Q1 2022 iClick Interactive Asia Group Ltd Earnings Call
Hello, Ladies and gentlemen, thank you for standing by for the I Click Interactive Asia Group Limited 2022 first quarter Unaudited financial results Conference call. At this time all participants are in listen only mode. After management's prepared remarks, there will be the question and answer session Today's conference call.
Is being recorded I will now turn the call over to your host Ms. Lisa Li Investor Relations Director Lisa. Please go ahead.
Hello, everyone and welcome to the 'twenty 'twenty Q I quakes first quarter, although that's financial results conference call.
Company's results were issued earlier today and are posted online you can download the earnings press release forms going up for our distribution list by visiting the IR section of our IR.
I R I S.
Oh I see came to come.
In addition, during the call management will keep their prepared remarks in English during the Q&A session. We will take questions in both English and bundling.
Third party translator will provide consecutive translation ultra installations are for convenience purposes, only in case of any translation discrepancy management statement in the original language show creep up.
Ching Tang TJ, Chairman, Chief Executive Officer, and co founder of earthquake will first provide a high level review of the 2022 first quarter results and share a scholar or execution strategy going forward.
Chief Financial Officer, David Chang will follow and keep us additional insights on the financial results.
The wide guidance for second quarter.
For a full year of 2020 Q. He will then turn the call back over to TJ for closing remarks before the code is open for Q&A.
Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
We're looking statements involve inherent risks and uncertainties as such the company's results may be materially different from the views expressed today.
Information regarding these and other risks and uncertainties is included in the company.
As filed with the.
Securities and Exchange Commission.
<unk> does not assume any obligation to update any forward looking statements, except as required under applicable law.
Please also note that <unk> earnings press release, and this conference call include discussions of other.
GAAP financial information as well as all the non-GAAP financial measures.
<unk> press release contains a reconciliation of the non-GAAP measures to the most directly comparable unaudited.
GAAP measures I will now turn the call over to our chairman and Chief Executive Officer, and Cofounder Ching Tang TJ. Please go ahead.
Thank you Lisa.
And welcome to the call everyone.
So the first quarter of 2022 well I click was highlighted by the successful refinement of our product mix, which go.
Our gross margin despite challenging market conditions.
On today's call I will first discuss how we achieved this improvement.
<unk> by how the macro uncertainties and other forces.
<unk> our implementations.
Finally, how we will leverage current market conditions to build long term shareholder value.
First.
The increase in our gross margin.
Used by our consistent focus on our higher margin enterprise solutions segment.
Well conjunctive Lee on winding lower margin higher risk marketing solutions businesses.
As a result enterprise solutions revenue has continued its strong momentum.
Growing by 34% year over year to <unk>, one 7 million.
Really cool Cai among any historical first quarter for this segment.
We are quite encouraged by this growth.
As it relates directly to what we expect to be the primary driver of our future revenue, our SaaS plus X business model.
This adjustment to our product mix will drive I played its long term success in the face of a complex.
<unk> land.
Landscape defined by COVID-19 involvement on the shifting regulatory on the macro you influence us.
The contraction in the overall advertising industry has led to the adverse impact of our marketing solutions business as we discussed in our last earnings conference call.
We have undertaken.
Constitute action to direct our continued investment in higher growth on the higher margin enterprise solutions business, while selectively winding down our marketing solutions until such time.
As market conditions warrant resumption.
The regulatory Jim clamped down on certain industries, we have served raising our marketing solutions.
As well as the strict COVID-19 measures to curtail the spread of the virus.
Uh huh.
<unk> reached the challenges for us compared with the same period last.
Last year.
As we weather this broad based industry wide phenomenon.
We believe our approach will help I click better navigate these challenges, especially with the soft capital markets landscape.
I mean, the resources, we can mobilize.
Well this market sectors also continue to challenge our clients implementations.
Audience of enterprise solutions business in the first quarter on the beyond.
We are optimistic that our strategic shift will result in long term value creation.
Our SaaS plus business model empowers brands in China.
Made that these challenging market conditions on the continuously evolving business models.
As clients require higher levels of guidance on the implementation from iconic.
Starting holiday can enhance the consumers' loyalty on the repurchase rates to drive continued revenue growth.
