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spk03: Hello, ladies and gentlemen. Thank you for standing by for iClick Interact with the Asia Group Limited First Quarter 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there'll be a question and answer session. Today's conference is being recorded. I would like to turn the call over to your host, Ms. Lisa Lee, Investor Relations. Lisa, please go ahead.
spk01: Hello, everyone, and welcome to ICLIC's first quarter 2021 Financial Results Conference Call. The company's 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 ir.i-click.com. Jian Tang, T.J., Chief Executive Officer and Co-Founder of iClick will first provide a high-level review of the first quarter 2021 results and share his thoughts on our execution strategy ahead. Chief Financial Officer Terence Lin will follow and give us additional insights on the financial results for the first quarter and provide guidance for second quarter and for year of 2021. He will then turn the call back to TJ for closing remarks before the call is open for Q&A. Before we continue, please know that today's discussion will contain forward-looking statements made under the 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 company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's 20F, as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also know that ICLEX earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. ICLEX press release contains a reconciliation of the unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures. I will now turn the call over to our chief executive officer and co-founder, Jian Tang. TJ, please go ahead.
spk07: Thank you, Lisa. And welcome to the call, everyone. Despite ongoing COVID-19 impact, fiscal 2021 began with a strong performance as we reported record first quarter revenue, gross profit, adjust EBITDA, and adjust net income. We are encouraged that revenue in our core marketing solution segment reached record first quarter levels of 54.8 million, up 23% year-over-year, benefiting from continuing ad spending recovery despite some lingering effects of the coronavirus pandemic. Likewise, the momentum in our enterprise solutions segment also remains quite strong, as this SaaS-based revenue reached $11.7 million in the first quarter, up 166% year-over-year, and reached another quarterly record for the sixth consecutive quarter. revenue from our higher margin enterprise solutions segment accounted for approximately 18% of total revenue, much higher than 13% in the first quarter of 2020 and 11% for all of fiscal 2020. These financial accomplishments are excellent indicators that we have the proper data-driven solutions and the business strategy to help our clients benefit from the digital transformation opportunities in China, not to mention the significant operating leverage inherent in our structure as we continue to increase revenue. We firmly believe we are in the right spot at the right time as the digital revolution in China continues to unfold. As I mentioned in our previous call, 2021 will be a year of investment in more new initiatives, particularly those that further develop and foster revenue in our SaaS-based enterprise solutions segment and M&A opportunities. In addition to extending our efforts to continue gaining market share among the key accounts clients, we have also started to tap into the mid-tier clientele to leverage our experience and the product offerings from the past two years. We remain on track to hit these objectives, and I'm happy to share with you more details on our strategy and execution. As a reminder, at the beginning of this year, we announced a strategic partnership with Baozun in which we will provide front-end solutions, including mini-programs and mini-programs store establishments. Sunspace tools and data analytics platforms while Baozhun will handle operations services and back-end infrastructure services to jointly target key account customers in China. The integration progress has been moving smoothly with both teams in frequent communication. Concurrently, both parties are introducing their respective clients to each other to help promote cross-selling opportunities. We are currently integrating all the technological resources and working on developed comprehensive solutions to fulfill demand from clients. We are also working on several pilot case clients and will share more details with you once they are ready. We continue to see significant synergies, not only from the one-stop solutions that key account customers desire, but also from exploring a number of target industry verticals to rapidly penetrate, giving our strong market presence on the track record. In addition to the extensive cross-selling opportunities we are seeing from the one-stop solutions developed with Baozun, we have also witnessed a higher conversion rate from over 3,000 clients in our marketing solutions segment and a more willingness from them to adopt enterprise solutions. With our data-driven products, we can address all the issues and challenges they will likely face when exploring the unprecedented opportunities from private domain traffic or smart retail, leveraging leading technological capabilities and key account customer service experiences from both iClick and Baozhun. As we continue aggressively gaining higher market share among the key account customers, we view the mid-end clientele segment as being a huge untapped market based on the number of merchants in this segment. Given this opportunity, we have developed and launched a series of standard SaaS products including ISERM, with different solutions targeting the unique needs of clients across some key industry verticals. We first introduced such solutions to the market in the first quarter, and the initial feedback from many mid-tier clients has been quite positive. As a result, we expect to start seeing some financial contribution from these new mid-tier clients beginning in the second quarter of 2021 and ramping at a faster pace in the second half of the year. In addition to fulfilling demand of domestic clients, we have also launched another standard SaaS-based product called iSmartGo. iSmartGo was specifically designed to fulfill the strong cross-border e-commerce demand from foreign brands that are aggressively taping into the enormous smart retail market in China, in part to capture the lost revenue due to travel restrictions resulting from the pandemic. iSmartGo helps those brands build and operate the own private domain traffic marketplace based on the WeChat ecosystem and eliminates the need for our clients to develop and maintain the necessary e-commerce infrastructure themselves. On the M&A front, we are always looking for opportunities to scale our product offerings both wider and deeper. Ideally, our M&A targets will have three key characteristics. First, we will offer cross-channel SaaS products or technological capabilities that will allow us to more easily manage omnichannel platforms, including but not limited to WeChat on behalf of our clients. Second, their products will enhance our current offerings, including data analytics capabilities, or offer more functionality modules beyond our current key focus on customer relations management. And third, they will already have a strong base of clients in certain industry radicals that we can cross-sell our current data solutions into. Our acquisition of Polly is a terrific example of how we carefully target a candidate and integrate it into our suite of digital solutions offerings. Polly has enhanced our marketing automation and broad expertise in widget-based SaaS solutions that has helped us accelerate the growth of enterprise solutions. We have been exploring and assessing the M&A opportunities carefully and will share future developments with you as any of them become mature. This concludes my opening remarks, and I would now like to turn the call over to our CFO, Terence Lee, to discuss the first quarter financials. Terence?
