Q4 2019 Earnings Call
Ladies and gentlemen, today's conference call. This due to begin shortly leased good deed to standby. Thank you for your patience.
Once again lead us in children today's conference call is due to begin shortly these could you just standby. Thank you for your patience.
[music].
Well <unk> fourth quarter. It sold your 2019 earnings call at this time all participants are in listen only mode. After the speakers presentation. There will be a question answer session.
You asked a question Gary the session you will need to press star one Josh.
Please be advised that today's conference is being recorded.
Hi, Chris over its your first speaker today, Mr. Christian Organelles Saiki Beast go ahead.
Thank you Hello, everyone and thank you for joining us today on the call are Mr. way, Dunkel, Chairman and Chief Executive Officer, Mr. pay Chen President.
<unk> Chief Financial Officer.
Following their prepared remarks, all three will be available to answer your questions Jersey queuing they session that follows.
Before I begin I'd like to remind you that this conference call contains forward looking statements within the meaning of section 21 E. UBS Securities Exchange Act of 1934.
Amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995.
These forward looking statements are based upon managements current expectations to current market and operating conditions, which are difficult to predict and may cause the companys actual results performance or achievements to differ materially from those are the forward looking statements.
Further information regarding these and other risks uncertainties or factors are included in the company's filings for the U.S. Securities Exchange Commission. The company does not undertake any obligation to update any forward looking statements as the result of new information future events or otherwise except as required under applicable.
With that I'd now like to turn the conference over to wage. Please go ahead.
[noise] thanks, operator.
Good morning, and even either <unk> or a lot about sports called out without a non game on his call.
Mobile has always been committed to maintaining the hyped endoscopy cooperate social responsibility I would like to kick off gets caught my shall we appeal, while we have been doing those up all the fight against the <unk> 19.
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Okay. The called me Nike outbreak.
First the money and as a company we pride ourselves in contributing what we can do what we came to these costs.
The number of course, not pushing messages sent out doing the mindful of February my all customer.
In the online news media Entertainment and education et cetera.
Stop or.
Compared to previous mouse.
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Not at speaking I'll review by the Alky operating and financial performance for the up last quarter.
For it.
But the mobile app utilizing it is the windup aldi beneficial basis, well documented the what happened to aim Celleration reached 1.15 bought by meeting as of December 40, plus the 2019 for all approximately 1.1 meeting last December.
This represents an average off into a thousand new apps coming onboard and we mouth during the quarter.
Second.
But I do I speak I guess donations incremental like if we plastics beat it that's off the December 2019 from 19.8 billion last December.
But the number from I'm pretty I do you want them up with the Rice. We cobre continues to increase reaching 1.36 began in December 2019 from 1.4 began in December.
He did double it without the agent.
He's wasn't feel the by the increase the number of apps that used to all that became I think everybody with direct the adoption of a J verification that decay.
But you often to Saudi growth momentum from the appeal it quarterly Calder why more consummate some not to use our job edification brought out into 2019 with a notable new customer inquiries shamalia easily and quite easily dance. Its launch at the end of 2018 recounting increasing number of.
Got them at Sun not quotes are up to corridor.
These represent out with <unk>, our property casualty battery products that meet the needs of the Optum Rocky.
During the cold or more than 600 absolute dollar justification surveys we have aggregate. The are you now exceeding 100 tied to meet it.
Jeff verification is now the second largest developers are they just for the automobile by a wide range of developers have to push SDK.
That study in the fourth quarter of 2019 leases, we saw the number up paying customer inquiries to do it 2141.
Role to up 2096, a year ago.
Now, let me discuss highlights <unk> financial performance during the quarter.
Total revenue during the cold out what the renminbi wines <unk>, if we meet at 19% year over year.
The decrease was due to the congenial transition from I'll watch as well as hockey marketing, that's traditionally talking about getting busier stood on your advertising driven soft model.
As we mentioned last quarter. These mean this means changes in the way in wage impact all piano with lower revenue by increasing margins.
For all the transition we'd be would that rope gross margin both interests office and teach and absolute number is the best yes, yes. They for measuring performance of I'll be saying is now and going forward.
