Q2 2019 Earnings Call
This conference call is being recorded.
I'll now turn the call over to your host Mr. usually.
Senior manager of Investor Relations.
Lisa Please go ahead.
Hello, everyone and welcome to <unk> second quarter, 2019, and financial results Conference call. The Companys results were issued earlier today and are posted online you can download the earnings press release and sign up for our distribution list by visiting the IR section of our website at <unk> are not I Hisun C.L.I.T.K. dot com.
Semi she our chief Executive Officer, and co founder and Chairman Lee, Our Chief Financial Officer will provide an overview of Bluff water and then we'll turn the call over to Q and a.
Before we continue we knew that today's discussion will contain forward looking statements made on dirt of safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and uncertainties.
As such the Companys results may be materially different from the these expressed today.
Further information regarding these and the other week in uncertainties is included in the company for the F. As filed with the U.S. Securities and Exchange Commission.
The company does not assume any obligation to update any forward looking statement, except blessed with quite under applicable law.
Please also note that <unk> earnings press release, and this conference call include discussions on audited GAAP financial information as well as on other than non-GAAP financial measures.
I Quakes press release contains a reconciliation of the UN audited non-GAAP measures to the most directly comparable UN audited GAAP measures I will now turn the call over to our Chief Executive Officer, and co founder Salman shape.
[noise] quicker Lisa how do I for one and thank you for joining us today.
I am happy to report that for the second quarter of 2019, our total revenue grew 16% year on year to a record 49.3 million.
Revenue growth came despite a 7% depreciation of the renminbi against the U.S. dollars compared to the same period last year.
In fact.
On a constant currency basis.
Revenue increased 24% to 52.8 million for the second quarter compared with the same period last year.
Also in this quarter, our gross profit marks the third consecutive quarter of historical high increasing by 37% year on year to 14.6 million.
These results were achieved in light of the challenging factors an inference that currently exists outside the cost of our normal business operations.
We think that there's challenges may continue to affect our results in the near term.
But I am optimistic about the long term growth prospects of our business and industry and stability of our business model.
I want to know if she would that depending where pollution in China remains strong.
That's all fine business continued to go online.
That's the country's consumer activities, it's already among the most recent anywhere in the world.
I'm sorry, so the offline retail sales itself remains the bulk of retail sales in China.
As companies see higher cost to acquire a new traffic online.
Securing more cost effective ways to understand and manage consumers, even better and improve the sales performances becomes an important topic for them.
And this is also fueling the digital transformation in smart reach out.
I figure is already well positioned to provide this data and to support companies to attract customers and increase sales performances and we are poised to keep up with whatever demand the future holds.
In May 2018, we launched a strategic initiative to develop our enterprise solutions business Triple fine our customers' business intelligence capabilities to maximize the value optical paci data we provide.
This is what this was an important step for our company as we continue to move beyond our online marketing business.
We now report these numbers separately in an asset to accurately reflect our progress.
In the second quarter.
We reported a 2.8 million in revenues from this unit versus 1.5 million in the first quarter of 2019.
For more than 80% sequential increase.
We are excited to report that the business currently accounts for about 4.8% of our total sales for the first half of 2019.
Which we believe is a significant contribution to overall sales in the early stage of this rollout.
I want to we entering that by the end of 2019, we anticipate our enterprise solution may account for significant gross profit contribution of around low to mid teens.
We have a strong pipeline and continue to expect this business to emerge as key driving force for the company's long term revenue growth and margin expansion.
To review our progress in the enterprise solution area.
Earlier this year, we announced the acquisition of a controlling interest in chunky.
A leading independent software vendor with the capability of establishing reach media programs.
And then consolidating online and offline consumer behavior data.
In May we announced a strategic partnership with BTG, We link the online service of Beijing Tourism boom.
And Tencent holdings.
China, leading provider of Internet value added systems.
The partnerships represent significant opportunities for our enterprise solutions business.
As we target to help BTG establish a new customer relationship management system across more than 100 brands.
In addition to this agreement, we recently announced a memorandum of understanding to form a business partnership were quick to being the leading strategic public relation groups in Japan triple by integrating the marketing an enterprise solution to Japanese business targeting.
