Q3 2022 Jianpu Technology Inc Earnings Call

Good day and welcome to the Jiampu Technology Inc. Third quarter 2022 earnings conference call.

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I would now like to turn the conference over to Colin Chung, Head of Corporate Development and Investor Relations. Please go ahead. Most of Mar Vert Universities have anger ratio of Hum two dot from 15th to 15th only

Thank you, operator. Hello, everyone, and thank you for joining us today. Our third quarter and first nine months 2022 earnings released were distributed earlier today and is available on our IR website at IR.JEMPU.AI, as well as on PR Newswire Services. On the call today from JEMPU Technology, we have Mr. David Yeh, co-founder, chairman and chief executive officer, and Mr. Oscar Chen, chief financial officer. Mr. Yeh 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 your 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 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and current market...

of a challenging macro environment.

Our revenue growth remained solid at 26% year over year.

Our adjusted net loss reduced by 82% year over year for the NIMBY 9.4 meeting.

and our adjusted net loss margin improved significantly to 3.5%, around 24% a year earlier and 12% in the previous quarter.

These results were primarily driven by our balance and diversified the revenue structure.

continued operational efficiency improvement, and disciplined cost optimization measures.

The results further demonstrate the resilience and the nimbleness of our asset-like graphical model.

our team's capability to navigate through the challenges and uncertainties.

as well as our commitment to progressing our vision of becoming everyone's financial partner by empowering the digital transformation through our tech knowledge and product innovations.

Let me now go through the key operational highlights for the third quarter.

First, we have further strengthened our competitive positions.

as an independent open platform and continue to gain market share with a balanced and diversified revenue structure.

In the third quarter, we continue to empower the financial industry with solutions based on our technical capabilities.

digital marketing and acquisition, data analytics.

operational and risk management.

Leveraging our market leading position with further geographical and demographical expansion.

our recommendation business to spend a robust revenue growth of 30% year-over-year in the third quarter.

In terms of the critical recommendation services,

we have leveraged our strong partnership with banks and the unique omnichannel capabilities to further expand into more products and services.

For instance, we worked with several digital savvy banks.

to promote ruler revitalization credit cards to Lance Affluent.

remote ruler revitalization credit cards to less affluent geographic areas.

Helping some banks acquire and engage with new users is a new open resident category.

In addition, we customized our digital solutions by building ecosystems for banks to improve their cothold of attention and engagement.

improve the operational efficiency.

We also continue to cooperate with leading banks.

to expand and explore the digital currency electronic payment or DCEP initiatives.

Financial institutions have been encouraged to extend more lending.

to support the real economy.

in particular the small and medium-sized businesses sectors.

We have taken advantage of such policy shifts.

adjusted our product coverage of our loan recommendation services.

So, currently, the more estimate is.

and increasing new open citizens.

and continue to expand our geographical coverage to service users in financial needs in less affluent cities and less developed areas.

In the third quarter, revenue from our loan recommendation services

grew by 76% year over year in the third quarter.

60% of our loan recommendation revenue.

was contributed from seven third-tier and less affluent areas in the first nine months of 2022.

Overall, we continue to achieve a solid total revenue growth of 26% year over year in the third quarter.

At the same time, our business mix...

has become more diversified.

Moving on to my next point.

we have seen continuous gain in operational efficiency.

anticipating the challenges and uncertainties of the macro economy and the regulatory environment.

We further prioritize efficiency over growth.

With our platform business model, technological and product innovation capabilities.

We have seen tremendous efficiency gain.

Overall, ROI or revenue recommendation services, advertising and marketing services divided by the corresponding cost of acquisition and promotion.

improved by 12 percent.

12 percentage points year over year in the third quarter, and the six percentage points year over year in the first nine months of 2022.

We have also seen sequential improvements.

So our options in the first quarter, second quarter, and third quarter of 2022 were 125%, 126%, and 135%.

second quarter and the third quarter of 2022 were 125%, 126% and 135% respectively.

Third, our ongoing cost optimization measures led to a significant margin improvement.

Our total operating expenses including sales and marketing R&D and GMA

increased by 19% year over year in the third quarter of 2022.

as a result.

we recorded further margin improvement and a sharp flow of net loss in the third quarter.

Specifically, our operating loss and non-gap adjusted net loss narrowed significantly.

by 47% year-over-year, and 82% year-over-year in the third quarter.

Our non-cab adjusted the net loss margin.

improved significantly from 24% a year earlier and 12% in the previous quarter to 3.5% this quarter.

We maintained the strategy of optimizing company resources and streamlining operations which yielded further results.

through a reduction in the fixed cost base, including office rentals and other back office costs and resources.

Going forward, we will maintain disciplined cost control and strive to improve our productivity and emerging further.

Finally, I will now take a few minutes to discuss the outlook for the macro environment and our differences.

with regard to the macro environment.

China's real GDP growth.

remained moderate.

at 3.9% year-over-year in the third quarter.

