Q2 2023 Jianpu Technology Inc Earnings Call
Speaker 1: Hello and welcome to the Gen-Fu Technology, Inc. 2nd Quarter 2023 earnings conference call.
Speaker 1: All participants will be in listen-only mode. Should you need assistance, please send to a conference specialist by pressing the star key followed by zero.
Speaker 1: After today's presentation, there will be an opportunity to ask questions.
Speaker 1: To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I now would like to turn the conference over to Li Ting Liu, Investor Relations Director. Please go ahead.
Speaker 2: Thank you operator. Hello everyone and thank you for joining us today. Our second quarter 2023 earnings release was distributed today earlier and is available on our IR website at ir.genpu.ai as well as on PR Newswire services.
Speaker 2: On the call today from Jianfu 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 the operations and company highlights, followed by Mr. Chen, who will discuss the financials and guidance.
Speaker 2: They will all be available to answer your questions during the training session that follows.
Speaker 2: Before we begin, I'd like to remind you that this conference call contains forward-looking statements defining Section 21e of the Securities Exchange Act of 1934 and the U.S. Private Securities Mitigation Reform Act of 1995.
Speaker 2: These forward-looking statements are based on management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, complexities, and other factors, all of which lack scientific functionality of the public and private sector.
Speaker 2: 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 this and other risk uncertainties or factors is included in the company's filing with the US SEC. The company does not undertake any obligations to update any forward-looking statements as a result of new information, future events, or otherwise except as required under applicable law. Finally, please note that the unless otherwise stated or figures mentioned during the conference call are in RMB. It is now my pleasure to introduce our cofounder, Chairman, and Chief Executive Officer, Mr. David Yeh. Please go ahead. Thank you for your time. Hello everyone.
Speaker 2: 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 this and other risk uncertainties or factors is included in the company's filing with the US SEC. The company does not undertake any obligations to update any forward-looking statements as a result of new information, future events or otherwise except as required under applicable law. Finally, please note that the unless otherwise stated or figures mentioned during the conference call are in RMB. It is now my pleasure to introduce our co-founder, chairman and chief executive officer, Mr. David Yeh. Please go ahead. Thank you, Li Yiten. Hello, everyone. Good morning and good evening.
Speaker 3: I've been sitting under the weather with the source rate for the past two days. So Oscar Chen will be handling the CEO scripts on my behalf. I will try to answer one or two questions during the Q&A session. Oscar, please go ahead. Okay, thank you, David. I'm Oscar. Today, due to David's soft load,
Speaker 3: I guess everyone on the call can hear that. So I will do David's part on his behalf, followed by my part, the CFO's groups.
Speaker 3: and save David's voice for the Q&A part.
Speaker 3: So let me start with the CEO script first.
Speaker 3: Thank you everyone for joining us today.
Speaker 3: After a strong reopening boost earlier this year, the second quarter saw some volatilities and slowdown in terms of economic recovery.
Speaker 3: Furthermore, the second quarter was a critical quarter for certain regulatory policies implementation and execution which presented certain challenges to us.
Speaker 3: Despite these headwinds, we continue to deliver another solid quarter benefited from our capitalized platform model and the diversification strategy.
Speaker 3: with a continuously improving margin profile of approaching break even and a year-over-year revenue growth of 7.7%.
Speaker 3: With our strong commitment to the digital transformation of financial services providers and other ecosystem partners, we continue to enhance our leading market position. Our long recommendation has witnessed a further year-over-year revenue growth of 26%.
Speaker 3: Our in-depth cooperation with financial sector partners resulted in a rebound of our data, big data and system-based services revenue, recording a year-over-year growth of 23.2% in the second quarter. Superintendent,
Speaker 3: Furthermore, we achieved high growth in our new businesses with an 88.6% surge in revenue.
Speaker 3: As we continue to improve operational efficiency and optimize cost structure, our ROI increased significantly to 135% with 9 percentage points improvement year over year. Our AI initiatives also helped in this regard.
Speaker 3: With certain AI technologies integrated into our daily operations, we have seen the benefits of efficiency enhancement.
Speaker 3: More importantly, we are approaching break even with a net loss margin of 0.3% in the second quarter, showcasing our steady trajectory of generating sustainable long-term growth.
Speaker 3: Now let me go through key performance highlights from the officer quarter.
Speaker 4: First.
Speaker 3: Being an independent open platform with diversified business mix, we deliver the solid quarter with a more balanced revenue structure.
Speaker 3: Our revenues from long recommendation and big data and system-based...
