Q1 2022 Jianpu Technology Inc Earnings Call
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I would now like to turn the conference over to call and Qiuya Chen. Please, go ahead, sir.
Qiuya Chen: Thank you, operator.
Hello everyone, and thank you for joining us today. Our first quarter 2022 earnings release were distributed earlier today and is available on our IR website at ir.jianpu.ai.
As well as on PR Newswire services.
On the call today from Jianpu Technology we have Mr. David (Daqing) Ye, Co-Founder, Chairman and Chief Executive Officer, and Mr. Oscar (Yi Lu) Chen, Chief Financial Officer.
Mr. Ye will talk about our operations and company highlights, followed by Mr. Chen, who will discuss the financials and guidance.
They will all be available to answer questions during the Q&A session that follows.
Before we begin, I'd like to remind you that this conference call contains forward-looking statements as defined in section 21E of the Securities Exchange Act of 1944 and the US Private Securities Litigation Reform Act of 1945. These forward-looking statements are based on management's current expectations in current market and operating predictions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control. These risks may cause the company's actual results or performance to differ materially. Further information regarding these and other risks, uncertainties, or factors, is included in the company's filings for the USSEC.
The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required as an act of law.
Finally, please note that, unless otherwise stated, all figures mentioned during the conference call are in Renminbi.
It is now my pleasure to introduce our Co-Founder, Chairman and Chief Executive Officer, Mr. David Ye David. Please, go ahead.
Daqing Ye: Thank you, Qiuya. Hello ,everyone. Thank you all you for joining us today.
During the first quarter, despite the challenging macro environment and the resurgence of COVID-19 in some areas of China, we delivered another strong quarter of growth, with the total revenue up 43% year-over-year.
we delivered another strong quarter of growth, with the total revenue up 43% year-over-year.
The results were primarily driven by our persistence in pushing forward our vision to become everyone's financial partner and empowering users by enabling the digital transformation of financial service providers through technology and product innovation.
I will start by going through the key highlights for the first quarter, then share some observations around the current macro and COVID-19 environment, and their potential impact on our business, before turning it the over to Oscar to go through our financial performance.
before turning it the over to Oscar to go through our financial performance.
First, we ended the quarter with a more diversified and balanced revenue structure, thanks to the growing revenue contribution throughout our new initiatives.
thanks to the growing revenue contribution throughout our new initiatives.
In the first quarter, our revenue continued its growth momentum with a more diversified structure.
We have 22% revenue from our loan recommendation services, 47% in revenue from credit card recommendation services.
10% from data-driven and system-based risk management services, and 21% from advertising marketing services and other services, versus 19%, 54%, 18% and the 9% in the corresponding quarter of 2021, and the 21%, 51%, 16% and a 12% in the full year 2021.
And other services, versus 19%, 54%, 18% and the 9% in the corresponding quarter of 2021, and the 21%, 51%, 16% and a 12% in the full year 2021.
Among the revenue streams, our recommendation business continued to gain market share.
With the revenue increasing 36% year-over-year, during the first quarter, we sustained our industry-leading position in the credit card recommendation business.
During the first quarter, we sustained our industry-leading position in the credit card recommendation business.
We maintained solid the relationship with the majority of credit card issuer banks in China.
We continue to be the top owner acquisition channel to many of these key banks.
As for our new businesses, we have accelerated the deployment of our omnichannel marketing solutions, to adjacent the category with our large data-reach user-base and the great financial needs, resulting in significant revenue growth.
The revenue for advertising marketing services was around two 2.5X year-over-year.
Was while two point five X year over-year.
The growth momentum is a further proof of our success, by extending our social media and partner program into non-financial service categories.
Secondly, alongside the recovery of the business, the economies of scale kicked in is a clear trend of improvement in efficiency.
Economies of scale kicked in is a clear trend of improvement in efficiency.