Sean then go through these in more detail later.
I mean I'll give you was on caught up on the performance of all bearings business segments.
Well the highlight book is called I guess, a revenue, which I never idea about the beneficial basis, which increased significantly by 91% for renminbi seven one for me to deal with a seven people late last year to let me be.
But if we plan to meet it.
This wasn't many due to growth in Boston number of customers from 1265 to 1644 in ARPU, which increased by 47%.
You bet, a bunch of basis on the local.
118, 18% of total revenue up brought a presale yet to go.
During the quarter we company.
We completed at the anybody alcohol logic that it would probably be called project.
Which contributed to the opposite growth.
As the market increasingly embrace I'll, let Jay push and jab edification product.
It's bad to see that you brought up a chavez this revenue growth there that here in the future.
Revenue from talking marketing were down 44% you every year and now account for 66% total revenue.
Compared with 81 particular yoga is due to the 43 factors first.
She is being driven by the <unk>, if that something suffering Chinese macroeconomic environment.
And of course called out 2000, 2018, and 19 funding industry, where men adversely impacted by tighter ending regulatory.
I see that remand that you felt you would during the quarter our ties us enough financial services vertical him a dakota, how great. It would do and they all advertising spending in the market.
Second as we mentioned last quarter, we continue to be Heidi said that do and disappearing our approach to new customer acquisition in view of macro economic headwinds. We should result in a surprising on many customer that did not meet our straight into an oh your customer process.
We went mad at them and about low Randy pursuing revenue growth at that you bet expanse of inquiries and raise a you know we see barbarous.
What is the impact of.
Transaction for all traditional talking marketing model to on your stock based model to recap.
Under these new stock based model that previously what I'm now on deal fall.
On the gross ROE spaces, I know well I can therefore on on that basis.
Revenue under these new model now contribute launch Epicentral out wasn't margin with no cost of revenue Mcafee Maladies SaaS based model has close Charlie I don't think ISO new south based customer equal been dot quick one topic, Scott and she shops.
Our current 8 billion for that trial with Baidu in totality BD with a new SaaS model, we'll continue to drive the expansion of our margin going forward.
Our revenue mix by Santo authority, but as the these Calder we've got so much in the financial services reticle contribute 50% off at revenue mobile gaming contribute 26, 27% media entertainment and either plenty of repairs that are.
There were many participants and contributed by other verticals, including ecommerce education auto.
In terms of advertising inventory has anybody on the all 43% in dollar terms.
I like to quickly.
Our life, which Elias leasing as well.
Handing the call went away.
As of December, but the breadth of 2019.
Apps that I bet you at all I push SDK you see deal 40000.
40000, we put the are you seeing.
And you find meeting.
Somebody using our life, which allows China inc. with a we book, we bought JD finance indoor QQ music and the I'd be shocked.
We didn't we could you know Ses joint interest being created there for all customers and apps do matter press seeking to benefit from these try not to advertise and monetize their apps.
Well, it's bad idea you for our life, which allowed the spacing is due in the fourth quarter to increase by tens of millions, we should wheel IDBD, because usually each will drive significant revenue and probably grow in coming quarters.
Now I'll turn the cultural Fay will get the it's got to look up amounts of rabies, whose lives within south Florida in multi dose.
Thank you Chris.
On the revenue from the top products, including financial risk management market intelligence, and izod generated solid growth by increasing 15% from Reminbi 25 million in the fourth quarter of last year, two Reminbi 29 million.
This was mainly due to a strong 10% year over year, increasing the ARPU, where customer numbers increased by 5%.
Digging deeper into financial risk management.
Committed to and they continue to execute all proven strategy.
On the leading players in the banking and the consumer financing sector.
Despite a challenging business environment during the quarter, we managed to grow the revenue by 4% year over year, which was driven by an increase an increasing ARPU up 14%.
No contract site.
Including.
Cost center, I sat back and the tone changing pool.
Oh my team kind of gets product is a growing strongly in comes up customer numbers, increasing 25% year over year.
Geographically, we expanded the all global footprint in Europe by signing our first the UK based declines.
