This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Good day and welcome to your Liu Kang year-end 2021 financial results call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero to reach a live operator. At this time, it is my pleasure to turn the floor over to Alice Xiong of the Equity Group. The floor is yours.
spk01: Thank you and good morning, everyone. Copies of the 2021 year-end financial results press release, which was issued after market close yesterday, can be found at the investor relations section of the company's website, www.lokong.com. Before we get started, I would like to note that, except with respect to historical information, statements made in this conference call may constitute forwarding statements within the meaning of the federal securities law, including statements relating to trends, the company's operations and financial results, and the business and products of the company and its subsidiaries. Lokwong's actual results may differ materially from the results anticipated in this forward-looking statement as a result of various risks and uncertainties underlying our forward-looking statement, including risk and uncertainties associated with COVID-19 and its impact on the economy and on our business, as well as those risks described from time to time in Lokwong's filings with the SEC. including our latest Form 6-K and subsequent reports. Low-cost specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, trade developments, or otherwise, unless required by law. A replay of this call will be provided through a link on the Investors Relations section of our website, shortly after its conclusion. On today's call, Low-cost Chairman and CEO, Mr. Xue Songsong, we'd like to take the opportunity to introduce Dr. Dong Pu Zhang as the president of the company. And Dr. Zhang will begin the call with some opening remarks. The company's CTO, Mr. Bao Mingli, will continue with the discussion of the latest operational developments, and CFO, Mr. Jie Yu, will conclude with an overview of the financial results and outlook for 2022. As a further note, Mr. Song will be here to address any questions our investors may have in a Q&A session. A Q&A session will follow management's prepared remarks. If any individuals would prefer to email questions they'd like to ask during the session, feel free to email me directly at azhang at equityny.com. And please specify whether you would like to have me read your name as well. With that, I'll turn it over to Dr. Dongfu Zhang, President of LOCWA. Please go ahead, Dr. Zhang.
spk03: Thank you, Alice. And thank you, everyone, for joining us this morning. I'm joined today by the members of low-cost executive team, and we are excited to have the opportunity to discuss low-cost growth in 2021 with the investment community today. We are very pleased to have achieved significant top-line growth and gross margin improvements for 2021. This includes delivering the record annual revenue of $145 million U.S. dollars, more than seven times that of 2020. 2021 is the year in which we are working to build strong foundations for future growth. Roquan is a rapidly growing company connected by the core belief that our special temporal technology will increase our value proposition. A society is a whole seek to harness the intelligence and the can connect to cars, cities, and people. Loquan considers itself a major player in enhancing people's daily lives and their surroundings and the connection between the physical world and our digital space. We have established a leading position in the HD map, IoT intelligence, big data, autonomous driving, and smart transportation, vehicle-road cooperation, carbon neutrality and remote sensing data service, which are the necessary building blocks of digital change. A digital change is a virtual representation that serves as the real digital counterparts of physical objects or processes. This is the core and critical underlying architecture of low-cost. Low-cost growth centers on the connections between the physical world is our digital space, along with our three key business pillars, smart transportation, remote data sensing, and LDS. We saw revenue growth in all three of these areas in 2021 and are pleased to have continued to win large global customers that apply our technology and solutions into their products and their service for their purpose. We believe we have only just begun to realize the potential of our smart transportation and remote sensing business. The acquisition of EMAC-GO, which we closed in March of 2021, we have the most transformative developments for low-cost students this year. Seeing the integration of EMAC-GO to our operations, it has become a key driver of the low-cost future growth with the positive momentum of the company with the unique and industrial-leading technology that advantage in Lokong's existing LDS business, as well as the smart transportation and the natural resource asset management service, expanding the depth and breadth of the applications which Lokong can establish itself as a leader. We believe that the road to vehicle coordination is the cornerstone of the smart travel and autonomous driving in the future. Smart cars require smart roads, which for China is very good at building smart roads. And we are actively developing smart solutions for both vehicles and roads. For vehicles, we expect the strategics to secure that EMAP goals positioned as a leading IT map provider in the fields of the autonomous driving data service and the simulation service and the full cognition