spk05: Thank you, TJ. Hello, everyone. I'm happy to share with you our strong financial performances in the first quarter of 2021. Despite the ongoing effects of the coronavirus pandemic and an expanding market that has yet to fully recover, the first quarter financial set many seasonal records, including record first quarter revenues, gross profit, adjusted EBITDA, and adjusted net income. First quarter total revenue increased 36% year-over-year to $66.6 million. This growth was driven by growth in both our marketing solutions and enterprise solution segments. Marketing solutions set a first quarter revenue record of $54.8 million, up 23% year-over-year, driven by growing market demand from performance marketing campaigns. Enterprise Solutions revenue in the first quarter was $11.7 million, up 166% year-over-year and a new quarterly record, and account for 18% of our total revenue, also a new height. Gross profit grew by 47% year-over-year in the first quarter to $19.5 million. primarily due to continued growth in marketing solutions and rising contribution from higher-margin enterprise solutions. Cash-cash equivalents, time deposits, and restricted cash as of March 31, 2021, was $100.2 million, compared to $94.5 million as of December 31, 2020, Our venture remains strong to accommodate both our organic growth and M&A opportunities. We have in place a 50 million ADS repurchase program through December 31st, 2021. And as of March 31st, 2021, the aggregate value of purchased shares was approximately 1.1 million. For the rest of my discussion, I will focus on our non-GAAP results. You can find reconciliations of these non-GAAP results in the past release we posted earlier today, and which can be accessed at our investor relations website. Adjust EBITDA for the first quarter of 2021 was $3.6 million, up 54% year over year. Adjusted net income for the first quarter of 2021 was 647,000 versus 553,000 in the first quarter of 2020, making the sixth consecutive quarter of positive adjusted net income. While spillings in the first quarter of 2021 was 200 million, up 27% from the period a year ago, and driven by recovery in advertising spend. Overall, we are pleased with the financial performance in the first quarter and are optimistic that future quarters will continue along a similar growth trajectory. For further information, please see the detailed recap of other financial matches in the past release we issued today. As we have emphasized in our prepared remarks, 2021 will be a year of investment and full of opportunities for us. Growing our enterprise solutions, contributions remain a high priority. And we continue to roll out a number of products and seek partnership and MA opportunities to further accomplish this goal. The offline to online digital transformation in China continues to be a powerful tailwind for companies like ours that can iterate around this megatrend. The large available market opportunities in front of us and the potential to gain market shares have us confident that any investment initiative will pay off over the longer term, even if this leads to some short-term wearable profitability. In addition to managing both top-line growth and bottom line profitability as best we can. Our key focus in 2021 will be the top line growth for enterprise solutions. I would now like to conclude my remarks with our outlook for the second quarter of and full year 2021. Please note that our outlook for revenue is based on current market conditions and reflects our current gauge of the COVID-19 These assumptions are subject to change. We estimate our second quarter 2021 revenue to be between $72 million and $77 million. Revenue from enterprise solutions for the second quarter is estimated to be between $12 million and $13 million. In the meantime, we revised our 2021 revenue guidance. to be between $318 million to $338 million, with revenue from enterprise solutions for the year to be between $62 million and $68 million. With that, I now turn the call back over to TJ for closing remarks.