As a result, we believe our growing footprint will uniquely position the company to continue to capitalize all the very much in tact.
Meg a digital transformation trend in China.
In view of this we have.
Yeah.
Relentless.
Upgraded on the improve the hours south plus product mix.
As we seek to meet the huge demands of our brand and our clients. For example, we launched the <unk> version of our defense one of our data analytics products that help Spence.
I think they find the most appropriate K O L to conduct a promotion.
This upgrade in largest.
The coverage of Idefense beyond its existing media platforms.
Sure Who's who on the Bill Bailey with this upgrade we are also able to.
And particularly the one stop smart marketing strategy for the brand the plants on the can nimbly adjust the strategy with real time data analytics feedback.
It was a strong case study is the value we have helped.
Next step a leading plc based professional sports brand.
<unk>.
In advertising the appropriate on the customized to content marketing strategies based on product features to attract different groups of users under various scenarios.
In addition to the powerful data analytics features provided by our defense. We also have a dedicated operations team to facilitate the execution issue.
Sure in the clients customization and the involving improvement with our deep experience and the trust to the guidance realizing the true value of the SaaS plus business model the key strategy of our enterprise solutions.
In addition to our product upgrades, we were honored to receive numerous awards both.
The mezz, but domestically and internationally, which recognized our innovative efforts and outstanding products, most notably the Hong Kong Institute of marketing awarded I click as the winner of market leadership in digital.
<unk> of 'twenty or 'twenty one.
We were also recognized by the.
Police teachers Asia.
Pacific.
D V Awards, our international Business Awards competition opened to all organizations in the 'twenty nine nations of the Ace.
Asia Pacific region, receiving.
Full.
Gold stripes on for achievements in product innovation product innovation in paid media planning and management most.
<unk> out.
Advertising or marketing team of the year as well as the marketing campaign of the year for COVID-19 related information.
Additionally, as part of 'twenty 'twenty four Asia's most valuable companies in Hong Kong of words, I click was recognized as Asia's most reliable marketing technology platform and finally.
Digital Media Awards, Ingrid China, we were named the digital media innovator of the year.
We are heartened by the strong industry recognition as it serves to validate our extra ordinary efforts in delivering the most compelling and innovative solutions serving the digital.
Station of China.
This concludes my opening remarks, and I would now like to turn the call over to our CFO , David John to discuss the first quarter of 'twenty 'twenty four financial results. David. Please go ahead.
Thank you James Hello, everyone.
I'm pleased to share with you our financial performance for the first culture over 2022.
Ongoing challenging microenvironment, we still reached a record high enterprise.
Enterprise solutions.
Oh historical first quarters and the improvement in our gross margin.
Great.
I would like to begin my comments.
Key highlights.
The first one culture 172.
Parents with a superior alternative to one.
Revenue for the first quarter ore tonnages under tool was $47 $4 million decreased by 29% year over year looking at each segment separately.
From enterprise solutions was $15 $7 million.
Up 34% year over year.
Mainly driven by an increase in knees for consumer behavior data integration and the digital transformation.
Revenue from marketing solutions was $31 $7 million decreased 42%.
Primarily due to our strategic to go dark of online advertising business in favor of resources allocation to enterprise solution business.
Omicron Applegate.
Outbreaks and locked up Hong Kong and Shanghai.
Gross profit margin was improved to 33, 8% from 29, 4%.
<unk> from.
Our resource allocation to the higher margin enterprise solutions business and online advertising clients.
Gross profit dollar amount decreased by 18% year over year to 15 $15 million.
And of course, our culture.
We funded two mainly due to the decline in marketing solutions segment.
As of March 31st funded funding to the company.
Cash and cash equivalents time deposit.
Restricted cash of $91 million comparable is 88 client selling yes.
As of December 31st 2021.
For the rest of my discussion I will focus on our non-GAAP measures.
I found the rig cancellations of this non-GAAP results in the press release with postpaid.
He's already today, and which can be a SaaS at our Investor Relations website.
Adjusted EBITDA for the first cultural in 2022 with a loss of $3 3 million in U S dollars compare obviously incongruent.
Great.
<unk> made in <unk> for the first call it almost anytime they want.
