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spk03: Hello, ladies and gentlemen. Thank you for standing by for iQIC Interactive Asia Group Limited's 2022 Second Quarter Unaudited Financial Results Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. At this time, I'd like to turn your call over to your host, Ms. Leigh Lisa Lee, Investor Relations Director. Lisa, please go ahead.
spk01: Hello, everyone, and welcome to ICLIC's 2022 second quarter on audited 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.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 in Mandarin, and a third-party translator will provide subsequent translations. Please note that all translations are for convenience purposes only. In case of any translation discrepancy, management's statement in the original language shall prevail. Jian Tang, teaching chairman, chief executive officer, and co-founder of iClick will first provide a high-level review of the 2022 second quarter results and share his thoughts on our execution strategy going forward. Chief financial officer, David Zhang, will follow and give us additional insights on the financial results We will then turn the call back to TJ for closing remarks before the call is open 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 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 20-F, 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 note 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 chairman, Chief Executive Officer and Co-Founder Jian Tang. TJ, please go ahead.
spk06: Thank you, Lisa. Welcome to the call, everyone. I will first share our challenges, approaches, and strategies over the past quarter and after how we envision building our business future. Looking back to the second quarter of 2022, because of the resurgence of COVID-19, many cities in China experienced strict controls or even lockdowns, including Shanghai and Beijing, where our main operations are located. In the meanwhile, the unpredictable microenvironment has continued to drive conservatism on advertising spending and promotional activities. As constantly highlighted in our previous annuals, we have executed our strategy to move away from lower margin and higher risk marketing solution business. As a result, iClicks total revenue for the second quarter 2022 declined by 51% year-over-year, amounting to US dollar $38.1 million, and revenue from marketing solutions decreased by 62% to $24.3 million year-over-year. Strategically winding down our marketing solutions business has allowed us to redirect the resources to our enterprise solutions business. As we remain optimistic about the enormous market potential of the digital transformation in China, we continue to invest in this segment. Our enterprise solutions delivered 3% year-over-year growth to 13.8 million in the second quarter, regardless of the negative impact of strict COVID-19 control measures. Now we are entering the second half of the year when the pandemic is relatively under control. but with occasional thirst. We see a mild trend of business recovery, yet it highly depends on future pandemic development and control measures. Here, I would like to introduce our new product, Aroha, an app that integrates AI, AR, and avatar for live streaming on the metaverse platforms. as we have kept on upgrading our subclass X product metrics. In the quarter, we have also engaged a global home care brand, iZero. Through our marketing automation product, iPale, we helped iZero develop automated solutions to shorten its advertising transaction cycle while driving traffic and the conversion to reach a broader target audience. In addition to our product upgrades, we were honored to receive a couple of rewards. For example, Digital Marketing Influencer Technology Company of the Year and Best Digital Marketing Tool of the Year by Golden Mouse. And our case study also won gold. in private domain marketing and was awarded Classic Case of Socialized Marketing by Phoenix Tree. Together, these awards highlight our capability as well as strong industry recognition for our solutions. We believe our value proposition on top-tier run clients remains intact. in the long term. Furthermore, we expect better performance once the overall market sentiment and the client operations recover. Our healthy financial position and cash flow should allow us to further invest in our enterprise solution business. This concludes my opening remarks. Now, I would like to turn the call over to our CFO to discuss our second quarter financial results. David, please proceed.
spk05: Hello, everyone. I will report key financial results for the second quarter of 2022 compared with the same period of last year. Total revenue was $38.1 million, decreasing by 51% compared with $78 million for the second quarter of 2021. Revenue from marketing solutions declined 52% to $24.3 million compared with $54.6 million for the second quarter of 2021. Primarily due to our skill down of our marketing solution business, and a slowdown of the overall advertising market. Revenue from enterprise solutions slightly grew by 3% to $13.8 million year-over-year and accounted for a historically high 36% of total revenue for the second quarter of 2022. Cross-profit for the second quarter of 2022 was $9.3 million. compared with $24.3 million for the second quarter of 2021. Bus parking margin decreased to 24.3% from 31.2%. Total operating expenses was $26.8 million for the second quarter of 2022, compared with the $23.4 million for the second quarter of 2021. primarily due to the additional bad debt provision as a result of unfavorable macro conditions. Operating loss was $15.5 million for the second quarter of 2022 compared with the operating income of $0.9 million for the second quarter of 2021. School bill impairment charge of $24.9 million was recorded in the second quarter of 2022 for marketing solutions due to the scale down of our marketing solution business, which resulted in a shortfall between the carrying value and the estimated sale value of this segment as of June 30, 2022. The change to goodwill in balance sheet does not affect the company's cash position. Net loss totaled $45.8 million for the second quarter of 2022, compared with net income of $0.6 million for the second quarter of 2021, primarily due to the group view impairment and decrease in gross profit. As of June 30, 2022, the company has cash, cash equivalents, and deposit and restricted cash of $83.5 million, compared with $88.7 million as of December 31, 2021. Now then, our gap measures. Adjusted EBITDA for the second quarter of 2022 was a loss of $13. 6.2 million U.S. dollars, compared with an income of 6.1 million for the second quarter of 2021. Adjusted net income, net loss, for the second quarter of 2022 was 15 million U.S. dollars, compared with adjusted net income of 2.6 million U.S. dollars in the second quarter of 2021. For further information, Please see details in the press release we issued today. Now I turn the call back over to TJ for closing remarks. Thank you.