Anticipating the uncertainties and the challenges arising from the macro environment and the regulatory change, we have strived to achieve a balance between growth and efficiency.
Our social media and the partner program has played an increasing important role in delivering both growth and efficiency.
The ROI, or revenue divided by the corresponding cost of acquisition and a promotion of recommendation business, improved 2 percentage points year-over-year and 10 percentage points sub sequentially.
improved 2 percentage points year-over-year and 10 percentage points sub sequentially.
We have also see a promising trend of the new businesses, delivering over 10% points ROI improvement quarter-over-quarter, while the scale continued to grow at 103% on the same basis.
while the scale continued to grow at 103% on the same basis.
To grow at 100% to 3% on the same basis.
Third, we have further enhanced our capabilities to enable the digital transformation of the financial industry and other industries.
We have seen an increasing demand from financial institutions to acquire, identify and engage their users across JT channels, to provide better service and to improve users' lifetime value.
to provide better service and to improve users' lifetime value.
Our omnichannel marketing solution is well positioned to capture this increasing demand. As an independent third party open platform, we have already aggregated the user acquisition sources for our online and mobile media, as well as our proprietary social media and the partner program.
We recently started to explore different user acquisition channels through various consumer consumption scenarios, such as travel, e-commerce, lifestyle, et cetera.
We believe that such channel expansion and integration will allow us to diversify our user base and to further strengthen our omnichannel solutions, to enhance the acquisition capability of financial institutions.
In addition, the banks have also been increasingly focused on improved user retention and customer loyalty post acquisition.
This brings plenty of business opportunities to us as we explore ways to enhance the operations through our cutting-edge technology and product operational experiences.
We have deepened our collaborative relations with existing banks in our punishing network, launching initiatives such as digital promotion activities, to improve customer engagement in the co-sale, given the financial products and services.
Using our suite of digital transformation solutions to help financial institutions improve efficiency and reduce costs.
The breakthrough that we have recently done was the establishment of strategic cooperation with a large telecom, to jointly develop a suite of tax solutions and services to target the digital transformation of financial institutions, local or government authorities, and other enterprises.
To jointly develop a suiteter of tax solutions and the services to target the digital transformation of financial institutions, local or government authorities and other enterprises.
The phase one of the cooperation will provide supply chain management systems and the related financial services to small and medium-sized enterprises.
We have also been building our pipeline of such strategic corporations, including with internet platforms and cloud service companies.
Finally, we remained very disciplined in executing our cost optimization measures and initiatives, resulting in further optimization of our cost structure and as a productivity optimization of our businesses.
Our operating losses increased by 19% year-over-year, and the non-GAAP adjusted net loss margin further improved by 10% points compared to the same period in 2021.
by 10% points compared to be the same period in 2021.
Over the coming quarters we will remain disciplined, we will maintain the disciplined approach to continuously optimize, and there will be more nimble and agile in our operations.
We remain, maintain the disciplined approach to continuously optimize, and there will be more inble and adjoing our operation.
I will now take a few minutes to talk about the latest COVID-19 situation in China, and the latest macro environment and the regulatory dynamics, as this issue appears to be at the top of many investors` minds.
With regards to the COVID-19 situation.
The resurgence of COVID-19, which resulted in the multi-city lockdowns that started in March, has impacted consumer confidence and led to a slowdown in the economy. I think there are several moving pieces. On one hand, under the current COVID-19 zero policy, it is expected there will be a continuation of rolling lockdowns across the country. Furthermore, despite a subsequent easing of lockdown in places such as Shanghai and Beijing, our previous experience would tell us that it usually takes some time before business ramps up to its prior level.
it is expected there will be a continuation of rolling lockdowns across the country. Furthermore, despite a subsequent easing of lockdown in places such as Shanghai and Beijing, our previous experience would tell us that it usually takes some time before business ramps up to its prior level.
our previous experience would tell us that it usually takes some time before business ramps up to its prior level.
To suppor level.