spk07: Thank you, Terence. We are proud that the financial momentum established in 2020 has carried over into 2021 and expect these growth trends to continue. We are committed to growing the higher margin enterprise solutions segment at a rapid pace and continue to view marketing solutions segment as the essential base revenue and the profitability of the company. The online to offline digital transformation initiatives for many customers are still in the early stages, and we are steadfast in our resolve to remain the market leader for brands looking to capitalize to this digital revolution in China. Our data-driven solutions can help such brand customers effectively tap into Chinese consumer behavior. We still see significant growth opportunities for both marketing solutions and enterprise solutions and continue to expect enterprise solutions to account for an increasingly larger percentage of total revenue. Our strategic initiatives I discussed earlier are really focused on making this happen, both in 2021 and beyond. I want to thank all our customers that entrust us to help them grow their businesses as the digital revolution unfolds in China. I want to reiterate my appreciation to all the iClickers who help us deliver innovative data solutions to our customers. And I certainly want to thank all our shareholders who have chosen to seek capital appreciation with us and have impressed the confidence in our management team here at iClick. 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.
spk03: Thank you. For the benefit of all participants in today's call, if you wish to ask a question in Chinese, please immediately report and repeat your question in English. And please limit your questions only to one each time. Our first question comes from Brian Kitzlinger of Alliance Global Partners.
spk00: Please go ahead. Great. Thanks so much for taking my question. First, can you update us on the progress you're making with the Oracle and HubSpot partnerships? And when do you think those might become more meaningful growth drivers to your business?
spk02: Thank you for your question. My question is, can you update the progress of your cooperation with Oracle and HubSpot? When can we see their cooperation as an important growth factor in our business? Thank you for your question.
spk07: In terms of cooperation with Oracle and HubSpot, as we mentioned last time, we are still working very actively with these two partners to promote solutions for some overseas customers in China. For this, we are actually working This year, Q1 has also launched a product plan specifically for overseas customers, called iSmartGo. As we mentioned in our announcement, iSmartGo is mainly for overseas customers, to help some overseas customers enter China and establish a micro-ecotourism operating system in China. Now, we are also using this tool to cooperate with these two companies. Of course, this may take some time because we want to push the tool to more customers and let more customers know. This actually takes a long time. But we believe this plan is very helpful for overseas customers to enter China.
spk02: Thank you for your question. As our cooperation with Oracle and HubSpot, as I've mentioned last time, we are actively promoting the cooperation with them and we are actively promoting the private domain solution to overseas customers. And in Q1 this year, we've launched a specific product targeting foreign brands called iSmartGo. And this product will help overseas customers go into the Chinese market and become part of our WeChat ecosystem. And in the future, we're going to rely on the iSmartGo to further our cooperation with these two companies. But it will take time. because it will take a rather long time to roll out this tool to more customers and make more customers aware of the functions of this product. But I believe that this tool is a very useful one for our overseas customers.
spk00: Great. Thank you.
spk03: Thank you. And the next question is from Nelson Cheung of Citi. Please go ahead.
spk06: Thank you. The difference of 3 million is mainly driven by which driver? Is it because of the growth of small and medium-sized customers, or is it because of the greater certainty of Guangzhou's cooperation? And then my other question is that I want to ask, because I just heard that small and medium-sized customers may start to have some income in the second quarter, So let me translate myself. So thank you, management, for taking my question, and congratulations on the strong set of quarterly results. So I have two questions. The first question is regarding your revised guidance annually. Just wonder whether the incremental revenue from the enterprise solution will be a driver of your revised guidance. Is it due to the growth of new clients or higher certainty on the partnership? And my second question is related to the client mix in your enterprise solution. Just wonder management if you can provide more colors on that. current mix of KA and VTA clients, and whether you are on track to meet the 3,000 VTA client target this year. Thank you.
spk05: Thank you, Nelson. This is Terence. And for your first question about the guidance, we revised the guidance up on enterprise SaaS solutions. mainly because we see general demand is stronger than before in the market. And secondly, we also believe that some of the case that we run right now with Baozhen and some of the standardized products that we are launching to the market probably would start to kick in some numbers starting from June. So maybe sometimes earlier than our original budget that numbers may be kicking in from the second half. That's why we waited a bit and more like a kind of showing to market that we have more confidence right now on that numbers. On the second part of the questions, I think I will let TJ to address the questions.
