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spk03: Greetings. Welcome to the DataSea Fiscal Year 2022 Financial Highlights and Corporate Updates Call. At this time, all participants are in listen-only mode. In a question-and-answer session, we'll follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll turn the conference over to Annabelle Zhang. Ms. Zhang, you may now begin.
spk05: Thank you, Rob. Good day, everyone, and welcome to DataSys Fiscal Year 2022 Financial Results Conference Call. With us today are Fu Liu, founder and chairman of the Board of Directors of Shuhai Beijing, Kathy Sun, Chief Financial Officer, and Annabelle Chang, the principal IR contact based in the U.S. This call is also being webcast from the website. A replay of the call will be available later today. Please refer to the press release for more details. Now, allow me to go over the safe harbor. Today's discussion may contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussion of these risks and uncertainties, please refer to our latest fiscal year report on Form 10-K and other documents filed with the USSEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we do not undertake any obligations to update these statements except as required under applicable law. In addition, during today's call, Cathy and I will give the prepared remarks in English during the Q&A session. Other than Cathy and I, Mr. Fu Liu is also open to take questions and he'll answer in Chinese. All translations are here for convenience purposes only. In the case of any discrepancies, management statements in the original language will prevail. With that, now I will turn it over to Cathy, who will walk you through the details of our financial results. Cathy, please go ahead.
spk04: Good morning, everyone. My name is Cathy Sun, and I'm the CFO of DataCity, Inc. It's my pleasure to discuss the 2022 financial highlights. DataCity is a leading provider of products, services, and solutions in three converging and innovative industries, 5G messaging, acoustic intelligence, and smart city to enterprise and retail customers. We had revenues of $17.08 million and $0.17 million. for the years ended June 30, 2022 and 2021, respectively, which shows a $16.9 million of 9,653% increase by comparing with the same period of last fiscal year. The increase in revenue was mainly due to the expansion of the company's business towards 5G messaging, For the year ended June 30, 2022, revenues mainly consisted of service fees from our 5G SMS service platform. From July 2022 to June 30, 2022, the company generated $17.08 million for revenue, which consisted by 5G messaging business with amount of $17.02 million, including $11.93 million from 5G SMS and $1.8 million from 5G IMMCP and $3.26 million from aggregated message cloud as value-added services and $56K from smart city projects On top of that, blue-chip customers are accumulated exponentially, business model was well proven, and a strong cash flow was generated. One reason the revenue increased rapidly is because the investment on R&D for providing a wide range of products to solve the problem of the customer need. Also, the high-growth artificial intelligence adoption penetration rate creates a tremendous demand for 5G messaging. In addition, the company's marketing strategy is effective and efficient for reaching the target customers from different industries. Even more, the brand recognition with strong customer loyalty is so helpful to retain old customers meanwhile developing new markets across the country. The original customers of the company are distributed in dozens of provincial administrative regions in China, including Beijing, Liaoning, Jilin, Heilongjiang, Jiangsu, Shanxi, and Guangdong. During the reporting period, the company continued to expand in Guizhou and other provinces. through 5G messaging and acoustic intelligence business, and signed 5G messaging sales and service agreements with more than 11 industry customers, including express logistics, internet, chain fitness, education, etc. The proportion of the company's service customers covering China's provincial administrative divisions continued to increase. and the industry deeps and the breadth of the service customers increase. Growth margin is 5.6% for the 10 months ended June 30, 2022 as the company proceeds into the later stage of the 5G messaging business. Three factors will help equip the company with more flexibility in pricing and improving the growth margin. First, Costs will be reduced by economic scale over a large number of customers, fixes, and the increase of production. Second, by adopting differentiation strategy, growing brand recognition and customer loyalty will strengthen the company's pricing power. Third, after the commercialization of 5G messaging in the Chinese market expected in the fourth quarter of 2022, the target customers and the product forms will be expanded. For example, the company will provide the 5G IMMCP as source software, customization, and value-added services to improve profit margins. We incurred R&D expenses of $1.26 million and $0.85 million during the years ended June 30, 2022 and 2021, respectively, which shows a $0.41 million or 48% increase by comparing with the same period of last fiscal year. The increase in R&D development has brought the company products that are more in line with customer needs. The rich product line, the technical advantages, and the characteristics of the products are one of the main factors supporting the