Q4 2020 Cloopen Group Holding Ltd Earnings Call
[music].
[music].
Ladies and gentlemen, thank you for standing by and welcome to <unk> fourth quarter and full year 2020 earnings conference call.
At this time all participants are in a listen only mode.
After prepared remarks by the management team there will be a question and answer session.
Today's conference call is being recorded.
If you have any objections you may disconnect at this time.
I would now like to turn the conference call over to your host today The Lane Die clippings Investor Relations. Please go ahead.
Hello, everyone and thank you for joining crook of fourth quarter and full year 'twenty 'twenty earnings conference call the company's financial and operating results for issued an absence of at least their newswire services earlier today and are posted online.
Can download the earnings press release on sign up for our distribution list by visiting our IR website.
It depends on today's call will be Mr of challenging so on our founder and Chief Executive Officer and Mr. Stephen Lee, Our Chief Financial Officer, Steve.
Steven will provide an update on our operation now for flawless, that's all of our strategic initiatives on behalf of all of our CEO. Mr. Sun and then he will give you an overview of all of financial performance and for my guidance for the first quarter of 2021 management of both again with the payer.
For March and the call will conclude with a Q&A session.
Before I hand, it over to the management I'd like to remind you of coop in the states have the safe Harbor statement in relation to today's call except for the historical information contained herein. The matters discussed in the conference call I'll forward looking statements. These statements are based on current of chance estimate.
The projections and therefore, you should not place undue reliance on them for.
We're looking statements involve inherent risks and uncertainties on number of I'll say reported on factors could cause actual results to differ materially from Dell was contained in any forward looking statement.
For more information about the potential risks and uncertainties. Please refer to the company's filings with the Securities and Exchange Commission with that I'll now turn the call over two hours yeah, it's almost evenly.
Thank you for Ya Ling, Hello, everyone and thank you for joining us today I'm pleased to deliver today's opening remarks on behalf of our CEO Mr. Sun <unk>.
This is our first earnings call as the public company following our IPO in February. This year. We are excited to speak with all of you about our financial and operating results on job.
Of this you regardless of our journey to transform the enterprise communications industry in China. Many of you listening today, maybe new to our store range. So let me spend a few moments describing our business before walking through our full year on the fourth quarter highlights we are a leading multi capability of cloud based.
Communications solution provider in China, offering a full suite of cloud based communications solutions. All of our services include the communications platform as the service or see Pos on cloud based contact standard OCC on the cloud based on your only five communications and collaborations also referred to as <unk>.
Youll see on C R.
Our C pass all for services similar to <unk>, allowing enterprises to add real time communications capabilities, such as what is on the messaging to their applications and the systems by deploying <unk> I speak.
<unk>.
With our <unk> service in their prices kind of interact with its customers through their friends China is at the lower cost on battery efficiency Zander ask would be of U S comp for this type of service all of our third of segment you see on the sea helps enterprises manage of communications raising the.
The organization is through user interfaces. This the.
Serve as a similar to the products offered by noon Central U S.
All of our prime customers in China are large enterprise sales with a broad range of communication demands with all of our comprehensive business. The portfolio, we are better positioned to fulfill those business demands in 2020, we generated about 70% of our total revenues from large enterprise customers.
About one third of the customers employ more than one category of our solutions, providing us considerable cross selling on the outside of the potential you know do you share.
The maturation of the communication of industry to cloud based solutions has only just the began in China. The penetration of cloud based communications in China was just the two 7% in 2019 compared to roughly 10% in U S. The market is also very fact balance therefore.
Ripe for consolidation, we are called items that are recognized the leadership position and the comprehensive cloud based communications solutions pulled out of position to adapt to market dynamics on the capitalize on the tremendous growth opportunity.
I think it goes without saying that 2020. It was a year that has tested all of us in one way or another sort of in general ability on the great deal of hard work. Our team was able to work through problems meets the challenges on the sales.
Pas opportunities. This is evidenced by our results. We are proud that we have now the only preserved the through the extraordinary year, but have been able to come out even stronger our IPO in February of this year was a testament to our hard work on the recognition of our market leadership position the.
I feel also raised our brand profile significantly.
International stage.
Despite the unprecedented say the challenges presented by the COVID-19 pandemic. We are pleased to report a solid 2020 top line growth of 18, 1% of the year over year, whereas the revenue of 700, and the 67 7 million RMB three of them by a 13% expansion in the <unk>.
<unk> of active customers to reach over 13000 by the end of 2020 as compared to the number of active customers as of December 31 2019.
