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spk00: Good day, ladies and gentlemen. Welcome to QHAL's second quarter 2021 earnings conference call. At this time, all participants 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. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Mr. Eric Yun. Please go ahead.
spk02: Thank you, operator. Hello, everyone. Welcome to Chihuahua's second quarter 2021 earnings conference call. The company's results were released earlier today and are available on our IR website. On the call today are Leslie Yu, Chairman and CEO, co-founder Barry Barr, and CFO Sandra Chee. Lastly, we will review business operations and company highlights, followed by Sandra, who will discuss financials and guidance. So they will be available to answer your questions in the Q&A session that follows. So before we begin, I would like to remind you that this call will contain forelooking statements made under the safe harbor provisions of the private securities litigation reform act of 1995. Such statements are based on management's current expectations and current market and operating conditions and are related to the events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance, and achievements to differ materially from those in the further statements. Further information regarding these and other risks and certainties and factors is included in the company's findings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forelooking statement as a result of new information, future events, or otherwise except as required under law. With that, I will now turn the call over to our chairman and CEO, Mr. Leslie Yu.
spk01: Please go ahead, sir. Thank you, Eric, and thank you for joining our second quarter 2021 earnings conference call. We are pleased to report another strong quarter as total revenue grew by 81% year-over-year and almost reached the milestone of RMB $1 billion. Thanks to strong demand for our services and our large network of workforce across the country, Lastly, our main business lines, on-demand deliveries, mobility services, and housekeeping solutions cover the needs of people's daily necessities and saw robust growth momentum in the second quarter. In addition, our growth profit margin quickly rebounded from the prior quarter as labor costs normalized to standard level. As a result, we achieved adjusted net income of RMB 10 million, a significant improvement from the first quarter. These results reflect the economy of scale of our business model and the strong execution of our multi-scenario deployment strategy. Now let me walk you through our key business performance in Q2. First, let's look at our biggest revenue contributor, the on-demand delivery business. As the COVID-19 pandemic remained largely under control in Q2 nationwide, albeit with some small-scale resurgence in a few regions, people's lives will generally return to normal. Taking advantage of the solid demand for on-demand delivery services, our revenues maintained healthy growth and reached IMB 942 million in Q2, up 74% year-over-year. The trend we see in the current market is that premium delivery providers like Qiho are taking market share from cloud-sourced providers. This has given us a window of opportunity to aggressively expand our presence in existing markets and penetrate new ones. In the second quarter of 2021, we provided services in 1,205 business circles across 139 cities nationwide, compared with 950 business circles across 75 cities in the same period in 2020. For Q2, the overall number of average monthly delivery orders were 45 million, up 85% year-over-year. On the cost side, if you recall from our last earnings call, we observed that labor shortages were mitigated after more migrant workers returned to cities after Chinese New Year holiday, and it helped to strike a balance in demand and supply levels. Our growth margin significantly improved in Q2 on a sequential basis. Next, I would like to give you an update on our housekeeping solutions. In Q2, revenues sustained its rapid growth momentum, increasing 67% sequentially to RMB 22 million. We continued to expand our service capability to meet growing demand. In June, the number of housekeeping orders from hotels increased by 120% from a quarter ago, and the number of rooms of B&Bs that were served by us increased by 250% from a quarter ago. In addition to traditional housekeeping services, we began to provide more value-added services to strengthen our relationship with B&B operator clients. We launched our proprietary housekeeping SaaS solution, Xu Chen Dan Property Management System, or PMS, to connect homestay operators with multi-marketing channels and room rental platforms. As a central hub, PMS gives both BNB operators and housekeeping managers an easier way to check orders and listings, in addition to very user-friendly data visualization tools and real-time information. Upon receiving these new service orders from the system, PMS managers can send workers to serve our clients immediately. Our mobility business, which includes shared bike and ride-hailing solutions, also delivered solid performance. Revenues increased by 337% year-over-year and 50% quarter-over-quarter to RMB 26 million. In the second quarter, the number of orders for our mobility business grew approximately 60% from prior quarter. Now I want to give you some updates about the progress of our multi-scenario deployment initiative. We aim to offer the workers on our platform better flexibility in terms of job selection by matching their skill set better and increasing their income with more job opportunities. At the same time, offering multi-scenario services can enable us to achieve optimal use of resources and improve efficiency and save on costs. According to our statistics as of Q2 2021, the cumulative number of workers engaged in two or more job types on our platform reached 17,700, an additional 2,000 compared with the prior quarter. In the meantime, we continued to strengthen our mandatory occupational and safety training for riders, which has also led to increased income for our premium riders. In Q2 2021, riders with an average monthly income of at least RMB 5,000 accounted for 54% of the total group, compared with 45% a quarter ago. We are also constantly exploring new business models and potential revenue streams. In July, Qiubo reached a strategic cooperation agreement with GeMei2 technology, a leading smart community IoT cloud platform. We have been working together to launch a brand that targets services catering to the direct-to-home housekeeping market. Through deepened cooperation with property management companies, workers on QCOT platform can directly provide various housekeeping services for millions of households, thereby extending our service capabilities to individual families instead of only servicing enterprise clients. These strategic developments are in line with our multi-scenario deployment strategy. At present, this cooperation has been launched in Tianjin, Changsha and Shenzhen. In conclusion, we are strongly motivated by the trend of growth opportunities ahead of us. As we regularly scale our platform to meet growing demand in various service areas, we remain fully committed to delivering long-term value and profitable growth for our shareholders. This concludes my prepared remarks. I will now turn the call over to our C4 session. We'll discuss our financial results for the second quarter.