From the corporate segments, we continue to sign new contract and the renewal previous ones from that superfast, such as I Ci and the Barbara.
Other verticals, either such as to what your boss and the new upcoming companies, including and travel and then you do it.
And lastly, I don't business continues to generate solid growth with revenue, increasing 43% year over year during the quarter new customers. During the quarter included a customers in that real estate tourism and the retail sectors, including subsidiaries of Costco punching make how though and.
So John.
<unk> tourist Bureau.
We continue to see solid demand for iPhone product, which generated the Apple was 43% year over year.
With that I'll, then I'll pass the call to Shannon.
Thanks very.
Since crews that are really talk about topline numbers for this quarter. Our go to the some of our other piano items.
As mentioned earlier by Chris We made very good progress in transitioning all traditional packet that marketing business due to new advertising driven SaaS model during the quarter.
The shifting mix of revenue from traditional targeted marketing and the new advertising sophomore, though.
<unk> revenue comparisons difficult and I love the good reflection of the business underlying profitability and trends.
We believe that gross margin wolf in terms of percentage absolute number.
The best Yardstick for measuring the performance of our business now and going forward.
Gross margin for Q4 increased meaningfully to 33% from 28.2% last quarter and 27.6% during the same period last year.
This was a direct result.
Optimized product mix, well development services, and SaaS based products, even to generate a much higher gross margin and contribute.
Digital assent digital revenue.
That's a percentage.
Oh for revenue develop with services and SaaS based products accounted for 34% during the quarter and increased from 19% doing the same quarter same period last year.
At the same time, we're also seeing margins improved across all talk a bit marketing business I see benefits from the ongoing transition to the new advertising driven SaaS model.
This improvement has helped increase the overall margin during the quarter.
The net effect of all unfolding strategy is that despite a 10% decline in revenue sequentially.
Gross margin in absolute dollars increased 6% sequentially, which reflects the direction. We are heating in as we scale the business for the.
Total operating expenses increased 19% year over year, 200, and tree Milind renminbi in particular.
That's for all effort to optimize cooperation in the 2019, we reduced headcount by approximately 120 during the quarter.
Associated compensation was.
<unk> at 6 million, we allocate the two babies opex, depending on the department.
So she said weve.
R&D expenses increased 6.8% do 44 million, mainly driven by increases in staff cost, including the compensation paid.
Selling and marketing expenses increased 40% to 30.5 million <unk>, mainly due to the increase in stop loss. We should get includes the compensation paid to staff who are let go.
And increase in marketing expenses associated with high in the world events and stuff. We know we attended during the quarter as part of it but disco our business and increased brand awareness.
DNA offensive increased 15% to 28.8 million, mainly due to increase and stuff calls, including the compensation paid for stuff that we let cool.
Our adjusted EBITDA was negative rami be it point ninemillion during the quarter compared with negative 26 million in the previous quarter.
Improvement in gross margin, coupled with the better control of operating expenses.
No more disciplined approach to managing risk receivable resulted in a significant improvement in adjusted EBITDA sequentially.
Onto the balance sheet items.
So the assets would really be 942 million. So December 31st 2019. This includes.
Cash and cash equivalent or 431 million a color sort of those <unk> hundred 37 million.
Prepayments of 55 million Remy be fix that that's 106 million, who may be lump them SSL hundred 69 billion living b.
Total current liabilities were 100 696 as of December 31st.
It doesn't nitrogen using crude cost people off 20 million, you've put revenue of 79 million accrued liabilities of 96 million.
That's what December 31st two dozen nitrogen we maintained a healthy level of working capital the amounted to 460 million.
First quarter is typically a seasonally weaker quarter of the you due to the Chinese do your holiday.
This year.
The Corbett Nitin outbreak impacted this is seasonally slow Peter even further as businesses across China's truly restart cooperation later than expected.
Many dues that would have otherwise been close.
And contract it would have otherwise have been signed during the quarter have been delayed as a result.
This uncertainty and slow start falling to holiday adversely impact our business during the first what off Twentytwenty.
At the same time, where in the missile this transition from all traditional targeted marketing business to the new advertising driven sauce model resources.
