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spk01: Hello, ladies and gentlemen. Thank you for standing by for iClick Interactive Asia Group Limited Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Lisa Lee, Investor Relations Director. Lisa, please go ahead.
spk07: Hello, everyone, and welcome to ICLIC's second 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. In addition, during the call, management will give their prepared remarks in English. During the Q&A session, we will take questions in both English and Mandarin, and the third-party translator will provide consecutive translations. All translations are for convenience purpose only. In case of any translation discrepancy, management's statement in the original language shall prevail. Jian Tang, TJ, Chairman of the Board, Chief Executive Officer and Co-Founder of iClick, will first provide a high-level review of the second quarter 2021 results and share his thoughts on our execution strategy ahead. Chief Financial Officer Terrence Lee will follow and give us additional insights. on the financial results for the second quarter and provide guidance for third quarter and full year of 2021. He will then turn the call back over to TJ for closing remarks before the call is opened for Q&A. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Security Legislation 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 and uncertainties is included in the company's 20-F, as filed with the US Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable rules. Please also note that SPIClick's earnings press release and this conference call include discussions of an audited gap financial information, as well as unaudited non-GAAP financial measures. ICLIC's 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 chairman, chief executive officer, and co-founder, Jian Tang. TJ, please go ahead.
spk02: Thank you, Lisa. And welcome to the call, everyone. We are excited to share with you yet another quarter of robust growth in both our marketing and enterprise solutions and strong financial and operating performance. In fact, the second quarter saw record performance on numerous metrics, including enterprise solutions revenues, gross profit, adjust EBITDA, and adjust net income, further demonstrating that we have the right data-driven solutions for our clients and that we are enjoying strong demand from our products and services. With our solid execution and a clear strategy to further penetrate the enormous private domain traffic market, we remain confident in our strong outlook for the future. Total revenue in the second quarter grew 34% to $78 million. Looking at our two business segments, enterprise solutions achieved record results for the seventh consecutive quarter, with revenue reaching $13.4 million, up 160% year-over-year. Our marketing solutions segment also continued to deliver healthy growth as revenue grew 22% year-over-year to $64.6 million. Gross profit increased by 46% year-over-year, outpacing revenue growth as we further expand sales growth in marketing solutions and drive increased contributions from our higher margin enterprise solutions business. While we keep investing actively in enterprise solutions, we have still managed to achieve historical highs in adjusted EBITDA and adjusted net income, demonstrating the strong economics of scale we have achieved in marketing solutions. ICLIP is a must leader in assisting clients realize digital transformation through embracing offline to online integration opportunities on the private domain traffic market in China. Encouragingly, according to PWC, online and offline retail sales in China are estimated to reach 2 trillion and 6 trillion respectively. And we believe the total $8 trillion can give us a rough estimate of the enormous market potential we are facing. While our key account clients and mid-tier clientele segments remain distinct, they are equally important growth drivers for our enterprise solution sales. We have over 3,000 existing key account clients in marketing solutions for which we expect to see significant cross-selling opportunities, especially within those industry verticals where we have gained traction, such as cosmetics and food and beverage. As we grow our enterprise solutions business, we will grasp additional opportunities for scalability through replicating our success in these familiar industry vehicles. In the meantime, we are also further growing our presence in the mid-tier market and have received a strong reception from clients for our high value, easy to use SaaS tools and our unique implementation methodology that provides hands-on team-led implementation delivery and guided integration. Maintaining our momentum with key account clients and penetrating rapidly into mid-tier client segments, both organically and through expansion into new vehicles with Baozun remains a top priority for 2021, and we are off to a great start. I would now like to share with you some client-based studies for each of the growth engines, fueling enterprise solutions, starting with our organic key account clients. Bailea Commercial, one of China's leading department store brands, is an exciting example of how iClix integrated solutions have brought impressive value to our key account clients. are traditional strengths. iClick helped to integrate 470 by the offline client stores into a WeChat mini program that functions as