spk06: Thank you, David. We remain optimistic about the prospects for recovery in China's economy over the long term as COVID-19 control measurements received The huge digitalization market opportunity remains intact, and iClick will remain at the forefront. We will continue to implement important innovations and strive for enhancements to our offerings that drive additional value for our customers. As always, I wish to acknowledge and thank our clients, partners, shareholders, and all our other stakeholders for your continued support, and all our iClickers who have been essential in our success. Our management, clear strategies, keen focus on the market opportunities, and prudent investments will guide us through this challenging period and establish a promising future for iClick. Thank you all for participating in today's conference call and for your continued support. This concludes our remarks and we will now open for questions. Operator, please go ahead.
spk03: For the benefit of all participants on today's call, if you are a Mandarin speaker, please raise your questions in Mandarin and then immediately our translator will repeat your questions in English. We do ask that you please limit your questions to only one each time. To join the question queue, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speaker phone, we do ask that you please pick up the handset before pressing the numbers to ensure the best sound quality. Once again, that is star and then one to join the question queue. And our first question today comes from Colin Liu from China Renaissance. Please go ahead with your question. Yeah, Colin, you're...
spk04: Can you hear me? Please proceed. We can. Please proceed. Hello, Director Chen. Thank you for the opportunity. I have a question. It's about the recovery after the epidemic. Because we all know that the performance of the second wave, no matter which line it is, has been seriously affected by the epidemic. The red line has also been seriously affected by the epidemic. I don't know if we will be able to So I'll quickly translate for myself. Good evening, management. Thanks for the chance for the Q&A session. And I just have one question. We all know that, you know, the second quarter results across both lines were severely impacted by COVID lockdowns and the COVID's negative impacts on the macroeconomy. So I wonder what's the progress of our recovery, particularly in July and August. If any color of recovery from these two months can be shared with us, that would be really helpful. Thank you.
spk06: Hi, Colin. Hello. I'm TJ. Let me answer your question. This is from the recent July and August, because now we are just saying that it is equivalent to the past one or two months of Q2. But what about the long-term changes? I think in the long run, it will still be with this whole China. This epidemic prevention and control policy, ah, and some other industries. This policy of supervision is, ah, has a great deal to do with it. Ah, we can only say this from these two months. If you look at this situation, ah, this one, whether it's this ES, ah, our business digitalization business, or MS, this one, The advertising related business should still have some recovery. From the perspective of ES, in fact, we think that ES business customers' long-term digital needs, whether it is for some SaaS products or some corresponding services, are still there. If we take Shanghai as an example, China China China China China China China China China China This lockdown has caused a lot of communication within the client, which has been continuously delayed. Now, the recovery needs a cycle because their organization is more complicated. So, but anyway, I think for ES, these long-term needs are basically still there, but there is a certain delay. This is our observation. And then from the MS perspective, in fact, we see that from the perspective of the customer's subjective needs, there is also a certain recovery. Because after Q1, in fact, the customer budget of MS has been affected too seriously. Because of the lockdown, there was a break in logistics, and a lot of customers didn't receive any services. So they stopped the advertising budget. Some customers even did that. We see a certain degree of recovery. Some customers will try to Hello colleagues, this is TJ. Let me take your question.
