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spk02: Good day, and welcome to the NASUN International Investor Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Spring Liu. Please go ahead.
spk06: Good afternoon, everyone, and morning to my colleagues in China. Welcome to NASUN International Enterprise Development Group's Investors Conference Call. My name is Spring Liu. and I serve as the investor relationship directors of the company. It's a great pleasure for me today to host today's call. So we will discuss the financial results for the six months ended June 30, 2024. And before I start, I would like to extend a warm welcome to all our shareholders and potential investors joining us today. So on this call are also our chief executive officer, Mr. Liu, and our chief financial officer, Ms. Liang. Mr. Liu has served as a director since September 2020 and as our CEO since May 2024. Mr. Liu received a bachelor's degree in international business in 2012 from Shandong University of Technology. He is an experienced businessman, proficient in management skills and across border trade. Ms. Liang has been our CFO since August 2019. Ms. Liang obtained her bachelor degree in accounting in January 2010. So first of all, I would like to provide a cautionary statement regarding forward-looking information. as this conference call may include forward-looking statements within the meaning of Section 27A of the Security Act of 1933 as amended and Section 21E of the Security Exchange Act of 1934 as amended. These forward-looking statements are based on the current expectation of the management of Nathan International and are subject to a number of risks and uncertainties including, but not limited to, changing market conditions, competitive factors, and other risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These forward-looking statements are based on certain assumptions and analysis made by the company in light of their experience and their perception of historical trends, current conditions, and expected future developments. as well as other factors that the company believes are appropriate under the circumstances. However, whether the actual result will conform to these expectations and predictions is subject to a number of risks and uncertainties, many of which are beyond the control of the company. The company undertakes no obligation to publicly update any overlooking statement whether as a result of new information, future events, or otherwise except as required by law. All statements in this conference call that are not historical facts are forward-looking statements. So first of all, let me give you some brief introduction of the company. I'm sure you have some understanding or maybe familiar with the company already. Mason International is a technology-driven provider of integrated supply chain solutions. Founded in 2012 and headquartered in Shanghai, China, they operate primarily within China. Our business is built on two main revenue streams, one from services, including financial solutions for small and medium-sized enterprises, I will call it SMES, and supply chain financing. And the other revenue stream is from our supply chain trading business. Since entering the financial services market in 2019 through our subsidiaries and VIEs in China, we have provided a broad range of technology-driven services customized financing solutions to SMEs, helping them gain improved access to capital. These services, facilitated by financial institutions in China, allow us to offer risk-free support as we only earn fees based solely on financing amounts arranged for our clients. Additionally, we provide direct banking solutions to smaller banks and financial institutions to aid in managing their direct banking products. Our FinTech online platform enhances asset allocation and financial planning services for institutional and individual investors, optimizing their risk control and asset management to reduce investment risks. Our technology is backed by big data, AI, IoT, and blockchain technologies. We are well positioned to support the growth of SMEs and the wider industry. In January 2020, we launched our integrated supply chain financing solution through digital platforms, becoming directly involved in the sales transaction. Our supply chain financing solution services include supply chain financing, trade financing, and the receivables financing. Our multi-tiered supply chain financing solutions package both Core Enterprise and SMES, combining financial and operational support within our client supply chain processes. Our AI-driven platform Streamline these services by matching upstream suppliers with downstream customers, offering operational efficiency and enhanced trading terms across China. The company maintains a very strong relationship with all supply chain players, including suppliers, logistics partners, and distribution channels. that our services span across multiple regions in China. Since the launch of our supply chain financing solution business, we have connected with supply chain participants from different sectors through our supply chain platforms and developed high-quality customers in multiple industries, especially in agriculture and commodities. As our supply chain financing business grew substantially in size, we introduced our supply chain trading operations in 2021. Leveraging our technology and customer network, we build compatibilities in procurement, logistics, inventory management, and warehouse. Our intelligent matching systems use AI to link suppliers with customers. ensuring efficient transactions from procurement through to delivery. Now let's discuss our financial performance for the first half of 2024. For the six months ended June 30, 2024, total revenue rose by 52% to $192.5 million, compared to $126.9 million in the same period last year. The supply chain trading business saw significant growth, with revenue increasing by 114% to $142.1 million from $66.2 million in the same period last year. driven by our growing