Chinese consumers traveling to Japan.
We are excited to work with them as they rank as a top 15, PR agencies and one of the fastest growing in the world operating in more than 10 countries across Asia.
The partnership will focus on the development of enterprise solution Pocketing Chinese consumers.
In Japan to utilize the potential of smart retail through offline and online data integration.
This partnership it's a perfect illustration of I click integration of marketing and enterprise solution as it allows us to provide the Japanese market with the technology to effectively target Chinese customers properly in Japan.
While utilizing victus train in content marketing and client generation locally.
The future outlook for this business is very positive as we continuing our efforts to grow our domestic and global partnerships.
We are experiencing solid demand from a growing number of our top tier clients and to date.
We have successfully deploying our enterprise solution with a number of well known international brands.
Including a global oil and gas company.
Leaving snake foot rent, a multinational consumer goods Corporation and international fashion and retail company.
To name a few.
Our strategy is our ability to cross sell our enterprise surfaces to the 2000, plus top tier markets weaker new represent.
Turning now to our marketing solutions business, we are still experiencing stable demand for marketers, who want to leverage iflix continually expanding list of Chinese consumers.
Which numbers now stand at approximately 80.
825 minute pump out active data sets.
In the second quarter, we reported record revenues of 46.6 million, representing a 9% year on year growth.
On a currency neutral basis, the revenue would have increased 70% year on year to 49.9 million.
For the second quarter of 2019.
Our priorities for our marketing solutions business to continue to focus on the Chinese markets to generate stable organic growth and enhanced profitability within that market.
While simultaneously expanding our geographic reach and to collaborate with complimentary.
Thanks.
As an example of our global expansion assets back in July we announced the official launch of our joint venture will we G.I. Global media Highlands number one online to offline solution provider across advertising payment and logistic top homes, which is a unique market leader in Thailand that has been the largest and most captive out of home media platform.
Covering our nationwide network.
Our companies will work together to develop marketing SaaS solution, an AI powered mobile applications that make use of the data we saw says how five each yacht.
In addition to our agreement.
We were delighted that we choose to become a strategic imperatives of Iclusig.
We still this demonstrates confidence in our companies working together to create synergies and many partnership opportunities in the future.
Before I conclude my opening comments.
We understand that many of you may be concerned about what the impact of the current U.S. and China trade situation may be happening, maybe having on our business. So I think it's appropriate to take a moment to comment on our model and our corporate resiliency in light of these factors first we have Ics explained to retract record of growth doing our 10 year history.
On an annual basis, we grew at a taker of approximately 40% in different economic cycles.
As I said earlier, we believe the business I'm Baumann will remain challenging in the near term.
But we are cautiously optimistic about our future success and have a very bright long term outlook.
Our company is pod power I think operational efficiency to deliver products and services to our customers in the most cost effective manner possible, while still ensuring the high quality of surfaces and support we traditionally provide.
And we are laser focused on achieving profitability, while market prudent use of cash of cash on our balance sheet.
Second this is will want to remind everyone that we are not a manufacturing or trading company with less than 5% of our revenue coming from the U.S. our business rely primarily on domestic consumption in China, which remains a key power team for the country.
As Chinese consumers become wealthier at growing emphasis is placed on the quality rather than quantity of the product and surfaces purchase.
Marketers quickly benefit from the important information we provide.
Foot to pull them to be our enterprise solution in 2019 and beyond will be the key to our future we already see the new business emerging as a central driving force for the company's long term revenue growth and margin expansion.
Finally, we have built a strong company that is operational breakeven with positive adjusted EBITDA and increasing margin profile and a healthy balance sheet.
Well if that.
I would now like to turn the call over to our CFO Terence Leap to review the second quarter financials.
Thank you Sally.
Welcome to the call anyone in this quarter I am pleased to report that we achieved record revenues gross billings and gross profit, while our new enterprise solutions business increased sequentially in a very challenging macroenvironment.
SMB touched on previously along with new business initiatives. The key to our continued success is achieving book to operational efficiency across our business lines, including but not limited to the erotic CODI reviewing our overall business to recognize opportunities to control costs expenses manage our cash flow more efficiently and focus on higher margin business products and Keyence. This illustrated coped with our plan to be able to end the price business and we are well on track to enhance what we have already achieved.