AI service. We local use our map as a cognition tools for the environments that around us. For rules, we are actively promoting the smart rules and service based on local spatial temporal digital platform, aiming to access assistance that express operators in managing their digital assets more securely and efficiently, and achieve the vehicle-to-road data communication. These efforts, they are validated through our service providing for the out-car makers and the top tires autonomous driving companies, as well as the projects Lo Kuang are implementing in the fields of smart highways such as the Chinese Changzhou Express Highway. That is the first in China that the expressway use the HD map. Moving from our second basic pillar, natural resources asset management. Although Lo Kuang service do not directly solve the issues of carbon emission, emissions, we believe that our data service can help policymakers, industrial regulators, and market service participants make their better decisions by providing access to real-time situations and monitoring and data change. As we continue to try to reduce carbon emissions and to serve as an important digital platform for carbon emissions trading, We believe that Rokon has established China's most powerful remote sensing data engine that integrates high resolution remote sensing data, HD map, and the rest of the IoT sensor data. Enablers have launched the most efficient remote sensor data process service, including our recent launch, holographic spatial temporal products and data fusion service. offering for the natural resource monitoring and the carbon sink accounting. We have signed several contracts for a carbon sink service in Anhui Province, China. As an RBS data service provider of the information flow management and the market service, Low-cost RBS business is powered by its integrated platforms and the capability to manage the entire lifecycle of the microservice from planning, ordering, fulfillment and conversion, monitoring and reporting. All of this is behind our ability to grow revenue nearly 700% year-over-year. Our significant R&D investments and ongoing efforts to extend our existing partnership based on enable us to achieve this record revenue growth, which is the only beginning of the low-cost long-term prospect.
spk00: Please hold on. The subscriber you dialed is busy now.
spk03: With the support of our stakeholders and many others, we have overcome the challenge of DOD matters in the first half of 2021, which we will not rehearse here. With this particular concern behind us, we are pleased to have been able to put our focus on our vision and the growth of our business. In 2022, we remain fully committed to accelerating the growth and improving our bottom line results. Five plus months into this year, we are optimistic about the company's growth potential and the Looking forward to sharing more developments with the development community in the coming quarters. I would like to turn the call over to Mr. Baomin Li, our CTO, for more detailed discussions on our operations. Baomin, please go ahead.
spk04: Thank you, Dr. Zhang. I would like to highlight some of Luoguang's recent significant operational developments. In February 2022, Loquan announced that its operating affiliate EMAC-GO has began providing mapping services for two new Ford Motor Company vehicle models. Both models are equipped with Ford's Blue Cruise Active Driving Assistance System, which supports R2 autonomous driving function as defined by SAE International. This is the validation of EMAC Go's leading market position in providing mapping services. And we look forward to expanding our partnership in the smart transportation area, not only with Forbes, but other top tier automakers as well. In March 2022, Luo Kuang announced that our operating affiliate agreed to acquire Beijing Hongda Jiutong Technology Development Corporation Limited, a leading big data service provider for intelligent transportation and connected vehicles in China. This is a strategic acquisition for Luo Kuang to take advantage of Hongda Jiutong's vehicle data processing expertise and hence improve our intelligent highway data management system capability and provide additional capabilities in driving assistance to improve safety and energy efficiency when combined with our HD map services. We are very excited about the insights Hongda Jiutong will bring to the company in the fields of autonomous driving, assistance driving, intelligence transportation, and the synergy it creates with our existing products and services. We expect to close the deal in the second quarter of 2022. In April 2022, Loqua announced the launch of its remote sensing holographic spatial temporal portfolio of products and services for natural resource monitoring and carbon sink accounting. The launch of this series of products and services and its commercial application in a couple of country-level regions enabled us to seize a greater opportunity in China's largely untapped market of carbon neutrality and natural resource management. The new portfolio of offerings covers areas like carbon sequestration, forestry, agriculture, and other fields. And Lo Kuang anticipates expanding its range of services to various application scenarios such as carbon emissions, environmental protection, water conservancy, disaster emergency management, and much more in 2022. In May 2022, Lo Kuang announced that its operating affiliate Beijing bought IoT Intelligent Corporation Limited has assigned a service contract to provide research institute