spk07: Regarding your second question, regarding the current progress of our customer group in the Central and Western Departments, as well as our judgment on the relevant business of this year's customer group, I can add some more. Regarding the customer group in the Central and Western Departments, from the current situation, Q1 has already done a lot of work. 我们大概运用了一些渠道商来帮助我们触达EP客户 并且现在看到的进度其实也是非常好的 我们已经接触了EP早期的客户 采用我们的标准的SaaS产品 and provide some service attempts. The customer response is very good. They are very willing to try in this direction. Of course, the confirmation of income will actually follow the rapid growth of our customer group. Secondly, because the confirmation of income will actually use this After the customer buys our product, it will take a period of time to continue, and then gradually confirm the income. This is the logic of full SaaS. So we may have to start with Q2 to see that we have some reflections on the income. In general this year, we believe that we have a customer group of 3,000 to 5,000 middle and high-end departments. As to your question about our mid-tier customers, the progress and the outlook this year, well, in Q1 this year, we've already done a lot of work. We've been leveraging distributors
spk02: to reach out to customers, and we've seen very encouraging progress. We've already acquired some early adopters who have bought standard SaaS products from us, and we also provided operational services to them. So the initial feedback is very positive. As to the revenue recognition, well, as the mid-tier customer base grows and As these customers purchase our products, we will gradually recognize our revenues. And therefore, I think that we'll see the financial contribution from mid-tier customers kicking in in the second quarter this year. So I think that it is highly likely that we're going to acquire 3,000 to 5,000 mid-tier customers this year.
spk06: Thank you. Thank you very much.
spk03: Thank you. And our next question comes from Thomas Chong of Jefferies. Please go ahead. Mr. Chong, is your line open or did you meet your line?
spk05: Good evening. Thank you for accepting my question. My question is mainly about enterprise solutions. Can the management share how we see the future of our customer base? And then, if from a tiering perspective, this is a medium-sized, large-sized customer. Can you share a little bit about 這個 tiering 或者是在不同的取決的領域的一個狀況。 Thanks management for taking my questions. Can management talk about the GP margin trend for the enterprise solutions, as well as the merchants in terms of the number of merchants, the size of the merchants, as well as the penetration. or the mix across different industries. Thank you. Thank you for your question.
spk07: Let me explain this question a little bit. Regarding the growth of the customer community in Enterprise Solutions, we have two main directions this year. The first is that we will focus on the big customers of KAA. In this group of big customers, by the end of 2020, we have about 200 big customers. In 2021, in the first quarter of this year, we should have added about 40 such big customers. So this year, this year, this year, this year, this year, this year, The first is to use our own marketing solution to do up-sell. The second is to use some of the customer-level cooperation with Baodun. This year, we should be able to have a total growth of 200 to 300 large customers. This is a growth of a group of customers that we have seen on large customers. The second is to In the customer group of the central department, because our second direction this year is to push our standard SaaS products to the customer group of the central department. So in this customer group, we estimate that we can do 3,000 to 5,000 such central department customers this year. The progress we have seen so far should be completely achievable. It's probably such a situation. Thank you.
spk02: Thank you for your question about the customer growth of enterprise solutions. Well, this year we will focus on two directions. The first direction is we will continue to expand key account client base. By the end of 2020, we had a little bit over 200 key account clients. And in first quarter this year, we added another 40 key account clients. And for the whole year in 2021, we're going to upsell to the marketing solution customers as well as further cooperating with Baozun. And in this way, we are going to acquire 200 to 300 new key account clients. And the second direction is to sell our standard SaaS products to mid-tier customers. And this year, our target is to acquire 3,000 to 5,000 of them. And based on the progress we've seen, the target will very likely be achieved.
spk05: Hi, Thomas. This is Terence. Let me add on on your gross product margin questions. Firstly, about our key accounts, we are still standing at relatively high margins at the 60% to 65% gross profit margin. And on standardized products, we actually believe that it would be even better. And it could be at the 75% range because that is more standardized than most of our R&D expenses have been spent on before. So that's the current kind of profiles of the two segments that we have. Thank you.
spk03: Thank you. Next question, from John Chang of ESG Bank. Please go ahead, sir. Mr. Chang, is your line open?
spk04: Yes. Thank you, Mr. Guan. I'll translate myself. Congratulations to the management for the strong quarter. My question relates to our mobile marketing business. Advertising industry has been recovered from the pandemic in China and with the enlarging budget from advertising across criticals and the saturated revenue growth on the publisher's side. What's the management's outlook for the recovery chain and its impact upon our marketing solution building and revenue in upcoming projects? And also, will the launch of the applications of iOS 14 IDFA, will it impact on our targeting accuracy and attribution and what will be our content management? Thank you.