Speaker 3: risk management services continue to grow over 20% year over year respectively.
Speaker 3: benefiting from the digital transformation of the financial sector.
Speaker 3: In addition, our initiatives of expansion into adjacent categories and non-financial sectors have yielded preliminary successes.
Speaker 3: The revenues in this regard achieve the year-over-year growth of 88.6% in the second quarter with continual efficiency and margin improvements.
Speaker 3: As such...
Speaker 3: The revenues from loan recommendation, big data and system-based risk management, and marketing and other services contributed 29%, 10%, and 25% respectively of total revenues in the second quarter. For more information, visit www.fema.gov
The revenue from credit card recommendation services decreased by 25.7% year over year due to the lowering market budget of credit card issuers since May. Consequently, its contribution to the total revenue reduced to 36% in the second quarter.
The more diversified business mix and the revenue structure demonstrated the network effect of our platform business model.
This includes leveraging our cutting-edge technology and extending our existing marketing and acquisition capabilities into adjacent categories and industries, including telecommunications, e-commerce and lifestyle products and services.
to facilitate their digital transformation.
Secondly, we further enhanced our operational efficiency and optimized our causal structure, leading to a continual modern improvement.
In the second quarter, the ongoing optimization of...
Both products and monetization coupled with new partnerships resulted in a commendable increase in ROI, which stand at Chairman, Chairman and opportunity.
135%. Additionally, in line with our commitment to innovation, we further integrated AI tools, including various generative AI solutions into our daily operations and saw many improvements in the operational efficiency, particularly for R&D team.
achieving significant cost savings.
Such efforts have contributed directly to our modeling improvement.
Our operating loss margin decreased by 75% year-over-year in the Sigma Quarter, while operating loss margin improved by 10 percentage points, achieving 3.7%.
As a result, our net loss margin reached 0.3% approaching break-even.
Third, we continue to leverage our industry expertise and market-leading technologies and solutions enabling our financial partners digital transformation.
leveraging our reputation and experience.
accumulated from many years deep cultivation in the financial sector.
We continue to explore new acquisition channels to further diversify and enhance our marketing and acquisition capabilities.
For example, in the second quarter, we appointed our in-house financial experts to share on live streaming platforms.
of their valuable industry insights on AI, modeling, and other topics.
We also established a strategic partnership with a well-known Internet giant, solidifying our position as one of the few recognized platforms for financial product discovery and recommendation in the market.
In addition, we continue to extend the reach of our social media marketing channels which strengthen our competitive edge in the industry.
These efforts have expanded and strengthened our long-term partnership within the financial sector through which we are ultimately driving the digital transformation of the financial industry.
resulting in a 23.2% increase in revenue from big data and system-based services in the second quarter and paving the way of collaboration with financial service providers with a broader spectrum of products and services. Last but not least, I also want to share with you some new AI initiatives have been instrumental in driving innovation. aggregating various AI tools
into an internal one-stop portal. We have seen that approximately 72% of our employees are utilizing AI tools and technologies in their day-to-day work.
enhancing operational efficiency in areas such as R&D, customer service, and finance.
In addition to such efforts that benefit us internally, we have also been actively exploring new avenues of AI development to empower our ecosystem partners with innovative solutions.
During the second quarter, we organized an AI HEXON event where several projects and initiatives demonstrated the potential for further development and commercialization.
Going forward, we will continue to allocate resources to drive innovation in the AI space as we strive to develop the next version of a technology-based inclusive finance business model.
Before I turn to the CFO part.
Given the recent volatilities, there remains some uncertainty surrounding the development and the recovery of the economy. In response, the Chinese government and the regulators have taken proactive measures to revitalize and expand market demand with a specific focus on stimulating private consumptions. It is expected that near-term implementation and execution of additional stimulus policies will be critical to the remaining of this year.
Financial service providers and other ecosystems are expected to excise their caution and continue to tighten their spending in the interim.
as what we observed in the second quarter, that certain credit card issuers are lowering their market budget.
As a result of these circumstances, we remain cautious in our outlook for the second half of this year and will continue to focus our efforts on efficiency improvement and cost optimization of our existing businesses.
Despite the near-term impact, our dedication to executing our vision
of becoming everyone's financial partner for this.
Our total revenues from the second quarter of 2023 increased by 7.7% to RMB 285.5 million. Our market leading position in recommendation businesses sustained with total recommendation services stood at RMB 186.5 million in the second quarter of 2023. Revenues from credit card recommendation services decreased by 25.7% year over year in the second quarter mainly due to the lowering marketing budget of certain credit card issuers.
