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spk02: Ladies and gentlemen, thank you for standing by and welcome to QHIO's first half year of 2022's earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a Q&A 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 call over to Ms. Kisho Wang. Thank you, and over to you.
spk01: Thank you, operator. Hello, everyone. Welcome to Chihuahua's first half year of 2022's Earnings Conference Call. The company's results were released earlier today and are available on our IR website. On the call today are Chairman and CEO Leslie Yu, CFO of Barry Bar. Leslie will review business operations and company highlights followed by Barry, who will discuss financials and guidance. They will be available to answer your questions in the Q&A session that follows. Before we begin, I would like to remind you that this call may contain forward-looking statements made under 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 relate 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, or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks Uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking 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 our Chairman and CEO, Mr. Leslie Yu. Please go ahead.
spk05: Thank you, Qishu, and thank you all for joining our first half of 2022 earnings conference call. We are very pleased that in the first half of 2022, Qihua has continued its strategy of revenue growth first and profit growth later in 2021. While total revenue growth steadily in the first half of the year, growth profit increased by 89.6% year-on-year. The increase in revenue came from the increased demand for community service products and the expansion of the coverage of service cities and business districts. In terms of gross profit, thanks to the improvement of the company's operating efficiency and the strengthening of the cost control, we further reduced the cost of revenue and achieved an increase in gross profit margin. The gross margin in the first half of 2022 was 5%. compared to 2.7% in the same period last year. At the same time, general and administrative expenses decreased by 22.8% year on year. Our adjusted EBIT was RMB 10.8 million, compared with the loss of RMB 49.4 million in the same period last year, which shows that our profitability has improved significantly. At the same time, we have endeavored to reduce dependency on individual business line and the major consumers. On the basis of the solid foundation of on-demand delivery solutions, our community service business has paced into a higher growth stage. In terms of segmented revenue, mobility service solution increased by 32.2% year-on-year. And the housekeeping and accommodation solution increased by 24.7% year-on-year. Now I would like to share with you specifically how we have provided continuously high-quality services around the four essential living needs of food, clothing, housing, and transportation for the community in the first half of 2022, even under the complex international situation and domestic academic control. In the first half of 2022, the dynamic zero policy prevents people from traveling freely, which led to an increase in the demand for home services. Our business service covers the majority of areas with strong economic demand in first and second tier cities in China, providing services that meet the basic needs of the community. In addition to the continuous development of our existing business sectors, such as on-demand delivery solutions, mobility service solutions, housekeeping and accommodation solutions. It also includes our pioneering exploration in laundry services. In terms of order fulfillment service for platforms such as Meituan, CD, ELE, et cetera, including on-demand delivery solutions and mobility service solutions below, We have built Chihuahua's core competitiveness and mode through lean management operations and a national-wide infrastructure network. In terms of the operation of our own service platform, including housekeeping and accommodation solutions and laundry in trial, we plan to empower more community service providers to expand revenue and improve efficiency through the SaaS system and the services. Let's take a look at how Qihua enables more community service providers to expand their income and improve efficiency through the SaaS system and services. In the process of providing community services for a long time, it is found that the mass participants of community services are very fragmented. And the service capacities are limited, thus the demand and the capacity of community services are poorly matched. and it is difficult to achieve cross-regional deployment and fully meet the needs of consumers. In order to solve the above problems, we have begun testing and implementing a community ecosystem based on 10 years of community service experience, using SaaS tools to link community service providers and production capacities since the second half of 2021. Nowadays, we are taking the laundry solution as a business entry into community service. Now the factory, logistics, distribution, and the community store owners are connected by our laundry order staff management system. And the community residents are involved in our community service platform through community store owners, for instance. Community shop owners who are operators of grocery stores career delivery points or gyms could have the ability to meet residents' laundry needs through the laundry factories involved in our SaaS system. They can deliver the clothes to the laundry factories through the instant delivery system on the service platform after receiving the laundry needs from consumers. We are cooperating with more than 70 laundry factories in 31 cities in the U.S. network and achieving trial operation results in Beijing and Xi'an. In the future, we are jointly promoting our community service ecosystem with our own teams and franchise partners, relying on over 130 cities and 1,200 business districts across the country, which are covered by the existing service network or SHIP and empower existing community service providers by SaaS-plus service to link and match the needs of millions