a centralized online consumer interface with various smart marketing tools for live streaming, e-commerce, and other areas to attract traffic and stimulate consumption. At the same time, Baileys' use of our standard SaaS product, iSCIM, enabled them to formulate and execute insightful consumer strategies to build consumer loyalty. On the backend, our SaaS product allowed Baileys to digitalize the sales management and evaluation, increasing management efficiencies and optimizing sales performance. Finally, our data analytics technology supported by this target marketing enhanced consumer repurchase rates and provided domain traffic with actionable analytics and insights, including consumption and the social behavior data. Our partnership with Baillie has demonstrated the wide range of services we can provide to maximize our clients' success across business lines and the ability of our standard product to reduce development costs. Amidst the ongoing rollout of our standard products, we have continued to enhance our product metrics to cater to the different needs of our clients. As you may remember, we launched our first cross-border standard product, iSmartGo, just this April. And we are excited to announce that two career companies, Golala, a global fashion wholesale market, and Polad, a fast-growing brand focusing on car seats, and baby products have implemented iSmartGo to quickly and efficiently expand the China footprint. These two client successes demonstrate our strengths in understanding the needs of global brands and assisting them in gaining access to consumers through highly effective integrated solutions. We also note that our partnership with Baozhun is advancing well as we have completed the integration of our resources and systems, and most importantly, have engaged with a number of new top-tier clients. Together, we are driving strong value in the marketplace with the combination of our fully integrated end-to-end solutions that leverage Baozhun's strengths in operation services and back-end systems. With iClick's networking and experience in WeChat ecosystem and our expertise in SaaS product offerings, we look forward to further expanding market share by capitalizing on the enormous market potential of private domain traffic in China. We are also very proud to continue to be recognized as an industry leader, and this quarter we received Big Data and Intelligence Company of the Year from the 12th Tiger Road Market Agency of the Year, Gold Award from Marketing Magazines Agency of the Year Award 2021, and Asia Best-in-Class Digital Marketing Technology from the Hong Kong Mall Award 2021, among others. Regarding China's involving data security regulation landscape, while confusing to many investors given the uncertainty it has brought to the Chinese technology market, we expect this to have limited impact on our business model and operations. In this environment of patent investor consent, it is important to highlight that online education accounts for a very limited contribution to our overall revenues. In addition, we have achieved level three classification for the data security from the Chinese government. Please note that level three is the highest ranking for the non banking institutions, and this is to highlight our compliance with the data security regulations. We will continue to monitor closely and adapt to regulations as they change in the future. Given the recent regulatory developments and micro uncertainties, we note these do have adverse impact on the advertising industry overall, and we are no exception. As a result, we will be more cautious with the growth of the marketing solutions looking into the second half, and we'll focus our resources on the most profitable clients, only for risk management. We are continuing to invest in our enterprise solutions. Despite the short-term headwinds, we are steadfast in our belief of iClix's exceptional value proposition that we bring to brand clients with our integrated enterprise and marketing solutions in the long term. On a separate note, as you may have seen from our press release, I have recently been appointed as the new Chairman of the Board of Directors, in which I will be serving in addition to my role as CEO. I have assumed the role of Chairman of the Board of Directors to consolidate the management and execution of the company's strategic direction in more comprehensive ways alongside my co-founder, Sammy Hung. who will remain a member of the Board of Directors with me. I would like to thank our co-founder, Sami Hain, for his enormous contributions as chairman for more than a decade, and I look forward to receiving his counsel as a member of our Board of Directors. Before I end my opening remarks, I would like to share that the Board of Directors has approved to upside the Shared Purchase Program announced on December 10, 2020 by $10 million from $15 million to $25 million. This demonstrates our continued confidence in our long-term growth prospects. We firmly believe that with the dedication of our employees and the support of our shareholders, we expect to capture additional market share in the quarters ahead, both organically and through strategic partnerships as we lead China's ongoing digital transformation. This concludes my opening remarks. And I would now like to turn the call over to our CFO, Terence Lee, to discuss the second quarter financials. Terence?
