Q2 2021 Cloopen Group Holding Ltd Earnings Call
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Ladies and gentlemen.
Thank you for standing by and welcome to <unk> second quarter 2021 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 call over to your host today.
<unk> di <unk> Investor Relations Representative. Please go ahead.
Hello, everyone and thank you for joining clubs on second quarter plenty plenty of on earnings conference call the company's financial and operating results for it should in the press release Newswire services earlier today and are posted online.
Can download the earnings press release and sign up for our distribution list by visiting our IR website.
It depends on today's call will be Mr. Challenging, so our founder and Chief Executive Officer and Mr. Stephen <unk>, Chief Financial Officer management will begin with prepared remarks on the call will conclude with a Q&A session.
That's all I hand, it over to the management I would like to remind you of clicks on the safe Harbor statement in relation to today's call except for the historical information contained herein certain matters discussed on desktops on his call. All forward looking statements. These statements are based on current shack app.
And projection.
And therefore, you should not place undue reliance on forward looking statements involve inherent risks and uncertainty.
Number of important factors could cause actual results to differ materially from those contained in any forward looking statement for.
Information about the potential risks and uncertainties. Please refer to the company's filings with the Securities and Exchange Commission with that I'm now very pleased to turn the call over to our CEO housing from please go ahead.
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Hello, everyone and thank you for joining clubs on the second quarter on this call today, we're excited to see strong performance in the second quarter with revenues come in at RMB, 273, 9 million, representing a 47, 9% year over year increase and <unk>.
Beating guidance once again, our second quarter gross margin remained robust at 43 point in Banca share.
Most importantly, our non-GAAP net loss narrowed to RMB 26 points for melia with lapping a significant $58 four per cent quarter over quarter decrease our dollar based net customer retention rate remains steady at approximately 110 per cent and the screen.
And at June 30 day plenty plenty one.
And the southern border of plenty plenty of what all of our high margin contacts on their and unified communications businesses contributed in more than 50 per cent of total revenue for the first time, what sushi revenue more than doubling on a year over year basis.
So it all zone, Johnny you by Susan.
Managing the day, Yeah, So call on me Buddha says.
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We noticed a recent announcements made by zone to acquire five nights and industry, leading provider of <unk> services and the United States for approximately 14.7 billion U S dollars consideration like pools on a leading industry player in China.
Providing see cash solutions to large enterprise customers from banking insurance automotive and other industries five.
Slide nine provides CCAR solutions to large enterprise customers in the U S.
This transaction is a clear sitting on that cruise on strategic plan heavily focused on cc business is on the right track. We are excited to be expanding our footprint in this fast growing market with huge opportunity evidenced by day year over year, a doubling of our cc business revenue debt.
Clutter. This jump was primarily driven by CCAR solutions provided to a number of large enterprise customers. We believe our sushi business will deliver even greater value going forward.
So we'll continue to develop its sekos business targeting large enterprise customers as a key growth driver for sustainable revenue.
We also focused heavily on product development as we empower clients with communication tools. We also add value with our product strategy of providing SaaS solutions to assist companies featured with B to C business model and new marketing, we aimed to look at them from our.
And for startup by developing products that can help execute closed loop marketing synagro, including customer acquisition sales conversion user operations sales management fishing marketing and Pete purchasing assault on physician 80.
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Tell me what was your highest agenda. She always you know well the rule didn't die deal women Runion Shimada income without sushi.
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Well the jump on those digital July box Ginger on the evil.
Data security has to come on the hot topic of discussion and we're aware of the general public's growing concern regarding data security coupons prioritize the security of this client's data and provides multiple security solution, including specialized private clouds and local deployment to satisfy.
Good for different data security needs for large enterprise customers. We mainly provides services for private cloud with data stored outside and to which program does not have assets.
For clients served for plus public clouds, we saved desensitize conversation on records and tax messages for three to six months in strict compliance with mats, where operators with climates and client inquiry neat.
But we did not collapse all use personally identifiable information and in addition, we utilize high quality data encryption and strictly controlled data access and our service contracts contain clear personal data protection disclaimer classes.