We also impact topline revenue, but that spend all the margin.
This in my we have decided to suspend issuing revenue guidance on the quarterly basis in the near near them onto the situation in China normalizes.
Targeted marketing tried this shouldn't is largely over.
Well if things remain highly uncertain, we do believe things have been improving over the last couple weeks as the outbreak comes under control.
Believed it was is behind us and the business activity would gradually resumed to normal levels.
Lastly, before I conclude I'll give a quick update in the share repurchase plan.
As of December 31st two dozen 19, you repatriate that <unk> of 921000 hideous since the start off all program.
Fourth quarter.
We repurchased hundred 15000 ideas at an average purchase price of U.S. dollar is two point $2.31.
I wish them all.
For aggregate them all U.S. dollar is 266000, we continue to monitor the need to repurchase depending on the market condition and the underlying share price.
And this concludes the management's prepared remarks, we're happy to take.
I should know operator.
Ladies and gentlemen, we will now begin the question and answer session.
If he wished it asked the question. Please press star one on your telephone and weight training to be announced.
If you wish to cancel your request please press <unk>.
Your first question comes from the line of build you from Goldman Sachs. Please ask your question.
Hi, Good evening management team I can I have a question that regarding your business transition from the traditional mall go into the SaaS based model.
Could you help us understand.
Hi, This perspective, so how will the transit work for example, we understand that your traditional model a you would purchase the media property and resell the same to the advertiser because you can you get a better conversion rate.
So now given your new SaaS based model how will the advertiser pay you a fall fall exactly what kind of us services.
Because I think they used to mention the within the Uh Huh revenues. You also have risk management you also have location based advertising.
And also the Mckee intelligent so we just want to understand that how you may or so in the transition how you may lose some revenue, but burden the same.
Such it in a different way.
Thank you.
[laughter] type Yeah, Hi, this is a bad so so actually let me kind if I actually since haagen marketing you thought it's different from the south products. We actually you know as a group Oh that includes three business clients, such as financial risk management I zone.
The and ER and.
The financial and Dimmock intelligence right don't three products, yes, it's tougher to defend their from does that happen Mcmeen thought so just talking about being SaaS is actually is actually transitioning from a traditional church enough growth based on that based on by by saying that Oh, what we what we do even product.
Yes that before actually you know the advertise that they will pay us do I'll give us the AD budget and now with that AD budgets, we ought to go buy media inventory on their behalf and also using big data analytics.
To select the.
Hi, good uses to place the ads so everything we do for that but no actually we don't we don't take that budget. We only provide the data that basically basically done you know we help them to screen out Oh, what kind of out or kind of.
ER devices.
Hi, good users and then those devices to ever used to either directly by the advertising themselves.
When they when they go to up half on the pace at all this thing however used to buy the platform, which in turn will be used to buy the advertises either I mean, so so we only touch the speed of service fee. Okay. This is the that service fee.
We charge it actually it's based on the on the and the budgets they pay us on the on the tough on for example, if an enterprise.
They they place like a you know 10 minutes, let me be advertising dollar on Cashel, So actually actually reach higher sequential actually you know a fee. It's a like for example, five cents. So that's that's actually a you know and this five attendees accounted as our at all or.
Revenue instead of it is a 10 minute.
Okay. Thank you for the clarification.
Then the reported number 29.2 million.
Quarter from South product.
So does this put you're not going to mitigate include the revenue stream you just mentioned.
No no no no no.
This does this top products attention I mean actually is just the three business line financial system enhancements, I zone, and ER, and a and mocking telling us.
Okay. Thank you.
[noise]. Your next question comes from the line or Fabry. Good from Credit Suisse. Please ask your question.
Good evening management I understand the recent data why.
Cannot provide guidance right now, but I could you. Please.
We see.
Like a world class true.
Like the reason too much appreciated and a financial updates from the company I because we are very keen to understand the impact of property outbreaks skarda virus.
Our business. Thanks.
Yeah Yeah.
However, as is the phase so actually it for the month of generally and the family.
Hi.