Credit card volume decreased year over year by 25% to approximately 0.9 million and the average fee for credit card adds up to R&D 113.5 in the second quarter of 2023.
Thank you.
increased by 26% year over year in the second quarter.
mainly driven by the increase in the number of long applications.
by 27.9% year over year to approximately 5.5 million.
Revenues from this data and system-based risk management services increased by 23.2% to
28.1 million in the second quarter of 2023 from RMB 2022 million in the same period of 2022.
This is mainly due to the increase in average spending per customer.
Revenues from marketing and other services increased by 88.6%.
to RMB 70.9 million in the second quarter of 2023 from RMB 37.6.
million in the same period of 2022, primarily due to the significant growth of our insurance brokerage service and initiatives of other new businesses.
further proving our success in applying our strong technological and digital marketing capabilities into adjacent categories.
Thank you.
Let me now move on to costs and expenses.
Cost of promotion and acquisition decreased by 0.7% to RMB, $119.4 million.
in the second quarter of 2023 from RMB 191.8 million in the same period of 2022.
The overall outline for recommendation services and marketing and other services improved by 8.8 percentage points.
sequentially to 135.2% in the second quarter, demonstrating our continuous improvement in operational efficiency.
We continued executing our cost optimization initiatives.
As such, cost of operation decreased by 2% to RMB 20 million in the second quarter of 2023, from RMB 20.4 million in the same period of 2022.
Our sales and marketing expenses and R&D expenses decreased.
by 0.9% and 16.7% respectively, while our general and administrative expenses increased by 8% in the second quarter of 2023 compared with the same period of 2022.
measured as the percentage of total revenue, sales and marketing, R&D and G&A expenses in total were 30% in the second quarter of 2023, reflecting a decrease of 3.5 percentage points from the same period of 2022.
with our continued efforts in optimizing our cost structure and improving the productivity of our businesses.
Loss from operations was RMB 10.6 million in the second quarter of 2023.
compared with RMB 35.9 million in the same period of 2022.
Our original loss margin was 3.7%.
in the second quarter.
of 2023 compared with 13.5% in the same period of 2022.
We are on track of approaching break-even and the recorded net loss and the non-gap adjusted net loss of RMB 0.9 million and RMB 7.3 million in the second quarter of 2023.
compared with a loss of RMB 35.9 million and RMB 32.2 million in the same period of 2022 respectively.
Our net loss margin and the gap adjusted net loss margin for the second quarter improved by 13.2 percentage points.
and 9.5 percentage points to 0.3% and 2.6% respectively, compared with the same period of 2022.
As of June 30, 2023,
We maintained a balance sheet with cash, cash equivalents, and the restricted cash and time deposits.
of IMB 668.5 million.
With that, I will conclude our prepared remarks. We will now open the poll to questions.
Operator, please go ahead. Yes, thank you. At this time, we will begin the question and answer session.
To ask a question you may press star then 1 on your headphone phone.
If you are using a speakerphone, please pick up your handset before pressing the keys.
To withdraw your question please press star then 2.
At this time we will pause momentarily to assemble the roster.
And the first question comes from Carl Long with Yubikayakin.
Hi, can you hear me?
Yes, we can hear you. Oh, thank you. Thanks for taking my question. I actually have two questions. For the first one, I would like to know more about your new businesses. So can you elaborate on marketing and other services? Can you share with us what are the synergies with our existing business?
and how do you see the growth potential of our new businesses. Thank you.
Okay yeah, this is how we not question ING 1: one what P of picture.
Great. Can you repeat your question? We actually can't hear clearly here in Hong Kong.
And then we have the crowd.
Is it clear now?
Yeah, this is better.
This is cool. This is good.
Hello?
Yes, we can hear you.
Okay, sorry, maybe it was disconnected. I would like to know more about our marketing and other services, our new business. So can you elaborate on the new business and can you share with us what are the synergies with our existing business?
How do you see the growth potential of our marketing and other services? Thank you
Okay, got it. I will try to answer this question. So, yes, at Jia-Fu, our mission and vision is to become everyone's financial partner, right? And our users, our customers.
customer focus, actually a part of our culture. I'm actually adding in my culture.
As we studied 12 years ago, we started offering or we started partnering with long financial service partners such as S&E Consumer Loan or banks, companies, credit card issuers, friends, and other low-income workers.
financial or wealth management information providers.
as well as other financial products.
But in the last three or four years, we have seen more need for our customers in terms of financial product such as insurance.
and other non-financial products such as going to access to better e-commerce offers.
as well as other authors from other areas.