spk03: Thank you, TJ. Hello, everyone. I'm pleased to share with you our strong financial performances in the second quarter of 2021. Our second quarter financials represent numerous records, including record results for enterprise solutions for the seven consecutive quarter and record gross profit, adjusted EBITDA and adjusted net income. In addition, revenue and gross billing also hit second quarter highs. Revenue for the second quarter of 2021, Grade 2, 78 million, up 34% from 58.1 million, for the same period of the power year, attributable to the increase in contributions from marketing solutions and enterprise solutions. Revenue from marketing solutions went to 64.6 million for the second quarter of 2021, up 22% from 53 million for the second quarter of 2020. primarily as a result of growing market demand from specific action marketing campaigns. Revenue from enterprise solutions was $13.4 million for the second quarter of 2021, up approximately 160% from $5.1 million for the second quarter of 2020. primarily due to the increasing need for online and offline consumer behavioral data integration and digital transformation. Gross profit for the second quarter of 2021 was $24.3 million, representing a 46% increase compared with $16.6 million for the second quarter of 2020. mainly due to the continued expansion of the company's marketing solutions and contribution from higher margin enterprise solutions. Cash and cash equivalent time deposit and restricted cash as of June 30, 2021 was $103.7 million compared with $94.5 million as of December 31, 2020. Our partnership remains strong to accommodate both our organic growth and M&A opportunities. We have encased a 50 million ADS repurchase program for December 31st, 2021, and as of June 30, 2021, the aggregate value of purchase shares was approximately 7.4 million. In addition, our board of directors today authorized the company to upside the share repurchase program from $15 million to $25 million. For the rest of my discussion, I will focus on our long gap results. You can find reconciliations of these long gap results in the past release we posted earlier today, which can be accessed at our investor relations website. Adjust EBITDA for the second quarter of 2021 was $6.1 million, compared with $5.2 million for the second quarter of 2020. Adjust net income for the second quarter of 2021 was $2.6 million, compared with an Adjust net income of $2.5 million in the second quarter of 2020. Cost Billings in the second quarter were $194.2 million, represent representing a 46% increase compared with $132.8 million for the second quarter of 2020. Overall, we are pleased with the financial performance in the second quarter. For further information, please see the detailed recap of other financial matches in the past release we issued today. As we have emphasized last quarter, 2021 continues to be a year of strategic investment into our enterprise solutions segment and a growing range of target products, including ISCRM and iSmartGold, which have both been seeing increasing traction for our mid-tier clients. Our focus remains on growing the contribution from enterprise solutions. as we capitalize on the large available market opportunities before us. Having said so, we have become more cautious regarding the growth of marketing solutions in the second half of the year. As we have consistently set the market, we are focused on ensuring a sustainable and healthy growth rate for marketing solutions. Based on the current environment, we will focus even more on risk management, cash flow management, and profitability. We expect that business ongoing solid profitability will continue to help support the robust growth of enterprise solutions. We would like to reiterate the strong value propositions that the integrated enterprise and marketing offerings can pay as its full-stack consumer lifecycle solutions that generates great value for brands. We remain confident that our strategies to capture market share will drive long-term value. Before I end, I would now like to conclude my remarks with our outlook for the first quarter and the full year of 2021. Please note that our outlook for your revenue is based on current market conditions. and reflects our current gauge of the COVID-19 pandemic impacts. These assumptions are subject to change. We estimate revenues from enterprise solutions for the third quarter 2021 to be between $17 million and $20 million. Revenues from marketing solutions for the third quarter is estimated to be between $65 million and $75 million. We keep our guidance on 2021 that total revenues and enterprise solutions revenues unchanged. With that, I now turn the call back over to TJ for closing remarks.
