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spk04: Thank you for standing by, and welcome to the Kuiwo Limited 22H2 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to management. Please go ahead.
spk00: Thank you, operator. Hello, everyone. Welcome to Q4's second half and full 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 Barry Ba. 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 have to remind you that this call may concern forward the statements made under the safe harbor provisions of the Private Security Legislation Form 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 statements as a result of new information for future events or otherwise. except as required and allowed. With that, I will now turn the call over to our Chairman and CEO, Mr. Leslie Yu. Please go ahead.
spk01: Thank you, Xishu, and thank you all for joining our second half and full year of 2022 Earnings Conference Call. In 2021, we proposed a strategy to improve profitability after increasing revenues. We achieved this goal with four-year revenue growth of 56% in 2021, followed by profit growth of 43.9% in 2022. Since the execution of this strategy at the beginning of 2021, we have made several initiatives to expand revenue, which was mentioned in the 2021 annual report. To be more specific, in terms of the on-demand delivery solutions, we increased the number of delivery orders we fulfilled by expansion into new geographic markets in 2021. In the mobility service solutions, we enlarged the customer base and the service scope of shared bike maintenance solutions and commenced the freight service solutions in July 2021. In the housekeeping and accommodation solutions, we started the in-depth operation of Chengdu and acquired Lai Lai to expand our solutions offering of hotels and B&Bs to enlarge the customer base of our housekeeping solutions. Those initiatives have maintained a stable income scale and achieved substantial increase in profits in 2022, despite the impact of the COVID-19 on localized life service. With four-year revenue of RMB $3,820.4 million and the gross profit of RMB $252.7 million in 2022, Qi Huo achieved a gross margin of 6.6%, higher than the 4.4% in 2021. And we achieved a historical turnaround in several figures, including operating income, adjusted EBITDA, adjusted net income, This result shows the effectiveness of the company's strategy to improve profitability after increasing revenues, and the trustworthiness of the company's team to implement the strategy. We believe that the company's business model is sustainable and it has a very short payback period, with an average payback period of about 12 months. Next, let's move on to the service categories offered by Chihuahua. We provide two categories of services on the gig economy platform. The first one is order fulfillment services for platforms, which mainly involves on-demand delivery solutions and mobility service solutions. Most of our clients in order fulfillment service platforms are well-known consumption service platforms, such as Meituan, ED, ELE, as well as some large chain catering enterprises, such as KFC, McDonald's, Legend Coffee, and so on. In this service, we provide standardized service products to our customers through executing lean management operations and charge a service fee for each order fulfilled. The revenue generated from this part is RMB 3.474 billion in 2022, and the gross margin increases to 6.6% in 2022 from 4.1% in 2021. The second one entails our housekeeping and accommodation services provided under our SAS service model. Our sustainability encompasses the Qiho Plus platform itself and the service team dedicated to maintaining the upkeep of the platform, including customer service and technology support, with which we focus on empowering small and medium-sized localized live service providers and helping them expand revenue and improve efficiency. This mainly serves housekeeping and accommodation partners in the second half of 2022. The primary source of revenue for such service products is the commission collected from the partners based on the GMV charges through our platform. We have always believed that technology plays a huge role in business growth, efficiency improvement, and partner empowerment. So we are committed to using our experience and management capabilities accumulated over the past 10 years in the field of local live services to develop SaaS services that can empower local live service providers based on the power of technology. Through SaaS service, we can connect the brand of Qiho and the business resources on Qiho local live platform to small and medium-sized localized live service providers. optimize their operational efficiency and compliance, and help these service providers reduce operational risks while increasing profits. Currently, this technology platform is capable of empowering various verticals, such as laundry, hotel, B&B, and all jobs in catering and housekeeping. Relying on the SaaS system, Qiho will help these service providers to integrate online traffic and business resources from multiple platforms. Based on the core management and operational capabilities accumulated over the years, as well as multi-channel brand building, Qiho has extended its operational strategy from urban BNP operations to more BNP operations. achieving successful cases of light investment and detailed operation, and empowering more than 8,000 customers. The chart model trained by AI, which has received a lot of attention recently, will be tentatively integrated into the business by Qigong in the near future. For example, we can use AI to increase efficiency, training, and communicating with workers, We can also use AI technology in our B&B business, where operators can use it to assist online information maintenance of B&B hotels, intelligent check-in and self-checkout of travelers. Looking ahead to 2023, we believe Chihuahua's existing business will continue to grow. During the past three years, the COVID-19 has been influencing the global economy. China companies whose main business is on-demand delivery, mobility service, housekeeping, accommodation have been affected seriously. With the full end of epidemic control and social restriction completely lifted, on-demand delivery, mobility, and housekeeping and accommodation services are expected to make a rapid rebound in 2023. In 2023, Qihuo will embark on new expansions and we have officially launched Qi Huo's international business in February 2023. Qi Huo International will take full advantage of China's cost differences in both industry and internet, manufacturing capabilities in new energy vehicles, and mature internet technology and operation expertise to export industry plus internet products and services to overseas partners. We aim to empower overseas partners with operational capability and technology of mobility services, such as online ride-sailing and on-demand delivery, along with the export of Chinese electronic vehicles and mopeds. This strategy has achieved initial results, generating revenue from others. Chihuahua is expected to give foreplay to its core competitive advantages in the industry with its existing technical and business capabilities and help our partners make considerable progress in overseas markets. We are confident that Chihuahua's global business will bring a new growth curve to the company. This concludes my statement, and I will turn the call over to our Chief Financial Officer, who will discuss our financial results for the year 2022. Thank you.