So that's why in the last couple of years we extended our product offering to our customers and our users from mostly of course financial products.
for long financial products.
The synergies are so obvious. It's all user driven. We want to actually get for users, we have multiple products.
financial or non-financial and the multiple offers.
which can make them faster, easier, more convenient to get the best offer.
that they have had. So in this case, it can help us to build the trust.
and the brand is our customer business.
So that's kind of the key benefits from the user side.
From the company side, from Genpoo's side, in the last 12 years we have built this super search and recommendation and offering platform with the cutting edge technology, big data, and AIs. And of course, we added the insurance.
brokerage products, insurance, we added e-commerce and telecon related products and in that case we were able to lower our costs by offering multiple products to our users.
The number you have heard from Oscar.
We have seen this marketing behind new business. We have seen the high growth.
high-double digital growth in the last two quarters and also with improved efficiencies, improved ROIs, not only from new businesses.
mostly non-financial products. We have seen the increased return on investment for financial products as well. So in this case, this is a win-win for our customers and for JN Food. So in the future…
This has proven in the future we need to still focus on the customer driven or user driven mindsets like Physical technology,
And we are going to optimize and further develop our business to further transform us.
from Productrays.
to a more user or customer-driven company.
more user accustomed to the company. Thank you.
Thank you very much. Yes, yes. Thank you for addressing your question. I have another question about our net profit. I see as we continue to do narrowing loss in this quarter, can you highlight what have we done to continue narrowing the losses? And do you expect the business to break even by the end of this year?
David, do you want to answer her question? Or probably I can have a first cup to answer Kate's question. Oscar, go ahead. Tony, hand the three names. Thank you, David. Go ahead. Okay. Thank you for this question. Yeah, I think we are approaching break even.
First is of course the scale, and the second is the efficiency improvement. And the third is cost optimization so far. So if you look into the revenue scale in the past...
in each quarter year over year. Thanks to our commitment to the digital transformation of the financial services industry, that's part of our mission as David said, become everyone's financial partner. We have done this kind of business for...
for close to 12 years. Also, the scale also benefits from our exploration into the new businesses. That's your first question, what the marketing and other services are. That's the initiatives we explored.
in the past three years and now it seems that we still recorded high growth, proven our capabilities to enter into these areas.
And then the second is about the efficiency. You can see a sequential improvement of our ROI. The ROI means how we measure our marketing and the user retention capabilities using revenue divided by our...
cost of marketing and acquisition. So we are seeing the continuous improvement of efficiency in this regard. And thirdly is the cost optimization. We continued during the past quarters, of course including
That's including some cost-cutting initiatives. And also, it's also an efficiency gain in terms of we deployed certain AI technologies to improve our cost structure. I think that's so far the initiatives and the facts we have.
But looking to the future, I think your second part of your question is about how we can break even by the end of this year. I think nothing can be guaranteed, particularly in terms of the uncertainties and volatilities.
of the market environment. So if we can continue to grow the scale, improve the efficiency, and saving the cost, definitely we can be pretty even in the future. But the volatilities and uncertainties...
may lead to something we cannot control and we cannot expect for now. So yeah, of course our goal is to build a healthy business to make profit, but the visibility of turn.
obtaining profit, obtaining breakeven, is not very near term.
I hope that answers your question. I have a few words to add. This is important.
So we were approaching breakthrough two. However, I mean our business is heavily dependent on the macro economy of China, especially the house.
They have
I, uh, how's that end?
of Chinese financial markets.
We have seen some recent data last week, and those data in terms of the...
The real estate market.
the S&E and the consumer loan, and also a month, and also the deposits. We definitely have seen a big decline of those numbers. So in a nutshell, we have seen a decline of those numbers.
Chinese consumers, they are paying off their debts.
Even if it is slowing down, you are powering it.
And also...
There are risks, credit risks, or the ability to pay.
risk, credit risk, or the ability to pay the pay out for consumers.
Thank you.
actually declining, the ability is declining.
actually the ability is declining. So as an open platform,
We heavily rely on our financial partners, banks.
non-bank finance company, credit issue, they are their capability to manage.
start over here The man is ghost.
and serve our customers.
So we are not giving any outlook.
or Q3 or Q4. It's just hard. It's tough.
It's not.
This is the playbook of
the sector with the data to do the estimation of the estimation.
So that's just my take.
My personal take of
of the sector and economy. However, we as independent open platforms, we have seen in the efficiency game in the last quarter, we are a wide asset platform. We have been including over...
quarter over quarter and we are confident. We, the management team and everyone in Jain pool, we are able to execute and we are going to ask from our peers.
and are we going to do better, quarter over quarter? Thank you.