No our goal I feel key financial highlights for the second quarter piece looked at all because given in us dollars unless otherwise noted.
Our total weapon new for the second quarter of 2019 grade, 16% to a record 49.3 million from $42.7 million for the same period last year.
The increase was partially offset by Luckity of foreign exchange impact as the renminbi depreciate at 7% against the US dollar compared to the second quarter of 2000.
18.
On a currency neutral basis.
The revenue would have increased 24% at $52.8 million for the same quarter of 2019 compared with the same period last year.
Our revenue from the marketing solution business also great to a record $46.6 million for the second quarter of 2019.
A 9% increase from the same quarter in 2018.
This growth was driven by the increase in demand we are seeing from market. This SMB talked about earlier the long term market dynamics in this area remains strong on a currency neutral basis. The revenue increased 17% to 49.9 million for the second quarter of 2019 compared with the same period last year.
As said, Jeff in last quarter's earning call we start to we put the weapon news from our enterprise solutions business separately in order to track the progress of these divisions.
We reported revenue of 2.8 million, which was more than 80% sequential increase over the first quarter of 2019.
Since this is a new business, that's no year over year comparisons.
Our gross profit has continued to hit record high four feet.
For three consecutive quarters.
We achieved an increase of 37% in gross profit to 13.6 million for the second quarter of 2019 compared to $9.9 million in the same period in 2018.
The increase came as a result of margins stabilization of the company's marketing solutions and contribution from higher margin and the price traditions business.
Our total operating expenses increased 44% to 16 million for the second quarter of 2019 up from 11.1 billion for the same time period last year, primarily as the result of the increase in expenses, we incurred for our new business development Apis.
These include an increase in headcount marketing activities for the launch as opposed to continue on its growth trajectory.
And lastly, as of June 32019, the company had cash and cash equivalents of 41.9 billion compared with 39.8 million as of December 31st 2018.
I'll restrict the cash and time deposits amounted to eight amounted to $9.8 million compared with new at December 31st 2018.
For the rest of my discussion I will focus on our non-GAAP results.
You can find reconciliations of these non-GAAP itself in the press release, we posted earlier today.
And rich can be assessed at our Investor Relations website.
Yes.
Our adjusted EBITDA for the second quarter of 2019 was stable at 840, thousands U.S. dollar.
Compared with 851, thousands for the second quarter of 2018.
This was the result of our increase in gross profit, which was partially offset by more operating expenses in regard to new business development I mentioned previously.
And just net loss attribute attributable to the company's shareholders, which excludes share based compensation expenses fair value losses on convertible notes and other gains for the 2019 second quarter remained stable at 1.1 million unchanged from the second quarter 2018.
Piece by additional financial results in the press release, we issued earlier today.
I'll now my prepared comments with our outlook for the first quarter and full year of 2019.
Our revenue outlook is based on current market conditions, and the Fracs out P. nimeiri estimates of market and operating conditions.
Expected foreign exchange waste and customer demand all of which are subject to change.
For the first quarter 2019, we estimate revenue to be in the range of $50 million to $54 million, we issued which should translate into a 17% to 27% year on year growth.
On a currency neutral basis. This would translate to an estimate growth rate between trend is 22 and 31% based on the latest available us dollar and renminbi exchange rate.
We estimate a gross profit margin to be between 26 and 28%.
Based on current market conditions, and primarily due to the renminbi depreciation assumptions, we are revising down our full year guidance and now we expect the sales to range from $190 million to $210 million.
And gross profit margin between 26 and 28%.
As we may see pricing pressure from our clients as we solve the macro environment.
I would like to take this opportunity to give everyone that beef update on a share repurchase program that we announced last November .
Our board of directors authorized us to purchase up to $10 million of our own adss in a 12 month period from November through the first half of 2019, we purchased an aggregate value of 520, thousands us dollar.
We will continue to purchase up Opportunistically as we think the share represents an excellent value.
We're confident in Iflix growth prospects and believe its share repurchase program provides an excellent opportunity to invest in the companys future.
