Q4 2019 Earnings Call
Forward-looking statements made under the Safe Harbor provision of the US private Securities litigation Reform Act of 1995 following the two statements involved in health risks at all certainty as such the company's actual results may be materially different from the views expressed today further information regarding this and other risks and uncertainties is included in the company's annual report on form 20-f for the fiscal year and the December 31st, 2018 and other filings month filed with the 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 promise earnings press release and this conference call includes discussions of our order to get financial information as well as other kids. Non-gaap Financial measures dead.
Thomas press release contains a re constantly.
Of the order now, we got measures to the most directly comparable gaap measures. Now turn the call over to our CEO. Please call ahead. Hello everyone. Thank you for joining our earnings conference call today 2019 was an outstanding job you for why me marked by a saturated close strengthening brand recognition and robust financial and operational results. Oh while we solidify our leadership position in the global smart vegetable industry longest focus focus focus on our company Mission and Healthcare strategy in the fourth quarter. We achieved healthy revenue and net income.
Close driven by strong performance from our newly launched products as well as effective sales and marketing Outlet in September 2019. We held our first International launch event at FIFA 2019 in Berlin Germany introducing two new products to the market recently in Las Vegas to each other out our amazing portfolio. We announce another new smart watch the advanced with GX.
Authorized user military certified body that is ideal for outdoor issues since including this newly-launched Potter. We have now expanded our amazed with brand to 7 Smartwatch product lines to meet the diverse needs of our white customer base. We also introduced from our new tws product line amazed with paba as well as an in no Innovative product line them both asleep Comfort app health-monitoring earpods.
Mentioned we would not have achieved our sales results without our effective sales and marketing strategy for Jacksonville. We see on high-profile opportunities presented in online shopping festivals such as the double check our Main Street branch ranked number one in the Smartwatch Market segment with retail price under a 1,000 MB.
Sales revenue and volume on JD and Timo platforms all of these significantly raise our profile over. Oh consumer awareness of our brand.
All experts to promote our palates also included International expansion through a multi-channel strategy focus on Thursday both du Lac sales and so party sales channels. Our International shipments continue to client needs to be success free raised our brand recognition Globe re during the year of 2019 approximate three months 51.6% of our total products showed was shipped overseas.
The success of amazed B cells can be a tribute to our own develop channels in both China and overseas more specifically we are strengthening our International sales and marketing team. We for example expanded our footprint to over 70 countries with 137 Channel customers.
In fourth quarter 2019. We enter it the largest yellow consumer electronics Channel media Market wage. You also entry major Consumer Electronic channels in India, Thailand Russia and other countries wage, according to the IDC fourth quarter 2019 report. We are ranked number one in market share for Indian Indonesian Spanish Marcos under Smartwatch category.
In the fourth quarter 2019 our shipments to the European market are also increasing rapidly especially amazed I watch shipment which increase by 440.1% in the Western European market including France Germany, Italy Spain and UK.
In the meantime our market share ranked number three in both last year and domestic China.
And number six in the Smartwatch Market including the excluding the countries. We just previous mention wage amazed with shipment close increased 328.5% in the left of the market. We shipped em.
Please leave with the continuous access our team continues to push forms. We can continue this successful growth over the long term.
Next let me provide highlights for now exciting new business initiatives.
This year's CES in addition to new SmartWatches. We unveiled for New Palace spanning three phone calls that go beyoung smart phones and watches amazed with home studio a smart. Jim have a mess with Aaron off. Oh foldable Next Generation cat meal amazed with power best true wireless stereo Fitness earphones with clip to go Thursday.
zampa, Comfort Health monitoring earphones
With this new Palace. We are taking an important additional step in building a Comprehensive Health and Fitness ecosystem.
We are demonstrating how technology and health can come together creating further future opportunities and possibilities Centric wrong our company Mission. It should be note that we do not expect meaningful Revenue contribution from this product in the near future as if you take time for us to ramp up production Market New devices educated consumer penetrate new markets now coming to our collaborative Xs.
We will continue working together with our Colin close Partners Comics group and shall me. We are both making solid progress with Tom Mix on product development.