Got it. Thank you very much.
Thank you. And once again, please press star then 1 if you would like to ask a question.
And the next question comes from Carol Yuan with Jungi Securities.
Hello management, can you hear me?
Yes.
Okay, thank you for giving me the opportunity. I would like to know how has generated AI helped your business, and what will be your plan of AI development in 2023? Thank you.
Oscar, please go ahead.
Okay, thank you for the questions.
Yeah, I think personally, for the AI, I think it's due in the early stage to everyone. So now, for now, what we have done is...
we created an internal OneStop portal that aggregating various AI tools, including large language models and other AI technologies for our internal use. So through that, we already shared some...
in our prepared scripts that we see significant efficiency gain in terms of using AI tools in our daily work. Particularly the R&D, the AI tools that we see significant efficiency gain in our daily work.
the enhanced efficiency of our engineer to write code. And also...
and also in our customer services, so on and so forth. So that's the internal part. And also we have captioned the wave of AI we...
We have an ARHEXON event in the second quarter. The purpose of this event is to encourage and to find some bottom-up ideas, initiatives that could be, you know.
that could be further developed or commercialized. In that event, we do find some interesting ideas, but still in the idea or demo stage, but we see some potential there.
We look forward, we can help our team to further build and enhance these initiatives and hope that can be commercialized in the future. And also one thing we want to share is you may also heard from the...
from the expert and media that if to deploy the AI, particularly the large language model into a certain scenario or user case, the sector expertise.
or the domain knowledge will play a more important role in that regard. We also believe in that theory, given what we have accumulated in the financial services industry, including the financial services industry,
the data, the user, the user behavior, all these could be the pre-trained materials to feed into the large model and may turn out into something interesting.
Yeah, I think maybe we can add up something. But one thing we are sure is that to embrace the change from the AI technology, we definitely will allocate some resources.
into the AI space. And we are targeted to do something interesting, something creative, and something that can enable our financial partners to do their business better and serve their users better in the future.
Thank you for your honor. I just want to add, like Oscar said, AI is a very important tool in the world.
AI application or AI training big model is still on a very early stage.
even in San Pablo, Silicon Valley and China. I just have two points.
Number one, we are not going to spend $50 million to buy lots of CPUs or turn in large models. It's not our capability. We don't have that financial assistance. We don't want to join that bubble.
I mean that's a clear message to our institution investors and all other investors.
However, what are our strengths?
Our strength, we have
we have the financial sector data. We have a lot of feedback data on why.
We are working with close to 1000 financial institutions. We have been working with them for years. We have scenarios. We have scenarios from Quaker, from Rome, from New York, from insurance. In Chinese we call it chan.
That's why we're able to work with a lot of the open-source large models.
to train or enhance.
tools, models.
So that's why we are in sales mode, not in bubble mode. We want to develop the financial services vertical in terms of.
solving the problem for our financial partners as well as our customers.
Chinese consumers at least, we can help them to be leveraging AI and even traditional models and some of the data to enhance the overall user experience and overall digital transformation of risk management.
digital experience and such. So that's what we positioned we are going to do. So finally, as Alpha said, we want to stress it's still early in the game. There will not be a clear winner in a quarter, in two quarters.
maybe longer. We don't need to be the patient. We need to really work with our partners to help improve the application, the tools and the user experience, just like Jam2.ai. Jam2.ai was...
founded in 2017 just right before our IPO and the Jian pool. Our friends and investors understand Jian in Chinese means simple.
Who means inclusive? So we had a vision in 2017 to use AI to make finance
simple and inclusive. We will continue our mission and vision to make AI simple and inclusive.
So now we all know the problem for AI in other sectors. The financial sector is too complicated, too difficult, too difficult for consumers, for businesses to use. It needs to be focused with our mission and vision to make AI simple and inclusive in finance and other sectors.
we will be successful in the medium and the long term. So focus on what? Focus on our strengths? Focus on what we can do? Focus on our mission and vision. That's the best offer we can provide to our shareholders and that's the best solution we can provide to our customers and partners.
Thank you.
Thank you. And once again, please press star then 1 if you would like to ask a question.
All right, this does conclude the question and answer session, so I would like to return the call to Liting Lu for any closing comments.
Thank you once again for joining us today. If you have any further questions, please contact us at IR at round3safety.com. Thank you for your attention and we hope you have a wonderful day.
Thank you for attending today's presentation. We now disconnect your lines. Thank you.