In closing I am encouraged by the fact that we continued to be favorably positioned in the marketplace, even under challenging macro environment.
I'm, particularly excited about early success, we are having in building our enterprise solutions as we are proving up how who to to how brands captures the lift that can opportunities with Chinese consumer.
Ultimately, we expect that our grove and operations disciplines shall pay off.
With that I will now turn the call back to Sandy for closing remarks.
Thank you Terence we are very proud of our accomplishments this quarter and so far in 2019.
For the second half of this year, we remain cautiously optimistic about our outlook for growth due to the current macro environment.
Yes.
We are well positioned for the long term to continue our progression in a rapidly growing addressable market.
Combined with our strong financial matrix, we see we have a stable business model that will continue to provide steady and consistent topline growth.
While we believe our review out our enterprise solutions business that Grupo five increasing the revenue opportunities and further enhance our gross margins.
This concludes our prepared remarks.
Thank you for joining us on today's call. We will now open the call to questions. Operator. Please go ahead.
Yes. Thank you ladies and gentlemen are now begin the question answer session.
If you have questions. Please press Star then the number one on your telephone.
And it appears that the request please press the pound.
Once again for the question.
Yes, Taiwan telephone.
For the benefit of all participants on today's call.
Ask your questions in Chinese.
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Once again this time one ask a question first question comes from the line.
On Jan of benchmark. Please.
Any pending Darren thanks for taking my questions.
Firstly on Q focused on your core solution business.
That second actually saw very robust growth.
Momentum right now and just wonder whether you could give us.
The update on the business right now, including the current projects and your client base.
As was the potential projects in our pipeline.
In the innovation in associated with that business.
If we listen to in the most recent earnings call in potential for Bob Schassler Baidu, the leading internet companies in China, I think all of them.
I think that test highlighted actually the importance of the enterprise solution business down the road.
Just wonder.
How you position your.
I guess sort of growth in regards to the potential competitive environment down real and what's the potential I think opportunities as well as the challenges you may see along the way.
Hey, Tom Thanks for the questions I think definitely the enterprise solution is a hot like our topic in the market in China. My account right now as you can see that from our earnings release, our enterprise solutions business grew more than 80% to 2.8 million in the second quarter, which is a very encouraging number for us as we are just beginning to expand into this like area. We feel that this results demonstrate our ability to execute.
Currently we see the enterprise solution business on track to reach our Andy you target given our robust pipeline of 50 clients plus in addition.
As I indicated in my prepared remarks, we have announced a strategic partnership with Victor the leading strategic agencies in Japan to half Japanese brands identify target and reach out going into the Chinese consumers traveling to Japan. We are the most effective advertising content as publishing we checked many programs integrating online offline data and the integrating of data analytics as of now there are already a number of leading Japanese brands in the pipeline from this partnership including a famous shopping mall, which features our fiber rotty opt to consumer packaged goods ranging from the world's most well known luxury brands to consumers that book.
Got it then I guess, even these two that on your side you know that you guys made insufficient progress and then what's the bottleneck. So you're right now like you know to potential a separate sure those are really the growth right now.
Yeah, I think the total addressable market you know the small retail you know on the new retail is enormous based on our research. After may still total retail sales in China could he'd like over a trillion us caught us by 20.
21. This is just the beginning of this month retail and all the players in different spaces are discovering grow their own business model you need to take into the market and tyco. The demand when you look at our current pipeline, we see that we have already strong pipeline in our.
In our book, so which means that we are just the beginning of an tripping you know the opportunities in the market.
And yes.
Other just one quick update the resource allocation towards this business.
It just wonder either currently.
How big is the key.
On the.
On the price side and is there any plan to increase your I guess has come down the road.
Hi, Fotis as Paris, I think on the resources side, let me give some insights as well I think right now our team on this like the enterprise solutions, including strategic that we apply working with challenging is basically now ready to grow to around like 200 headcounts right now.
In the quarters, we actually at only around 50 people, so those including oil and 120, plus engineers and also some new salesforce as well to help us to market. These new solutions. So youre pressures would be what are what is the bottom that at the moment I think on the scale on the targets that we actually sat for the market.