of the Highway Ministry of Transportation with the electronic blockchain data and certificate storage platform services. We are very pleased to announce the cooperation with the Highway Research Institute, which is a leader in integrating scientific research and industrial developments related to highway transportation. Loquan has been actively promoting the application of blockchain technology in various fields of spatial temporal big data. And this contract marks the beginning of our commercial services in the fields of highway transportation. We anticipate strengthening our relationships and expanding our scope of blockchain services with more enterprises and institutional partners that recognize our competitiveness in highway transportation. Our business is centered around our proprietary technologies and expertise in HD maps and the multi-source intelligent spatial and temporal big data. which is further supported by the long-term relationships we have established with reputable global partners and customers. While we remain committed to investing in technology improvements and product expansion to solidify our leadership positions in key technology areas, our partnership base is critical for our growth. and we continue striving to establish new relationships while deepening existing cooperation with players in a wide spectrum of industries. Overall, we are proud of what we are building here at Low-Com and are very pleased with the progress we have made. With that, I will turn the call over to our CFO, Jay Yu, for a brief review of the financials and our outlook for the year. Jay, please.
spk02: Thank you, Baoming. Thank you all for joining us. I will quickly review the financial statements and encourage each of you to review both our press release and the formal tuning ads, which will be filed with the SEC later. For the year ended December 31st, 2021, we recognized total revenue of $145.1 million compared to $18.3 million in the prior year. The increase was primarily a result of $113.5 million in increased revenue contribution from the LBS business, as well as substantial growth in the software and service business, and the smart transportation business. Our cost of revenue increased to $129 million, which was a proportionate increase to total revenue during the period and was primarily attributable to traffic acquisition costs related to the LBS business. We were able to achieve a higher gross profit margin of 11.1% compared to 4.3% for the year 2020, which was primarily driven by value-added service and improved contribution from the software and service and smart transportation business that tend to have higher margins. Operating expense increased to $81.7 million compared to $41 million, mainly due to increased expenses in salaries and the shared base composition for adding personnel in the R&D department, salaries and additional marketing personnel, as well as promotional and marketing expense. Moving to the balance sheet, as of December 31st, 2021, Wacom's cash balance was $16.4 million compared to $0.07 million as of December 31st, 2020. The next procedure will be released from the issuers of shares in 2021, primarily linked to closing the eMapGo transaction and the general corporate purpose of day-to-day operation. eMapGo has been critical in opening up various opportunities for the company's 3K business pillar, smart transportation, natural resource asset management, and LBS and Smart Industry Service. We are very, very pleased to have more than exceeded our goal of generating 100 million in revenue in 2021, beating this projection by 45.1%. We are now focused on 2022 and beyond, further strengthening our competitive advantage and streamlining our business to improve bottom line results. Having established a solid foundation for further growth in 2021, our goal is to continue growing the existing business, which including LBS and smart industrial service, smart transportation, and natural resource effort management. As I mentioned, our growth profit margin increased to 11.1% in 2021, which with the continuous optimization of our self-developed LBS intelligence advertisement platform in 2021, we expect growth profit margin will improve over time as we offer the value-added services. As the company continue to diversify its revenue streams with increased contribution from smart transportation, from natural resource asset management, which tend to be higher margin business. We anticipate improving our margin portfolio and create more favorable revenue mix. With the addition of more than 500 new staff, we have built a very strong team in taking our R&D effort to a higher level. The addition to Hongda Jiotong also adds some positive momentum in both enhancing our technology edges and forcing the industrial implementation of our smart transportation business. In 2022, we anticipate the R&D investment as a percentage of total revenue to remain stable as of 2021. Over the past years, we have had a great pleasure to communicate with our valued investors in various forms, including webinars we host to introduce our latest business developments of the company. And we look forward to continue this dialogue with the investment community. Our goal is to provide more transparent and regular updates on our activity, just like expected to be a public company. We thank our shareholders for their ongoing support and confidence in WorldCom and welcome the opportunity to speak with more of you as we move forward in the journey ahead. With that, operator, let's open up for questions. Thank you.