In the long run will continue to enhance our day their security practices, ensuring our ability to provide best in class data security solutions and solidifying our leading position in the SaaS sector.
While we have achieved solid progress in products and services as well as technology enhancement. Our business is also growing steadily through strategic cooperation with leading enterprises, such as Tencent with whom we have for partnership on tests on cloud tends on sedan, which is 10.
On clouds S CRM platform and we call our safety products on now available on Tencent cloud joint development product platform, we have begun receiving orders for UC products through a partnership with Tencent cloud for a wide range of industries, including manufacturing energy and Soc.
Oh governance for.
Furthermore, our seven more cloud well connect with weak on customer service and their face for which new products are expected to be officially launched in the third quarter.
On our cooperation with industry peers broadens, our market position will be sort of in house.
That concludes SUNS on prepared remarks. Thank you all for joining US now we would like to turn the call over to Steven for a closer view of our integration with Elisa and an hour sat down for their financials.
Thank you Charles you're on.
Hello, everyone and thank you for draw on the call today, we are delighted with our robust results for this quarter revenue was displayed the higher quality with our high margin businesses, including our cloud based contact center solutions and cloud based unified communications and collaboration solution business non contributing about 50.
Seven four per cent of the total revenue on.
On a dollar based net customer retention rate remains solid at approximately 110 per cent of the three months ended June 30th 'twenty, 'twenty, one or even calculation with elite CRM yoga remarkable results, including a stronger product pipeline on more large enterprise customers.
Last week and rich on refining our products expand our customer base on the bolster profitability. We are confident in our ability to deliver stable long term growth on consistently create value for our shareholders for.
First I'd like to talk about our integration with elite CRM, we completed integration with elites area only product label on more in depth level in the second quarter, the strategic synergies of the elite CRM acquisition began to materialize as manifested by roughly RMB 13.
For seven unit revenue attributable truly in preparation during the second quarter.
They are on solid industry insurers and the vast technological capabilities user M. C. C strength in the application layer of our club for communications infrastructure complement to our existing business portfolio.
Next let's look at our financial metrics for the second quarter, we reported impressive results this quarter, beating our productions with revenue totaled RMB 200 on the $73.9 million a 47 for the 9% year over year increase the increase was mainly driven.
By the strong performance of our CSA business, which were all significantly at 105 on 1% year over year on the contributor at around 40% to our revenue.
Our sensors business has been thriving south to our diverse enterprise customers and especially the increasing number of large enterprise customers. We have approximately 13000 active customers as of June 30, 2021 on most of which are small and medium sized companies.
However, our roaster of large enterprise customers is growing steadily with 205 customers at the end of the second quarter on.
On the customer concentration rate is very low you haven't seen our overall stability.
Total revenue increased by 36 months eight per cent to RMB 100 on the 55.8 million in the second quarter on 2021 on a year over year basis, primarily due to increased telecommunications resource costs, all sourcing parts on the staff cost at the company.
<unk> to scale this business.
Gross profit increased by 65 from 4% year over year to RMB, 118th on one day only and the gross margin remained stable at 43, 1% during the quarter.
Now moving on to operations expenses in the second quarter of 'twenty 'twenty. One operating expenses were RMB 214, 5 million, representing a $65 six percentage increase from RMB 100 on 'twenty knife on five mainly in the second quarter on plenty plenty.
R&D expenses increased by $16 one per cent to RMB 62 million in the second quarter of plenty from day, one compared with RMB.
$36.6 million in the second quarter of 'twenty 'twenty due to an increase in share based compensation expenses of RMB $3.2 million on <unk>.
Crazy R&D stop expenses for development of core features on the functions in cloud based on city solutions on the cloud base are you sensing solutions for the increase in technical technology service expenses paid to the outsourcing service providers for the development of certain non core features on the phone.
Actions in cloud base, you will see on the C solutions.
On the marketing expenses increased by 56, 2% to RMB 72, 8 million weighted in the second quarter of 2021 from RMB 46 for 6 million low second quarter on 'twenty 'twenty, primarily due to a increase in share based compensation expenses.
RMB $6.6 million and an increase in staff expenses as the company continues to scale its business on the reach a wider customer base.