spk01: and if we look at the july and august you know we've only like what two months past the second quarter so over the past two months we've seen some changes but long-term changes still depends on the control measures in place as well as the industrial regulation and over the past two months we've seen the recovery in our we've seen some recovery in our yes and ms businesses for yes business The customer's long-term demand for digitalization, as well as the stock products and services, are still there. Take ShenHai as an example. After this round of pandemic resurgence, customers have started to resume discussions. So we think that the demand is still there, but just postponed and put off to the following quarters. And also because of the lockdown in Q2, the internal communication within the customers' companies was stopped or delayed. And since the company's organizational structure usually is very complicated, so it takes time for the customer's company to resume their operation, resume their discussion. Therefore, long-term demand, as I've mentioned, for ES business is there, but just delayed. As to MS business, we've seen some recovery of customer demand. In Q2, some customers' budgets were severely affected by the lockdown, and also the logistics was also interrupted. Therefore, some customers had to stop their ad spend. But now we've seen some recoveries. So, you know, it still takes time for the demand to recover to normal level.
spk03: Thanks very, very helpful. Thank you. Our next question comes from Nelson Chung from Citi. Please go ahead with your question.
spk02: Thank you for accepting my question. I have two questions. The first question is about MS. I would like to ask, because the economy is slowly recovering now, I would like to know more about whether some industries are more stable, and the recovery speed is faster, and which blocks may recover slower. The other question is about ES. I just want to ask Manager Chen, in the second quarter, how is the data of our customer flow? And then in the second quarter, and then in the third quarter, have their care facilities improved? And then if you look back, this year, have we made any major changes in the strategy of getting new customers? Thank you. So let me translate myself. I have two questions. My first question is about the marketing solutions, just when the management can provide more color in terms of industry verticals, like which verticals are recovering faster and being more resilient compared to other sectors. And my second question is related to the enterprise solutions, just when the management can provide more color about the current client base for the ES business, including the retention, the paying willingness, and the outlook into the third quarter. Thank you.
spk06: Nelson, hi. I'm TJ. Let me try to answer your first question about MS. The second question seems to be about ES flow rate numbers. I will leave these to David. David, please help me answer them. Your first question is about some industry issues in the MS business. This is how it is. From the beginning of the year, we started to do some scale-downs, especially in some industries where competition is relatively intense, such as the game industry and some web-based industries. In fact, the first two quarters were in some industries where the return was relatively fast. And then our current company resources are more focused on ES business. Secondly, in MS, we will focus more on some industries that can be associated with ES to some extent. This is more typical of consumer goods. So now, although the entire economic environment is not particularly good, However, we believe that consumer goods can maintain a certain amount of volume and living space even from the perspective of the cycle. Therefore, in the consumer goods industry, we see that in terms of advertising budget, there is still a certain recovery in the past one or two months. This is what we have observed. We also mentioned this in the previous question. As for other industries, to be honest, we don't pay much attention to them now, including the education industry, which was under a lot of supervision before. I believe this should be Hello, Nathan. This is TJ. I will take your first question about marketing solutions business. And as to the second question,
spk01: about the enterprise solutions business, I believe David will be in a better position to answer that. Okay, as to the marketing solutions business industry verticals, since early this year, we have started to scale down the marketing solutions business, and in particular, those very competitive industries like gaming. And over the past two quarters, we have strategically winding down our businesses in these industries so as to redirect our resources to enterprise solutions business as well as those part of marketing solutions business that have high synergy with ES businesses such as consumables. In spite of the weakness in the macroeconomy, we think that consumables still have room to survive and grow, and we've also seen recovery in their advertising budget over the past one to two months. As to other industries, for example, education, you can see that their advertising spending has fallen off the cliff, and I don't think it will recover this year. And other industries, they're also out of our radar now.
spk05: Hello, I am David from the company. I will answer your second question. In the second quarter of 2022, the number of customers with income contributions is about 410. Compared to the previous quarter, there has been a slight increase of more than 10 customers. In the second quarter, the closure measures in Shanghai were still very strict and greatly affected. Most of our ES revenue actually comes from companies in Shanghai. Mr. Tang has already made it clear in terms of strategy. Our company also has sufficient resources to invest in ES business. So ES has still maintained a relatively mild growth. In terms of revenue, it has also increased by 3%. Okay, this is David.