market share in the gold trade trading sector. However, revenue from SME financing services decreased by 16% to $48.5 million from $58 million in the same period last year, primarily due to challenging financing market conditions resulting from China's economic slowdown. Additionally, revenue from supply chain financing solutions dropped by 30% to $1.9 million from $2.7 million in the same period last year for similar reasons. That said, we are beginning to see signs of economic turnaround following the government's recent stimulus measures, and management remains optimistic about the future of both of our SME financing and supply chain financing business as conditions improve. Cost of revenue increased by 64% to $175.3 million from $107.1 million in the same period last year, primarily due to the expansion of the lower margin supply chain trading business. Growth profit decreased by 13% to $17.2 million from $19.8 million in the same period last year, with growth margin narrowing to 9% from 15.6% in the same period last year. While the supply chain trading business operates with lower margins, it creates valuable synergies with our high-margin supply chain financing services. We are actively seeking opportunities to improve profitability in this area by focusing on higher-margin products and expanding into new markets. Operating expenses declined by 31% to $5.7 million from $8.2 million in the same period last year. largely due to a reduction in selling expenses, which fell by 69% to $0.8 million from $2.6 million in the same period last year, primarily driven by lower revenue from SME financing solutions, which resulted in a reduction in related channel promotion expenses. G&A expenses also fell by 14%, to $4.7 million from $5.5 million in the same period last year, owing to enhanced cost control. On the other hand, R&D expenses increased by 27% to $0.5 million from $0.4 million in the same period last year, primarily due to the amortization of technology service fees associated with the platform technology acquired by the company in June 2023. Net other income decreased $1.2 million from $2.4 million in the prior year, driven by reduced investment income following a drop in short-term investments. On the six months ending June 30, 2024, Net income totaled $10.3 million, down from $11.4 million a year earlier, primarily due to a lower gross profit. Earnings per share were $2.61, compared to $2.87 in the same period last year. Our cash provision as of June 30, 2024, was $47.8 million, down from $114.6 million at the end of 2023. The primary driver of this decline in cash was an increase in advances to suppliers, which is a strategic investment that will support future growth in sales and earnings. Additionally, a decrease in accounts payable contributed to the cash reduction. Both of these factors reflect our commitment to scaling the business efficiently and positioning ourselves for continued expansion in the second half of 2024 and into 2025. Looking ahead, we remain focused on restoring shareholder value and rebuilding investor confidence. We believe that our stock is significantly undervalued, and we are pleased to share that our largest shareholders increased their stake by approximately $1 million during the first half of the year. Additionally, we have approved a new $15 million share buyback program, which reflects the management confidence in the company's future. We intend to begin repurchasing shares as soon as the trading window opens in the next couple of days. Thank you all for your continued support, and with that, we welcome any questions during the Q&A session. Operator, please open the questions. Thank you.
spk02: Thank you. If you would like to signal with questions, please press star 1 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 if you would like to signal with questions. And our first question will come from Andy Gold with Gold Capital Ventures.
spk01: How are you guys doing? Hopefully good. A question on the operating expenses being down 31%. Can you detail cost measures you're implementing and your sustainability of continuing to cut costs?
spk03: Thank you.
spk06: Hi. Thank you for the question. That's a very good question. And we are very happy to see that our operating expense is down 34%. It shows our success in the strategies in cutting expenses. We've implanted several cost control measures in the first half of the year, including optimizing our sales channels, reducing unnecessary expenditures, and improving overall efficiency in our operations. For example, as you can tell, our selling expenses significantly reduced It is primarily driven by lower revenue from SME financing solutions, which resulted in a reduction in relative channel promotion expenses. We also tighten our G&A cost. So, we believe that these measures will continue to drive our operation more efficiently moving forward. And there are several other measures we are doing. We believe that you will see it reflected in our financial results in 2024. Thank you.
spk01: How do you foresee your R&D expenses going forward, especially with the increase you had this year? Is that continuing or should that come down over the period of time?
spk06: Yes. R&D is related with our cutting-edge technologies that we use in our online platform. We believe that is a very important part of our strategy and one of our competitive advantages. As you can see, our R&D expenses increased about 27% in the first half of the year. These expenses are mainly related with amortization of a platform technology service fee associated with agricultural-focused platform technology that the company purchased in 2023. So moving forward, we plan to continue to enhance our AI-driven supply chain solutions and also continue developing new technologies. We believe our technology will further streamline our operations and provide values to our clients. So we expect that investment in R&D will be a continual process, and we believe that it will contribute to the company's long-term growth.
