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spk04: Hello, ladies and gentlemen. Thank you for standing by for iCLIC Interactive Asia Group Limited's 2022 Third Quarter Unaudited Financial Results Conference Call. At this time, all participants are in a listen-only mode. After management's 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 Li, Investor Relations Director. Lisa, please go ahead.
spk07: Hello, everyone, and welcome to 2022 iClicks third 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.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 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, T.J., Chairman, Chief Executive Officer, and co-founder of iClick will first provide a high-level review of the 2022 third quarter results and share his thoughts on our strategy going forward. Chief Financial Officer David Chung will follow and give us additional insights on the financial results. He 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 risk 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 ICLIC's earnings press release and this conference call includes discussions of unaudited GAAP 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 on audit gap measures. I will now turn the call over to our Chairman, Chief Executive Officer, and Co-Founder, Jian Tang. TJ, please go ahead.
spk01: Thank you, Lisa. And welcome to the call, everyone. I will first share our strategies and execution over the past quarter and after how we envision our business in the future. We saw improved performance in the third quarter with 16% sequential growth in enterprise solutions revenue and a 3% modest uptake in marketing solutions, combining for a 8% quarter-over-quarter increase in our total revenues for the quarter. These increases were largely driven by the gradual easing of COVID-related lockdowns and containment measures and the associated resumption of business and economic activity. We are also pleased to see the recovery for our enterprise solutions business with revenue contribution hitting a new record high of 39%. We remain optimistic about the continued resumption of economic activity and the business fundamentals that will drive increased demand for our innovative SaaS Plus technologies and services, and in turn, further sales growth. In addition, we have continued to drive cost optimization across our operations, allowing us to reserve sufficient cash, maintain our core teams and products intact, strengthen our capabilities in offering valuable services to customers and whether the microeconomic headwinds. We believe these positions iClick for continued market rebound as conditions improve. This strategy is central to our future success as we believe Our core value proposition rests on our ability to remain a leading innovator in the breadth of value our solutions embody. We achieved notable solution implementations and rollouts during the quarter that drove exceptional value in assisting clients to accomplish the diverse goals. For example, we collaborated with Jindong Technology to build a full-stack private domain e-commerce solution based upon iClicks Changxun and Jindong Technology Cloud Service with the integration of Jindong Alliance Commodity Promotion Solution or CPS and JD.Kepler supply chain services. This integrated offering aims to empower retailers in the cosmetics, FMCG, and affordable luxury apparel industries through all ecosystem smart retail SaaS solutions. We also were recognized through numerous industry awards. For example, we scooped the first third-party service provider of the first half of 2022 by a lighting award. We are honored by the strong industry recognition we continue to receive and strive to remain a leader across our industry-wide solution mix. This concludes my opening remarks, and I would now like to turn the call over to our CFO, David Jiang, to discuss our third quarter financial results. David, please go ahead.
spk03: Thank you, DJ. Hello, everyone. I will share our key financial results for the quarter of 2022 compared to the same period of 2021. Revenue for the third quarter of 2022 was $41 million, decreased by 53% year-over-year. Looking at the individual business segments, revenue from marketing solutions was $25 million, decreased by 62%, compared with the $66.6 million for third quarter of 2021 as a result of our strategic strategic shift away from some high-risk advertising business and the overall advertising market slowed down in China. Revenue from our enterprise solutions was $16 million, decreased by 21% compared with $20.3 million in the third quarter of 2021, mainly due to the challenges from the pandemic and the control measurements. which affected the progress of our new clients' onboarding and solutions implementation in 2022. Gross profit for the third quarter of 2022 was $9.2 million, compared with $21.7 million for the third quarter of 2021, aligned with the decrease of revenue. Total operating expenses was $20.8 million for the third quarter of 2022, compared with $24.1 million for the third quarter of 2021. The changes were primarily due to decrease in share-based compensation, staff costs, and promotional expenses. Google impairment of $3.7 million was recorded for the third quarter of 2022 for marketing solution business. This partial non-cash impairment chart represented a shortfall between the carrying value and the estimated sale value of this reporting unit as of September 30, 2022, due to the slowdown of advertising industry. Net loss totaled $19.4 million for the third quarter of 2022, compared with $2.6 million for the third quarter of 2021, mainly resulted from operating loss of $11.6 million, Google impairment of $3.7 million, and impairment of equity investments of $3.4 million. As of September 30, 2022, the company had cash and cash equivalents, temp deposits, and restricted cash of $99.9 million, compared with 88.7 million US dollars as of December 31, 2021. For the non-GAAP measures, adjusted EBITDA for third quarter of 2022 was a loss of 8.5 million US dollars, compared with earnings of 3.6 million US dollars for third quarter of 2021. Adjusting that loss for third quarter of 2022 was $10.2 million, compared with the adjusted net income of $0.8 million in the third quarter of 2021. Growth speeding was $61.7 million for the third quarter of 2022, compared with $195.5 million for the third quarter of 2021. For further information, please see more details in the press release we issued today. With that, I now turn the call back to TJ for closing remarks. Thank you.