At the beginning of the year to achieve the $10 million topline revenue right. Now this scale is almost optimal for us to execute that but in terms of whether we want to speed this up or not I think we are trying to strike a speed and balance of our original solution like the marketing solution as well and also the split between this with the enterprise solutions. So we believe that that we're still executing according to our plan to achieve the $10 million and to make sure that we can execute it right and provide the right solutions to existing customer for us. So this is our top priority at at the moment.
Got it that's very helpful.
Second question is regarding your.
Guidance.
Thank you mentioned that there is a potential headwind on exchange based I, just wonder like number one.
What's the implied Apple to Apple basically in a constant currency basis your growth for the full year secondly.
Again, I think semi talks on the macro.
Just wonder.
What you.
See in the second half, whether you are potentially seating in a more headwind.
Advertising growth.
Let me address you know the macro like.
Bauma first and then you deterioration again come back to you going to work hard to guide. His part I think you know from what we can see unit in the market I think many of the key players in the industry unit provides a more conservative outlook I would say as the macro environment and also the uncertainties surrounding the U.S. and China going to trade conflict will be a swing factors with regard to the advertising demand in the second half of the year recently, we started going to few some pressure you know from our clients with the unfavorable shift in the industry like sentiment.
Despite this like our low outside issues. The second half of the year has been historically during the peak of our sales performances and we see no reason to believe that the rest of the year will be an exception. We continue to expect in a 45% to 55% brick downgrading revenue between first half and second half. This is the same message you know that we have been communicating with the market and given several factors, including first the sheer size of the advertising market in China second the shift from traditional marketing to digital marketing and third the ever increasing penetration rate of marketing automation. We believe that there should be a large new runway for us to grow given our leading position in the market and our demonstrated data and technology capability.
So hi, bankers as Terence I think in terms of guidance in terms of the impact of the currency I think thats definitely something.
Or is really the reason why we are adjusting our guidance right now because as you know the majority of our sales execution in renminbi and the our reporting currency is us dollar so the volatility in the foreign exchange way do have impact to us to a certain extent so as in the first half of 2019 and there was around a 7% impact as we also discussed the train concert gradually evolut into currency issues and we believe it is reasonable to assume that it would have some you know continue kind of impacts and unfavorable interests are we putting for farmers. That's why we have the wise our annual guidance and right now the expectation is at 5% down because many of the renminbi depreciation so our guidance also adjusts.
On the gross profit margin as you also Lotus I think that echoes on the comment from Sami that we do see some.
Oversupply of inventory in the market right now and that maybe there will be some impact on the b minus route so popular would translate to southern pricing pressure of some up from some of our customers. So thats right. The full year gross profit margin guidance has also been we ride stand for two percentage point basically two we've got all these like on potential impact and our best estimation or kind of like our expectation at the moment.
Understood Thats helpful. Thanks to cemetery Opex in Q.
Thank you next question is from the line of their necessarily of Roth capital.
Please go ahead.
Okay.
Good morning, good evening to you thanks for taking my questions.
So if I could go back to your guidance I just want to be clear. So the revision down I understand the currency impact in your revised guidance for gross profit and revenue.
Changing.
Solely due to marketing solutions or have you tempered.
Your view on enterprise solutions as well.
Hi, Darren this as terrorists so regarding the guidance questions. Let me give some more like color on that first part of the revision is really mainly because of the ramp DPP shares and mainly on the marketing solution part and we feel that more you know.
Is that more of their impact will probably be on the marketing solution and more than their enterprise solutions at the moment and this is happening of course, I think different industry in China to fill some of the pricing pressure, but our enterprise solutions business. We are still expecting that to remain at a stable kind of like on gross profit margin around the 70% Mark that we are still anticipating so on.
I think on our adjustment is mainly coming from that and so we believe that the marketing solution, we feel more pressure on that and Thats why we had just on the margin profile.
That's helpful and then.
Could you talk about I think I heard Sami say that your pipeline of enterprise solution clients is over 50.
I'm curious of paying clients.
How did that change from the first quarter to the second quarter in terms of absolute paying clients.