spk05: Hello, everyone. Welcome to second quarter 2021 call. Please be reminded that all amounts quoted here will be unless stated otherwise. Our total revenues were 991.8 million, representing an increase of 81.1 percent year over year. primarily due to rapid growth of our major business lines. Revenues from on-demand delivery solutions were $942.2 million, representing an increase of 74.1% from $541.3 million in the second quarter of 2020, primarily due to the increase in delivery orders fulfilled as a result of the industry growth in the aftermath of COVID-19 and our continued penetration and expansion into new geographic markets. Renews from mobility service solutions consisting of shared bike maintenance and ride-hailing solutions were 25.7 million, representing an increase of 336.9% from 5.9 million in the second quarter of 2020. primarily due to our enlarged customer base and the survey scope in shared bike maintenance solutions and the increase in the numbers of ride-hailing drivers on our platform. Revenues from housekeeping and accommodation solutions were 21.8 million, representing a significant increase from 0.4 million in the second quarter of 2020. This was primarily due to our enlarged customer base for probation of housekeeping and accommodation solutions, including hotels and B&Bs, as part of the network synergy we achieved following the acquisition of Lila and Chengdu Home. The cost of revenues was $920 million, representing an increase of 88.8% year-over-year, primarily attributable to increased labor costs in line with our continuing business expansion. The general and administrative expenses were $84.7 million represents an increase of 187.2% from $29.5 million in the second quarter of 2020. The increase was primarily due to the increase in one share based compensation from $1.3 million in the second quarter of 2020 to 44.4 million in second quarter of 2021, and two professional service expenses. If excluding share-based compensation, the general and administrative expenses increased by 42.9% year-over-year, and as the percentage of revenues declined to 4.1%, around 5.1%, in the second quarter of 2020. As such, we maintained unit cost savings along with business growth. Research and development expenses were $4.5 million, representing an increase of $63.6 million from $2.7 million in the second quarter of 2020, primarily due to the increase in compensation for research and development personnel. The operating loss was $14.7 million compared to operating profits of $29.6 million in the second quarter of 2020. Including share-based compensation, the adjusted operating profit was $29.7 million, relatively stable as compared to $30.9 million in the second quarter of last year. We also recorded other loss net of $7 million. which compared to other income net of $3.6 million in the second quarter of last year, primarily due to the decrease in variable change of investment in a mutual fund. The income tax expense was $11.2 million, which remains relatively stable as compared to $11.5 million in the second quarter of 2020. The adjusted EBITDA was $29.1 million, representing a significant improvement from adjusted EBITDA loss of $78.5 million in the first quarter of 2021. The adjusted net income was $9.9 million, also representing a significant improvement from adjusted net loss of $29.3 million in the first quarter of 2021. And we will endeavor to improve our probability further going forward. Now on our guidance. For the third quarter of 2021, we expect total revenues to be in the range of $1.1 billion to $1.2 billion, representing an increase of 43% to 56% year over year. The forecast reflects our current and preliminary views on the market and its operational conditions, which is subject to change. This concludes our prepared remarks. Thank you for your attention. We are now happy to take your questions. Operator, please go ahead.
spk00: Thank you, ma'am. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the pound or the hash key. Once again, that's star followed by the number one on your telephone keypad and wait for your name to be announced. We have the first question from the line of Dylan Hasmel from Roth Capital. Please ask your question.
spk06: Hey, good morning, good afternoon. Thanks for taking my question. First on sort of the multi-serial deployment, pretty good numbers there with increasing like 2,000 workers quarter over quarter. Could you talk a little bit about One, how many cities that's in now? I think on the last call you said it was 48. And then, where do they stand in terms of which services they're doing? I mean, I'd have to guess the main one's still food delivery, but is there any second one where the majority of that multi-scenario is being deployed?
spk01: Yes, thanks for the question. Ana, this is Leslie. And usually, We have two types of multi-scenario deployment, which is mainly caused by the peak and low time for live consumer scenarios. For example, our riders for food delivery usually be busy in the lunchtime and evening time, and in the morning and afternoon time, normally they can be sent to do the work for the share bike maintenance or for the share motor maintenance work. And on the other side, for housekeeping and solution, usually the workers are females, and they can work for the hotel for the room cleaning and in the noontime. And in the evening time, they can work for the KFC or other restaurants for the restaurant cleaning. So normally, that is the two major types of multi-scenario deployment. And now we also have been working with Gamet technology and we started to build the services for the family units. That's what majorly happened for our multi-scenario in Chihuahua's platform. Thank you. Got it.