G&A expenses increased by 72 three per cent to RMB 17, nine 7 million in the second quarter of 2021 from RMB $46.2 million low second quarter of 2020, primarily due to an increase in share based compensation expenses of RMB 28, one for.
One is primarily relating to share options granted to eligible employees and directors and restricted ordinary shares issued to management employees for business acquisition and the increase in social insurance premiums as the company benefited from a social ear for as premiums did.
In 2020, according to the government relief policies during the COVID-19 outbreak.
Net loss for the second quarter of 2021 was RMB $105.6 million compared with RMB $62.2 million in the second quarter of 2020 day, whereas the increase primarily driven by increases in non cash items of RMB 50.318.
Including the increases in share based compensation of RMB, 38, 1 million and impairment loss of long term investments of RMB 15.7 million.
For the third quarter on plenty for them to warm propane currently expects revenue to be between RMB 200 on a 17.5 million RMB 278 million, representing an increase of $43 eight per cent to 45, 3% year over year.
Sure.
The above outlook is based on the carbon market conditions and reflect the Companys current preliminary estimates are for market and operating conditions on customer demand all of which are subject to substantial uncertainty with that I'd like to open up the call to questions operator. Please.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you were using a speakerphone please pick up your handset before pressing the keys.
If at any time for your question has been addressed and you would like to withdraw your question. Please press Star then two.
For the benefit of all participants on today's call. If you ask a question. Please first ask in Chinese and then in English.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Mark Li with Citi.
Please go ahead.
Hey, Aquarius on how are going for you took oh, yeah T. Our supporting you on that.
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So you shouldn't they got down to a fixed on long from tool not just for a.
See more U K on <unk>.
On Tuesday, you got those would seem quite well shut them down the whole oh acute without a D. C. O M diblasi share by Guy. So I think things on wheel doors. All are high on that just didn't yeah from companies that just walking on it until you see too low we just seem to hold their share I'll, probably just think of who the C. D. R. Horton on the Hanmi.
Well, thank God zone.
Oh, Hi, this is mark Li from Citi. Congratulations on the strong results I want to also I noticed for the CPE business. This quarter the growth has been.
Price strong.
Just share about a breakdown for OCC and T Mall and also.
Good day E CRM contribution on what could be the organic or core growth and also could you share about like the U K and so you'll get into true or the industry. Thank you.
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I mentioned before we will see you see.
Is increasing much faster compared to walk on part of Southern War I think for for her.
For this call are the links into the best sales increasing.
Much much bigger than 100 per cent for the second quarter and I asked for seven more Oh I think the increase for southern was roughly around.
40 to 50 per cent for this quarter Oh, just one reminder, on the there's actually also for your second question on the revenue for NCC included are the about $30 million revenue generation from at least they are and so what if we pick those are revenue from your leased.
They are on alt than the the inquiries for our sensor business for the second quarter is still over 80 per cent.
Oh, well I ask for a.
The number of for some example from new customers added for for this quarter.
I will pass this question to chew on to our CEO.
Sure, Steve machines, and got a shipyard.
Michael I'll go home.
Daniel.
Hmm.
Yeah.
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Judy the Cola, Joe well I'm going to jump on and ready to go as you all did all news on co who the issue on the Thailand plant.
Yeah.
Sure. Thank you very much management and congrats on that.
On our translate it and three.
On our.
Our growth M. C C. Mainly relies on two factors one is our superior various sales and marketing team and that is our continuously enriching for.
<unk> and functional models.
On our target is to improve the customer acquisition insufficiency and retention everybody for its clients. So we are currently provide on all of the services, including including customer acquisition, and our sales conversion efficient, especially on marketing.
On.
On the new customers and.
Q2 is mainly Ah.
Customers from banking, our brokers and other financial situations.
Does the specific names is not very convenient to.
At this time.
Well, we can't go on and take the next question.
Thank you. The next question comes from Mirror Lee with CIC C. P.
Please go ahead.
Are there any kind of how does it all kind of things Oh, what are they on for the winter.
Pete Seeger Lindsay you should wait to see them.
Oh Gosh I don't know what kind of go on for those who they are we don't got it sounds good.
What's your assumption so you've got one in D. C. I N S. C R and yeah you got from.