spk03: Thank you. Thank you.
spk02: And our next question will come from Adam Fried, a private investor.
spk05: Hi, thank you very much for the information today. I'm looking at the revenues increased from your supply chain platform, almost $78 million. And I see that it's primarily in the gold trading sector. How do you advertise that? How do you get users to use that platform? And how do you project that growth and scale it up?
spk03: That's a good question.
spk06: As you can tell, gold trading business comes for a majority part of our supply chain trading business. So that is a significant driver of our revenue growth in the first half of the year. We use an online platform to try to link our suppliers and with customers since we have already built a supply chain financing service platform before. So on this platform, we have a lot of suppliers and customers. So based on our database, we use our advanced technology to link suppliers and the customers. So we saw a lot of potentials in this area. And to sustain this growth, we are trying to continue to deepen our relationship with key players in this supply chain and expand our trading capabilities. In addition to that, we are also looking for adjacent markets and other products to diversify our trading portfolio. For example, this year we also see some growth in our Chinese Herb's business, which is part of a trading business as well. So we believe brand our product portfolio and expand our market in different regions in China, even overseas, will help us maintain this momentum that we build in this sector.
spk05: Thank you. One follow-up question. Based on that revenue, how do you How does it build out? How are you making money from that? Is it a straight percentage based on sales, based on transactions, or does it depend on the size of the trade, et cetera? And also, I think that's a great asset to expand into exactly. I mean, not just the gold, but all the other metals markets, you know, you could probably outlay, you know, worldwide and double that, I would expect. Is that in your growth plan as well?
spk06: Yes, you're right, because we, for us, for these products, we try to, for the gold business, as I mentioned, we are trying to expand into new geographic area and the product market. And our newly joined CEO is a very ambitious young man. He's very experienced in international trading. And as you can see, we also get listed in US. One of the purpose is to expand our overseas market as well. So for this supply chain trading business, we not only look into higher margin sectors, we also try to expand it beyond our core focus area, as you mentioned, maybe metal industry and other industries as well. So this allows our board of strategies to diversify our revenue stream and enhance our profitability. And I also would like to highlight, as I mentioned previously, although the supply chain trading segment operates with lower margin currently, but it also creates a very valuable synergy with our high margin supply chain financing service. So it's a very important part of our business and we are confident in expanding this business in future.
spk05: Gotcha. So you guys, when you're talking about the different sectors and the profitability, how is that gauged? How is that set? Is it just whatever price you can manage, or is it preset with the buyer and seller?
spk06: Currently, it depends on the market demand. And it also depends on our competitive advantages.
spk03: So as I mentioned, we already experience our supply chain financing technology platform.
spk06: So we are trying to focus on some products which have a higher margin and have higher market demands. And we are also trying to pick up certain industry that the company has competitive advantage in that. So by doing that, we think we not only improve our efficiency, but also will improve our long-term margins. And at the same time, as I mentioned previously, the company is trying to cut operational expenses as well so that we can operate more efficiently and create better value for our shareholders.
spk03: Thank you. Thank you very much. Thanks for your attention to our talk.
spk02: Thank you. And once again, if you would like to signal with questions, please press star 1 on your touchtone telephone. Again, star 1.
spk03: We'll pause for a moment. And we'll go back to Andy Gold with Gold.
spk02: We'll go back to Jim Moe with a private investor.
spk04: Yeah, what are the steps you guys are taking to help improve the profitability in the supply chain trading business, given just the overall, it's the nature of the business, you know, low margin. But congrats on the, you know, a great quarter.
spk06: We realized that our supply chain trading business operates at a low margin compared to our service-based revenue. But we are new to this business. As you can see, we only entered this business in 2021. So currently, we are actively working to improve its profitability. Basically, we are trying to do two different things. One is we try to identify higher margin products. We continue looking for products that will have competitive advantage and a higher demand in the market. Second is we are trying to expand into some new and more lucrative markets. So, additionally, we are trying to leverage our technology to streamline our operations and reduce costs. So, this will contribute to better margins in the future.