of families in the community more precisely through the way of stacking multiple services in one site to expand income and capacity sharing to improve efficiencies. We will constantly enrich service scenarios, increase the service output of the community, enlarge the community service network, strengthen the competitive mode of regional services, and upgrade the ability to fulfill the essential social demand, focusing on the essential living needs of the community residents. At the same time, I would like to emphasize the social value created by Qihua in its business development. There is a severe employment situation in which many companies experience a wave of layoffs due to the economic downturn triggered by the pandemic. Based on this situation, stabilizing employment has become one of the priorities of the government, and new forms of employment represented by the gig economy has caught widespread attention. As a leading gig economy platform in the community service field, our business and platform provide a large number of blue collar workers with employment and entrepreneurial opportunities. For employment, the QHO platform links enterprise and individual workers precisely, connects suitable jobs and needs, and promotes efficient production capacity matching. At the same time, QHO provides diversified services to assist capacity providers to adapt to new scenarios more quickly and plan career development reasonably. including safe and security and vocational training. Furthermore, QIHO provides an entrepreneurial platform for some workers who have a higher pursuit of career prospects. Where they can obtain support, QIHO has helped nearly 500,000 workers find jobs, of which 22.6% have a college degree or above, up to now. We will sustainably produce the social value of promoting employment, stabilizing income, and helping entrepreneurship in future development. Finally, I would like to conclude that the essential living service demand for the community is a long-term constant demand. And for this reason, the catering, clothing, travel, and accommodation industries are enduring. The epidemic in the past three years has limited more and more consumers to rely on ordered online and delivered offline services, further increasing the penetration rate and the reuse rate of the internet. As an internet technology company, Chihuahua continuously improves satisfaction rate of community services through technology and offline empowerment. The 10 years experience of the operational platform services has accumulated our dominant position in the community service market. And the community ecological service ecosystem of SaaS plus service will further enhance the bargaining power and the profitability of Chihuahua. Therefore, we are confident that the future development of Chihuahua will have long-term and sustainable social and commercial value. This concludes my prepared statement. I will now turn the call over to our CFO, Barry Bauer, who will discuss our financial results for the first half of 2022. Thanks, Leslie.
spk04: Hello, everyone. Thanks for joining us in Chihuahua's first year of 2022 conference call. Please be reminded that all amounts coded here will be in RMB and are stated otherwise. Total revenue of Chihuahua for RMB 1,863 million in the first year of 2022, which remains relatively stable compared with RMB 1,838 million in the first year of 2021. Let's further break down. Revenue from on-demand universal solution for RMB 1,763.8 million representing a slight increase from RMB 1,757 million in the first year of 2001. Revenue from mobility service solutions consisting of share-back maintenance, we are having under five service solutions for RMB 56.5 million, representing an increase of 32.2% from RMB 42.7 million in the first year of 2021. Primarily due to our first, our enlarged customer base and the service scope for shared back of maintenance solutions and also the commencement of FRIED solution in the July of 2021. Revenue from housekeeping and accommodation solutions for RMB 43.4 million representing an increase of 24.7% from RMB's 34.8 million in the first year of 2021, primarily due to our large customer base for housekeeping and accommodation solutions, which include hotels, B&Bs, and as part of the network synergy we have achieved following the business expansion of our housekeeping and accommodation solutions. On the whole, what we have achieved is basically consistent with our strategic direction. The cost of revenue for RMB 1,769 million, representing a decrease of 18.9 million year-over-year, primarily attributed to the increase of our operation efficiency. As a result, gross profit improved significantly, reaching RMB 93.9 million in the first half year of 2022, which has increased by 89.6% year-over-year, corresponding to a gross margin of 5% compared with 2.7% in the same period last year. General and administrative expense were RMB 99.5 million, representing a decrease of 22.8% from RMB 122.9 million in the first year of 2021. The decrease was primarily due to the decrease in the share-based compensation expense, from RMB 50.3 million in the first year of 2021 down to RMB 12.5 million in the first year of 2022. R&D expense was RMB 7.2 million, representing a decrease of 22% from RMB 9.2 million in the first year of 2021, primarily due to the decrease in the average compensation for research and development personnel after restructuring our R&D team. Net loss attributed to Qi Huo Limited was RMB 25 million as compared to RMB 111 million in the first year of 2021, which is a big increase A big decrease in the loss shows our consistent improvement in our profitability. Adjusted net loss was RMB 14.1 million as compared to adjusted net loss of RMB 69.3 million in the first year of 2021. Adjusted EBITDA was RMB 10.8 million as compared to adjusted EBITDA loss of 49.4 million in the first year of 2021. In terms of the balance sheet, as June 30, 2022, the company has cash and short-term investment of RMB 148 million and the short-term debt of RMB 107 million. This concludes my prepared remarks. Thank you for your attention. We are now ready to take your questions. Operator, please go ahead.