The ongoing pandemic prevention and control measures continued.

Specifically, growth in the retail sales weakened to 2.5% in September .

Meanwhile, the residential mortgages and household consumption loans

recorded a moderate growth rate.

4.1 and 5.4% year over year respectively at the end of September 2022.

The Chinese government and regulators have recently unveiled various measures to address

to stimulate the real estate industry and ease certain pandemic control policies.

and ease certain pandemic control policies. However...

The reason the resurgence of the pandemic indicates a more complicated macro outlook.

with uncertainties likely to persist in the first quarter of this year.

In the long run, we believe the government will maintain a more relaxed physical and monetary policy.

to revive the economy.

this time

With the government's emphasis on the quality development of the economy,

We believe China will be able to regain the growth momentum in the coming years.

While the COVID control measures may continue to impact some of our operations in the next few quarters.

The potential slow recovery in consumer sentiment.

may also constrain the growth of our business.

Normally, the 4th quarter would be our strongest quarter of the year, even our historical seasonality pattern.

But we would take a cautious view that the upcoming fourth quarter may not.

follow the historical pattern and expect our growth rate will be dampened in the near term.

at the same time.

We believe our industry leading position technological capabilities

and a strong execution.

will enable us to successfully navigate through these challenges.

While our diversified revenue structure, optimized operational efficiency and disciplined cost control measures will help us to continue enhancing our overall productivity, efficiency and supporting our goals in the future.

I now hand over our call to CFO Oscar Chen to go through our financials.

Thank you David and hello everyone. As David mentioned earlier, we delivered another solid quarter with strong revenue growth, margin improvement, and narrowing losses in the third quarter of 2022. Our third quarter results reflect our persistent efforts in business and the geographic diversification.

digital transformation capabilities, as well as our discipline of path control.

Our total revenue for the third quarter of 2022 increased by 26.4% to RMB 268.8 million from RMB 200.

and 12.6 million in the same period of 2021.

Our market leading position in the recommendation business extends with total recommendation services revenue increasing by 30.3% to RMB 211.6 million from RMB 162.

of $4.4 million in the same period of 2021 on the back of the 11.9% and 75.8% year-over-year increase in credit card and loan recommendation service revenues respectively.

The increase in revenue is primarily driven by the increase in number of low applications and credit card volume given our geographic diversification and omnichannel marketing strategies.

The average fee per credit card has a slight sequential and yield-over-year increase to RMB 116.4 in the third quarter of 2022.

Their advocacy for domestic loan applications increased by around 48% year-over-year to R&D 16.5 in the third quarter of 2022. This resulted from a more optimized product mix.

The revenue from our BIP data and the system base of this command and services decreased by 18.8% to RMB 25% to RMB 25%.

million in the third quarter of 2022 from RMB 30.8 million in the same period of 2021.

The decrease is mainly due to the impact of COVID-19.

about our cooperation with customers as well as

part of that just left.

Revenues from advertising and marketing services and other services increased by 66% to R&D 32.2 million in the third quarter of 2022, from R&D 19.4 million in the same period of 2021.

primarily due to the growth of insurance brokerage services and other new business initiatives.

Let me now move on to the content expenses.

Cost of promotion and acquisition increased by 22.1% to RMB 180.2 million in the third quarter of 2022 from RMB 147.6 million in the same period of 2021.

In the third quarter of 2022, we have seen the continuous trend of efficiency improvement.

All of the recommendation services, advertising and marketing services, and other services have shown encouraging improvements.

with an increase of 9 percentage points compared with the sigma quarter of 2002, reflecting our continued efforts to achieve a good balance between growth and efficiency.

At the same time, the ROI improvements also benefited from our growing scale.

The ROI of our new business initiative improved by 23 percentage points year over year and 77 percentage points sequentially in the third quarter.

The economics of scale, economies of scale of our platform business model.

Cost of operation increased by 5% to RMB21 million in the third quarter of 2022 from RMB 20 million in the same period of 2021.

The increase was primarily attributable to an increase in software development and maintenance costs.

related to big data and system-based risk management services.

As we continue to execute our cost optimization initiatives.

Our R&D expenses and the GMA expenses decreased by 11.2%.

and 41.6% respectively in the third quarter of 2022 compared with the same period of 2021.

Our sales and marketing expenses had a slight increase of 1.2% year-over-year in the third quarter of 2022.

measured as the percentage of total revenue. Sales and marketing R&D and GMA expenses in total were 32.0% in the third quarter of 2022, compared with 49.7% in the same period of 2021, a decrease of about 18% in points.

In the third quarter, we also recorded an impairment loss of RMB 13.3 million, which was an impairment of the goodwill and intangible effects of an acquired subsidiary.

with our continued efforts in optimizing our cost structure and improving the productivity of our business.

with R&D 31.9 million in the third quarter of 2022, compared with R&D.