spk04: Thank you. My second part of the question is, you know, it appears that you guys have, you know, seen, you know, great growth in the gold trading segment. How do you plan to sustain this growth moving forward?
spk06: Code trading business is an important business for us. And as the main driver for the growth of this quarter, to sustain this growth, we're trying to strengthen our relationship with key players. And also, as I mentioned, we are looking to get into different markets, trying to expand the market shares in this business. And at the same time, we are also trying to diversify our trading portfolio. We think by diversifying our product portfolio, it will also reduce our operational risk.
spk03: Thank you. And I will now turn the conference back over to you. Is there any more questions?
spk02: We'll take a question from Andy Gold with Gold Capital Ventures.
spk01: I have a question on, have you guys ever thought about doing a cash dividend or you're not allowed to do that because of Chinese tax rules and stuff like that? I know you have to get some credibility in the stock. A buyback is a buyback, but cash is cash and A lot of U.S. investors have a hard time investing in Chinese companies because of the lack of transparency on cash, and I think a cash dividend to shareholders might entice a lot of investors to be more interested in the stock going forward. I know the cash dropped because you put out money for procurement, but that cash comes back to you when you close more and more deals. That's like a cash advance, right, for procuring supply chain. Could you comment on that? Thank you.
spk06: Yes, you're right. We do see a significant decrease in cash. And as you can see, 70% of the operating cash decrease is from advances to suppliers. So this actually is a sign that we are trying to use our cash to expand our future growth. So additionally, you can see there is a decrease in accounts payable contributed to the cash reduction. So we view this as necessary steps to position our company for future growth and expect this investment to fill our expansion plans for the second half of 2024 and 2025. As I mentioned previously, the company has already improve the $15 million buyback plan. And because management do think our stock is undervalued as most of China's stock, and we are committed to improve our shareholders' value. I think there were several factors influence impact on Chinese company stock. And I totally agree with you in that there are concerns over transparency and corporate governance and internal controls, et cetera. And also, U.S. investors are not familiar with Chinese business environment, and there are factors, there are risk factors, like regulatory and geopolitics risks, et cetera. But we understand these concerns, so that's the reason, unfortunately, we are like most of China's stock is undervalued. So to improve our valuation, we think it's very important to stress the investors' concerns. So we plan to focus on enhancing our transparency, such as conduct more investors' outreach programs, roadshows, and presentations to strengthen our communication with investors. So today is actually a start of that. So we will continue strengthening our communication with investors.
spk01: On the same side, we also... That's definitely a step in the right direction for Chinese companies because the transparency and Chinese companies have a tendency to take investment cash at any price and dilute their stocks down to nothing just as a... In the U.S., we value equity more than cash, and the Chinese companies seem to want cash more than they care about the stock price. But I think by you doing a conference call, that's a good step in the right direction. It does go a long way for helping people to understand the business a little bit better. So congrats on doing that. That's a great step in the right direction for you.
spk06: Yes, yes, you're right. And I'm sorry for maybe some bad experience of our new U.S. investors experience with Chinese company. But I don't think all the Chinese companies are doing that. And at least we are not doing this. So we also try to improve our governance standards and internal controls over financial reporting to comply with U.S. regulations. So the company is trying to demonstrate long-term growth to our investors. So we're also trying to expand globally and also try to form some strategic partnerships in the future when there are opportunities. So all these measures is trying to focus on long-term growth of the company and to improve our service value.
spk01: That's why, guys, people write short reports on companies because they're not transparent. When you guys were called, I think, Hebron Technology, somebody wrote a really terrible piece on the company. This is going back three, four, five years ago when it was a different company. But that That I think is the company has done a much better job being much more transparent since then. So that was definitely a step in the right direction.
spk03: Thank you for the comments. And that does conclude the question and answer session. I'll now turn the conference back over to you. Do we have any more questions? There are no further questions at this time.
spk02: Okay.
spk06: Oh, thank you. Thank you, everybody, for your continued support to the company and your attention to this conference call and your valuable time. And we will continue our communication with our investors and shareholders and committed to maximize our equity shareholder value. Thank you again for everybody. Bye-bye.
spk02: Thank you. And that does conclude today's conference. We do thank you for your participation. Have an excellent day.
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