That makes it quite well diaghilev. He she doesn't need to do is I think on the Hollywood agenda, when like wholesale simple Nashville, CCAR drag on sales.
For that.
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Yeah.
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No no that's it for me I got to go through that channel.
Maybe for C pass them, because they have more of them nothing jumped on board that will push for licensing that's illegal in patients on to go through testing platform.
For the module.
Well I'm going to translate for myself quickly.
First one is regarding <unk>.
We see a strong growth for the business, Inc. Second quarter. So could you opted for more information about the progress of C. R and M. S. T. R E business and my second question is regarding the online education sector, which has experienced some fluctuations recently so well.
The impact of the online education industry on our business.
On the second on the third question is we noticed that the number of active customers plus the credit likely compared to the first.
So could you share more information about the number of customer by product such as the past losses.
More on my last question My last question is.
Could you give us the breakdown of gross margin in terms of debt segment. Thank you.
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Remember, there's a womans I see I am they acquired the day the involved agenda on that you can go up.
On the integration of it let's see I am was a industrial debt. It did it hold position is very smooth.
Currently the strong complementarity between products and customers have they get that began to emerge and unless you're a M country due to over 13, Natalie on revenue and the stack on quarter. We believed that later on the synergy EM debt business flow.
Become more apparent.
On the Sci on business of crude on it still and its initial sales and we are both doing S. T I N and the new marketing services Division.
Which named before stuff on more of an a in our industrial digital division for seven more it's G. S. C. I am has already established its first version and the second quarter and began to have have some revenue and in desktop water.
And Raleigh D C well focus on.
And insurers, although more tests and that's these three industry and we will target to establish for sample.
In the third quarter.
Yeah.
Was there a follow up.
And the second question for Us.
I see I see see analyst is whose balance.
Oh, Okay, Yeah, I'm all for the other remaining pretty fast for us.
The second question is regarding the <unk> the other.
The recent policies on the Oh I have a patient in the sector.
Impacts for our business.
As of now are the the impact is as it is really not there yet so oh for our assisted business. We have been operating on its normal about so we expect there will be some some matter of impact for all of us there's probably during the second half.
Of the year, Oh actually I mentioned during the call are we focus on a lot of different industries. We don't rely on a certain industries are the are the.
Revenue from education sector, Oh come for about eight percentage of our total revenues.
So are we.
We would expect there will be some amount of impact.
It seems we have been doing very good for you. The other industries. So on our target for for this year is to it.
They are the same as the beginning of a.
All of the year.
For the third question is regarding the <unk>.
A smart a.
Chris in terms of all for a total active customers well actually the the reason for this very small day, Chris is because we are we took out some very small customers who are.
In terms of our ROI.
Who are really not worse for the company is investing a lot of resources into those are very small customers, but like.
Like we mentioned during the call the number of large enterprise customers who.
Who are the major revenue contributor a habit craving for the past several quarters.
We expect this trial will continue into the future.
And the vote on question is regarding the gross margin for each of our business line on the gross margin for a safe house business for Q2 of 2021 is roughly 27% on the gross margin for the.
The sensor business is around 50, 556% on the gross margin for our sensor business.
It was actually a higher compared to previous quarters.
Is about 52 per cent for the second quarter of 2021.
Okay. Thank you.
Yes.
Yeah.
Again, if you have a question. Please press Star then one.
The next question comes from Tina Hu.
With Goldman Sachs. Please go ahead.
Oh, so drunk on him on his Hello, yeah, well for one.
Do you want to you're actually young children, you shut them in C. C. J O clock now in English about cohort I hope she's on C. C. J acquired on why not take a <expletive> to call. Some would you Don I shall rule high share kick off I think the extra day shall rule on steel.
Ara go shoe called the VSAT, Linda Chang Qi, though you got non-GAAP EBIT breakeven on this.
Since I can see on mailing you got back she thought she can't you might comment on Japan.
On what maybe you thought that you saw I mean I found only on for Neil.
She got break even though she can be.
I Hope this doesn't go one key she'll conduct that Linda.