But on the other hand, as many financial institutions have already begun moving toward digital transformation and using digital operation in the face of COVID-19, the absolute impact might be smaller, given some financial institutions can continue their customer acquisition operations through online channel. Hence, I think the overall effect of COVID-19 is relatively short-term and manageable.
the absolute impact might be smaller, given some financial institutions can continue their customer acquisition operations through online channel. Hence, I think the overall effect of COVID-19 is going to be short-term and manageable.
In terms of our own business, given the face-to-face nature of some of our businesses, we have also sustained some impact due to COVID-19.
Nevertheless, we continue to maintain relationships with our financial institution partners and the regulatory authorities.
Given the ongoing trend for digital transformation, we believe once the lockdown eases, we can continue to cultivate our pipeline for further projects and initiatives.
On the macro environment and the regulatory front, we continue to be encouraged by recent public comments from regulators, and remain optimistic about the future development of the digital economy and the opportunities it brings to us. As many of you know, since the beginning of the year, the Chinese government has issued statements and policy guidance in support of the digital economy and the platform economy from the very top level.
By recent public comments for our regulators and the remain optimistic about the future development of the digital economy and opportunities it brings to us. As the ment day of you know, since the beginning of the year, the Chinese government has issued a statement and the policy guidance in support of the digital economy at the partful economy from the very top level.
We also have seen policy guidance coming from the China`s Banking and Insurance Revenue Commission to support the digital transformation of the banking and insurance industries through this latest notice, focusing on the importance of tech empowerment for banks to carry out process innovation and business improvement in terms of their capability in response to customers' needs, especially during time where many businesses are affected by the pandemic.
with this latest notice, focusing on the importance of tech empowerment for banks to carry out process innovation and business improvement in terms of their capability in response to customers' needs, especially during time where many businesses are affected by the pandemic.
In addition, there is a rising focus on supporting 300-plus million potential new urban residents.
These new residents, typically have higher needs and urgent needs for financial product and services, but they don't have the prerequisite documents and the credentials to obtain and apply for financial products or services for financial solutions.
This creates an additional driver for digital transformation, as the financial institutions seek customized and smarter digital solutions, and new risk-profiling capabilities and tools, to help these new urban residents to meet their massive financial needs.
And lastly, we are beginning to see signs of liquidity being injected into the financial system, with the banks receiving guidance from the government to increase their loan balance and portfolio.
with the banks receiving guidance from the government to increase their loan balance and portfolio.
to increase their loan balance and portfolio.
We believe the government's measures and initiatives will support our economy growth and will bring an increasing digital transformation trend through financial service providers.
We will continue our efforts to empower financial institutions` digital transformation and support the development of China's digital economy.
Despite the ongoing uncertainty around COVID-19-related lockdowns, we remain very confident in the long-term prospects of the sector and the overall industry.
we remain very confident in the long-term prospects of the sector and the overall industry.
We believe the groundwork we have laid in our investments in digital transformation solutions and tools will ultimately deliver greater value to the company and our shareholders, and other stakeholders.
Lastly, I would like to take this opportunity to announce a change to our leadership team.
Mr Jiayan Lu will no longer take his current the role as Chief Operating Officer of the company from July 1st, 2022.
He will continue to serve as Director, and we will also retain Jiayan as an advisor until early next year.
On behalf of the Board and the management team, I would like to express our gratitude to Jiayan for his dedication and contribution to the company in the past decade.
We believe that we will continue to benefit from Jiayan`s expertise and experience as a director and adviser of the company.
I will now turn the call over to our CFO, Oscar (Yi Lu) Chen, who will discuss our financial results. Thank you.
Yil Chen: Thank you, David, and hello everyone. As David mentioned earlier, we delivered a strong financial result with a more balanced revenue structure and margin improvement in the first quarter of 2022. Our first quarter results reflect our persistent efforts in business development and the disciplined cost control.