spk02: Thank you, Terence. Our data-driven solutions are clearly driving scalability and sustainable growth. and the cross-selling opportunities we are seeing from our existing marketing solutions club and through partnership with Baozun are feeling strong growth opportunities ahead. We have achieved strong performance through the first half of 2021 and I believe we have established the core fundamentals for driving further growth. We are more committed that We are more committed than ever to growing our higher margin enterprise solution segment along with our marketing solutions segment to improve the overall profitability of the company. The market opportunity from private domain traffic is massive with applications in virtually every segment of the consumer and the B2B markets. we also recognize that a pure SaaS model in China is not ideal. And therefore, for the key account clients, we expect to benefit from the collaboration with Baozun to provide operation services and outstanding warehousing and logistics systems. Meanwhile, we also see huge market potential ahead with mid-tier clients. that we are not only servicing with our SaaS tools, but also providing with valuable industry methodology. We see this dynamic as driving stronger scalability that will yield growth in enterprise solutions. I wish to thank all our key stakeholders, partner clients, and shareholders who see what we see in iClick. That is the promise for a very bright future, the promise of delivering true innovation against the backdrop of the digital transformation overtaking China. To all our devoted iClickers who help us to deliver excellence every day, I say thank you to all of you, for it is with you that our success truly rests. To our shareholders, I note that while we are experiencing the impact of shifting regulatory sentiment due to our geography, we will not be swayed by interim shifts in sentiment that do not impact our fundamentals. Instead, we remain keenly focused on the long-term drivers that have led us here. the history of our successes and the prospects of our ongoing success, which we believe are bright. While we feel current valuations do not represent the fair value of the future of iClick, we will remain focused on creating lasting shareholder value. Our management team is dedicated, as always, to driving growth profitability, and excellence. Thank you for your continued support. 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.
spk01: Yes, thank you. At this time, we will begin the question and answer session. To ask a question, please press star then one on your touch-tone phone. If you are using a speakerphone, Please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. For the benefit of all participants on today's call, if you are a Mandarin speaker, please raise your question in Mandarin and then immediately repeat your question in English. And please limit your question to only one each time. At this time, we'll pause momentarily to assemble the roster. And the first question comes from Nelson Chung with Citi.
spk05: Thank you for accepting my question. I have two questions. The first question is about the marketing solution. We have seen that some of the shopping malls have been closed recently. And some of the cases of pneumonia have appeared. I don't know how the advertising industry is doing in the second half of the year or early next year. The other question is about So let me translate. The question is in English. So thanks, management, for taking my question. Congratulations on the solid quarter, and TJ, for your new role. And two questions. My first question is on the marketing solution. Just want to check if management did have any updated advertising outlook in the second half this year or next year, despite the impact of education, overhang, and the soft consumer sentiment, as well as the resurgence of COVID cases. And my second question is related to the enterprise solution. Just want to check if we can share the number of new K8 variants added this quarter as well as the mid-year clients this quarter. And do you see whether your plan will be disrupted given the soft consumer sentiment, which may lead to a softer business growth of the mid-year client right now? Thank you.
spk02: Thank you for your question. I am TJ. Thank you for this comprehensive question. It covers both our marketing solution and our enterprise solution. So I will answer your first question about the marketing solution. Regarding the marketing solution, we think that in the first half of the year, our advertising business is doing well. There is an increase of more than 20% in revenue. In addition, from China's entire market environment, we see that some industries are gradually under more and more strict supervision, including K-12 education, including some game industries, as well as the uncertainty of the overall epidemic. So it will indeed have some impact on advertising business. But in the second quarter, we actually saw that this impact actually did not have a very big impact on our business. But after the third quarter, there may be some impact, it may be a little bit more obvious. So there is indeed some uncertainty in it. But in fact, our advertising business is relatively comprehensive because of the covered industry. In addition to these supervised industries, we also have some more traditional consumer goods, Japanese goods, fast-selling goods, and luxury goods. These are actually relatively normal, and even have a relatively good growth. In addition, our advertising business has actually reached a certain economic scale. So with its growth, in fact, you can see that it has given us some better experience after adjustment and some experience after adjustment. In fact, they are constantly improving. Thank you for your question. This is TJ. Your questions cover two parts, marketing solutions and enterprise solutions. And I will take the first question about market solutions.
spk08: Overall speaking, in the first half, our advertising business delivered good performance with revenue growing by 20% year-on-year. If you look at the Chinese market, indeed, there were some industries that were tightly regulated, such as the K-12 online education and gaming, and the pandemic has brought more uncertainties to the economic outlook. Therefore, the advertising business was affected. And in the second quarter, you will see that the impact was limited. But in the third quarter, the impact is likely to grow bigger. So there are indeed certainties in the market. But, you know, our advertising business covers a lot of industries. And in addition to those taxally regulated ones, we also have traditional industries such as consumables, SMCG, household chemicals, luxuries, which enjoy healthy growth. So, in addition, our advertising business has achieved economies of scale, and with the steady growth in its revenues, we've seen adjusted EBITDA and adjusted net income increasing steadily. Therefore, for the second half, our management will focus more on the potential implications of the uncertainty in the market, and we will be more cautious in developing our advertising business, and with more focus on risk management, cash flow management, so as to ensure steady profitability. And in spite of all the negative impacts, as our CFO Terrence has mentioned, we maintain our guidance on operating revenue. Thank you.