spk06: And then also on the food delivery side, what was average order value in the quarter?
spk05: Sorry, we can't hear you clearly. Can you repeat it?
spk06: Sure. Average order value, or average revenue per order, I guess, is the way that you've defined it in the past on the food delivery side. I think in Q1, it was roughly $7, or 750 RMB, 7.5 RMB.
spk04: Yeah, for Q2, the average value per order is 7 RMB.
spk06: Got it. And then I saw a good lift in gross profit margin this quarter compared to Q1. How confident are you that you can continue to grow that 7.2 figure back to sort of, I guess, where you were this time last year in the 10% to 11% range?
spk05: As we mentioned before, the first quarter of this year was a special quarter due to the stay-at-home policy in China and the Spring Festival. From this quarter, as far as we are concerned, we can see that the growth margin is back into normal track. For the next one or two quarters, I'm afraid I can't give accurate or specific guidance for the gross margin, but it won't be much different from this quarter. But it may not be that much compared to the same period of last year, especially the third quarter last year.
spk06: Got it. And last one for me. On the housekeeping side, have you looked into adding any more partners that can help you really ramp up your scale, both geographically but just in different penetrations in the cities you're already in?
spk01: Yes, and actually the housekeeping side we are doing in two ways. One way is that we work with the existing housekeeping and we use our system and use our management team and use our large network of facilities to help them to get the work and get the business going. and also help them to manage the services. On the other side, we together work with the property companies. For example, we work with several property management companies together to deliver the service. directly to home housekeeping. And for these property management companies, they already manage a large suburban area, and there are a lot of households they can reach, but their demands they cannot meet. So during this kind of cooperation, they can provide our services to their existing householders in the suburban area. So that's the two major ways for currently how we expand our business in a fast way. We're using the way of cooperation with existing property management companies and also we together work with the existing hotel service providers. And on the other side, for B&B side, we use our PMS system to connect to the property owners and help them to better get the orders from different platforms and provide the services to them. In conclusion, our expansion is together with we connect the different resources and based on our core competence in the management and in the technology development. Thank you.
spk00: Once again, ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. We have the next question from the line of Georgios Kisarnas from Exclusive Capital. Please ask your question.
spk03: Yeah, hi. Even though your mobility service solutions, housekeeping and accommodation, they're growing very, very fast, they're still very tiny or very, very small, I would say, part of your overall revenue mix. My question is, can you give us some color if these two segments will continue to grow as you have seen over the past year or so? I mean, Insofar as housekeeping, it was partially answered by the previous caller, but insofar as the overall growth picture, do you see these two segments growing in the same way over the next year or so?
spk01: I think from our side, under these two segments of housekeeping and mobility, we are growing very fast. and as we can see the past few quarters. And we can expect that even faster growing seed in the next quarter. And comparing with the, if we considering the market for housekeeping and mobility currently in China, actually they are more like we call this existing business volume. So when we approach the whole market, we use corporate and we use merge and that's the first way for us to consolidate these resources in short term and then we can empower with our technology competence and our management competence. So we expect that two sectors will have much faster growing pace. The reason we are observing they are small because at the same time for our major business like food delivery, you still keep a fast growing feed. So that's why if we put them together, we cannot see that maybe they are too small. But for the growing feed, we expect that they can contribute especially for this year, and we'll have a certain significant percentage of our total revenue. Yes, thank you.
spk03: Thank you. Just a small follow-up. Do you have an estimated TAM, total addressable market, of these two segments in the markets you serve? Is there some sort of estimate you guys have come up with? I don't have an estimate. I don't have an estimate. I mean, not in all of China, just, you know, where you do business. I mean, if you have.
spk01: Especially for housekeeping market, I think it's very large. And we call it, in Chinese, we call it Wanyi. Because this sector is not just for enterprise service needs but is largely demanded by household family units. Currently in this market is very fragmental and especially for household. they prefer standard service for their housekeeping. But unfortunately, currently in this market, normally it's individual and they provide a service for this household. And they are service standard and varied from different people. So we consider this is a large market and not requested by the enterprise clients and also is very needed by household and they want the standard service and they don't want to replace their housekeeping service people very frequently because it will cost much for them. And for mobility services actually that is included not only for the like we call it ride-hailing and also include the shared bike and also include a shared motor. And both for these sectors, for these three sectors, and they are growing very fast in China, especially we can see that for the ride-hailing side and for the shared bike side. And maybe this side is a little bit smaller than the housekeeping side, but we still can see that it's a bidding market. Yeah, thank you.
spk03: Thank you.
spk00: Once again, ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. Once again, ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. Once again, ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. Once again, ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. Ladies and gentlemen, as there are no further questions, that concludes today's conference call. Thank you for participating. You may all disconnect.
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