Adjusted net loss for the first quarter, Alternatively tool was $5 4 million compared with adjusted net income.
$6 million in the first call just 2020.
Good morning.
Cross bidding wars.
99 $9 million for the first quarter.
<unk> tended to comparable is 400 million that's auto is for the first quarter of 2021.
For further information please see the detailed recap of other financial metrics in the press release, we issued today.
In December 'twenty, 'twenty, one isolate announced a share repurchase the purchase program.
The aggregate value of up to 20 ton emitted yes.
In full year of 2021 'twenty two.
As of March 31st 2022, the aggregate value of re purchase shares.
Ah promised late.
<unk> 2 million U S dollars.
You feel the resurgence of COVID-19, pandemic and the various DCC disease control measures implemented in China.
Shanghai and Beijing substantial uncertainties remain around the <unk>.
Economic conditions in our client demands.
Rachel and I will continue to significantly affect our client on boarding and the solution implementation. Therefore at this stage, we withdraw 20 turning to revenue guidance.
Enterprise solutions until visibility improves.
The company will closely monitor Michael environment, and the violence internal resources focus on product innovation and the sales pipeline to keep I click creating more value to customers.
Surprised solutions, which we believe.
Higher gross potential.
With that I'll now turn the call back over to TJ for closing remarks. Thank you.
Okay.
Thank you David.
We have been adapting to evolving market conditions on the macro forces over the past year, which has led to high clip a strategic shift in focus to.
Constituted investment enterprise solutions, while also good typically winding down the marketing solutions business.
We are constantly evaluating our market position on our strategy to capture more market share in our high growth high margin enterprise solutions business.
While the enterprise solutions business may see some <unk>.
Adverse impact on client implementations.
The onboarding due in.
In part to the strict measures, resulting from containing the spread of COVID-19 in China for the first quarter and now into the second quarter, we deeply believe that the mega trends driving digitization.
<unk> across China remains.
Intact.
We are well positioned to continue our growth in enterprise solutions.
<unk> remains at the core.
Forefront of serving this enormous market and we intend to remain a powerful and dynamic force driving that change.
All clients realize the tremendous value of our solutions, which are helping zone to evolve and.
Capitalize on new capabilities.
Our devotion to innovation and to.
Two the highest ASP by regions of service and execution guide us through these challenging times.
We are confident our discipline and our devotion will be rewarded in the long term for both our shareholders and our company alike.
As always I wish to especially acknowledge and thank.
Our clients partners and our key stake holders for the continued support and all of our iconic cars without whom our success would not be possible.
We will reveal on the comp.
Please sound management team focus on the prudent investments in the resources on the solutions that remain the drivers of our success.
You all for participating in today's conference call for your continued support this concludes our prepared remarks.
And for joining us on today's call, we will now open the call to questions.
Operator, Please go ahead.
Thank you Dear participants we will now begin the question and answer session. If you wish to ask a question. Please press star and one on your telephone keypad and their names will be announced for the benefit of all participants of today's call. If you and I'm I'm doing speaker. Please raise your question in Mandarin and then immediately our translator will repeat.
Questions in English please limit your questions to one at one time. Thank you.
The first question comes through line of calling <unk> from China Renaissance. Please ask your question.
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Yeah.
Yeah.
Thanks management for that for.
For the chance to raise your questions.
Two questions here. The first the first one is actually about the customer would you mind enterprise solution.
We noticed that you know management mentioned about some delays.
Onboarding and implementation due to that Tobey restrictions a lot of measures.
And other and other.
The limitations, so just wonder how resilient do you think actually.
Cosmos, you're mindful of our enterprise solution is and it was all the restrictions being lifted in the index.
And as soon in the near future.
You'll see a very foster a bond of their revenue growth enterprise solution in the second half this year.
And then my second.
My second question is about the.
Marketing solutions segment.
We noticed that there were a lot of directly tree.
<unk> in second half last year and in the first quarter. This year, we have seen a very restrictive lockdown measures and the macro weaknesses in China. So it has all of that.
Now all the manufacturers being reflected on the first years, sorry on the first quarter numbers.
Instruments, we use all maybe in second quarter.
