue going forward as we see a relatively spike this quarter. Thank you.
[laughter] Hydro very high this is say yeah. So regarding your first question regarding you know the topline revenue number right. So as you can see actually we break it the revenue into three segments.
Develop a service.
Which grew 39%, which is very very stable predictable.
Very healthy business, if that took a SaaS business right and a and the three five products, which also grew over 40%, which is also very healthy and that's also very typical you know SaaS products. The only the only a revenue line that we saw.
So decline is basically the haagen marketing, so actually talking about talking year over year. It declined about like 80% and the main reason right, yes, because actually Chris mentioned is about three reasons right. So first two years actually due to the macro environments.
So we do see you know some customers at a at a cost and as a kind of like a tightened a at the project. This is the one reason and that the second reason, yes, because we purposely actually you know do not wanting to work with some risky customers, we walk, though with them before because the we assessed.
No doubt that potential of you know a being like a delayed payments, albeit you know defaults alike are like like at the onetime and write off if actually purely due to a single customer called <unk>. How G. You know the customer actually that customer you know it was a weather or the stock right you know like Oh.
A few months ago, but now they cannot find a finally invested to continue to support them right. So the CEO of how do we got enough that they don't want to pay that the pilots anymore right.
So we want to avoid this kind of a customizing the situation to happen again, so we purposely actually.
Got rid of some business actually we were the otherwise you know conducted a in a normal macro situation. So these two actually on the net effect is the we lost about.
Revenue opportunity.
And then actually.
This is the target marketing to act.
Hey, the gap you get more like a 90 minutes.
Oh, so the another.
Oh, you mean actually is the trends.
From a from the tradition.
According to our new auto Okay. So that's what we mean and.
You can call if as you know.
But the D.N.V. the gross flows gross revenue now.
Can't since we are doing it the conducting a sophomore, though we take like 5% to the take rates actually that revenue becomes become you know 2 million right. So distant these tune that effects actually do you see that reduction of the of the haagen marketing business. So I hope it is happening now.
Just can't explain what happens you know and quantify what exactly happened.
And also regarding your second question regarding the operating expense right. So the company you know Oh actually without without the wrong on this quarter was Oh was actually.
Normally a higher than than previous quarters. The main reason why is it because of that how did you write off right. How did you write off so if you. If you remove how did you use that right off the onetime actually this quarter the cost structure is actually the lower than.
The previous quarter, and ER, and therefore for current quarter or the fourth quarter. The cost structure. We are pretty much we remain similar to two the took a second quarter. After the second quarter and then going forward, though actually all company you know a we'll continue to look for option.
It is you know to optimize our cost structure in terms of you know in terms of basically basically getting rid of people who was nonperforming. So in terms of the headcount actually we are looking to like God. We do it's like I think it to tend to have count okay eating in the current quarter. So next next year.
If you look at the total operating expense level. It should be it should be you know and most a similar to two.
Who to this year's number and it may be even even a little bit lower yeah. So that's that's the you know that the cost structure going forward.
Thank you very helpful.
[noise] once again, so I asked the question. Please press star one from your telephone.
There are no questions at this time I would now like to have the conference.
So Chris go Chris.
Thank you everyone for joining our call. This evening, if you have any questions or comments. Please don't hesitate to reach out to the Investor Relations team. This concludes the call have a good night. Thank you.
Thank you so much ladies and gentlemen, this concludes todays conference call. Thank you for participating give me Alton it's gonna.