As we looked at our financial performance for the for the Tomorrow I guess southerly if the if they are weaker than we expected.
Particularly in a in the month of Ah favour are they cover or they are so there may be thing is it because you know a actually most of although we we actually started the you know a company resumed to walk in the beginning of February with most of the employees walking from the whole. Okay. So we're not allowed to come back to the office physically.
But you know a similar and most of our customers. They also work from home and many many contracts actually cannot be really is fine because that's no stem can be obtained by our customer. So definitely the you know that slow down the contract signing on planning process and then you know the Soviet though.
Which was also delayed delayed into the focus will be town, we can provide without a contract signing right. So so so far so some of them also primarily is.
It's a pretty weak, but but I think they know.
Starting from a from a week ago I'm pretty much most of the including ourselves you know more than half over 50% I mean, probably not back to the office physically and also our customers. They are back to the office you know with Oh with a meaningful a meaningful premise of that.
So so things have been picking up so so so I think I think in general.
The first quarter.
Surely will be a weaker than we originally anticipated before the end of last year.
Yes, just a very quick full on so according to the current circumstance, so I like when our how soon.
Back to the recovery welcome.
Yeah, I think I think.
The recovery I actually we properties.
We actually with us on.
On your agent Agency published a report.
Yesterday.
Talk about the general General population.
General population returning back to a two to walk right. So it's actually.
You know at a pretty much as of as of now about a 50% of China what costs have been back to walk okay and.
But the thing is that the as you know when they back to walk a and most people. They are still like to you know basically.
Going back and forth from the workplace, we got home right. You know they didn't really you know carry all other AFI activities right. So the business.
Yeah economic actually.
The full recovery is still going to take some time and ER and the if the potency economic recovery that's another being.
Back to normal, which we are which we are certainly depressed you know.
Some of the consumption right and the and if the consumption Pratt suddenly, which we are also impacts of the advertising dollar and and and the southern in which we are impact our business as well in particular that with a target marketing business traditional marketing business right.
Although although although you know all off our sophomore top model actually.
Picking up the main reason is because you know it's starting from a small small base small base right. So overall net net.
Marketing revenue will continue to see quarterly quarter over quarter sequential decline.
For the quarter and and we are we are continuing to monitor the progress of Ah of agenda populations, returning back to walk and and do we think this impact.
No should continue you know and to the end of the and the end of this amount.
No.
Sure I understood. Thanks.
Sure.
Once again, ladies and gentlemen, if you wish to ask the question. Please press star one on your telephone and wait for name to get announced.
Your next question comes from the light a fried Roberts from.
That this capital please ask your question.
Hey, guys.
Question.
We set up.
Uh huh.
Yes.
Clarity on what.
For Q4, what the.
Advertising dollars.
Right.
With that consumption was up.
Thanks.
Right.
I would like.
Certainly you must know.
But.
[noise] so right now just recap.
Understood. No question you <unk> you would like to know what was the traditional.
Oh by the traditional talking at the marketing revenue.
Yes on an apples to apples basis, you Bossier, well give that Q4 number last year or what it would have been.
Thank you.
Either way.
Yeah, I guess Q4 last you mean 2018 night.
Yes.
I think kupol aging and the percent of that is traditional targeted marketing.
Okay. So that is right. So so.
Yeah, Yeah, Yeah, Yeah, no you sounded I've got that understand transition.
I understand what the magnitude I mean, you're shipping up the.
Step away from the accounting impact just understand underlying demand was it. So in Q4 he did not have.
That filling the targeted marketing, which is that I understand that.
What are we looking at on a wild wasn't.
Yeah. If you look at what we have under the traditional under the new SaaS model revenue, we would have 50 million gross billing.
Zero.
That's very much.
And well we'd said overall.
I think.
This quarter.
Right.
That said how much.
That's what they.
Does that add up you'll notice that model.
More.
But.
[noise] things in terms of the progress.
Making good progress if you compared to what we haven't seen last quarter. We think we just closed about 40 million.
Gross revenue billing based on saw some smaller and now we have 50 million this quarter, if I look at Walgreens Chief.