spk09: Thank you, David.
spk01: While Chinese government's recent announcements suggest signs of easing quarantine requirements and tribal restrictions that might bode well for economic activities, supply chain disruptions, intermittent lockdowns, and geopolitical conflict around the world may still adversely impact consumer sentiment. We own companies' operations. and further curtail business performance in the short term. We are nevertheless cautiously optimistic and expect recovering consumer sentiment to be greatly beneficial to the overall economy as well as our consumer-centric total solutions as conditions improve. In the longer term, we remain highly confident in the intact mega-train of digital transformation in China. Supporting our strong conviction is the steadfast commitment from the Chinese government. The 20th Party Congress report explicitly indicated the importance and acceleration of digital economy development. Therefore, iClick will continue implementing its SaaS Plus strategy by further upgrading the product offerings of enterprise solutions and enhancing our top-tier clients' servicing capability so that we can better seize the enormous opportunities ahead and deliver sustainable growth for the future. Before I end my closing remarks, I would like to provide a recap of how our execution in 2022 has been anchored by the strategy we defined at the end of last year. Even though government regulations microenvironment and geopolitical conflicts have constituted an uncertain operating environment for us since the second half of last year, we have remained resolute in ensuring that we maintain sufficient cash and resources to help us withstand these micro-shocks. Our strategy to wind down high operating cash, lower margin, and higher risk business within our marketing solution segments is the basis of this approach. Consequently, our cash and cash equivalent have reached almost 100 million as of the end of September, compared with approximately 89 million at the end of 2021, as well as a reduction in bank borrowings. In addition, in support of the strong long-term prospects of the digital transformation trend in China, we have continued to invest in our higher margin enterprise solutions. which positions iClick well to capitalize on rebounding economic activity and improved business sentiment, and the associated recovery in client demand. Thus, our R&D expenditure has remained relatively constant. This is core to our long-term strategy. as we believe the investment is what fundamentally will drive our future growth momentum. Lastly, we have, in parallel, been streamlining our operations and driving cost optimization, reducing expenses in a number of areas. We are proud of our solid execution with a clear vision to carry iClick forward through these volatile periods. With that, I wish to acknowledge and thank our clients, partners, shareholders, and all other stakeholders for our continued support. And of course, all our iClickers who have been so dedicated to the work through thick and thin. Backed by our sound management and clear strategies, we believe we will be able to deliver better results and further establish ourselves in the digital transformation market. Thank you all again for participating in today's conference call. and for your continued support. This concludes my remarks and we will now open the floor for questions. Operator, please go ahead.
spk04: Thank you. If you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you are on a speakerphone, please pick up the handset to ask your questions. For the benefit of all participants on today's call, if you are a Mandarin speaker, please ask your questions in Mandarin and then immediately our translator will repeat your questions in English. Please limit your questions to only one each time. And our first question will come from Nelson Chung of Citi. Please go ahead.
spk02: 谢谢管理员接受我的提问。 我的第一个问题是关于ES。 我就是想多了解一下我们现在这个疫情的影响 对我们的项目的进行以及变现会有什么影响呢? So let me translate myself. Thanks, management, for taking my question. My first question is regarding the ES business. I'm wondering what would be the impact of COVID on the project implementation of the business in fourth quarter and next year. And my second question is related to the advertising outlook into fourth quarter and next year as well. Thank you.
spk01: Thank you for your question. I'm TJ. If I'm not mistaken, your question should be about the trend of ES and MS, or some trends, right? This one, we actually now, the overall feeling is Q3. Compared to Q2, This is a little bit of a recovery. The reason is that everyone is very clear. Because of Q2, China has a very serious lockdown because of the epidemic. And then when it comes to Q3, the epidemic prevention and control is a little bit more relaxed. But overall, because everyone is looking at this prevention and control, the future direction, at least in Q3, is actually not very clear. It has continued to this day. So, in fact, in this industry, in fact, it also includes many of our customers. In fact, everyone is actually more cautious in terms of investment. While walking and looking, it's usually such an attitude. So, in general, there is some slow recovery, but there is no significant recovery. This is the overall situation. Cynthia.