Good day to the G&A that hung back tissues that are actual rupee drone shots on vs. Outdoor now on how long does that take a geologist suddenly you're hanging on whole Geo satellite on how long. These couple of current year, a couple of years I take a weekend channel.
Cash over there trying to be totally you called on by like Holly I Hope the whole you go on tissue, what kind of dogs on that.
Good day to do without a J a.
But if it goes well.
Qunar, who kind of shoot out into a number of shares outstanding on how some people be easy to sometimes on bush out at home.
But I should admit in sometime for us on by our sugar midair not to go on triage share. You'll you show me. Yeah, you are holding what that mean Georgetown. She though you go fully diluted the shoot that cash flow don't that guy on door shop, just yet.
Oh, okay.
I'll answer the first three questions and I think for the for your last question on we need to when you took a lot Ah yeah I'll.
So the first question is regarding the on the the secret.
Especially with the increase of revenue.
Yes, like I mentioned that are the the the the main reason for the increase of for RCC business is due to the large enterprise customers due to the total seats their business and Oh in terms of our recurring revenue.
On the licensing and the perfect revenue.
Right now it is for the half on half and the what about so you know to be.
Honest.
No.
Most of it to be a larger price customers are ours do.
Much more preferred to to have a tailor made a private cloud based solutions compared to a public a top public cloud based on solutions, especially considering the recent policies regarding the data security Ah Ah you should buy our garments.
So oh I think for for US, we will continue to come up with solutions that.
Most suitable for to meet the demands of our largely for our customers to protect their data security and at the same time, we will two to get a you know as much revenue as possible from the public.
Probably caught a recurring model.
Oh. The second question is regarding the book even a timetable.
As we have in Michigan for for for.
Since our IPO I think right now considering the market Margaret conditions.
If I'm on stage of our of China's a cloud based communication business. The number one priority for our company is due to to getting more market share. So the a in terms of the the breakeven points are I think we are most concerned about is the improvement of our.
Productivity I think that's the that's evidenced by the <unk> are all our financial results for the second quarter.
Probably see our a product on our operating efficiency and productivity had been improving very significantly so as a result.
We expect our breakeven point will come.
Probably sooner.
Then you know once you mentioned on the during the call, but we'd be cash gave me Oh.
A very clear timetable are you in terms of whether we can get to the breakeven point on a quarterly basis.
The third question is on the surface all.
The surface is regarding the G&A expenses.
Well I think there are two reasons on the Oh.
Oh on tourists why Dr. Joseph your G&A expenses as a percentage of total revenue a decrease of loss for the second quarter on the first of all as we are the company got some sort of level. We will continue to invest in you know sales on our marketing to expand our sales team in order to get more customers and also weighted.
To continue to invest in the R&D perspective, you'll continue to add more features to our products, but in terms of Oh Gee on a function.
It will be a very stable are you in in the last two.
Two to three years and I think another reason news there are some one time costs either related to a two two acquisition, though for some minority our holdings are in terms of all of it relates to two ipos are are not happening for the for this quarter.
So I think those are the two reasons why the share he especially as a percentage of total revenue decreased for this quarter.
The very last question Oh helium will also require less pressure.
Yes.
The increase in the number of shares outstanding on its mainly because two reasons. The first one is because EPS is calculated on a weighted average of outstanding shares based on a time basis, so because they've got lifted on Saturday alright, So we issued 46 million.
New shares in February the night and also on the day, we lifted our preferred shares or turn into common shares.
And the preferred shares on not calculated at eight P. M EPS it for ourselves and and lap it led to a huge increase in number of outstanding shares from AR and sat on Florida, and our fully diluted.
Number of shares should be around three.
300 on 15 million it will be just a little higher against 300 on tiny millions and sat on product.
Well I mean benefit from guys yet.
Does that conclude the answer to the question.
Yeah. Thank you.
Thank you.
Im showing no further questions. This will conclude our question and answer session. At this time I'd like to turn the conference back over to <unk> Investor Relations for any closing remarks.
Once again, thank you everyone for joining today's call. We look forward to speaking with you again soon good day and then that.
This concludes the earnings conference call you May now disconnect. Your line. Thank you.
Yeah.
Thank you.
Yeah.
[music].
Okay.