We are delighted to see the outstanding value preposition that our paradox on services deliver rats on that but it's more on more on their prices in the marketplace in the first quarter of plenty of 'twenty, we firmly executed on our mission continuing to cultivate an expanding customer base on the further the vials or cloud.
On the AI based on communication services all for Ams revenue was in the first quarter increased to RMB 200, and the 58 7 million, representing a 15, 5% increase year over year.
That's the let me provide some highlights on the business segment level, we continue to see double due to the growth in 2020 for our <unk> segment revenue from the past in 2020, the growth by 15 points of light per cent to for funds rates. Upon one of the only RMB, primarily due to the rapid growth of our tax the message on <unk>.
Services, which saw an increase of demand from sort of large enterprises as well as significant increases in revenues generated from our Iot services in the <unk>.
First quarter of 2020 revenue of FERC Pos was 100 a.
Third it was around about a 35 million RMB.
Our cloud based assay for the segment was the standout performer in 2020. The same revenues increased by 41 two per cent to 200 on the 45 on one the only RMB driven by a significant increase in customer at the numbers that performance could have been even stronger if it wasn't.
For a shrinking of the business, but sort of medium or small enterprise sales customers, who are affected by the COVID-19 outbreak.
So some of this other than in the first quarter of 2020 day, where the Cc Robyn the was up 17, 4% year on year to 19 million RMB driven by the release of underserved the demands.
During the COVID-19 outbreak in the first half of 'twenty 'twenty.
<unk> is the usually on the same solutions had the more difficult year, whereas the revenues decreasing three 9% of RMB 118.3 million in 2020 day of decreasing nine 5% on year over year in the first quarter plenty of 22, RMB 30 effects on $5 million. This week.
Clients, primarily came out the result of delayed project delivery due to the COVID-19 outbreak.
As we move ahead in 2021, we have two of our business accelerated significantly in the first quarter benefiting from the broad based economy economic recovery being serviced by China. We have successfully acquired new large enterprise customers, where the numbers in the teams.
On our dollar based net of customer retention rate has bounced back to above 100% in the beginning of 'twenty 'twenty. One internationally, we have of graduate sort of significant on the growth from our Japan business as well as made the progress, whereas the market entry in Southeast Asia. Most recently opened the of our first of all fair.
In Southeast Asia.
In March we.
In turn it into a dearth of nature agreement to acquire E. You leave the CRM, a leading customer relationship management software provider with the.
The substantial synergies in terms of product portfolio and customer base from this acquisition.
CRM software adds to our capabilities in serving large enterprise clients on it helps us to solve the defy our position as the comprehensive solution provider in terms of customer base you leave the CRM has built up a impressive impressive customer portfolio, particularly in PMT on E.
For us, which will complement our historically strong position with financial service sector. Once the transaction is closed what do you expect at least the R&M to immediately make a positive contribution to our bottom line.
Yeah, <unk> is right for consolidation of the added the financial firepower that came with our IPO gives us a great foundation on which to the next stage of the Companys growth can be built we will continue to ease for other alternatives to students of our company through I'm, the only selectively as the year progresses.
This concludes Mr says prepared remarks, I will now provide a brief overview of our financial results for the first quarter of 2020, all comparisons are year over year on the old numbers are your RMB.
Net otherwise noted.
Our revenues reached $258 7 million RMB in the first quarter of 2020, increasing 15, 5%. The increase was mainly driven by very strong performance from our cloud based contact center solutions business, which saw revenues increased 74% year over.
A year or 291 5 million RMB, primarily due to an increase in the number of customers as I mentioned earlier called the revenues increased by 19, 2% to 100 on the 58 million RMB, which was due to increase the cost of revenues from <unk> solutions as our ex.
Spanning customer base drove the increase in taxing cost on the increase in cost of revenue from <unk> solutions, primarily after the resolve of our increase the business scale as well as increase the infrastructure I mean, your equipment cost as we continued to ramp up the project delivery.
Gross profit was 107 million RMB 10, 2% higher than the fourth quarter of 2019.
Now, let's look at our expenses in the first quarter operating expenses were 184 million RMB, representing a 30% of increase from 100 and the.
$38 8 million RMB in the first quarter of 2019, R&D expenses increased by five 8% to $52 5 million RMB, primarily due to the increase in technology of service expenses paid to the third party all sourcing service providers for the development of sort of non core feature.