spk05: Hello, question. This is TJ. If I understand correctly, your questions are about the outlook or trend of ES and MS business. Well, compared with Q2, Q3 saw performance in our businesses. I think the reasons are very clear. In the second quarter, due to the COVID, a lot of cities were under lockdown. And in Q3, these COVID-related control measures were eased. However, the future trend for the COVID-related control measures still remains unclear. Therefore, many industries including many of our clients' industries, are still prudent in making the investment. Overall speaking, we've seen some slow recovery, but not very strong.
spk01: 我可以稍微展开一下,就是在 enterprise solution 这一块呢,我们感觉这个业务其实相对会好一些,因为呢,这个 customers' needs are still there. Our enterprise solution is to help them solve this digitalization, how to manage their own data assets, and better interact directly with consumers from these perspectives to help our customers. So this kind of need, actually customers always have a relatively large need. So we see that these needs, these pipelines, actually still exist. It's just that because of the epidemic prevention and control, it usually slows down some of the needs. Because the customer's decision-making requires some internal processes and needs a lot of communication. So the lockdown brought by the epidemic actually slows down the entire process for some major customers. So this is, especially when we develop some new customers, because it usually takes a lot of interaction. In such a situation, in fact, the prevention and control of the epidemic has usually slowed down the whole process. Therefore, this actually slowed down the whole rhythm of our delivery service, as well as the rhythm of the client's real signature order. But anyway, we see that Q3 is still better than Q2.
spk05: Relatively speaking, the ES business has performed better because the demand for ES business is always there. And in our ES business, we help to meet the digitalization needs of our customers by providing them better opportunities to interact with their consumers, and manage their digital assets better. So there is always a strong demand for our yes businesses. Therefore, the pipeline is quite good. However, due to the COVID-related control measures, some clients' demands have been put off because it usually takes a rather long time for our clients to make a decision about working with us and onboarding. and then solution implementation. And the lockdown and other control measures have actually delayed the entire process. And therefore, and also during the onboarding of new clients, it requires a lot of interaction with our clients. But overall speaking, our Q3 performance is better than Q2.
spk01: As for the advertising industry, we can see that Q3 is slightly better than Q2, but the signs are not very obvious. I think this is because the advertising industry has been quite pessimistic during this year. including a lot of industries that have been severely affected since last year. Some industries have even disappeared due to the control of the country's policies. For example, a lot of customers in the education industry and the gaming industry have also been controlled. And then there are a lot of these now, even including a lot of these big brand customers. Because of the environment of this e-commerce, some interruptions in this logistics have been greatly affected. So even some bigger brand customers, in fact, they are also more careful to adjust their advertising budget. So in general, we think this year's advertising business is relatively pessimistic. But this is actually set up with us at the beginning of the year that advertising business is a strategic contraction. This strategy is actually not contradictory. So we should say that this is a relatively early prediction of this situation and made our choice. This is a situation of the advertising business that we are seeing now.
spk05: Well, as to the marketing solutions business or the entire advertising business, we've seen some sign of recovery in Q3, but not very strong. Actually, this year, the entire advertising industry is weak. Since last year, many industries have been adversely affected. In particular, some industries such as the education or the gaming industries just disappear because of the tightening of government regulations. And due to the logistics hiccups facing e-commerce companies, even some big brands have started to adjust their advertising budget. So overall speaking, the marketing solutions business remain weak this year. And that's actually in line with our strategic decision to wind down some high-risk marketing solutions business And we can say that we have forecasted this trend and made our choice early this year. 这个就是对这个问题的回答,谢谢。 This is my answer to a question, thank you.
spk04: The next question comes from Thomas Chong of Jefferies. Please go ahead. 谢谢,感谢管理员接受我的提问。
spk06: 我这边有两个问题,第一个问题是关于我们的ES业务的,就是想问一下目前我们这些新老客户的流程情况怎么样,以及说我们在新客户区上的一个策略目前是怎么样子的。 然后另一个是想也是问一下我们的ES业务这边,就想问一下我们目前怎么看这块业务的一个竞争情况以及我们的竞争优势。 好,很快翻译一下。 Thanks management for taking my questions. So I have two questions. My first question is for the enterprise solution business. So how to retention rate for new and existing clients, and how's our client acquisition services so far? And my second question is also for the enterprise solution business, and how should we view the competition landscape and our competition advantages? Thanks.