spk02: 然后继续回答您关于这个 enterprise solution的第二个问题。 There are two aspects in this. One is about our KA customers. The other is about some clients in the central department. In terms of KA customers, we are still maintaining the guidance we gave at the beginning of the year. We expect that this year, KA customers may increase to 200 to 300 customers. The average up value of each customer is about $150,000 to $600,000. In fact, in the first quarter, we added about 40 major customers. In the second quarter, we added about 40-50 major customers. So it is still an on-track situation. Regarding the major customers of KA, at the end of last year, we had about 200 major customers. These existing customers, each customer this year can still have about $50,000 to $60,000 recurring expenses. So, currently, the industry of these major customers is still using cosmetics, cosmetics, cosmetics, food, drinks, such consumer goods, including luxury goods, and some customers in the retail industry. And then the second aspect is our clients in the mid-to-late stage. In fact, we found that our plan to enter the mid-to-late stage is even faster than we originally expected. In fact, by the second quarter, we already have more than 10 distributors and some channels. There are about 3,000 stores in total. As we mentioned before, we focus on the chain-based customers in the central department. Each customer usually has more than 20 stores. Some even have more than a hundred stores. Some even have more than a hundred stores. But for the clients in the central department, their income has to be divided into 12 months. Currently, the overall contribution to our revenue is very small. However, with the further development of our SMEs, I believe this will provide another good foundation for the further rapid development of our enterprise solution. In addition, I would like to mention that In fact, we are not only selling our standard SaaS software to clients in the central and central departments, but also to ISCM, our social CRM products. We are also exploring and helping them to do private operations based on our products. We are working more closely to help them to do a community and offline private operations model. Okay, as to your second question about enterprise solutions, it also
spk08: involves two parts. First is the key account clients. The second is the mid-tier clients. And we maintain our early year guidance on the growth of key account clients. And this year, that is this year, we're going to acquire 200 to 300 new KA clients with average output of $150,000 to $160,000. In the first quarter, we've acquired 40 KA accounts, and in the second quarter, we've acquired another 40 to 50 KA accounts. So actually, everything was on track. And by the end of last year, we've already had over 200 KA accounts. And this year, these existing clients will continue to bring $50,000 to $60,000 of recurring revenue to us. And currently, our KA accounts Our clients are concentrated in cosmetics and food and beverage, luxury, and general retail industry. As to mid-tier clients, well, we have been acquiring mid-tier clients faster than we expected. By the end of second quarter, we've already signed over 10 distributors and nearly 3,000 outlets. And the mid-tier clients are usually train stores with 10 to 20 outlets or even 100 outlets And for these mid-tier clients, they make payments on a monthly basis. These payments need to be allocated along 12 months, so the current contribution is quite limited. But as they grow, I believe it will contribute a lot to the development of our enterprise solutions. And in addition to sell ISCRM standard SaaS products to these clients, we also help them manage the private domain traffic. So currently we are exploring the GMV profit-sharing model with them. I believe that as long as this model is well-developed, it will bring huge opportunities to our enterprise solutions.
spk05: Thank you. Thank you very much for the answer.
spk01: Thank you. And the next question comes from Thomas Chong with Jefferies.
spk00: Hello, Mr. Chong. I have two questions. I have two questions. The first question is about iSmartGo. So do we have any update on SmartGo, like any quantitative numbers, just number of clients? And my second question is about the overseas strategies. Thanks.