<unk> on the functions you can cloud the using the <unk> solutions, partially offset by a decrease in the R&D staff expense as a result of a reduction in social insurance contributions due to favorable impacts from government of relief policies. During the COVID-19 outbreak.
Starting on the marketing expenses increased by 29, 4% to six to 807 million RMB, mainly due to increasing staff expenses on the increase in spending on the online advertising components on them.
The marketing services and the company continues to scale as the business on the reach a wider customer base.
<unk> expenses increased by 15, nine 2% to 67 upon one of the only RMB. The increase was primarily due to costs you incurred of preparing them for the company at the IPO on the increase in share based compensation expenses line.
Also sort of increase in our adult for accounts per region in the period.
Net loss for the first quarter of 2020 was 305 for me only RMB compared with $53 9 million RMB in the first quarter of 2019, whereas the increase is primarily driven by 241, the only RMB of noncash items, including change in fair value of <unk>.
We're really liabilities of RMB 200 on the 24 upon the 8 million on the share based compensation of RMB 15 on $4 million.
On the diluted net loss per share. It was 37% of 65 RMB in the first quarter of 2020 as of December 31 of 2020, the company had $296 6 million RMB of cash on cash equivalents.
For more of our 2020 of full year financial results. Please refer to our earnings press release for further details.
Looking forward for 2021, we believe we are well positioned as the company to take advantage of pent up demand from enterprise activities. The late in 2020 on.
On the capture of expanding cloud communication services deployment the alternatives the positive impact of impactful for the age we have already begun to witness in the first quarter of 2021.
For the first quarter of 2021 clue currently expects revenues to be between 100 and of 92 million RMB. Two 100 of 97 million RMB, which would represent an increase of 45% to 48, 8% year over year.
The above all of it's based on the current market conditions on the reflect the company's current on the preliminary estimates of market on the operating conditions on the customer demand, which are all subject to substantial uncertainty with that I'd like to open up the call for questions operator. Please.
Ladies and gentlemen at this time, we'll begin the question and answer session. The App.
Ask a question you May press star and one to remove yourself from the question queue. You May press star two.
You are using a speaker phone we do ask you. Please pickup your handset before pressing the keys to ensure the best sound quality.
Once again to ask a question it is star N. One.
Our first question today comes from Mark Li from Citi. Please go ahead with your question.
Hi management, Thank you very much for representation on.
Martin <unk> from Citibank Research Ah My first question is for that.
Congratulations on the strong growth in the contact center business.
No.
The price growth.
Any color on the op for growth.
Indeed.
The breakdown I can give a bit more color and.
And my second question is for your first quarter guidance.
Could you give us any color on the growth for the major of segment I E.
You can see at the seaport.
Thank you.
Oh sure for.
For the first question.
As for our <unk> performance in the the first of all of 2020. The increase was mainly due to the increase of number of customers as I mentioned in the call.
I think I discussed this before are you right now.
I think the company is our number one priority is due to get more market share or to.
Acquire more customers of expanding into more of.
Sectors are more industries, so oh from the companies for per sector, we're not eager to really increase the price of our offerings of the weather to a 2222 to have more access to more customers and also you know to try to ask our customers to pay for.
For more.
More premium package of all.
Part of our offerings.
Uh huh.
As for the the our.
Guidance for the for the first of all of our of 2021.
Overall waste back on our revenue will increase by close to 50%.
The amount of the three business lines.
The <unk> business on the use of MTI business, apparently are a much more important.
So of the company will on the west are much more for our tissue resources into those two segments as we talked of before so the the increase for the PC business.
And usually on the fee business will be a much higher actually compared to those the.
The the pretty H O 45, two of 48% of increase, especially the PC business. We inside of our thesis for US. There's a will have a very strong performance in the first quarter of 2021.
Very clear thank you Steven.
Our next question comes from.
Q1, <unk> from Goldman Sachs. Please go ahead of your question.
Hi management.
From Goldman Sachs.
Congratulations on the results. Thank you very much for your time.
Thanks for your questions. If I may the first one the staff could.
Could you give us the breakdown in terms of gross margin for the sea.
Gentlemen.
For 2020.
Also.
Gross margin outlook for.
For 'twenty.
The 21 the Wow.
The second question is in terms of your acquisition because of it.
So plenty of income.
So I assume that the first quarter results on.
The third quarter guidance for 2021 does not include any.
Our revenue contribution there yet so is it.
For a few of them back.
In two the second.
Fourth quarter net.
We are going on even a better revenue traction.
Acquisition and also.
One on 'twenty.
2020.