Our total revenues for the first quarter of 2022 increased by 42.6% to RMB 207.6 million, from RMB 145.6 million in the same period of 2021.
Our recommendation business continued to grow and sustain our market position, with total recommendation service revenues increasing by 35.6% to RMB 144.1 million, from RMB 106.3 million in the same period of 2022, on the back of the 24.8% and the 65.8% year-over-year increase in credit card and loan recommendation service revenues, respectively.
The average fee per credit card had a slight increase to RMB 110 in the first quarter of 2022, the average fee per domestic loan application increased by around 4% to RMB 11.6 in the first quarter of 2022. The increase in revenue is primarily due to the increase in the number of loan applications and credit card volume, driven by our continued success of omnichannel marketing strategy that attracted a more diversified user base to our platform.
due to the increase in the number of loan applications and credit card volume, driven by our continued success of omnichannel marketing strategy that attracted a more diversified user base to our platform.
Revenues from big data in system-based risk management services decreased by 24.9% to RMB 20.2 million in the first quarter of 2022, from RMB 26.9 million in the same period of 2021. Despite the impact of COVID-19, we have established and maintained a solid relationship with financial institutions, state-backed credit bureaus, and other ecosystem partners.
From RMB 26.9 million in the same period of 2021. Despite the impact of COVID-19, we have established and maintained a solid relationship with financial institutions, state-backed credit bureaus, and other ecosystem partners.
And now working on several long-term partnerships with telecom operators, Internet platforms and other enterprises.
Revenues from advertising and marketing services and other services increased by 248.4% to RMB 43.2 million in the first quarter of 2022, from RMB 12.4 million in the same period of 2021, primarily due to the significant growth of insurance brokerage services and the initiatives of other new businesses.
As David outlined previously, the growth momentum illustrates our success in extending our social media and partner program into non-financial services categories.
Let me now move on to the costs and expenses. Cost of promotion and acquisition mainly consists of the expenditure relating to our marketing efforts and activities, which increased by 63.2% to RMB 149.5 million in the first quarter of 2022 from RMB 91.6 million in the same period of 2021. The increase was in line with our revenue growth from recommendation services, advertising and marketing services and other services. In the first quarter of 2022 we have seen continuous trend of efficiency improvement.
ROI of recommendation services, advertising and marketing services, and other services have shown encouraging improvements, with an increase of 7 percentage points, compared with second half of 2021, reflecting our efforts in improving operational efficiency. At the same time, the ROI improvement also benefited from our growing scale. On a year-over-year basis, the ROI was 5 percentage points lower, which was mainly attributable to the change of revenue mix.
compared with second half of 2021, reflecting our efforts in improving operational efficiency. At the same time, the ROI improvement also benefited from our growing scale. On a year-over-year basis, the ROI was 5 percentage points lower, which was mainly attributable to the change of revenue mix.
The faster growing new businesses took a larger pie in our revenue structure, while its ROI was relatively low, given the early stage. In the future, we will continue to strive a balance between growth and efficiency.
Cost of operations slightly increased by 8.8% to RMB 18.5 million in the first quarter of 2022, from RMB 17 million in the same period of 2021.
We continue executing our cost optimization initiatives, which led to a reduction in sales and marketing, and R&D expenses.
Excluding our cost optimization initiatives which led to a reduction in sales, sales and marketing, and AR the expensves in dollar amount.
In dollar amounts, these expenses decreased by 8.6% and 19.2% respectively in the first quarter of 2022 compared with the same period of 2021. Our general administrative expenses increased slightly in the first quarter of 2022.
Measured as percentage of total revenue, sales and marketing, R&D and G&A expenses in total were 45.4% in the first quarter of 2022, compared with 71.5% in the same period of 2021, a decrease of 26 percentage points.
With our continued efforts in optimizing our cost structure and improving the productivity of our businesses, loss from operations was RMB 54.6 million in the first quarter of 2022, compared with RMB 67.1 million in the same period period of 2021. Operating loss margin was 26.2% in the first quarter of 2022, compared with 46.1% in the same period of 2021.