spk01: Let me take your second question about the YES business. In the second quarter, 410 YES customers contributed to our revenue. Compared with Q1, there was a mild increase, about a dozen of customers. And in Q2, due to the strict lockdown in Shanghai, our businesses were severely affected you know most of our yes revenue came from come from our Shanghai subsidiaries but STJ has made it clear that we've directed our resources to ensure that yes businesses can continue to grow so we've seen a mild growth of yes business in the second quarter and our revenue has also increased slightly by two percent
spk05: From the point of view of paying the hospital, there is not much change, but because it was closed in Shanghai at that time, there may be some customers. The progress of the delivery will be delayed, but after this is unsealed, they will still pay as promised. Of course, the economic situation is not very good now. The demand for digitalization is still very strong for ES customers, but because the economy is not very good, everyone is arguing about paying off the price. They will also pay attention in terms of price.
spk01: As to paying willingness, we don't see any changes. It's just that during the Shanghai lockdown, some customers delay their payment, but as long as the lockdown was lifted, they've honored their payment. And as we've mentioned, the demand for digitalization services is very strong. But since the economy is weak, so customers have become more price sensitive. So we will try our best to provide more valuable services for our customers.
spk03: Our next question comes from Thomas Chong from Jefferies. Please go ahead with your question.
spk00: Thank you for accepting my question. So I transformed myself. My first, I have two questions. My first question is about our enterprise solutions. So how do macro helwings impact the pace in ramping up the enterprise solutions and updates about our strategies in near, medium, long term? And my second question is about the competitive landscape in enterprise solutions. And are there any updates about the cooperation with Baozun? Thank you.
spk06: Hello, I'm TJ. Let me answer your two questions. The first question is about the ES strategy. We see it this way. The current global environment has a great impact on the country's economy. So there are many factors that we think are beyond the control range of the company, whether it is the entire macroeconomic or capital level. A lot of this influence is indeed beyond the scope of the company, and this also leads to the bad of the capital market, which also leads to this channel of financing. Basically, it is a state of such a closed state. So in this situation or under pressure, our entire management team is focusing on re-adjusting the internal resources of the company. The overall goal is to maintain the development of ES in the long term. Because we have been working on the development of ES is still very confident. This corresponds to the demand of a large number of companies in China. Although the environment is not very good, this demand is still a relatively long-term and market-rich track. So we are very optimistic and continue to invest the company's resources in the growth of ES. In terms of the specific strategy, we will pay more attention to the control of the cash flow, the control of the operating risk, and the better control of the input and output. So I think this is one of our basic ideas. I would like to ask Cynthia to translate this.
spk01: This is TJ. I will take two of your questions. So the first question is about the strategy of a yes business. Well, the macro environment has been affecting our economic conditions. And we found out that a lot of factors are out of our control. For example, the macro headwinds and the poor performance of the capital market, which has led to the closure of our financial channels. Therefore, the management has shifted our focus to redistribute resources so that we can ensure the further development of the enterprise solutions business because we are confident about the prospect of yes business. We think that the long-term demand of enterprises for digitalization is there and we are optimistic about the prospect of the enterprise solutions business. we must redirect resources and invest in its future development. And also strategic-wise, we will also control the cash flow as well as the operating risk, and we will do a better job in controlling the input and output of our businesses.
spk06: And then regarding the second question, I remember it was about the competition pattern of the entire ES. In fact, this is also related to the first question. It is also related to our long-term development strategy. It should be said that there is also a certain relationship. How do we look at this competition pattern? I think that these economic digitalization in China now, especially digitalization of some commercial enterprises, is actually still in a stage of development. All the participants actually have their own unique models or some different customer groups. We believe that in the next three to five years, this market is still a relatively blue sea market. So in the next three to five years, it is actually very important to establish some leading advantages in this market. I think one of our advantages is that we have accumulated a large number of top-notch customers in the MS advertising industry. In addition, we have already proposed this SAP plus X, which is a model of product plus service, which will be more helpful to us in this kind of This is one aspect. The second aspect is the financial structure. Basically, this ES is still a 2B market. It is different from the 2C market. 2B, in the end, is not a market for winners and losers. So, this market, in fact, we see not only some competitors like YouZhan and Weimeng, but maybe even some giants, the cloud sector, will also participate in these competitions to some extent. But I think as long as the Chinese digitalized market is big enough, The company can grow to a large enough scale in this market. In addition, there is a third point about this competitive pattern. I think every company and every team has its own different gene. In fact, it is not easy to adjust the gene or the basic team model. Some companies may have been doing SMB small and medium-sized enterprises, but they are more skilled. Companies like ours, from the beginning of the MS advertising business, are more skilled in doing large and medium-sized customers' products and services. We have accumulated a lot of money over the years, including the organization of the entire team. the company's thinking model. So I think in this regard, we actually still have a certain advantage. If you want to change your entire model, I believe it will be a very challenging thing. So on this big client, I think we should say that we will definitely have our own place. There is also another point. From the perspective of our chosen customer group, When we entered the ES business digitalization track in 2019, the first group of customers we chose was consumer goods. Until today, we still treat consumer goods as our most important ES business customer group. Now, we are facing a downturn in the entire economy. We think this track should be a very correct choice. Even in the economic downturn, consumer goods have always been a pillar of the people. There are no fundamental problems in this industry. We provide continuous and continuous improvement services to this industry. It will definitely have a market space and be a very sustainable business. This is about your second question. Thank you, Cynthia.