company's increase in sales revenue. The companies are under deep performance include but not limited to the volume. First, the core products of 5G related, such as 5G IMMCP, 5G IMMCP, and Smart Push were launched on the market and continued to receive customer orders. Second, DataSys Acoustic Intelligence says it has passed the certification of the third-party authoritative in the institution that has proven to achieve a 99.83% efficacy in 9 seconds against COVID-19. At present, a complete set of acoustic intelligence product systems has been performed. Third, R&D investment has also led to a continuous increase in intellectual property rights. As of the date of September 28, 2022, the company owns PRC Rejector 27 patients and the 77 software copyrights, including 20 patent applications pending in core technologies. We intend to invest approximately $10 million in technological products development over the next three years. The debt to equity ratio is 1.34 and 49.12 as of June 30, 2022 and June 30, 2021, respectively, which proved better management on credit sales and credit procurement. As of June 30, 2022, accounts receivable is $259K and accounts payable is $197K. The amount of accounts payable is approximately the same as accounts receivable, which means the weight average of cost of capital is in optimal level for financing current assets, and the maturity matching of short-term debt is perfectly achieved. As of June 30, 2022, the total liabilities of DataSea is $2.1 million, which shows a 43.52% decrease from previous periods. The decrease of liability is due to matching the accounts payable with accounts receivable. The level of working capital is optimally well positioned. Fiscal 2022 is passed by, and the performance belongs to yesterday. The management of the company is competent for the development of the new fiscal year. For 5G messaging business, From June to August 2022, DataCity announced a total $41.72 million procurement agreement to supply 5G messaging services. The agreement demonstrates DataCity's capability to provide rich messaging experiences through 5G at scale and revolutionize the way enterprises interact with customers. For acoustic intelligence business, the air and environmental disinfection product series has completed the research and development and prototype production of ultrasonic air sterilizers in four categories and more than 15 models. A sales agreement has been signed and pursuant to agreement, one major client agreed to purchase no less than 10,000 units of the ultrasonic sound air disinfection equipment by September 2023, and the total purchase value and agreement would be no less than RMB 35 million, approximately 5 million U.S. dollars. Yusheng has placed the order of the first bench and the 1,000 units of the two models of ultrasonic sound air disinfection equipment will be delivered by end of 2022. Let us briefly discuss the impact of the recent global economic situation, which is also of concern to many investors. While domestic outbreaks were high in the second quarter of 2022, China's economy has shown resilience and the impact of policy stimulus. According to the National Bureau of Statistics, China's GDP growth reached 2.5% in the first six months of 2022 as the proportion of the COVID-19 continues to decline. the Chinese government has cut taxes, cut interest rates, and accelerated infrastructure investment to continue recovering the national economy. As of August, the country's economy has gradually stabilized and the main indicators show the positive changes. First, the service industry continued to recover in August, the national service industry production index increased by 1.8% year-on-year, 1.2% points higher than the previous month. Second, the recovery of market sales accelerated and the accumulative growth rate of total retail sales of consumer goods turned from negative to positive. In August, the total retail sales of consumer goods reached a year-on-year increase of 5.4%. Thirdly, consumer prices were basically stable and the industrial producer prices continued to fall. Although the current external situation is still complicated, and the domestic economic recovery still faces many difficulties and challenges. However, we judge that the fundamentals of China's economy are improving for a long time and the factors supporting high-quality development have now changed. The follow-up theories of economic stabilization policies and successful policies and measures will be released faster. and the Chinese domestic economy is expected to recover and operate within a reasonable range. The market involvement for the company's domestic development is still positive. Meanwhile, the company accelerated its global business development strategy. We have been planning to expand our overseas market exposure, including taking the U.S. registered companies as the main body of operations and setting up U.S. business subsidiaries and promoting the company's acoustic intelligence-related products to the global market, including North America. Going forward, the company will continue to improve the market expansion of its main business based on existing contracts including 5G messaging and the market launch of acoustic intelligence, the company's objective is to expand our revenue stream and achieve annual profit in the new fiscal year. Before I finish my remarks, I would like to thank our founder and director Fu Liu, CEO Benny Liu, for the outstanding leadership and great contribution. Thank you.