Our net loss and non-GAAP adjusted net loss were respectively RMB 53 million and 50.7 million in the first quarter of 2022, compared with RMB 51.3 million and RMB 49.4 million in the same period of 2021.
The slightly increase of net loss versus improvement in operating loss was mainly attributable to a realized investment gain in the first quarter of 2021 which was an one-off item.
Given the growing scale and improving efficiency, our net loss margin and non-GAAP adjusted net loss margin improved by 9.7 and 9.5 percentage points respectively, compared with the same period of 2021. As of March 31st 2022, we maintained a balance sheet with cash equivalent and short-term liquidity of RMB685.8 million.
With that, I will conclude our prepared remarks. We will now open the call to questions. Operator, please go ahead.
Operator: Thank you. If you would like to ask a question, please press star one on your touchdown phone. If you are using a speaker phone, we ask you to please pick up your handset before touching the keys. To withdraw your question, please press star, then two. Today`s first question comes from Kevin Lee from [inaudible] capital. Please, go ahead.
To enjoy your question. Please first ST than twotoday. His first question comes from kevven E inspicyour capital. Please go ahead.
Kevin Lee: Hi, management. Congrats on the great results. Two questions, if I may. First question, the revenue from advertising and marketing service grew strongly this quarter. I'm guessing, most of this is coming from the new business initiatives. Is it possible to give a more detailed breakdown of where the growth is coming from and share with us some more color regarding this new business initiatives, and your business strategies for these over the coming years? I'm trying to see how big this market is and, you know, how it's going to grow going forward. And then, on the second question, is regarding costs. You previously mentioned that you do some upfront investment relating to these new business. Are these investments still being made, and when do you expect to start to see a more meaningful contribution to the bottom line from these businesses? And, in addition, can you give me a bit more color in terms of your cost optimization program? What are the targets you`re trying to achieve and what will you be focusing on for the cost optimization? Thank you.
Daqing Ye: Thank you, Kevin. It`s Kevin, right? This is David. I will answer the first part of your question about the new initiatives. And, in terms of the second part, relating to cost, I will see if Oscar will answer that. Yes, I think it`s a good question about, we do see a substantial growth in our first quarter, of course, some of the growth from our new initiatives. As we know, in the past decades, especially in the last few years, we have invested strategically, we have invested heavily in research and development, in tech knowledge, in product development. Our focus in the early years, we were focusing on building capabilities, including digital marketing, data and AI-driven credit and risk management solutions, and other tech solutions for credit card companies, for banks, for insurance company and other fintech-related companies. So, we have achieved growth year-over-year, but it started about two years ago, we started implementing similar digital and technical capabilities into other adjacent sectors and categories.
Credit and the risk management solutution and other tech solutions- credit card companies for banks, for insurance company and other as a fintech related companies. So we have achieved a growth year over a year, but it started the about two years ago. We startedied the implementing and similar digital and and the technical capabilities into other adjacent sectors and the categories.
So, we will see that growth from like, for example, e-commerce sector. So, as we know, e-commerce in China has accomplished huge growth in the last almost two decades. I have a few key numbers I can share with our investors. So, e-commerce sales in China reached around RMB13.8 trillion in 2021. Will grow to around RMB 21 trillion by 2025. And, there is something in common between e-commerce and the financial services.