spk02: Thank you, Leslie. Hello, everyone, and welcome to the Q4 second half and full year of 2022 conference call. Please be reminded that all the amounts coded here will be in RMB unless stated otherwise. Before I delve into our full year result, I would like to draw your attention to something notable that occurred during the second half year of 2022. For the six months ended December 31, 2022, revenue was RMB $1,956.6 million, slightly declined compared to 2021, which was RMB 2,187 million. Now let's look at the segment results. Our revenue from on-demand food delivery solution for RMB 1,874.9 million, which represents a 9% decline from RMB 2,071 million in the second half year of 2021. This decrease was primarily due to the reduction in the number of delivery orders caused by the regional resurgence of COVID-19 in multiple areas during the later year of 2022. The revenue from our mobility service solutions, which includes shared bike maintenance, ride-hailing, and the flight service solutions amounted to $51.6 million. reflecting a decrease of 23.5% from RMB 67.4 million in the second year of 2021, which was primarily due to the reduce of customer demands resulting from the regional resurgence of COVID-19 in multiple areas during the second half of 2022. The revenue from our housekeeping and accommodation solutions were RMB 30 million, which indicates a decrease of 37.6% from RMB 48.2 million in the second half year of 2021. This was primarily due to the reduce of customer demand caused by the regional surges of COVID-19 in multiple areas during the second half of 2022. The cost of revenues was RMB $1,797.8 million, representing a 12.8% year-over-year decrease, primarily in line with the reduce of customer demand resulting from COVID-19. GMA expense was RMB $114.1 million, representing a slight increase of 2 percent from RMB 111.8 million in the second year of 2021. RMD Expense were RMB 5.4 million, representing a decrease of 50.8 percent from RMB 10.9 million in the second year of 2021. primarily due to the decrease in the headcount and overall compensation level for our research and development personnel as we restructured our R&D team. Speaking of income, our operating income was RMB 43.7 million compared to the operation loss of RMB 54.2 million in the second year of 2021. We recorded another loss net of RMB 17.8 million compared to other loss net of RMB 6.6 billion in the second half of 2021 primarily due to the reflection in the federal value of our investment in the mutual fund. Income tax expense was RMB 14.3 million representing an increase of 75.2% from RMB 8.2 million in 2021. Net income attributable to Chihuahua Limited was RMB 11.8 million compared with net loss attributable to Chihuahua Limited of RMB 46.4 million in the second half year of 2021. Adjusted EBITDA was RMB 47.8 million compared with adjusted EBITDA of loss of RMB 23.3 million in the same period of 2021. Adjusted net income was RMB 17.4 million compared with adjusted net loss of RMB 53.0 million in the second half year of 2021. Now let's move on to the full year of 2022. During the fiscal year of 2022, total revenue was RMB 3,820.4 million compared with the total revenue of 4,025.3 million in 2021. That's further breakdown. The revenue from our on-demand food delivery solution was RMB 3,638.87 million, which indicate a decrease of about 5% from RMB 3,829 million in 2021. This decrease was primarily due to the reduction in the number of orders caused by the regional resurgence of COVID-19 in multiple areas during 2022. The revenue from our mobility service solution was RMB 108.1 million, reflecting a decrease of 1.9% from RMB 11.10 million in 2021, which was primarily due to reduced customer demand caused by the regional resurgence of COVID-19 in multiple areas during 2022. The revenue from our housekeeping and accommodation solutions was RMB 73.6 million, indicating a decrease of 14.6% from RMB 86.2 million in 2021. This was primarily due to reduced customer demand caused by the regional resurgence of COVID-19 in multiple areas in 2022. Regarding the cost of revenue, it amounted to RMB 3,567.7 million, representing a 7.3% year-over-year decrease. Primarily, the decrease in service fees paid to workers, which was in line with the decrease of number of delivery orders resulting from the original resurgence of COVID-19 in