The annual revenue as well as margin for I B E.
And the company.
And then the first question is in terms of Oh, maybe.
No that type of investments.
The wrong in November.
In November of last year, So wondering how we like to leverage that.
So on and their potential customer base to expand our business.
The market share and then the last question is also related to that.
So you mentioned that.
China's top of the indication of market, it's much more fragmented.
So.
Hum.
Uh huh.
For the trial.
On this market.
Hum.
The consolidation level.
And also for loans.
Do we have in the mid to long term.
Oh for sure.
Oh, five or 10 years.
Thank you very much.
Okay.
Yeah it.
It seems that there are a lot of pressure and so although I will try to Oh Gee the chesnut.
Ms anyway.
If I Miss any questions do you kind of just remind me of lots of again. So your first question is regarding the breakdown of our of the.
Gross margin regarding the each of our best of segments for 2020 are overall, the gross margin for our 2020 of performance is a 40%.
The parts business has a lower gross margin.
It is about the 28, 29%.
The other thesis about the.
Since the business has the gross margin of.
Two of the 55 on the fixed 56% for the the U K business. The gross margin is around 45%.
So that's the the brookdale for for the three segments for the entirety of plenty plenty.
Yeah.
In terms of gross margin.
Your second question is regarding the acquisition of Oh, There's a say on a company at least the CRM, yes, all right.
The we are we will not are we on that.
I'm expecting to include any of that revenue in Q1, because the acquisition will be a complete sales at earliest at the end of it. The most so of the in terms of revenue contribution that will start from the Q2, but.
So what I would like to also remind all of you is the reason why the company acquired a there's a favorite of the coffee not just for the short term revenue contribution or the net.
Non profit contributions, but rather we want to add the CRM.
Two of our product offerings.
As we continue to expand on our total solutions to our customers. Our CRM apparently is a core function for many of our customers and.
And by adding that as a function of the module to our total solutions. We believe that will actually gave the company better positioned to serve our customers and the long term are no. So as.
As I mentioned that during the call we have of greatest synergy with the CRM company. Both in terms of the customer base on in terms of the the the the the product offerings are.
Yeah about Oh.
The the what I can.
Talk a little bit as the other the company on a yearly basis at the center of company. It has the revenue of a roughly a beaten.
The 10 15, two two to 60 million RMB. So in that range. So out of that Oh no. So the this company actually is the profit making business. So that will benefit our bottom line as well as I mentioned during the call.
Your next question if I remember correctly, it's regarding the the pins that Tucson is a very important strategic investor for our company and Oh.
Since I'm the actually offers a.
Very importantly, China of vertical for us to have the access to a lot of our large enterprise customers and the governments are actually during the Q1. So far we have already had several signed deals from Tencent.
On the other the pipeline is even bigger and we started working on those are different.
Okay.
France is that so are we in fact the of the Tencent are will really help our that's the develop significantly are in the are in the ER in the coming future.
Future.
The last question is regarding how.
How we look at our best day is in the long term.
I kind of mentioned during the call right now the the China's market is still very.
Are we early stage comparable U S. The penetration rate is very low the the market is highly fragmented of.
We are at the company will continue to two to use R. R.
Our of vantage of multi product solutions strategy to continue to expand into new industries to acquire new customers and also we will continue to.
Look for.
Our targets are the communists, such as there's a fair on our company will continue to look for for example of the RPI business the.
The the the AI business, the CVP business to continue to add to our product mix. So the I'm on they will be a lot of the key strategies for the company in the long term and also the international on the overseas markets as I mentioned during the call our Japan business.
<unk> has been doing really really well for the past two years.
On the arch of investors.
Well, we expect the ultrahigh net says will actually be more than double that this year in terms of of the revenue and we are a REIT now exploring the new markets in south and southeast Asia as well. So the international expansion will also be one of our key strategies into the future so by doing the <unk>.
All of that.
We expect all of our revenues our gross margin and also our Baltimore will improve into the future over over the long term and in our U S.
Three five years of three years, probably a it's too short of time, you know five to eight years, we expect the baidu, you'll all of the things I just mentioned the company should be able to have a market share of a five to 10 per cent of the total market of clubs.
Communication market in China.
Did I Miss anything Presser, Thank you Darren.
Okay.
Yeah. Thank you.
Once again, if you would like to ask a question. Please press star and one.
Our next question comes from all of you leave from CIC. Please go ahead with your question.
Okay. Thanks management for taking my question.
Graduation of sounds very strong results.
My first question is on our 'twenty to 'twenty one guidance on this.