spk05: Kathy, thank you very much for your remarks. Okay, I'm going to dive deeper into the recent business developments in fiscal year 2022 and address questions investors may be interested under the current environment. I'm very proud to share that DataCity had a very strong end to the fiscal year in the midst of an incredible dynamic environment. Compared with fiscal year of 2021, 2022 marked a significant inflection point to scale and transfer DataCity. Underscoring the robust growth and competitiveness building in the 5G messaging business, the long-term strategic planning by adding the acoustic intelligence business, and the proof of great synergies and diversified revenue streams among the innovative business sectors, which are 5G messaging, acoustic intelligence, and also the smart city business. In fact, DataCity set several records with performance this year. DataCity delivers strongest annual revenue, record contracts and orders grow in product portfolio, ongoing innovation and research, and expanded industry leadership. These important metrics illustrate the company's growth momentum, diversified revenue streams, and also great business potential, which also provide us with enhanced visibility and resilience about DataSafe business. DataSafe's primary operational goals are to, first, provide best-in-class products and solutions in 5G messaging, acoustic intelligence, and smart city. Second, maximize long-term sustainable growth of earnings and operating funds. Third, generate cash flows and returns to the shareholders. Such objectives will be accomplished by diversifying product portfolio, improving operating efficiency, achieving superior risk-adjusted returns through digitally allocating capital, accelerating market reach and also client acquisition. In today's environment, DataCy is focusing on four things, which are not only business initiative DataCy values, also vital to help us achieve operational goals, which I discussed above. First, DataCy is well positioned to help organizations deliver on their digital imperatives. DataSys 5G messaging solutions increase and improve ways in which people and businesses communicate while delivering brands opportunities to engage, convert, and nurture buying relationships efficiently. DataSys aims to assist all kinds of companies regardless of their size and industries to meet the marketing needs. DataSys SmartSafe solutions provide near real-time awareness of issues requiring attention. and data collected and analyzed from these databases can be used to optimize CT operations. Smart CT solutions can improve basic services, enhance public safety, increase sustainability, and inform planning and decision making in different scenarios. Database offerings are customizable and also cost efficient to empower all companies. When we communicate with customers, It's very clear than never that there is real opportunity to help organizations in every industry use 5G messaging to overcome today's communication challenges and emerge stronger, and use these smart city solutions to make cities safer, more livable, and sustainable. That's what DataCity is here for, to create connections that make the impossible possible, empower businesses, and improve the quality of life with a sustainability focus. Second, Zetasy invests to take share and build new businesses in categories where we expect to have long-term structural advantage. Zetasy is one of the first movers in the 5G industry in China and has built a comprehensive 5G messaging product portfolio with high brand recognition. The company's 5G messaging business continues to be recognized and engaged by customers in various sectors and the revenue in 2022 continues to grow. In 2022, DataCity added acoustic intelligence business and commit to take acoustic intelligence full business potential and wield acoustic intelligence across industries in meaningful ways. DataCity has formed research alliance with top-notch institutions to unlock the full potential of acoustic intelligence in the commercial applications. Top applications include healthcare, medical beauty, agriculture, smart homes, smart city, environment protection, manufacturing, among others. To date, DataCity has completed the technology development, product design, supply chain management, and marketing plans for a series of hardware products powered by acoustic intelligence. For example, DataCity's ultrasonic sound sterilization and antivirus equipment has achieved 99.83% disinfection with COVID-19 in just nine seconds. And the equipment was developed into several models to be used for public areas like office buildings, hotels, restaurants, and in-home applications. Other than that, DataSea also supplied core acoustic disinfection modules to manufacturers such as Shanghai Drive-On Automobile. Third, at DataSea, We firmly believe in using innovation to provide convenience and choice to customers and commit to staying ahead of the emerging market trends. These efforts have been taken into fruition, and you can not only find our expanding top talents and research partnerships, new launches and upgrades of products, but also the growth in 5G messaging and solid demand signals. For example, in 2022, One of our 5G messaging smart push integrates 5G wireless, big data, and data mining to transform the overall marketing experiences. 5G wireless is accurate at pinpointing location. When combined with 5G messaging, that means a retailer will be able to tell who is near the store and immediately trigger SMS and video SMS to promote the products or services the customer is standing by very close to. Empowered by data science, Smart Push can even leverage more information and also customer input to personalize that messages. In 2022, DataC also released China's first white paper with co-authors Institute of Cloud Computing and Big Data, China Academy of Information and Communications Technology to uncover detailed facts and compelling analysis of acoustic intelligence technology. commercial applications, and also the industry outlook. DataSys' white paper conducts a systematic forecast on acoustic intelligence evolution and also adoption, demonstrating DataSys' capability to disrupt and also accelerate the applications. Lastly, we will manage through this period with an intense focus on execution or excellence in our own operations. DataSafe's strategic business expansion to 5G messages started in early 2021 and to acoustic intelligence in 2022. Today's fruitful developments all prove that the company can identify great opportunities in the market and grasp them with execution. Since the product launched in 5G messaging, DataCy has been engaged by more than 300 enterprises in terms of 5G messaging with more than 17.02 million revenue in 5G messaging business and is awarded as the top 10 enterprises of 5G messaging in 2021. In