spk07: Thank you for your question. Let me answer some questions about the advertising industry. In general, we do see a good recovery and development in the advertising industry this year. In general, we see that the advertising budget of many industries is rising to a more normal level. So we believe that this is related to the epidemic in China, including in the world, which has gotten better and better control. So because of the recovery of such a big environment, we see that some industries, such as tourism, hotels, We believe that there will be a good rebound in 2021. Of course, there are also some industries that have been hit at a relatively low political level, including the education industry. It also includes some sudden events, such as the cotton incident in Xinjiang, which may have some impact on the clothing industry. However, from the overall advertising business of iClick, the above factors are generally recovering and recovering, but there are also some influences from individual industries. So in general, we see a steady growth. This is because in general, in Marketing Solutions, the income of our customers in each industry is more balanced. So in general, we still maintain a healthy growth. And from our company's strategy for Marketing Solutions, We also pay more attention to the growth of health, especially this year, we will still pay more attention to the development of this business related to the online environment of KOL and MCN in the marketing solution. So in general, in 2021, we feel that the entire industry, just to summarize, the entire industry will still be a Well, thank you for your question. I will first take the question about the advertising outlook. Yes, we've seen the recovery of the advertising industry this year.
spk02: and many industries have seen their advertising budget getting closer to the normal level. This is largely due to the fact that the pandemic is put under well control in both China and the rest of the world. For some industries, such as travel and hospitality, they will see retaliatory recovery in 2021. On the other hand, Some industries are subject to adverse impact from regulations, such as online education. And there are also some one-time events. For example, the BCI Xinjiang cotton incident has negatively affected the advertising spending of apparel industry. But if you look at the marketing solution business of iClick, you will see that some The revenue contributions from different industrial clients are quite balanced. Therefore, our marketing solution business has been enjoying healthy growth. This is in line with our strategy this year, that is to focus on steady and healthy growth. And in addition, this year, for marketing solution business, we're going to focus more on developing the KOL and MCN-related business. So in conclusion, in 2020, the overall advertising industry will enjoy healthy recovery, and our iClicks marketing solution business will also grow steadily.
spk07: Okay, and then the second part of your question is the issue of the shutdown of IDFA in iOS. Let me explain a little bit. In this, we see that Apple chose to implement this policy. For our advertising business, for our marketing solution business, we believe it will not have a very big impact. The reason is because, first of all, Apple's market share in China is not very large. In our marketing solution business, we have done preliminary statistics. Apple's market share in our business is more than 10%. And we believe that this policy, because it was just launched, the IDFA was chosen by the consumer to be closed. This still needs a very long time to pass. Because this requires the upgrade of the mobile phone, the upgrade of the operating system, and the upgrade of the app. These all need time. So this is a level from the hardware point of view. In addition, I think from the point of view of the replacement of IDFA, in fact, China's advertising and marketing related industry is also exploring some possibilities to replace it with some new solutions. We also see that the industry is making some efforts to do so. In addition, as far as we know, even in Apple mobile phones, Through IDFA, the proportion of ads is probably more than 10%. So in general, even if such a program is closed, it will have a very limited impact on our entire business. And there is an additional point. iClick has now adopted more and more Thank you.
spk02: Okay, as to the second part of your question about the Apple's IDFA policy, as far as I understand, this policy has had a limited impact on the marketing solutions business of us, and there are several reasons. It also has limited impact on the advertising industry and businesses. There are several reasons. First is the Apple's market share in China is small, And for our marketing solution business, our exposure to Apple is around 10%, so very limited. And the second is this policy was newly launched. So it may take some time for us to see whether the customers will opt out or not because it will require the upgrading of the cell phones, upgrading of the operating systems, and upgrading of the apps. So it all takes time. And this is from hardware perspective. And also from industry perspective, the advertising or marketing industry is also actively exploring alternatives around this policy. And as far as we understand, the ad placement via IDFA is just around 10%, so very limited. And therefore, we think that the IDFA policy of Apple has had limited impact on us. And so when I click serving our customers at current stage, we rely very heavily on first-party data provided by customers centered on CBP platform, and which actually will depend on the logging status of users. So this is my answer to your question.
spk03: Again, if you have a question, please press star then one on your touch-tone phone. Thank you. If there are no further questions, I'd like to turn the call back over to the company for closing remarks. Please go ahead.
spk01: Thank you once again for joining us today. If you have any further questions, please feel free to contact ICLIC's Investor Relations Department through the contact information provided on our website. Thank you.
spk03: This concludes the conference call. You may now disconnect your lane. Thank you.
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