spk03: Thank you. I'm David. Let me answer the question about the flow rate. If we compare the first and second seasons, according to the number of customers, the turnover rate is about 65%. If we look at the amount, our turnover rate is about 95%, which is relatively high. Our old customers have made a lot of contributions to improve sales and services. Well, this is David. Let me first take your question about retention. Compared with Q2, the Q3 saw a good retention rate. You can see that in terms of the customer number, the retention rate,
spk05: was 65%, and dollar amount, the retention rate was 95%, quite high level. And many existing customers have contributed more to our sales. And as to the question about competitive landscape, I would like to invite TJ to answer a question.
spk01: Thank you for your question. I will answer your second question, which is about our competition pattern. We understand that in China, the digital economy is still at an early stage of development. There are a lot of participants in this. not only some SaaS manufacturers, but also some giants, as well as various service providers. We all have different business models or different customer groups. We believe that the next three to five years will be a very important period for each of us to establish some competitive advantages through competition. We think that our advantage is that we have accumulated a large number of large and medium-sized head customers in the MS business. In addition, our SaaS plus X product plus service model also makes it particularly suitable for us to serve and grow these big customers. This is an advantage that we have established in the past two or three years. In addition, we think that the market of 2B and 2C is actually different. The market of 2B is not like 2C. 2B is not a market where the winner can eat. So we think that the whole market can accommodate at least Thank you.
spk05: Okay, let me answer your second question about competition landscape. I think in China, the digitalization process is still at its early stage, and there are a lot of players in this track, including SaaS providers, some giant companies, and also service providers. And these companies have different business models and customer bases. I think the next three to five years, will be key for these companies to build up their competitive advantages. And for us, our advantages lies with the fact that we have accumulated great expertise in serving medium to large-sized customers through our MS business. And our SAS plus X product plus service model is very helpful for us to serve these kind of customers. the competitive edge that we have been built up over the past two to three years. And for me, to-be business is very different from to-see business. To-be business is not a market for winner takes all. And the digitalization market in China is big enough to accommodate more big players. That's why we think that our SaaS Plus X model will have a big room to develop in the future.
spk04: The next question comes from Brian Kissinger of Alliance Global Partners. Please go ahead.
spk00: Great. Thank you for taking my questions. My questions are financial related. The first one is, DSO has dramatically improved. What has led to this much better collections? And can you continue to improve DSO, which is still quite high? And then second, can you discuss why the gross margin in the third quarter is lower than the second quarter? your revenue in both segments is increasing, you have a much better mix of the higher margin enterprise revenue, so I'm trying to understand when we'll start to see the margin recover.
spk05: Thank you for accepting my question. My first question is about our uh uh Okay, Brian, hello. Let me answer these two questions.
spk03: The first one, if we look at it from the perspective of cross-billing, Acoustics Uber's turnover is around 120 days. In fact, the third quarter is significantly improved compared to the second quarter. It has increased by 30 or 40 days. The second quarter, as everyone knows, is due to the pandemic and the lockdown in many cities. The third quarter will be much better. Of course, we continue to talk about the refund of our clients, and we also closely observe the value of the cost to increase the sales revenue. I will answer the second question in a row. If the interest rate drops, it is mainly because we have increased a lot of services in the old customers in terms of ES revenue. In terms of these services, we are trying to keep these valuable clients If the economy is not in a good condition, they are more likely to lose. We also give them some discount. For those new customers, for the future, for Q3 revenue, for the new customers, there is no significant income contribution. But our strategy is to keep valuable customers. In the future, we will increase their purchase of services here.
spk05: Let me take two of your questions. The first question, in Q3, our count of receivable turnovers is around 120 days compared with Q2. It's already like 30 to 40 days improvement. And as to Q2, due to the COVID-related control measures, A lot of the cities were locked down, and that's why the count receivable days has increased. But Q3, we've seen some improvement. And we have put in a lot of effort to improve the collection of these receivables. And we also have been maintaining good relationship with valuable customers, trying to increase their contribution to our revenue. And the second question about the profit margin. And the gross profit margin has decreased in Q3 because we have provided more enterprise solution services to existing customers in order to retain these valuable customers. When the economic condition is poor, these customers usually have a higher bargaining power. Therefore, we offered some discounts to them. As to new clients, they may not contribute a lot to our Q3 revenues, Our strategy is to retain those high-value, valuable customers so that in the future we'll have the chance to increase their contribution to our revenue. Thank you.
spk09: There are no further questions at this time.
spk04: I'll now hand the call back to Lisa Li 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 Investors Relations Department through the contact information provided on our website. Thank you.
spk04: This concludes the conference call. You may now disconnect your lines. Thank you.
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