Your line GP margin and.
For the European food business.
Part of the others.
For the late in 2020 of its called the 19th so how's that.
In 2021.
For the you can see the current business because of just launching last year. So could you share more.
Did you see the carbon business all day.
The second question is also on the M&A.
Because you'll have them up and the plan this year and beyond so what are the metrics that we take into account on that.
My second question is the key strategy.
But currently it's the game on market share. So could you elaborate more about our plans on the house.
On the distribution channel.
Capabilities and domestic second yesterday.
Thank you.
Oh, Okay, Oh for for the first question for all of the Houston say both of those.
Ah, Yes, I've personally seen most of the clients using the two best served our large enterprise customers. So.
They were impacted all of our Youll see that says of was impacted by the Cold me like the outbreak of the most of for last year. So other the other revenue was actually for US I'd say, both as of day critically for bed.
But as the.
The the impact from COVID-19 outbreak has been disappearing for for the past several months. So we saw our you'll see that's the business has bounced back a very significant place for a while.
I, probably can the gateway projections.
For the best day is only for the first of all of our old for for this year about the fleet. We fully expect Oh are you also have to say, but the real increases by a rather significant percentage of for for this year on.
In terms of what the kind of a best of segments. We included.
Our real estate of say both of those right now are you on the first one is the we offer a a similar per lacked a 222 didn't cop of Alibaba or the of the wechat from from pesticides.
On a probably of cloud based a tailor made solution to all of two large enterprise customers, especially that the oes.
So we are not competing with tencent on on that.
Alibaba about so we do things differently are actually there are great market potential in this sector and another thing we do for a real sense of business is our CV business, our computer vision business or could be the revision business, we actually only.
Started those are from the the second half of of loss here, but this doesn't it has been increasing really really fast Oh actually one of my mention of two said that you know.
Great sales triangle for looking for for for our company. Our CV actually are seeing the team has has of several product on several contracts signed from Tencent, China as well. So it tends to have actually can help of our favorite business vary greatly as well.
<unk>.
Ah, you're you're I'm, sorry, I didn't quite.
Credit remember your second class of your second question is can you repeat the second part of your I guess.
Yeah.
Yeah, and beyond the workout of matching scatter would take index.
And take into account on that.
And one of them.
And the snacks it in the target.
You mean for the acquisition of all of this the CRM company.
Or I can feel like were reflected in the.
Target.
Okay, Okay I think.
Yes.
We are you know when we look at our potential M&A targets are we actually are looking from the two ways. One is to to at the other of the paradox, you know to add more new features to our product mix, we want to expand our per hour of fragrance.
That's the theory. This CRM company is a great example of.
All of this strategy are we want to add CRM to our to our current product for our offerings and also into the future we may add.
Add more difference product fishers, two hour of product offerings as well and another way when we look at our partition of M&A has to do some kind of the of the the.
Industry consolidation.
That way, we can add their customer base to our car of the customer base on the also we can at a rather significant amount of revenue to our total operations to out to further that the gap between the us or the other competitors are.
Since we are the only one in China that kind of offer this multi product. The one solution strategy, we want to take this on vouchers and also you know by being the probably the company now we love who uses of the power from.
From the there's the type of market is two to two two.
To do more consolidation of <unk>.
Our tests as well.
On the your.
Your third question is.
Oh yeah.
Right.
Yeah, I remember it well.
Regarding the especially into lower tier city of yes are we we actually opened up several new well just open the several new actually the offices in the Usama easy nine of those Oh I see the addition to our more than 10 or 12.
I'll wrap up with this we already had.
In the lower tier cities.
So while we will continue to expand into lower tier cities, we see a great of the mass a great market potential in lower tier cities, especially for for many many.
Who are in the lower tier cities, but.
Right now may not have that as kind of a solution available for that and also on speaker.
Speaking of our expansion into lower tier cities.
At the same time, we will expand to do more channel sales as well right now most of our sales are direct sales, but you know as we expand into the orchard lower tier cities. We may do more channel our sales are in this year.
Comparable of last year.
Thank you.
Okay. Thank you.
And ladies and gentlemen, I'm showing no further questions. This will conclude our question. The answer session. At this time I'd like to turn the conference call back over to Elaine from Investor Relations for closing remarks.
Once again, thank you everyone for joining today's call. We look forward to speaking with you again soon good day and good night.
And ladies and gentlemen, this does conclude today's conference call. You may now disconnect. Your lines. Thank you for attending.
Yeah.