acoustic intelligence, DataCy forges relationships with new clients and partners not only make progress in product rollouts, sales perspective, but also expand market distribution in domestic and also global markets. In the end, I'd like to address some questions we have been asked a lot recently. We're aware of the recent market turmoil and investors' concerns over inflation, rising costs, and also the economic growth. The Chinese government has released important policy signals on its commitment to stabilize the economy and also the job market in response to COVID impacts. They're calling for better balance between COVID-19 controls and growth, and the top economic officials also vowed support for digital platform companies. In the long term, we have many multi-year growth opportunities to look forward to, giving DataCity confidence in our future. Long-term megatrends such as 5G, cloud, security, will likely provide tailwinds for DataSys growth. As the DataSys growth and also its portfolio is in a strong position to support customers, the company is looking forward to what lies ahead. While our business is not immune to macroeconomic trends, the company will remain disciplined in our business while benefiting from the strong multi-year investment trends and technological transitions, which I mentioned earlier. The company's innovation is helping our customers and partners navigate an increasingly amount of complexity, and there is a greater sense of urgency to leverage leading-edge technologies to deliver on their strategic objectives. This means that the company are constantly looking to provide unique and differentiated innovation to help customers advance their most urgent business priorities, such as business expansion, and also marketing. In summary, we have performed very well on our strategy and transformation over a period that remains very dynamic. This led to a strong close to our fiscal year, setting several records across our business thanks to the solid execution from our team. Our marketing leading innovation and also continued growth. The companies are investing and refocusing our efforts to help clients at this critical time and to take advantage of the massive technological change on the way. And that will be all I want to share today. Thank you.
spk03: Thank you. At this time, we'll be conducting a question and answer session. To ask a question over the phone, you may press star 1 at this time. Confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to move your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
spk02: One moment, please, while we poll for questions. Thank you. Thank you.
spk03: At this time, we have no questions, and I'd like to say this concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation. Have a wonderful day.
spk05: Sorry, Rob. I think I saw some, like... Oh, my apologies.
spk03: My apologies. Yes, from the webcast. I'm sorry. Please go ahead. My apologies.
spk05: Yes. Yeah. We received some questions regarding the communist operations and also the financial from the webcast. And the first... Yeah, this question is from Derek Cole from the CAR Capital. And he has two questions. The first is how will you describe the company's competitiveness in the 5G messaging and acoustic intelligence? And the second is also if the smart city solutions is not generating significant revenue, why the company decide to keep it? Okay, I will like refer this question to Mr. Fu Liu. I will tell him this question in Chinese. Mr. Liu, there is an investor named Derek. He asked two questions about the company's business. The first question is this. How do you describe the company's 5G news and the competitiveness of the deep-seated intelligence business? This is the first question. The second question is, he noticed that the company's smart city business has not produced a significant income in the past two years. If so, why does the company still choose to continue to keep the smart city business and not focus on 5G news and生学智能? Please answer. 5G news and生学智能's competitiveness, right? Yes. 5G news
spk01: This is a new technology launched by the Chinese government, based on the new technology of the three major operators. It uses our current mobile terminal to carry out new business presentation.
spk05: 你可以把所有的答案都描述完,然后我这边可以进行一个总结的翻译。 好的,那么他就是说中国拥有16亿的手机终端,那么16亿的手机终端,那么5G消息它就是通过这样的16亿手机终端进行各项业务的传输。
spk01: So the market is relatively large. The form of Shuhai's presentation is that we have already included such a member enterprise in our large business. We have acquired the authorization of our large business. So we have the opportunity to expand our 16 billion mobile phone Okay.
spk05: To address the question about your competitiveness in the 5G messaging. So Mr. Liu Fu thinks, first, the market in China is very promising and also it's enlarging. China has 1.6 billion mobile end users. And through the 5G messaging, you can reach every single of them. So that's quite a large market, even in the global perspective. Another advantage or the components the DataCity has already authorized by the three Chinese major operators, which means the company can have access to the national market. And the national market, which I just mentioned, there were like 1.6 billion mobile end users. They can interact with 5G messaging. That's the second point. The third point is, DataCity has a very strong and also comprehensive product portfolio. Other than the solutions, I think Kathy and Annabel, they all shared. Other than that, DataCity has built its own online cloud platform, such as messaging cloud, which makes their solutions more comprehensive. And also last, I want to mention that DataCity is one of the earliest movers in this market. Especially if you follow the company's disclosure closely, you can tell that the company has already formed very strong relationships with the leading industry leaders, such as the express delivery companies, several. And also, the company has strengthened its competitiveness, especially in the industry applications. Even because comedy is so important in the 5G messaging area, and also because this area is like infancy. So that's why the Chinese, in China, they actually helped, even like involved with some regulation draft, and also proposed their ideas about the commercial applications, some that in very important conferences and also seminars. So because of these four reasons, first, the very large market. Second, the company has already been authorized to access to the national market. Third, the company has a very comprehensive and also competitive portfolio. The third, the company is one of the first movers and also has already built up its own competency in this market. Because of these four reasons, we think the 5G messaging, the company in this area is very well positioned. Thank you for the question.