spk02: Thank you for your question. I'm TJ. So regarding our overseas market strategy, we are now also entering some customers in the central department through the iSmartGo product that you mentioned earlier. In fact, our main service strategy is to help some overseas brands that want to enter China. Because many Chinese people travel abroad, they can buy some overseas products. Now, because of the epidemic, we can't go. So, through iSmartGo, we can provide some overseas brands with an opportunity. They can use WeChat Ecotourism in China. They can sell their products directly to China and maintain the relationship of all their members. So in fact, after our product is launched, it should be said that the progress is very fast. In our script, we have already mentioned that we are now in South Korea, Japan and Southeast Asia. In fact, there are already some brand attempts. The advantage we have overseas is that we have already covered a lot of customers with marketing solutions overseas. Now, due to the outbreak, we are going to up-sell more of our SaaS products, including iSmartGo. This is one of our main overseas strategies.
spk08: Thank you for your question. This is TJ. As to our overseas strategy, well, currently, we are using iSmartGo to target mid-tier clients. And our strategy is to help foreign brands to enter the Chinese market. Because in the past, Chinese consumers, they can go abroad for shopping. But thanks to the pandemic, they can't do it anymore. So through iSmartGo, we can provide opportunity to foreign brands who can then use the WeChat ecosystem to sell their products to the Chinese consumers and also maintain their relationship with their members in China. And after launching this product, we've seen very good progress. And currently, we are working with brands in Korea, Japan, and Southeast Asian countries, and we've already shared two places in the script. So overall speaking, our overseas strategy is to leverage our products and operating methodology to help foreign brands. And our advantages in overseas market is that our marketing solutions business already have a big customer base in the overseas market. So we actually can take the opportunities presented by the pandemic to upsell our SaaS products, including iSmartGo, to this client base.
spk02: Thank you.
spk08: Thank you. Thank you.
spk01: Thank you. And the next question comes from Colin Liu with China Horizons.
spk06: Good evening, Mr. Guan. My question is also about the standardized products of China Horizons. I would like to ask if there is a target for us to sign a store or a number of stores at the end of this year. And then I just mentioned the GMV branch. So I just translate for myself. You know, we saw very good progress in terms of the standardized products across the markets. I just want to ask if the company has any Thank you for your question. Hi, I'm TJ.
spk02: As I mentioned in the previous question, we have signed almost 3,000 stores by the end of Q2. What we see in the whole year is that it should be far beyond the expected number of last quarter or the beginning of the year. In the past, I remember that we had the expectation that there would be 4,000 to 5,000 stores this year. But in fact, I estimate that we can have 8,000 to 9,000 stores all year round. It should be not a big problem. So we see that this standard product is actually developing very well. I think this is very relevant to the customer group we chose. They are a chain business. We need products such as social CRM and ISCRM to help them connect consumers and carry out private operations offline. This is from the point of view of the coverage of the number of stores. Then you said that the contribution of this year's business, we estimate that because the signing is gradually carried out, And they all need to be divided into 12 months. So we expect that this year, the overall contribution of the central government will not be particularly large. The estimated number is probably a little larger. I guess it is such a level. Then there is the GMV division mode mentioned. This is actually a model that we are very optimistic about. We have already started to try it on some of the larger clients in the central department. These clients are very welcome in this model, because we help them to carry out their personal desire through our social CRM products, and through the operation of the community and personal desire, help them to do the real sales. This is very important for these stores, In fact, it is a total increase in revenue. So they are very happy and willing to give us a portion of this increase in revenue. This is actually a mode that they are very positive about and customers like very much. And this mode, I think, may be a better mode in China. Because it makes up for what is not available, only providing tools. It is not enough to only provide tools. For customers, it is always a cost, especially for small and medium-sized customers. So this cost is actually that they are not willing to pay for it for a long time. But we turn this mode into a GMV, a draw mode, for it to generate increased income. We think this mode will greatly increase the annuality of customers, because what we give them is no longer a tool, but a tool plus the entire operating service. This annuality, it is actually very difficult to replace us. Thank you for your question.