On a monthly basis number has been on the rice every single month. So this is trending well and we do aspect that this continued.
Who grew up on the up a uptrend.
And then I think that's what Chris I'd say doing to Paul we are no. Besides quite so we are talking to buy do we are talking about Tokyo. So we've done I think the Pam they'll be able to TEP onto we'd be much bigger.
In the future quarters.
Understood. It starts it sounded like let me just make sure I understand it's all the marketing.
Yes.
People 19.
Revenue.
Drilling everything on a great they would have been what.
In addition of 50 million.
Additional twice.
Right.
Yeah.
Yes, that's all.
Your next question comes from the line of Bill you from Goldman Sachs. Please ask your question.
Hello management I, just wanted to quickly follow up.
The growth driver for the for the revenue because I noticed that youre, who year or sorry, the paying customer it's a relatively flattish up out with I'll go wider group last year versus this year. Meanwhile, the developer service customer actually grew by.
About 400.
So I want to start a little time is that the of the loss of the 400 paying customer from the advertising side. So is there any particular reason.
Because I understand if they come birch, the ER revenue model into say not spaces, they would remain paying customer.
And I'd also just to clarify the number I think Oh, that's mentioned that 50 million mall.
Ah revenue impact anymore, if we use the oldest and does that mean for Apple to apples comparison, that's happened in boxing revenue will be 170 million. This quarter, if we did not use than that phase.
They should.
Thank you.
Hey, so basically.
As you know the number off.
Cut them as a actually I used to create basically because of the bus raising its we are we are very disappointing I said lets say with true.
Do you know just to its customers rights away Aneel up with cost cut so we've got very good credit and and and the company's right. So they don't want you.
What we've also small companies so it's not so good criteria basically.
Weekend on him well they supposed to be customers right. So that's about companies does that go out.
And then the second raising its either the basically oh.
If I remember you know obviously, if we what we've got a pathway, but I think that by the title right. So on property on ISO pass one weekend Seymour them, what anyone else 200 caught them without using holiday to US right. We only a couple of one cut somebody's crisil, but not the 200 customers.
So probably many small cuts unless they are looking oh, we bought Apple pie. So it's a pipe on bindings case that we are Campbell, one customer pricing.
That that tolerate that will reasons.
Okay. Thank you.
[noise] you has a follow up question from the line there Fryer Roberts from now this capital. Please ask your question.
Hi, guys. Thanks, I'll, let me have been going into Q again.
I think it actually makes up in the balance sheet just quickly.
That's on the sequels.
I know we've had some problems with that earlier.
Moving to.
You guys are saying is actually better from a customer management point of view.
Kind of wonder receivable from it.
Much larger platform as opposed to direct advertisers, which I understand that.
I'm curious.
Our in.
In March.
I'm kind of getting through Q1.
I'm curious I know Q1, the second quarter for advertising demand.
Yeah, I guess he will these days.
Maybe if you could add some color with respect to some of the changes that you made last year. After you had some account write off.
Kind of where.
We are managing that this quarter. Thank you.
Yeah in terms of because result, so book, yes, we have done since the transition into dead the number of customer like what Chris I just see that's supposed to 200 led the customer we know when you have one question, which is good for us and debt impact it will translate that.
Due to a conscious about on the would be if you look at what we have Q3, we have overall 84 diesel turnovers, Elton would be but in Q4. It drop to 70 days. So you can see that itself is.
Pretty remarkable one we do not have those let the customer anymore. Secondly, we are more stringent in terms of customers screening and didn't translate to.
Better quality becomes a suitable.
And overall performance of the they are these days.
In March.
The year.
[noise] somewhere around there.
Yes.
The quarter.
No we do based on what we have done in the last two quarters. This cropping up by adding a.
Quality, we have is pretty good I do know aspect, we have a large provisioned required going forward.
Okay. Thank you.
Okay.
Once again, if you wish to ask a question. Please press star one on your telephone and wait for name to be announced.
Once again, if you wish to ask a question. Please press star one on your child so.
There are no further questions at this time, ladies and gentlemen. This concludes our conference for today. Thank you for participating you may now disconnect.
Thank you.
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