So thanks, Darrin so our goal Unifill at this year's target and close 50 key clients unit. This year as a reminder, we have already accumulated approximately like kind clients in the first quarter and also another 15 clients unit in the second quarter, which we enforce our believe that we are on track to reach this target our strategy is to acquire several leading clients in each of the verticals as to help US you to accumulate industry knowledge is and also the best practices and also we want to develop our standardized like vertical solution that can help US you do to launch in all of this solution much much faster. This will help us to drive growth and also momentum even faster unit within the 12 to 24 months.
That's great and then this last one for me so.
I do I do know that you're you're partnering.
With with a lot of players.
On enterprise solutions I'm, just curious about your thoughts.
With Salesforce partnering of all the Barbara.
Obviously, it's the U.S player partnering with.
China based player, but in terms of scale and Thats, obviously, a competitive threat. So I'm just kind of curious about one your thoughts there.
And then to do you feel like you need to partner with someone larger in order to scale those faster or it's just too early in the lifecycle of this industry that that really matter to this point.
Thank you.
Okay. So I believe that what you're talking about is our recent partnership with our big data and also the BTG. So we have been.
Progressing smoothly, you know, where if our PDG unit, including building up consumer data platform into the CDP and also as I appreciate the reach as many programs.
For a number of business unit for them. So the consumer the consumer data pop on unit place outbreak key role in that essential ice processing and also analyzing an order data unifill moebius like touch points. Aside from this we have also begun to establish another beachhead mini programs to help integrate the online and also offline data for a number of business unit for the BTG. In addition unit to the business opportunities. We see there remains a huge upside potential for the partnership with BTG unit itself given the number of the significant brands and also business unit. It has under his umbrella.
As a reminder, BTG owns more than 100 brands across more than six industry, including like restaurants hotel and lodging accommodations and tropo to name a few.
Well time unit. This could eventually become a multi million dollar contract currently the financial contribution here unlimited because there is a requirement you to allocate and recognize revenue over time given the circumstances. We continue to believe the contribution on PDG is more eminent among the other significant partnership. We currently have this as you know from arm to clients high on the on the on the publisher side you know I hear that you know your question is regarding the Salesforce Dot com pondering, Delaware by Alibaba, you think that you know the partnership of Alibaba and Salesforce Dot Com makes sense, you know were each leveraging that respective strength Alibaba unit the largest like ecommerce platform in China has a huge consumer consumer base and they know the online purchase behaviors of Chinese consumer extremely well.
While salesforce Dot com has been an expert in April finding CRM SaaS products for very long time, the accumulation of Alibaba and Salesforce Dot Com also highlighted the importance and the potential of the smart retail and definitely race, you know market awareness in the China market.
I think you had this alliance May force other big players such as Tencent to be more proactive in this area and may benefit us in long term you know by hoping unit a salary the ramp up of our enterprise solution because of the following factors first we see that our enterprise solution as a unique offering in the marketplace is riding on 10 send powerful recheck passport, which has more than 1.1 billion monthly active users. This platform as easily and convenient for any brand or consumer to adapt unit. Two in this ecosystem second based on our data analytics capability and deep understanding of the consumer behavior develop in our marketing solution unit over the past 10 years, we can help clients centralized and analyzing or the consumer data, helping them enhance consumer loyalty through the customer relationship management platform and.
Inbound targeted marketing system, we establish.
Furthermore, with our experiences serving top tier clients, we know how to better fulfill special requests and customize the solution. We believe our path on will be one of the top choices uniform, both domestic and foreign brands at and as we said.
We have a client number of leading brands in a worldwide, including a global oil and gas company and also several luxury brands.
Thank you.
Thank you next we have a is full pay of Oppenheimer.
Please go ahead.
Hi, Sammy parents and Lisa that's what taking my question. So I really have two quick one on their marketing solutions. So can you first talk about the top birdie codes for the business line and then reach one of their top worried Acos are you seeing is the most challenging and the current environment and then my second question is on if we look at the Twoq gross billing a Israel grew pretty well sequentially. If you look at the revenue pick Ray a it was down a little bit could you just explain a little bit on the dynamics here I think a much.
Hi, Paul This is Ah towers. So I think your first part of question is about our growth or try to fill up the cost of drilling.