We will continue to encounter some difficulties is it fair to say that we reached a bottom in terms of the marketing solution growth.
Is it too early to say thank you.
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Okay.
Your final question. This is TJ I will take two questions. Your first question is about customer demand for our enterprise solutions.
As Bob mentioned, indeed, the Colgate has produced the impact on US first and so the impact from the fifth round of Kobe researches in Hong Kong and you know we have a lot of our business in Hong Kong and then followed by Shanghai Lockdown starting from the late of March in Shanghai.
It is now under lockdown for two months and the Beijing, and then followed by Beijing, which is under Lockdown.
Our minds therefore.
I think the the Covid impact on our enterprise solution systems mini wisely from several fronts first is the onboarding of new customers chicken is the onboarding of new needs are from existing customers and if that is the implementation of our customer solutions and.
<unk>.
This means it.
Quite a difficult to predict the future grow also enterprises solution because the current economic environment is far from normal.
And I believe you are quite concerned about the demand in the mid to long term and this is our concern too and you know.
And recently most of our colleagues are under Lockdown in Shanghai and debating how do we keep a very close communication with our clients no set demands in pipeline with both demand that have already been briefed and implementation.
Being delivered according to schedule and what what is problematic.
The new demands and we observed that our client decision, making cycle becomes longer.
But these are the customers demands and they're even more.
Demand from them because most of the customers. We serve are bigger loans and in spite of the pandemic.
From macro with Macy's and they are.
No problem of survival and in addition, do you have a lot of offline outlets. So there's a need for them to find a digital solution and therefore, there is a strong demand from enterprise solutions business. So we expect that in the second half of this year. If the pandemic is put under control and <unk>.
Activities Museum and become normal we can expect a strong a pretty good growth enterprise solutions business and strong demand.
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Okay.
Your question.
My second question is regarding the marketing solutions in the first few months of this year, we continue to see the lingering effect of the tightening regulations.
The interest Steve.
And also we have seen me more macro headwinds that's what it is.
Implication from the strict COVID-19 measures.
This actually has affected adversely our advertising clients in the marketing solutions business because.
Most of them actually suffered a lot from the logistics and the supply chain and even delivery acceptance and you see that some customers. Although they tried to place advertisements doing this Q, yet and yet the cost on the consumer.
It's actually Andy and the jump the hotels because of the poor service quality. Therefore, we have seen that those large advertising clients have cut their budget drastically.
Q2, I don't think the things will do better for the advertising industry because of the impact from the COVID-19 is to.
A severe for that and in the second half of this year, if the economy doesn't bound and Ive a V shaped COVID-19 control policy and not to Miss Kate we will continue to be serious impact on the advertising industry.
As you know we've already made a strategic move to scale back on marketing solutions business.
We've intentionally cut those high risk low margin businesses, so to channel resources too.
Product solutions business, so for US I think the impact is smaller.
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Thank you. The next question comes from line of.
Oh no sorry. Please go ahead I think we can move to the next question.
Perfect. Thank you. The next question comes from the line of Nelson Cheung from Citi. Please ask your question.
C a T.
Thanks Lisa.
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Yeah.
So let me translate myself.
So that's my management for taking my question. My first question is about our marketing solutions are just wonder given most of the vertical has been adversely impacted.
Due to the pandemic wondering if there's any resilience protocols that could support our business.
For example, a N C D and my second question is related to our enterprise solutions are just one of the management.
Let's see if you have any long term target for gross margin.
Your enterprise solution business, and how can we achieve that through cross selling of your product and customers as well as.
So upselling.
Thank you.
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Well. Thank you for your question. This is TJ I would take your first question on the day they will.
The second question first question is about.
Recently into verticals using our marketing solutions business.
Q1, we have an intentionally scaled back on marketing solutions with names you know since last year, we have and select chiefly a constant growth.
Low margin high res.
Businesses with that'd be long.
Sure Julian telephone accounts receivable, such as gaming and some channels and so and that's F N B G.
Consumables.
In Q1, they were affected to some extent, but its not because of the industry problems. It's mainly because you know Q1 and then in the Spring Festival. So usually if you want you can low season for E Commerce.
Seasonal factors play a bigger role in their Q1 performance in Q2.