spk01: Okay, let me take your second question about the competitive landscape in the EF business, which is related to the first question, also to our long-term strategy. Well, we think that the digitalization of China's economy, as well as Chinese businesses, are still at its early stage, and different players have different business models and target different customer bases. And we think that in the next three to five years, this will still be a blue sea market. Therefore, it is critical for companies to establish leading position in this time window. And for us, our advantages are, first, we have accumulated large number of quality customers from our MS business. And second, we have adopted SAS plus X model, which provides both products and services, to our customers because we think that this kind of a model will increase the stickiness of a medium to larger size to customers by meeting their long-term demands. And the second thing about the competitive landscape is that the ES business or ES market actually is a to-be market, unlike a to-see market, which is a winner-takes-all market. So in this segment, there will be companies like WeMob and YouZhan. There will also be companies, cloud departments, like some cloud departments of Chinese companies. So as long as the digitalization market in China is big enough, I think our company will grow to a large scale. And the first thing about the competitive landscape is every company has its DNA. It's not easy to simply copy others. For example, some companies are good at SMB business, But for us, we think that we've started, we have been accumulating large and medium-sized customers or targeting large and medium-sized customers. Therefore, our way of thinking, our organizational structure are actually geared towards the large and medium-sized companies. And therefore, we think that we have our place in this market segment. And since we've started to enter the yes segment in 2019, The first industry we've chosen is consumables. And up until now, consumables remain the most important customer base for us. And we think that it is the right choice, in particular, given in this market environment. Because even when the economy is weak, consumables are still in the last demand of our customers. So as long as we continue to improve our services, and this business will be sustainable and will have a big room to develop. Thank you.
spk00: Thanks, management.
spk06: The third question is about your cooperation with Baozun. Actually, we have been doing various valuable explorations with Baozun. We actually formed a combination plan for both parties very early on. And these plans have also received some customer verification. We also did a lot of verification and implementation at the customer cooperation level. In fact, we and Baozun both have a situation where we don't introduce customers to each other. There are also successful cases. It's just that some customers don't want to do some large-scale promotion. So there may not be a lot of promotion. But from another perspective, Our cooperation with Baodun has not yet reached such a stage of large-scale income. There are many reasons, including the recent impact of the epidemic and the Chinese stock market in the past half year. The two of us are actually the Chinese stock market, and we have all been greatly affected. I think we will continue to explore how to better cooperate in the future. But before that, I think we have made a lot of progress in terms of the program, the customer verification, and the customer introduction. We have made a lot of progress in terms of the program, Thank you.
spk01: Okay, our third question is about cooperation with Baozun. We have made various available explorations with Baozun, and we've come to some solutions which have been validated or implemented by our customers. And both of us have also introduced customers to each other. Just that some customers didn't want us to promote it, so we didn't make a fuss about it. But having said that, our cooperation with Baodun has generated big revenues, and there are a lot of reasons for that. The first is the pandemic, and the second is the challenges facing Chinese ADR companies currently. Both of us are Chinese ADR companies, so we have been really affected by the recent developments. And in the future, I think we're going to further explore better ways of cooperating with each other. All in all, we have made some progress in solutions, in customer recommendation, as well as customer validation. And we've also already started talking with Tencent about cooperation, but it's just that there are some suspensions due to various reasons. So in the future, when things go back to normal, both of our companies well-reviewed talk about how to better cooperate with each other. Thanks.
spk03: Once again, if you would like to ask a question, please press star and then 1. Our next question comes from Brian Kinzinger from Alliance Global Partners. Please go ahead with your question. Hi there. Thanks for taking my questions. Could you just talk about really quickly how the pace has changed from your mini-app integrations to your enterprise solutions over the second quarter and thus far in the third quarter compared to the beginning of 2022 and even the second half of 2021?