We announced last week. Our first time makes product ironmen r300 cost with Series has already been launched in the market. We are pleased with this progress. We have made this time next in the meantime. Our long-term plans. This is tell me the popular me been part of line remains unchanged
We do lunch and five this year has plant and expect it to be another Blockbuster following the record-breaking performance of my band phone.
I will also would like to share with you my fault on our Healthcare strategy.
Health care how always been a focus for the company since Kwame was founded in 2013.
In 2019 with our established corporate suspicion connect house with technology. We strengthens our focus on healthcare related personality in our development of smart devices for a priority and Club.
In 2020 following the exclusion of a strategic memory London last year. We will continue developing our cloud-based Healthcare Services through further cooperation is packing University first hospital for the joint promotion heart Health Management Programs. We will also deepen the Strategic partnership established in October 2019 with a live call a transformative cardio care provider using deep learning and explore the opportunity to develop new high-performance. EG form factors to Global markets.
Furthermore we plan for mass production of our next Generation a 1002 which has already completed initial design phase 1/2 will be more intelligent than this British Setzer and enable more Health care-related personality to further differentiate our future Smartwatch Potter.
To close I would like to discuss the reason Corona virus outbreaks that has been changing the global.
From a business perspective. We have seen parts of our supply chain impacted and we do expect some impact on our operations and financials in the first quarter David you provide more color in a moment. However long our surprising Partners, we have gradually resumed normal walk operations since mid-February as a corporation am very strong social social responsibility. We do naked medical supplies such as math and this infection defective.
after show
Of our support to the religious most affected by the epidemic in the meantime. We are collaborating this
reputable Research Institute to leverage our show tap ability for the health monitoring of our users.
The bad assemble will be the movie that we were able to determine that during this recent outbreak illegal is like Europe heart rate case has increased significantly, especially in the Warren area.
In the meantime powered by our massive datasets and strong capabilities. We are currently building an effect and infectious disease prediction system and we are about to issue a paper on this.
AutoNation of the Nations and Technology have been highly recognized by the medical regulator Institute ation off.
hospitals doctors and our customers
pass provide an even deeper business justification for further and the expiration in health-related technology package with all the efforts. We made our technology and brand is becoming more and more deeply embedded in the healthcare.
Wire I could na laging the recent difficulties. We are facing we are proud of our achievements in 2019 and are confident that our growth initiatives in New Paris and Partnerships coupled with our strong sales and marketing capabilities will help us to achieve another successful year in 2020.
Thank you again for joining today. I will now turn the call over to our CFO David trade.
Thank you. All in the fourth quarter of 2019. Will you continue the trend of strong growth momentum driven by robust units a month of both sell branded products. And even before we shipped the Fourteen point seven million units in the fourth quarter representing 59.8% growth from the same quarter last year our revenue and net income attributed to a family Corporation increased by 72.4% and 64.5% year-over-year respectively demonstrating the growing awareness month and Adoption of our products by users during the fourth quarter. We also continue investing in R&D for the development of innovative.
products
In addition to stress and strengthening our sales and marketing strategy to promote are sweetbreads mindful of the length of this call. I will highlight the key financial measures for the fourth quarter and full-year 2019, and I encourage you to refer to our furnace press pound for further details regarding our financial performance. Now here are some of the highlights of our strong first-quarter off expressed in R&B unless otherwise stated
As previously mentioned revenues in the fourth quarter 2019 increased by 74.2% to 2.5 billion RP from one one point two billion be for the fourth quarter of 2018 shipments reached 14.7 million p 2 4 as compared to nine point two million in the same quarter of 2018 goes profit increased significantly by 62.8% to 503 million RMB from 309 million RMB in the fourth quarter 2018.
Gross margin was 23.8% compared with 25.2% a year ago.
Decrease was primarily a result of depend promote promotion during the shopping Festival.
Vehicle expenses total operating expenses increased by 60.6% $285 million R&B 678 million R&B for the fourth quarter of 2018.
Sucking or strategy of consistent investment in R&D with an emphasize on healthcare related product development and testing Talent acquisition in addition to branding and marketing to enhance the company's long-term returns.