Of course, it`s the large user needs, right? Almost everyone wants to buy stuff and spend money, and it's also analytical and data-driven. So, we definitely see the common needs in terms of user acquisition, user retention, engagement, managed risk, and we have seen some innovation related to purchasing and payments, as well as credit. So, that's why around two years ago we launched our social media and partnership program into the e-commerce sector, and this brings us diversified revenue stream on top of credit card recommendation, loan recommendation, insurance-related recommendation, data and risk management services, as well as advertising and marketing, and digital related revenues from e-commerce. So, that`s the growth we have seen in the last few quarters, especially for the first quarter of 2021. We believe the digital transformation trends for financial service sector, as well as other sectors and industries, will continue for years to come. So, we believe our investment in the last few quarters will put us in a much better position in terms of growth of revenue streams, in terms of more diversified revenue, and in terms of more efficiency and improved unit economics, and also, help us to achieve better economic scale going forward.
social media and partnership program into the e-commerce sector, and this brings us diversified revenue stream on top of credit card recommendation, loan recommendation, insurance-related recommendation, data and risk management services, as well as advertising and marketing, and digital related revenues from e-commerce. So, that`s the growth we have seen in the last few quarters,
Kevin Lee: Thanks, that is very comprehensive.
Daqing Ye: Oscar, do you want to go ahead with the other part, on the initiatives?
Qiuya Chen: Okay, yes. Thank you, David. And, thank you, Kevin, for your question. This is Oscar. I think your second question, relating to cost initiatives and management, I think the first one is about some cost measures about our new business. I think, in the current market environment, our strategy to manage our business is to balance between growth and efficiency. For the more mature business, such as recommendation services, and the big data and the system-based risk recommendation services, we prioritise efficiency over growth.
For the new businesses, as you ask, we may consider to sacrifice the profitability, to a certain extent, to achieve high growth.
As such, we closely monitor the growth rate and the unit economics, or contribution margin for our new businesses. In the first quarter, we are pleased to see the ROI of our new businesses keeps increasing, and the unit economics turned positive. At the same time, the fixed costs, mainly the R&D spending of new businesses, both in dollar amounts and as a proportion of total R&D spending, have decreased significantly. This is a result of previous upfront investments beginning to bear fruit as new business develops.
Anticipating the uncertainties and the challenges in the near term, I think we will focus more on the profitability and be more disciplined on cost control in the next few quarters, and stay nimble and adaptive, based on our cost monitoring of the business development. So, I think for the cost optimization measures we have taken, we have been taking our cost optimization initiative, almost in the last two years, mainly considering uncertainties and challenges around the ongoing pandemic and the regulatory change.
and stay nimble and adaptive, based on our cost monitoring of the business development. So, I think for the cost optimization measures we have taken, we have been taking our cost optimization initiative, almost in the last two years, mainly considering uncertainties and challenges around the ongoing pandemic and the regulatory change.
So, we`re also closely monitoring and evaluating the resources allocated among existing business and new initiatives, and consolidating overlapping resources to enhance operating efficiency and optimize our cost per structure, which led to the reduction in operating expenses. Just to give you a few numbers: the total operating expenses as percentage of revenue in the first quarter decreased by 26 percentage points, compared with the prior period in 2021; also, we have fixed cost reduction [inaudible]. We have also resource allocation [inaudible], the overall have around 11% cost savings. I think, anticipating the challenges and uncertainties will further execute our cost control and optimization measures in the coming quarters. We expect such measures will bring us efficiency improvement and further reduction of fixed cost. Hope this answers your question, Kevin.
We see expensal, the menttal with take around cal the of this year. We have also reour allocation and consation. We have to have the optimization through the imizationthe overall. The overall have around 11% cost of savingi think anticipate in the challenges and uncertainties. We will further execute our cost of control and optimization measure in the coming quarterswe expect such measures will bring us.
Kevin Lee: Yes, thank you.
Operator: And ladies and gentlemen, as a reminder, if you would like to ask a question, please press star, then one. We'll pause momentarily to assemble our roster.
And ladies and gentlemen, this concludes our Q&A session. I'd like to turn the conference back over to the management team for their final remarks.
Daqing Ye: Thank you, operator, and thank you all for participating on today's call.
If there are no further questions, then thank you for your support. We appreciate your interest and look forward to speaking with you again in the near future. Have a good rest of the day. Thank you very much.
Operator: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.