$60.6 million in the same period of 2021. Our breathing loss margin was 11.9% in the third quarter of 2021 compared with 28.5% in the same period of 2021.

Our net loss and the net gap adjusted net loss were respectively RMB 25.1 million and RMB 9.4 million in the third quarter of 2002.

compared with RMB 60 million and RMB 50.8 million in the same period of 2021.

Given the growing scale and the improving efficiency, our net loss margin and the net gap adjusted net loss margin improved significantly by 19 and 20 percent points respectively compared with the same period of 2021.

efficiency, our net loss margin and the net gap adjusted net loss margin improved significantly by 19 and 20 percent points respectively compared with the same period of 2021.

As of September 30, 2022, we maintain the balance sheet with cash, cash equivalents, and a short term liquidity of RMB 700.5 minutes.

With that, I will conclude our prepared remarks. We will now open call to questions. Operator, please go ahead.

Thank you.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad.

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At this time, we will pause for a moment to assemble our roster.

Our first question today will come from Calvin Wang of PICA Capital. Please go ahead.

Hi, management. Thank you very much for taking my questions.

I would like to have two questions, if I may. The first one is about the impressive sequential and disturbing trend of your ROI.

So could you please elaborate more about the underlying drivers of such good improvement?

and how the trend will look like into next year.

That's my first question.

And the second question is related to the outlook guidance because you mentioned that the fourth quarter may not...

follow the historical seasonality pattern. Why is that? And could you please provide more colour of the outlook towards next quarter and probably first half of next year? So again, the first one is more related to the ROI and the second one is about the outlook guidance. Thanks.

Hi, Talon. This is Oscar. Thank you for your questions. I will take your first question regarding the ROI and also the sequential trend of efficiency gain of our business.

I think there are a couple of reasons behind the improvement. Firstly, I think the improvement of operating efficiency is a natural outcome of our platform business model.

As the scale grows, the economies of scale will kick in. During the last three quarters, our revenue grew at 33% year over year. The growth of our business.

the economies of scale were kicked in. During the last three quarters, our revenue grew at 33% year over year. The growth of our business helped us.

to get more bargaining power. And we managed to get better economics in terms of average fee per loan application and credit card volume as we just discussed.

And I think the second reason is our diversification and omnichannel strategy also helps the efficiency gain, particularly in our low recommendation business.

as we expanded our footprint into more cities and areas and cover more users from different demographics.

our technology.

further enhanced the efficiency of our acquisition recommendation.

and the distribution capabilities.

And certainly, I think the most important is our strategy for this year to manage our growths which is to balance between the growth and efficiency. We closely monitor the growth rate and the unit economics or contribution margin for each business segment.

For more mature business, we proudly prioritize efficiency over growth.

For some new billionaires, we may consider to sacrifice profitability to a certain extent to achieve high growth.

So in the third quarter of 2022, our recommendation business grow at 30% with 10% improvement of efficiency.

And our new business initiative grew at 66%, with over 20% percentage points of efficiency gain, compared with the same period of 2021.

So I think that's – these are the major reasons for our improvement of ROI and the gain efficiency from operations.

Going forward considering the challenges and uncertainties, I think we will stick to our existing strategy to manage our business further. That means we still want to achieve the balance between growth and efficiency. And we may consider uncertainties when we prioritize efficiency further.

Hope that answers your question, Carlo.

Very clear, thanks.

Hello. Calvin, I will try to answer the second question why the fourth quarter may not follow

the historical peak high season this year. Yeah, so Jainpu and Longfei 60, we have about 10 years of four-year operational history in the past ten full years. We definitely have seen the fourth quarter

normally account for over 30% of annual businesses. The main reason is as a platform we are connecting our users or consumers or enemies with financial institutions. So typically in the fourth quarter or before the Chinese New Year.

our users, they are looking for more loans, credit cards, looking for more financial products and services. And also financial institutions typically extend more credit alone or other financial products to users. So that's why we have seen I would say pre-Chinese New Year or end of year.

holiday effect almost every year. This year of course is different. As we all know, the COVID-19 prevention and control measures are still impacting most of the regions and also impacting a lot of the business activities across the country.

across sectors, industries and across regions.

So that's why we would definitely have a very cautious view for the fourth quarter. So given the COVID prevention and control measures and other uncertainties and challenges, we definitely will not see a

fourth quarter peak this year. We definitely see the growth will be dampened in the next quarter or two. But we are confident we should be able to maintain our growth and also further improve our efficiencies and productivity.

in a couple of months.

in a couple of months. Thank you.

Thank you.

Again, if you would like to ask a question, please press star and then 1.

Thank you.

okay

I guess if there are no further questions.

I'd like to thank you everyone once again for joining us today.

Of course, if you have any further questions, please contact us at iall.com.

Thank you for your attention and we hope you have a wonderful day.

Goodbye.

The conference is now concluded. We do thank you for attending today's presentation.

and you may now disconnect.