Research and development expenses increased 64.8% to one hundred forty million R&B from 85 R&B for the fourth quarter last year primarily due to an increase in the number of warranty staff as we expanded our product lines and and skills are fundamental research in health health care related features algorithm Club services, and I shipped development. We also experienced a rise in testing costs associated with the pipeline by products.
Hi.
Results so far effort. We have launched a series of a new mystery products in the fourth quarter.
and at the beginning
Of this year at CES. We are confident this investments will increase the long-term value for our company and we expect to enrich our products further in 2020.
Our cellular marketing expenses increased to sixty three million R&B from twenty nine million R&B year-over-year as we make a new product release during the CES event increased advertising and promotion efforts during sales office and build a larger and stronger marketing and sales team for overseas expansion. We believe our multi-dimensional efforts could quickly improve our brand recognition and the deep in ourselves penetration, globally.
General and administrative expenses increased 29.1% to eighty three million warranty from 64 million month for the fourth quarter last year primarily due to an increase in professional fees released. To improve improve of operation management and business expansion and personnel-related expenses of setting by a decrease in service rep position.
Income before income tax was $237 billion R&B compared with 139 million R&B for the same quarter of 2018.
The gas that income attributable to the company increased to two hundred seven billion R&B compared with 126 million R&B or the fourth quarter 2018. Net income attributable to ordinary shareholders of the company also increased the tools two hundred thousand million, but you say panther looted no income attributable to ordinary shareholders of awami Corporation was 3.36 months.
RV and 3.21 R&B respectively as a reminder each 80s represents for state auditor shares for Malcolm measures a trusted less income attributable to farm Corporation increase the two two hundred off 14 million RMB 146 million R&B for two for 2018. Finally adjusted basic and diluted juice Yes actually available to ordinary shareholders of farming operation was 3.46 MB and 3.315, respectively.
Relating to cash as of the year end of a 2019 the company has had cash and cash equivalents on a 1.8 million R&B 10 p.m. With one point four billion R&B and the end of 2018. Now let's turn to some highlights off for a robust the full year 2019 results are Revenue increased by fifty 59.4% year-over-year from 3.6 billion MB to approximately 5.8 billion RMB due to an increase Market recognition and popularity of like a misfit products and continue the strong Lieberman sales.
After we lost them before in the second quarter of the year goes profit increased by 56.2% year-over-year from 939 million to 1.5 billion R&B gross margin decreased slightly year-over-year to 25.3% of our total operating expenses increased by 50.1% year-over-year from $574 million R&B to off of 61 million R&B. The increase in operating expenses was primarily due to the increase in R&D and marketing and sales rep.
And always the intention to support our strategy focusing on healthcare related technology development expect our Misfit product portfolio with new products such as GTS GTR and masefield. X wage and further strengthen ourselves in the overseas Market operating income increased 65.8% for the month or year increased from 366 million RMB to 606 million RMB the gas net income to Kwame took $575 million R&B compared with three hundred forty million R&B in 2018.
No, I don't trust income which exclude share-based compensation expenses increased 32.8% off 475 million RMB to 630 million R&B.
Okay.
No, two are up look as mentioned earlier. We have seen some impacts or supply-chain side took the current the corona. Where is the situation we expect our first quarter results to be affected to some extent by disruption of parts in our supply chain. However, we have seen gradual recovery of production capacity there for him had a supply chain constraint will be mainly felt in q1 2020.
Even the nineteen outbreak spread globally in particular in the Western European countries one of our overseas markets. We will continue to closely Monitor and assess the situation in those regions. That being said we still wage fact that we can achieve sustainable growth and profitability in twenty-twenty and b r through new product initiatives Palm Harbor Ichiban opportunities Global expansion and balanced operational expense control with all things considered for the first quarter of 2020 management currently expects net revenues to be between 980 million MB and 1.01 billion Jun.
Which would represent an increase of approximately 22.6% to 26.3% off 800 million R and B in the first quarter of 2019. We hope the entire and I mean the the situation begins to improve and still have confident that 2020 will be another successful year for life.