spk00: Sorry, can you repeat your question?
spk03: Yeah, can you hear me all right?
spk01: Yes, yes. Can you slow down a little bit?
spk03: Yeah, sure. Can you talk about how the pace has changed for the new mini-app integrations for your enterprise solutions over the second quarter and thus far in the third quarter compared to the beginning of 2022 and even the second half of 2021?
spk01: Hi, Brian. Hello, I'm TJ.
spk06: I understand that you asked about the integration of small programs. In fact, it may mainly refer to our ES and such an ES business in WeChat Ecology. In this area, in fact, we should say that the overall business of our ES, including some ES business in WeChat Ecology, Q2, compared to Q1, I don't remember the number. I'll ask David to add it later. Compared to Q1, we were in a state of growth at the same time last year. I don't remember Q1. It seems to be growing as well. So, although we were seriously affected by the pandemic, our Q2 was mainly based on the customer needs that we had in the pipeline. We still delivered such a result through some remote work. So, I think this also explains it from another perspective. Our entire ES business, especially the ES business related to micro-programs on WeChat, actually has a very strong customer demand. When we were in Q1, we had accumulated a lot of pipeline in our demand list. At that time, we didn't have enough resources to deliver. Then these pipelines gave us a chance to slow down. Although our colleagues can't go out to pitch new customers, and the customer's own decision has also been greatly affected, but we still delivered a result that was passable. After Q2, now in July and August, the epidemic has basically China China China China China China China China China
spk01: Hi, Brian. This is TJ. I believe your question about the pace of MediaApp integration of enterprise solutions business is related to our WeChat ecosystem. And compared As to the specific data, I would like to ask David to provide you with that data. But I can give you some overall picture. Compared with the same period of last year, we've seen the ES business in the WeChat ecosystem slightly increasing, or at least stabilizing. And you can see that compared with the Q1, I believe, was also some slight growth. And, you know, due to the impact of the pandemic in lockdown, due to the impact of lockdown in Q2, and our businesses were severely infected, yet we've accumulated a lot of customer demands. in Q1, and at that time, we didn't have enough resources to deliver to customers. So in Q2, we have started to deliver to customers through remote working. And this has shown that there is a strong customer demand for web businesses in the WeChat ecosystem. In Q2, our colleagues couldn't go out to pitch to new customers, and of our customers, they were also suffering some internal communication issues, but still we've delivered. And as to the July and August, now we've seen that the pandemic was put under control, so our colleagues can go out to find new activities now. So I believe that in the following quarters, the EF business will recover steadily.
spk05: Hello, Brian. I am David from the company. I would like to add that from the perspective of the number of customers in the second quarter of 2022, ES has increased compared to the first quarter of 2022 or the second quarter of 2021. From another point of view, there are two main reasons for the drop in uptrend in the second quarter of 2022. The first one is the influence of the epidemic control and the economy in Hong Kong. This is one aspect. Also, some of our new customers came in first, but in the second quarter, there was no significant contribution of revenue. It is also the control of the epidemic. These arrangements and implementation are still quite some after. In short, the trend of development has not changed at all. We are in the next plus X model, it is also in the process of trial and error. This is as you remember, our customers will come in more and more. The storage rate is about 60% of the number of customers. Okay, this is David. Let me add a few points. In the second quarter,
spk01: yes, customer base has increased compared with the first quarter this year or the second half of 2021, although the APU has dropped. And the APU dropped in the second quarter this year due to two reasons. First is the control measures and the second is the poor macroeconomic conditions. And the second reason is, though they are some new ES customers, yet they didn't contribute substantially to our revenue in second quarter. I believe their contribution has been delayed. And overall speaking, the growth momentum of the ES business hasn't changed dramatically, thanks to our SaaS Plus X model. And you can see that our customer If you look at from the customer number perspective, the retention rate is about 60% because some customers, when they come in, they may find our solution is not very valuable for them, so they will leave. But all the retained customers are long-term, high-quality customers. Thank you.
spk03: Thank you so much. That's all I have. And ladies and gentlemen, with no further questions, I'd like to turn the floor back over to Lisa for closing remarks.
spk01: Thank you once again for joining us today. If you have further questions, please feel free to contact ICWIC'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 lines. Thank you and have a great day.
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