I believe that to consumables and those industries that are highly related to offline companies will be affected to a larger extent.
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This is David I will take the second question about the gross profit margin enterprise solutions.
The expectation is under normal operating environment.
Enterprise solutions gross profit margin will be around 15% to 16% which is healthy.
Even our in fact that business model, how to achieve that well first the demand for our digital products.
With the strong momentum in <unk>.
<unk> the short term impact from the coffee related control measures, we hope that the the.
The demand will rebound from very soon.
The second is our product mix is healthy we have both from SaaS tools.
The services, our customers can buy a full stack.
Our solutions. They can also buy a particular product function authenticity and also we will carry out a communication with our customers based on their needs.
Increase their loyalty and stickiness, so and thanks to our continuous efforts, we now have a wider variety of products and services options.
So I believe that we can achieve that goal.
Yeah.
Thank you.
As a reminder, if you wish to ask a question. Please press star and bond when your telephone keypad.
The next question comes from the line of Thomas Chong from Jefferies. Please ask your question.
Please go ahead.
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Okay. So we can make up the hotel.
So much has on myself.
Management for taking my question. So two questions. My first question is about marking solution. So I'll just mention that we are scaling down although at a low margin matching solution business just wondering.
How about the Palisades.
Procession update about them right now and how much percent of type of business have been scaled down and my second question.
About <unk> strategy as we talked in the prepared remarks could management share more color.
Strategies and product stinks.
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Gotcha.
This is David.
First question and the TJ will take the second question since the fourth quarter of a locked in half are starting to choose downtown on low margin and highly snacking solutions business and currently speaking we have achieved our target with a third of that business. So you can see that the.
Marketing solutions revenue has dropped by 42% of course, there are many other reasons at play here for example, the macro headwinds and it will just take.
The problems caused by the Covid control measures, but we hope that these aren't just short term variables that will go away quickly and currently we have 91 million cash on hand more than the end of last year and we've also paid $18 5 million.
<unk> Centre, we've also reduced operating leverage you before we have enough resources to support the further development of enterprise solutions Stifel element and Dolby.
Currently I'm in a very good shape in terms of the business day Glo maintains and survival.
Oh, what strategic change I, just didn't think that Yoghurt wouldn't you shouldn't guang mujica enterprise solution and our strategy there.
Okay.
Okay Paul.
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Okay. This is TJ. The second question is about the stockpile strategy on enterprise solutions business well.
Currently our stock.
<unk> plus.
Business models, and actually provide both the products and services to brands.
Logic is that now a lot of domestic international brands as well as in some emerging China fashion brands.
They are in desperate need of online digital solutions and so we want to meet that need for that and we mainly work on two ecosystems. One is a recapture the other in south K O L and a full we cats, we provide like essence CRM.
And the mini programs as well as some back office digital operating platforms to connect to their online and.
Stores wasting offline with dogs and a case in study is la row. This year mini all brands of morale.
Our system provides a morale boost to system one is our lead from shortly to eat.
And system. The other is how to install wechat is a mini which is a b to C. A shopping mall based on the mini programs.
B.
It will actually link the consumers or inform the consumers of the inventories at the closest outlet also logged out and as to the Wii social or we want to connect thousands of local sales guys of offline stores off of Lasalle with.
Their consumers so that's that and in spite of the lockdown. These our sales guys can still provide online services to their consumers as to okay. All our ecosystem. We also have a specific product in 17.
And multi brands, including Chinese one signed international one side using <unk> platforms, such as Vishal shall be the BD on the tourism.
Our systems, well Hawk brands to identify appropriate K O L. And we also offer tools to create content strategies full brands. So that they can deliver the right messages to their clients. So our the goal of our southpaw.
Our strategy is to help friends to.
To operate and our wechat and parallel.
Ecosystem, so as to increase their spouse.
Excuse me have you finished with your question is how much.
Thank you.
Yes, yes.
Thank you I'd say there are no further questions I'd like to turn the call back over to the company for the closing remarks.
Thank you once again for joining us today, if you have further question.
Please feel free to contact <unk> Investor Relations Department through the contact information provided on our website. Thank you and see you next time bye bye.
This concludes today's conference call you May now disconnect. Your line. Thank you.
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