In this quarter I think we are growing so this attorney in terms of cross selling to in this quarter and I think a lot of verticals that we are suffering basically show so thats, an uptick in this quarter and including some outperforming vertical like e-commerce sector as some personal care beauty food and beverage and also some so some uptake also some of the slowing all relatively sluggish like our vertical in the first quarter like automobiles and petroleums because with the sale of an enterprise kind of cadence in that particular sector. As we had allowed us to before so basically is ticking up quite well as some of the sectors steel that like.
Underperforming at the moment Lyda gaming Entertainment and media, but we also expect that maybe have some you know our combat Swalwell order like a regulatory kind of issues become more Keith so in terms of the.
Growth ardent on different verticals, that's on our understanding at the moment.
So.
Your second part of the question is can you repeat that sorry.
Actually it was related to one line gross billing.
Growth was faster than the revenue growth in the second quarter for the marketing solutions.
Could you explain the dynamics you.
Okay understood I think you can look at our Q1 and Q2 performance you can see one difference is basically that our margin profile has the difference. So this is attributable to our like in the first quarter. I think we have explained that we are trying to focus more on some high margin product and also clients and then we can produce a much better wholesale margins and profit margins. So in this quarter I think when we have more visibility in the market. After the first quarter that we starting to uptake some pickup but check or bigger clients and kind of managing you know.
All releasing some of the cash flow to the market than we have been able to attract and get some baker spending hires but then in this regard band we sacrifice a little bit in terms of course by the margin. So thats why you see the difference in terms of takeaway and also the growth rate and also the margin profile, but in in most of the cases are in.
In the current situation, we do like to strike a balance between both the growth and the margin of our higher so thats our strategy at the moment.
The conference room helpful. Thank you.
Thank you.
Next we have this Nelson Chung of Citi. Please go ahead.
Hi, Sammy Antares friends for taking my question I have a question on company investments.
With the rise of.
Selling and marketing expense this year.
Operating expense in general.
Can management share with us.
It was the Saf incentive rate this quarter was your incentive policies for the next few quarters and in general can management rank your investment opportunities priorities in.
2019, and in the coming years.
Yes, its global expansion or is it you are reinvesting in your enterprise solution or enhancement in your internal infrastructure. Thank you.
Thanks.
So I think that I can address the second part of the investment strategy. So when we look at our marketing solution business. I think we are still having very like steady growth, while we're maintaining the grove on the marketing solution, but we will keep on investment going into the enterprise solution. When you look at our numbers you know we have like a pretty good like demand unit in our pipeline and also when we look at our Q2 numbers actually we have over 80% of the revenue growth in our enterprise solution and also we see that the Macroenvironment you know more and more customers. They are looking for the marketing automation to improve the internal like deficiency and also you know we have another like investment area will be our international business. So for example, we have a partnership you know well from the BG. Our you know the Pts group and also we are actively expanding into our Japan and also you know the Korean market.
Yes so.
For the first part of a questions I mean, you talked about or you asked about the operating expenses I think comparing to the first quarter. We have been growing this likely on a cash our pet basis around 5% sales and marketing is Jew as do our largest part of our operating structure and is due taking a major part and terms of commissions basis or the incentive basis I think in order to push our you know new enterprise solutions and also the sale of some high margin products such as some of our MTM product unless you know our like toppled quarters as well we've been raising some of that share our sales incentives to these you know our sales and also we also incurred to incur extra marketing Wesco body right now because we do try to.
Also without the solutions to different customer and you can see that we have the initial success with companies like waechter like Thailand, VTI or because of these marketing effort. Then we will be able to secure some of the local partnership and some bakers like resellers like women's or contracts with these in different regions as well. So I think these are investment upfront will be pay off in the relative long term and right. Now. These structures is relatively stable right now I would say going into the second half and also into the 2020 I think that would be relatively stable, but we do incur the bit more in terms of their sales and marketing at this moment.
That's very helpful. Thank you.
Thank you as there are no further questions I'd like to turn the call back over to the company for closing remarks.
Thank you once again for joining us today, if you have any further questions. Please feel free to contact I click on Investor Relations Department to the contact information provided on our website. Thank you.
Thank you. This concludes this conference call.
You may now disconnect. Your line. Thank you.