This concludes our prepared remarks. We will now open the call to questions operator, please go ahead.
We will now begin the question-and-answer session to ask you a question. You may press * then 1 on your touchtone phone.
If you were using a speaker phone, please pick up your handset before pressing the keys.
To withdraw your question, please, press * then two for the benefit of all participants on today's call.
it's
You wish to ask your question to the company's Management in Chinese, please immediately repeat your question in English.
At this time, we will pause momentarily to assemble our roster.
The first question comes from kind of Wong of Credit Suisse, please go ahead.
Hi, thanks for taking my questions is your free good to sell congratulation. I just wanted to add that the impact on the cockpit 19 in terms of human weakness in certain country right now, but especially in Europe that is also part of your important Market, you know versus so just wanted to ask the confidence for your 2020 Outlook in consider of the growth like Manitou. Can we see a better growth growth rate like more than I first quarter these kind of like neopia growth rate in twenty-twenty and versus your tire rotation at this is the first question. The second question is about the business Corporation with the timing given the. Target to launch the porter in the first place.
record for the first half so I wanted to get more updates since
Thank you. This is David. Let me take on the first question and I would like to turn your second time at question a tool or seal Mike. So Twitter first question as I explained earlier in the remarks Thursday, we we are we were you impacted from the supply chain side and when we March into Q2 and we're still in March right off. So we do see some impact in our European market, which is one of our overseas markets, but we even given that the first half year.
Because of the seasonality of ourselves, we would expect that in the later part of the year when the situation improves we should do our best to catch up for the for the losses. We encountered in the first half of the year at the moment. We could not promise a number that how how much we can achieve because we are still assessing the situation and and the the situation is still developing but we are confident that we are working with uh, working towards new product releases in the year marching towards our birth.
mission
And we should not see significant losses in 2020. I skipped her to 2019 Financial results.
Hi, this is Mike to answer your question about I Max we are still on track, you know, you know development product development schedule with the next products. In fact, you know, we just launched the first hour of our coffee cup Cooperative product the Timex Ironman or 300 series. Recently and as uh writing and David mentioned China's production line is slowly coming back to normal. So, we still ugh expect that the you know in the first half of this year, we will continue to rule out more collaborative products with himax in you know, in the first half of this year as originally scheduled. So, uh, so in terms of the uh, the impact of the virus fought for our Timex products,
Pat is relatively minor. Yeah.
Thank you.
The next question comes from Arthur Lie from City, please go ahead.
Thank you management team for taking my question income great for the maybe a good December quarter growth. I have a two small question. One is my investor. They have been you know, waiting for the big data analytics business and can ninja and chairman Fong or on my TV and update all the intelligence project with the university hospital and how you suck these potential business in the future. This is my first question and my second question is can you also qualify the shipment breakdown among the Indian a key and also New Market or Market? We understand that actually you Mark is still making a very small portion of dead.
You are dismissed, but I appreciate you. Give us a breakdown in those regions stop here. Thank you.
Hi Arthur, this is Mike. Yeah, so I'll adjust your first question and I'll let Dave it to answer your second question. So regarding the life Partnerships with the academic institutions, we are actually doing a lot. For example, we are currently working with Stanford University on the uh, research and review that process a tremendous opportunity for because sleep and say, you know, it's a month a very common problem and there's a lot of uh health care of Revenue opportunities in this area. So, uh, you know, we are actively engaging in example in the State research project with Stanford University. We also have been engaging with the uh, knowledge Institute of Technology and he dead
You on Improvement for example of the pie algorithm.
For a to to enhance it so that you could address for people with different chronic diseases such as people with high blood pressure or people with diabetes, you know, we working with them too long to to modify or enhance the pie out with them so that it could be more appropriate to be used by these people with chronic diseases. So we are continuously working with research institutions academic institutions on these type of data analysis to improve our algorithms and hedge our products.
David sure sure. I asked her. Thank you for your question regarding your second question about Europe is one of our Market which may represent which represents about one-third and approximately one-third of our overseas sales and remember that even though we experienced a significant growth in you can you hug and we which includes France Germany Italy and Spain and UK and