multiple locations in 2022. Let's move on to expenses. Our GMA expense amount to RMB $213.6 million, reflecting a decrease of 11.3% from RMB of $240.7 million. This reduction was mainly due to a decrease in share-based compensation expense, which decreased from RMB $86.9 million in 2021 down to $19.8 million in 2022. R&D expense for RMB 12.5 million, representing a decrease of 77.7% from RMB 20.1 million in 2021, primarily due to the decrease in headcount and the average compensation level for our R&D personnel as we restructured our R&D team. As our CEOs mentioned earlier, in 2021 we proposed a strategy of improving probability after increasing revenues. The effectiveness of this strategy was proven in 2022 as our operating income increased despite the challenging market conditions. Our operating income was RMB Operating income was RMB 35.6 million compared to operating loss of RMB 139.1 million in 2021. And the other loss net was RMB 26.1 million compared to other loss net of RMB 34 million in 2021, primarily due to the fluctuation in the fair value of our investment in the mutual fund. Income tax expense was RMB 21 million, representing an increase of 74.6% from RMB 12 million in 2021. Net loss attributed to Chihuahua Limited was RMB 13.1 million compared to net loss attributed to Chihuahua limited of RMB 157.9 million in 2021. Adjusted EBITDA was RMB 58.6 million compared with adjusted EBITDA loss of RMB 72.7 million in 2021. Adjusted net income was RMB 3.3 million compared with just a night lost of RMB 122.3 million in 2021. In terms of balance sheet in 2022, as of December 31st, 2022, the company has cash, shorter investment, and the restricted cash of RMB $165.4 million, and short-term debt of RMB 65.4 million. This concludes my prepared remarks. Thank you for your attention. We are now pleasured to take your questions. Operator, please go ahead. Thank you.
spk04: If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Once again, that is star then one to ask a question. And today's first question comes from Karina Wong with Tiger Brokers. Please go ahead.
spk03: Hi, thank you for taking my question. I want to know what the strategy in 2022 is to improve profitability after increasing the revenues. So what's the company's strategy in 2023?
spk01: Yeah, thanks for the question. This is Leslie. The strategy for 2021 and 2022 is to improve profitability after increasing revenues, and with focusing on achieving an increase in scale, which includes both revenue and profit. From 2023 to 2025, in the view of the strategy, We will extend along the industry ecosystem to localize life, gradually transforming from a localized life order for human service provider to a localized life operation service provider. For example, as a case of operation in B&B industry, The project Chengdu is currently in a leading position in this segment field and has empowered more than a thousand small and medium-sized homestead service providers after two years operation. We provide a SaaS system and online traffic and brand operation in multi-platforms We provide offline housekeeping, supply chain services for decoration and consumable products. So all of this, Chihou will empower more small and medium-sized localized service providers through our SaaS services, and also relying on our national wide operating network and leveraging accumulated technical capabilities and management expertise over the years. Also, the business resources we formed through long-term cooperation with consumption online platforms. We started to gradually realize superimposition and upgrading of the role from order fulfillment service provider to operation for this provider in 2023 to 2025? Yeah, thanks for the question, thank you.
spk04: Thank you. And ladies and gentlemen, as a reminder, if you would like to ask a question, please press star then one at this time. We will pause momentarily to assemble our roster. And as a final reminder, if you would like to ask a question, please press star then 1 at this time. There are no further questions at this time. I'll hand the call back to the management team for closing remarks.
spk05: Yeah, thanks, operator, and we don't have further remarks.
spk01: Yeah, thank you.
spk04: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
spk01: Thank you. You too.
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