spk02: Do you need to answer that? Yes, you can answer that.
spk05: But we need to pay attention to this part. Okay. Student Intelligence is Shuhai's most intelligent technology.
spk01: We, from the Chinese Ministry of Education and the Institute of Technology, have jointly published the first China's生学智能白皮书. Through the白皮书, we as an industrial leader, a technical leader, in China's industry, we make industry applications. Our生学智能技术, especially in the role of supernova, called starvation, In China, there are no similar companies or similar products. We still don't have such competitive products. Our COVID-19 vaccination rate is 99.83. This is the only technology in the country that can kill COVID-19. 我们讲这项技术还要继续验证到生医美,生医啊,超时加工的这个未来的这个行业应用上。 好的,谢谢。 So for the second question regarding the comparison about the data-based acoustic intelligence, Mr. Fu, he thinks that first,
spk05: The DataCity released China's first white paper with the co-authors, which we mentioned earlier, like Institute of Computing and Big Data, China Academy of Information and Communications Technology, and also other leading research institutions. This is the first white paper to actually discuss acoustic intelligence and its commercial applications with a very comprehensive perspective. So that laid a foundation, very solid research foundation for DataC, that DataC is a true analyzer in this, and also pioneer in this industry. And Acquitted Intelligence, not only the DataC owns the technology strengths, but also the applications can be very wide, other than the recent companies' product blowout. For example, we leverage this ultrasonic, like, sterilization technology to kill such as COVID-19 in 9 seconds with the efficacy at 99.83%. Other than this, acoustic intelligence can be applied in so many other areas, for example, agriculture, medical building, and more. So that's why this technology, the DataCity owns directly with a lot of patents pending. And also, this has wide applications. And DataCity has already looked through, studied through this, and even like public or white paper to discuss it. So that's the area that DataCity is actually staying ahead of the market chain. Thank you for that question.
spk01: So our infrastructure industry will have a broader market in the future. So in the future, our design is to expand our business through 5G news. Our ability will increase further. In addition, we have the ability They will effectively form three business partners. That is to say, using 5G news, it can assist in the construction of digital cities and the connection of business. Through such business connections, it will also insert the products of biotechnology and intelligence into the market of digital cities. So we have the confidence that through our 5G news business expansion, and also through the promotion of smart business, we will coordinate and drive the growth of the digital city business. So our three business blocks are organic co-operative relationships. So in the future, we can all help each other,
spk05: So for the third question, so the company has the smart city business, but it may not generating the significant revenue in the recent years. So why the company start to keep it? So for that question, Mr. Fu Liu feels first, the company starts with a smart city solution. And this is the market that has tremendous opportunities. So the market position itself is very good and promising. And also, as companies start to add other business lines, for example, like 5G messaging and acoustic intelligence, in those two areas, there's a lot of things can happen together and also reinforce and strengthen data-based solutions in terms of smart cities. You can tell the synergies among these three businesses are very strong. Let me give you an example. So in our smart city solutions, they integrate 5G messaging. And it can help the customers to communicate with each other. And for the acoustic intelligence, in the smart city solutions, which in the old model maybe just focus on the security, but with the introduction of acoustic intelligence, the security can be taken to another level. For example, today's COVID threats and also people's worries about health, something like that. So with the solutions we are now providing in the 5G and also Christine Chazen, when we introduce those solutions into the smart city, the smart city solutions can be stronger than ever. So that's why, there's too many reasons the company doesn't feel it's there's any need to drop it off because of the marketing position and also the other two business, the great synergies there to support the smart city going forward. Okay, that will be the answer from Mr. Fulio about the third question. Unfortunately, we are running out of time. Actually, there's still investors' questions about the financials, but we will make sure the IR team to write it down and then we can follow up with the investors like raising that question. Okay, Rob, I think that we're all for today. And please go ahead with the conclusion. Thank you.
spk03: Thank you. This concludes today's conference. You may disconnect your lines at this time and log off your computers. And thank you for participating.
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