spk08: This is TJ. As I've mentioned, by the end of the second quarter, we have already signed nearly 3,000 outlets. And for the full year, I expect to acquire or sign up more outlets. than we predicted earlier this year. Because earlier this year, we expected to sign up 4,000 to 5,000 outlets. But I think that for the full year, we will be very likely to have 8,000 to 9,000 outlets signing with us. And that means that the standard products are very attractive to these mid-tier clients. And because these clients, they are chain stores, So they need our SCRM products to help them connect with consumers and operate their private domain traffic. As to the contribution, you know, we are still signing up the outlets and also the contribution need to be allocated along 12 months. So the current contribution would not be a big, for the full year, it may be like a single digit or high single digit. As to the GMB profit sharing model, We are very optimistic about this model and currently we are trying it with some mid-tier clients and they all welcome it because they can use the SCRM to operate their private domain traffic and also operate their communities, therefore bringing extra sales revenue to these merchants. Therefore, they are more than willing to share the profit with us. And I think this model will be better for the Chinese market because If we simply sell soft tools to them, these clients will not be very sticky, because after all, it will incur costs for them, and long-term, they are not willing to pay it. As to the GMV model, since we can bring extra revenue to them, it will greatly improve the effectiveness of clients. And therefore, our clients were not willing to actually jump the ship and find other partners.
spk01: Okay, thank you. And the next question comes from Brian Kintzinger with Alliance Global Partners.
spk04: Great. Thanks for taking my questions and nice results. First, can you quantify the revenue from education in the first half of the year as a percentage of marketing solutions? And then based on your guidance, what are the assumptions in the second half of the year? And then similarly, there's been discussion around new regulations in the China gaming sector. Can you tell us if there's been any impact on your marketing solutions business from gaming customers and any expectations in the near term or changes of advertising budget specifically within that customer set? Thank you.
spk03: Hello, Brian. This is Terrence. I think I could first answer some, you know, about your numbers first, and then I think I would pass the questions to DJ to comment more about the industry and how the gaming sector may impact our second half results. First of all, online education was being regulated since actually last quarter, from the first quarter, and so it has been adjusting the numbers quite substantially. So in the second quarter, it only takes around 2% to 3% of our total gross billings. So it's really small numbers. And we actually believe in budgeting a minimal numbers in the second half or even to a zero numbers at the moment. And for the gaming, actually, it's a relatively bigger sector for us. It takes around 15% to 20% of our total numbers in terms of the gross billing and some of the revenues numbers as well. So I guess I would then pass the questions to TJ to answer on the second part about the industry kind of outlook on the gaming and the education sector.
spk02: Thank you for your question. I'm TJ. Regarding the advertising business marketing solution, in the second half of the year, We see that now because of the government supervision of the Chinese market, some industries are indeed affected. For example, the education industry is very typical. In fact, the impact of the education industry in advertising business has already been reflected in Q2 in advance. Although the education industry is really affected by the whole uh, This year, because of the uncertainty of the policy, there are other industries, including the game industry, including other industries, which may be affected by the supervision. So in terms of the whole thing, it also includes the fact that the epidemic is actually repeated, so it may also have some impact on the tourism industry. So in terms of the whole thing, we think that in the second half of the year, advertising business still has a relatively large uncertainty. Although there are many industries that cover our advertising business, we will still be more cautious in looking at this matter. So in the second half of the year, we will use a more secure strategy to manage our advertising business. We will focus more on those big clients who are more safe to invest in. Thank you for your question. This is TJ. As to the outlook of marketing solutions in the second half,
spk08: Well, due to the latest regulatory policy changes, some industries were adversely affected, in particular online education. We've actually seen the impact on the advertising budget of online education in Q2. And although the tightening of the regulations happened in Q3, in fact, in the second quarter, many of our online education clients didn't place any advertisements anymore. But we were not affected in the second quarter because the revenues from other industries actually made up the gap. And in the near future, other industries such as gaming and tourism will also be affected by the regulatory policy changes. So looking ahead at the second half, we've seen a lot of uncertainties in the marketing solutions business. Although our marketing solutions business cover a lot of industries, we will be more cautious and prudent in developing it in the second half. We will focus more on industry leaders as well as industries with more certainty. We also will focus more on risk management and cash flow management so as to maintain the healthy growth in our marketing solution business. Thank you.
spk01: Thank you. And this concludes the question and answer session, so I would like to return the call back over to the company for closing remarks.
spk07: 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. See you next time. Thank you.
spk01: Thank you. This concludes the conference call. You may now disconnect your line. Thank you.
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