spk02: Thank you very much. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw a question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Darren from Aftahi. Please go ahead.
spk03: Hi, guys. Good evening. Just a quick question. I'm wondering if you could maybe give a state right now of just the Chinese economy and since there's chatter about loosening restrictions on the COVID policy, how your business has maybe been impacted in the September quarter and then maybe even to October and November and maybe if trends have improved at all in the growth of your business and specifically on the on-demand delivery side and any other segments you kind of would indulge in. Thanks.
spk05: Actually, COVID-19 has lasted several years in China, but luckily we are focusing on community services. We are providing the service for the four essential people needs. We call it food, clothing, housing, and accommodation. So actually, if we look at the first half of 2022, the total revenue of on-demand delivery solution still is steady, slow growth. And for our mobility service solution and housekeeping and accommodation, also achieved very satisfying growth. So actually, this situation will still last for our quarter four. So we believe that in the quarter four we will achieve better results not only in the revenue but also in the gross profit. Yeah, and in addition that because the dynamic zero policy will still prevent people to going out and currently that most people have to rely on the order online and delivery offline services, so which also increase the reuse rate of the Internet and which also help us to further grow our business regions and increase our income. Yeah, thank you.
spk03: Great. Thank you, Leslie. And just maybe one follow-up. Is it challenging to find... workers to fulfill your fillment network, just given the zero COVID policy, are you able to procure the proper assets? Thanks.
spk05: Excuse me, I beg your pardon. Darren?
spk03: Yes? Hello? Hi.
spk04: Hey, Darren, for the last few words, we didn't catch up quite clearly. Can you say it again, please?
spk03: Sure, not a problem. My question was just around if it's given the lockdown policy and people ordering online and whatnot, is it challenging to fulfill the riders and drivers for your fulfillment network, kind of given the macro backdrop?
spk05: Yeah, I got it. Sorry about the misunderstanding. Actually, because people are being locked out, which also includes the workforce being locked out, so actually the people are not travel freely, which actually stabilizes our workforce. Of course, at the same time, we provide all kinds of support to help this workforce to settle down. and help them to focus on the work to provide the services. So maybe it's not a problem to speak in, but actually that we call it the flow rate of the workforce is lowering down, and currently that we are facing less challenges in the recruiting and the deployment. Thank you.
spk02: Thanks. Thank you. To ask a question, you may press star then one on your telephone keypad. The next question comes from Karina Wang from Tiger Brokers. Please go ahead.
spk01: Hi, thank you for taking the question. My question is, how will the company's strategy or actually improve or change in the future? Thanks.
spk05: Yeah, thanks for the question. And actually that we can see a little bit of some change and even the script and I just share with the audience, yeah. And yes, there will be some changes in our strategic directions. We will maintain the continuous development of order fulfillment services for platforms, such as Meta and DD, and to further optimize efficiency and improve the profits. At the same time, we will jointly promote our community service ecosystem, and together with our own teams and franchised partners in over 160 countries, 30 cities and 1,200 business districts, which is already covered by our existing service network. So we will empower existing community service providers by our SaaS Plus service to link and match the needs of millions of families in the community. And the way we will do is that we will stack multiple services in one site. so that they can expand their income and also we will lack the capacity sharing on the platform so they can improve efficiencies. So if we call that the difference between the strategic direction, I would say that previously in the last 10 years we may run the business mainly on our own team But now that we will organize the social resources and all the service providers together to do the business and to grow up together. Yeah, thank you.
spk01: Thanks. Thanks for gathering.
spk02: Thank you. A reminder to our participants, please press star then one to ask a question. Ladies and gentlemen, as there are no further questions, I would now like to turn the call over to Ms. Keisha Wang for closing comments. Over to Ms. Keisha for closing.
spk01: Okay, so if there are no other questions, we can finish our today's conference call.
spk05: Yeah, thanks for joining our conference call. Thank you.
spk02: Thank you. Thank you very much. Ladies and gentlemen, with this, we conclude today's earnings call. Thank you all for joining us. I may now disconnect your lines.
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