spk00: Thank you, Mr. Yu. Thank you, Mr. Yu. The floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. If you're using a speakerphone, we ask that while posing your question, you pick up your handset to provide the best sound quality. Again, if you do have a question or comment, please press star 1 on your telephone keypad at this time. And please hold a moment while we poll for questions. And Michonne, I'll hand the floor over to you while we're waiting for questions to queue up. Yeah, sure. Thank you, Tam. Appreciate it.
spk01: At the beginning of the call, we received a number of different questions related to the company's operations. Specifically, I would like to ask to post the questions to management while we wait for questions to queue up. So the first question I received is this. Will the acquisition of Hongda Jiu Tong result in any revenues? Because we know that this is announced as a strategic acquisition. What does that mean exactly? And that's my question.
spk04: Thank you. Hongda Jiu Tong is a strategic acquisition. It not only provides key technologies to us, it brings the existing business to us as well. So in terms of technological advantages to Luokung, it brings mainly two parts. One is the data collection capabilities. Another is the AI algorithms. We are confident that this acquisition will strengthen our HTMAP services and give us a competitive advantage in other areas, like assisted driving, vehicle-to-road collaboration, among others. In 2022, we expect Hongda Jiu Tong to of bringing revenue based on existing business and with the synergy it brings, we anticipate much more growth in other areas due to the Hongda Jutong's integration. That is fully integrated with Rokong. So this acquisition will fuel additional resource revenue growth in the near term. We continue to explore various potential MA opportunities, which will bring additional value to our business and to our technology portfolio.
spk01: Thank you, Mr. Li. My second question would be, what's Lo Kuang's gross prospects for the natural resource asset management and the smart transportation business, and how much of a percentage do they currently contribute to the total revenues right now? and how much of a contribution percentage do you expect for these two business lines for the year 2022? Thank you.
spk03: At low cost, the core product is the software and the service. So that makes us a very special feature that when you finish the developments of the software and the platform, such as we focus on the resource assets and management and also the remote sensing products, and when this is finished, and deliver the software product and service to the customers that the spending part is finished, then the process will go higher and higher. That is why we spend a lot of resources first in the development of all the platforms. And there will be very little adjustments in the software. when we finish the project. And the cost will drop significantly. And the profit will go higher and higher. And with the time passed, I think the profit rate will go even higher. And we will balance the profits with our development and for the new features. And, okay, well... another upgrade of the old platforming software. So I think for the profile, it will go on maybe 60% to 70%. And that is our main software in the resource asset management.
spk01: Okay, great. Thank you, Dr. Zhang. Karen, that's all of the questions we get. I'll try to call back to you for live Q&A session.
spk00: Thank you, Ms. Zhang. As a reminder to our audience, if you do have a question or comment, you may press star 1 on your telephone keypad at this time. Again, that's star 1 if you'd like to queue up for a question. We'll hold a moment and give our audience a moment to queue up. And there appear to be no questions at this time. So I would now like to turn the call back over to Mr. J. Yu for closing remarks.
spk02: Thank you again for joining us. And we believe Loquan is well positioned to carry out its growth strategy. And we intend to maintain our leading position as a special temporal intelligent big data service company and the provider of interactive location-based service and HD maps in China. We are confident that we have gathered the best team with experts from all major business lines to strengthen our core competency and that our growing partnership base will empower the company and its customers to achieve success in the future. We appreciate your time. and interest in the company and invite you to reach out to us with any additional questions. Thank you again.
spk00: This does conclude today's conference. We thank you again for your participation. You may disconnect your lines at this time and have a great day.
Disclaimer